UNIVERSITY OF ECONOMICS AND LAW FACULTY OF ACCOUNTING AND AUDITING GRADUATION THESIS AUDIT PROCEDURE FOR REVENUE AND COLLECTION CYCLE BY PWC VIETNAM AT COMPANY TT Lecturer : MintA. Bui Anh Thanh Student : Vo Minh Truong Student ID : K184050700 Class : K18405CA Ho Chi Minh City, 2nd May 2022 i ACKNOWLEDGEMENTS Ho Chi Minh City 2nd May 2022 The internship opportunity I had with PwC Vietnam was a great chance for learning and professional development. I am so grateful for having a chance to meet various wonderful auditors and professionals who led me through the internship period. Initially, I am using this opportunity to express my deepest gratitude and special thanks to the lecturers of the Faculty of Accounting and Auditing at the University of Economics and Law, as well as PwC Vietnam for establishing ideal conditions for me to complete the internship.
At the same time, I would like to express the appreciation to MIntA. Bui Anh Thanh, my supervisor, who provided me with valuable assistance and advice that enabled me to successfully finish the internship. Furthermore, not forgetting a thankful to Ms. Nguyen Minh Thu – Senior Associates at PwC Vietnam who equipped me with essential skill, took time out to hear, guide and keep me on the correct path in spite of being extraordinarily busy with her duties.
I perceive as this opportunity as a big milestone in my career development. I am determined to use gained skills and knowledge in the best possible way and work on the improvement to attain desired career goals. Sincerely, Vo Minh Truong Author: Vo Minh Truong – K18405CA Lecturer: MIntA. Bui Anh Thanh ii TABLE OF CONTENTS ACKNOWLEDGEMENTS.
I LIST OF TABLES AND FIGURES. V LIST OF ABBREVIATIONS. REPORT SCOPE AND LIMITATIONS. 2 CHAPTER 1 INTRODUCTION TO PWC VIETNAM .1 INTRODUCTION TO PWC GLOBAL .2 INTRODUCTION TO PWC VIETNAM .3 SERVICES OF PWC VIETNAM .4 ORGANIZATIONAL STRUCTURE OF PWC VIETNAM.
2 CHAPTER 2 LITERATURE REVIEW .2 SALES AND COLLECTION CYCLE .1 Risk of material misstatement of Revenue .2 Risk of material misstatement of Accounts Receivable. AUDIT PROCEDURE FOR SALES AND COLLECTION .1 GENERAL AUDIT PROCEDURES FOR SALES AND COLLECTION CYCLE AT PWC VIETNAM .1 General understanding of customers .2 Evaluation of the internal control system for sales and collection cycle. 11 Author: Vo Minh Truong – K18405CA Lecturer: MIntA. Bui Anh Thanh iii 3.3 Audit Program Design .4 Conduct audits of sales and collection cycle .2 GENERAL INFORMATION ABOUT COMPANY TT .3 UNDERSTANDING OF REVENUE CYCLE AT TT .2 Price List & Sales Return Policy.3 Goods delivery/collection .8 Business Performance Review .9 Segregation of duties .6 TEST OF CONTROLS .2 Gross margin analysis .8 SUBSTANTIVE TEST ON SALES .1 Test revenue transactions for completeness .2 Test revenue transaction .3 Examine for returned goods .4 Cut-off test .9 SUBSTANTIVE TEST ON ACCOUNTS RECEIVABLE .1 Account Receivable confirmation.2 Doubtful debt Aging.
44 Author: Vo Minh Truong – K18405CA Lecturer: MIntA. Bui Anh Thanh iv COMMENTS AND RECOMMENDATIONS .10 COMMENT ON THE AUDIT PROCEDURES FOR REVENUE AT PWC VIETNAM.11 THE STRENGTHS AND WEAKNESSES OF THE THESIS. 50 Author: Vo Minh Truong – K18405CA Lecturer: MIntA. Bui Anh Thanh v LIST OF TABLES AND FIGURES Figure 1: PwC’s organizational structure.
2 Figure 2: Accounts in the Sales and Collection cycle. 5 Figure 3: PwC's initial assessment on internal control. 25 Figure 4: Planned risk assessment. 25 Figure 5: Audit guide for sampling in Test of Controls.
29 Figure 6: Test of Controls [1. 29 Figure 7: Test of controls [3. 30 Figure 8: Test of controls [4. 30 Figure 9: Test of Controls [5.
31 Figure 10: Test of Control [6. 31 Figure 11: Lead Schedule - Revenue. 32 Figure 12: Trend analysis. 33 Figure 13: Gross margin analysis.
34 Figure 14: Missing invoices review. 35 Figure 15: Summary for test revenue transaction. 36 Figure 16: Template for test revenue transaction. 37 Figure 17: Working paper for test revenue transaction.
38 Figure 18: Summary for cut-off test. 39 Figure 19: Working paper for cut-off test. 39 Figure 20: Lead Schedule - Accounts Receivable. 40 Figure 21: AR Turnover.
40 Figure 22: Breakdown – Accounts Receivables. 41 Figure 23: AR confirmation report. 41 Figure 24: Alternative test. 42 Figure 25: Debt aging report.
43 Figure 26: Test translation. 44 Author: Vo Minh Truong – K18405CA Lecturer: MIntA. Bui Anh Thanh vi LIST OF ABBREVIATIONS Abbreviation Explanation AR Account Receivables CA Chief Accountant COGS Cost of Goods Sold EXW EX Works FS Financial Statements GA General Accountant GD General Director GDN Goods Dispatch Note GL General Ledger LC Letter of Credit OM Overall materiality PM Performance materiality SO Sales order SUM De minimis level T/T telegraphic transfer VAT Value-added tax Author: Vo Minh Truong – K18405CA Lecturer: MIntA. Bui Anh Thanh OVERVIEW 1.
Report rationale Revenue is an essential item on the financial statements, especially the company that I am going to report on is a manufacturer. The users of financial information have a tendency to be interested in revenue in order to assess the business, estimate the potential profit, anticipate the future value and make decision on investment. Furthermore, revenue cycle is a complicated section in which a huge number of transactions occur during the years. As a result, the item normally contains a high risk of fraud and errors, even if the situation is subjective or objective.
Also, revenue is closely related to tax payments which is a legal obligation, so the discrepancy required to be minimized at most as possible. Hence, the author has chosen to carry out the topic “AUDIT PROCEDURE FOR SALES AND COLLECTION CYCLE BY PWC VIETNAM AT COMPANY TT “. The topic would give the readers valuable insights to the audit procedures for sales and collection cycle in practice. Report objectives - Describe audit procedures for sales and collection cycle at PwC Vietnam.
- Illustrate audit process for revenue at Company TT (client) - Analyze and assess for the audit procedure for revenue at PwC Vietnam. - Clarify the extent of compliance with Vietnamese Standards on Auditing in the audit procedures. Report methods - Observe and perform practically the engagement, then simulate the process by numerical information. - Get specific insight by making inquiry from associate and senior staff, who have experiences in the audit.
- Reference from the archived engagement and the thesis in the previous period. Author: Vo Minh Truong – K18405CA Lecturer: MIntA. Bui Anh Thanh 4. Report scope and limitations - Scope: Audit procedure for sales an collection cycle of PwC Vietnam at Company TT.
- Limitation: Sales and collection cycle is a complicated section which is different from every client by their industry, nature and term payment. The scope is focusing on a manufacturer, whose risk on the section is lower than other’s industry such as finance, banking, construction and so on. Report structure The structure of this report is as follows: Overview chapter Chapter 1: Introduction to PwC Vietnam Chapter 2: Literature Review Chapter 3: Audit procedure for Sales and Collection cycle Chapter 4: Conclusion and recommendation Author: Vo Minh Truong – K18405CA Lecturer: MIntA. Bui Anh Thanh 1 CHAPTER 1 INTRODUCTION TO PWC VIETNAM 1.1 Introduction to PwC Global William Cooper, the precursor of PwC Global, was founded in 1984.
After seven name changes, the company is now known as Cooper Brothers and mostly operates in the business industry. By 1998, Price, Holy Land, and Waterhouse had merged to form the largest auditing firm in history. From there, Cooper Brothers became PriceWaterHouseCoopers, which was later shortened to PwC for ease of usage.2 Introduction to PwC Vietnam PricewaterhouseCoopers arrived in Vietnam in 1994. PricewaterhouseCoopers Vietnam Co.
was renamed PricewaterhouseCoopers (Vietnam) Co. PwC Vietnam did not exist in isolation from PwC's other nations, which are all controlled by a network with headquarters in the United Kingdom. PwC Thailand, PwC Cambodia, PwC Laos, and PwC Malaysia are all part of the same network as PwC Vietnam. Over the past 20 years of operating, PwC Vietnam has expanded its customer network to all 63 provinces and cities across the country and built good relationships with key officials in various industries as well as financial institutions, businesses in Vietnam.
Not only that, the relationship as well as the trust of foreign organizations in PwC Vietnam has been increasingly strengthened and consolidated, which has helped PwC become a reliable destination for many types of customers.3 Services of PwC Vietnam PwC Vietnam provides high-quality, industry-focused services to clients by creating and cultivating strong interpersonal relationships to truly understand their client. PwC Vietnam provides extra services such as Deals, Consulting, and even service packages intended for specific customer groups such as private firms, Japanese enterprises, and enterprises, in addition to similar services to PwC Global. Korean, Chinese, and Taiwanese firms, in particular: Author: Vo Minh Truong – K18405CA Lecturer: MIntA. Bui Anh Thanh 2 - Assurance and Audit - Deals - Consulting - Tax - Legal - Private business services 1.4 Organizational structure of PwC Vietnam The structure consists of six department as figure 1: Figure 1: PwC’s organizational structure Assurance line provides assurance on the financial performance and operations of business.
The department can also help businesses improve its external financial reporting and adapt to new regulatory requirements, including Vietnamese Accounting System, Vietnamese Accounting Standards and International Financial Reporting Standards (IFRS) Author: Vo Minh Truong – K18405CA Lecturer: MIntA. Bui Anh Thanh 3 Consulting line provides a wide range of service: - Transaction Services - Corporate Finance and Valuation - Deals Strategy: Corporate Strategy Business, Market Entry Strategy, Merger & Acquisition Strategy. - Tax Services PwC Legal Vietnam’s services provide an unrivalled level of support to clients, in fields: - Market entry - Mergers & Acquisition, Dispute resolution - Real estate - Intellectual property & technology transfer - Employment & human resources - Banking & financial services - Corporate compliance / entity governance compliance - International company restructuring Accounting department manages the company's cash flow including receipts and expenses such as administrative expenses, travel expenses. IT department manages employees’ electronic devices and solves technical issue raised by staff via support center site.
HR department is responsible for planning projects, allocating human resources to job and calculate salary monthly. Author: Vo Minh Truong – K18405CA Lecturer: MIntA. Bui Anh Thanh 4 CHAPTER 2 LITERATURE REVIEW 2.1 Audit According to Arens, Elder and Beasley (2012), an assurance service is an independent professional service that enhances the quality of information for users of financial statements. Such services are valued because the assurance provider is independent and perceived as being unbiased with respect to the information examined.
Individuals who are responsible for making business decisions seek assurance services to help improve the reliability and relevance of the information used as the basis for their decisions. In an audit of financial statements, management asserts that the statements are fairly stated in accordance with applicable U. or international accounting standards. An audit of these statements is a form of attestation service in which the auditor issues a written report expressing an opinion about whether the financial statements are fairly stated in accordance with the applicable accounting standards.
These audits are the most common assurance service provided by CPA firms. Auditing is the accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria. Auditing should be done by a competent, independent person. To do an audit, there must be information in a verifiable form and some standards (criteria) by which the auditor can evaluate the information.
The criteria for evaluating information also vary depending on the information being audited. In the audit of historical financial statements by CPA firms, the criteria may be U. generally accepted accounting principles (GAAP) or Inter- national Financial Reporting Standards (IFRS).