UNIVERSITY OF ECONOMICS AND LAW FACULTY OF ACCOUNTING AND AUDITING --- GRADUATION THESIS AUDIT PROCEDURE OF FIXED ASSETS AT ABC COMPANY BY DELOITTE VIET NAM INSTRUCTOR: HOÀNG THỊ MAI KHÁNH STUDENT: NGUYỄN NGỌC BẢO CHÂU STUDENT’S ID: K194050739 CLASS: K19405CA HO CHI MINH CITY, APRIL 2023 INSTRUCTOR’S COMMENT. Ho Chi Minh City, April 2023 Certified by Instructor THANK YOU NOTE On the very first note, I want to thank the Faculty of Accounting and Auditing for giving me the ability and provided help to me for completing this report. The successful accomplishment of this report is the outcome of the contribution of a number of people to whom I am grateful and want to thank them from the very deep of my heart. I am very grateful to my supervisor Hoang Thi Mai Khanh, The Master, University of Economics and Law for all her kind of cooperation and guidance in preparing this report.
Her professional advice enriched me to a great extent at the time of preparing this report. I am also indebted to BOD and all of you working at Deloitte Viet Nam Company Limited who kindly spared for me much of their precious time in giving me not only support and priceless information but also the opportunity to complete my Internship in their reputed organization. Once again, I would like to thank the teachers and brothers and sisters. I wish teachers and brothers a lot of health and good work.
Ho Chi Minh City, April 2023 Nguyen Ngoc Bao Chau i TABLE OF CONTENTS TABLE OF CONTENTS. i LIST OF TABLES.III LIST OF DIAGRAMS. iv LIST OF ABBREVIATIONS AND TERMINOLOGIES. V AUDIT OF FIXED ASSETS AT DELOITTE VIETNAM COMPANY.
The needs of the study. Scope and limitation of the study. 3 CHAPTER 1: THEORETICAL BACKGROUND OF FIXED ASSETS AND FIXED ASSETS DEPRECIATION .2 Principle of recognition and evaluation fixed assets .2 The characteristics of fixed asset depreciation .3 Principles of recognition and evaluation fixed assets .3 Auditing the fixed assets .2 Common errors occur during auditing fixed assets .3 Control procedure for fixed assets .4 Audit procedure for auditing the fixed assets. 11 CHAPTER 2: APPLICATION OF FIXED ASSETS AUDIT AT DELOITTE VIET NAM IN REALITY AND ILLUSTRATION CASE FOR FIXED ASSETS AUDIT AT ABC COMPANY .1 Introduction to Deloitte Vietnam.1 History and development of Deloitte Vietnam .3 Business service of Deloitte Vietnam .4 Organizational Structure of Deloitte Vietnam HCM Branch .5 Introduce Deloitte’s audit tools .2 Application of audit of fixed assets audit at Deloitte Viet Nam in reality and illustrative case for fixed assets audit at ABC company.2 Getting understanding of internal control and process .4 Determine performance materiality (PM).5 Tests of control.
38 CHAPTER 3: REMARKS AND SUGGESTIONS TO THE APPLICATION OF FIXED ASSETS AUDIT AT DELOITTE VIETNAM IN REALITY .1 Remarks on the audit of fixed assets at Deloitte Viet Nam. 63 iii LIST OF TABLES Table 1. Fixed asset objectives. Deloitte Vietnam’s headquarters information.
Deloitte Vietnam’s branch information. Basic information of ABC Company. Accounting policies for fixed asset at ABC Company. Fixed asset segregation of duties at ABC Company.
Flow of transactions. Fixed assets depreciation analysis. ABC Company data. Financial ratio analysis.
ABC’s IPE testing. 53 iv LIST OF DIAGRAMS Diagram 1. History of Deloitte Vietnam. The management apparatus in Deloitte Vietnam.
The structure of Audit and Assurance Department. 24 v LIST OF ABBREVIATIONS AND TERMINOLOGIES FS: Financial Statement FA: Fixed assets BS: Balance sheet GL: General Ledger CA: Chief Accountant FD: Financial Director GA: General Accountant TOD: Test of Details BOD: Board of Directors CIP: Construction in proress PO: Purchase order AP: Account payable MLP: Management letter point PM: Performance Materiality CTM: Clearly Trivial Misstatements D&I: Design and Implementation testing IPE: Information provided by the entity testing 1 AUDIT OF FIXED ASSETS AT DELOITTE VIETNAM COMPANY INTRODUCTION 1. The needs of the study The current unprecedented rapid development of society has made the management system of businesses more complicated and difficult to control. The agency issue is always a hot topic, causing difficulties for owners and investors about the truthfulness of financial information received from the Board of Directors.
On the other hand, thanks to policies to promote economic development from the Government, the capital market is on the rise so business owners try to show the good points of the business, sometimes, in a untruthful way. Because of that, the information published by the enterprise has not received much trust from investors, so the capital market can hardly develop. Realizing the urgency of the matter, the independent audit service was born as a service to enhance the truth and fairness of the FS before they were publicly announced. By examining assertions of data presented in the FS based on the issued Vietnamese Auditing Standards, the auditor give an auditor's opinion in accordance with the audit evidence obtained.
As a result, users of FS will be able to make correct and timely decisions. In an audit, fixed assets is always considered carefully by the auditor for the following reasons: • Fixed assets account for a large proportion of Assets presented in the BS, especially for manufacturing entities. • Fixed assets between entities have different characteristics, so the audit of fixed assets should be evaluated and considered differently between each type of enterprise. • The fixed assets depreciation expenses affect their net book value and are often great value.
If depreciation expense is determined incorrectly, it will directly affect the 2 data presented on both the BS (Net book value of fixed assets) and Income statement (Expenses), leading to errors in the determination of the entity's Operating Revenue. With the above reasons, it can be seen that the fixed asset is an item containing many risks related to the truth and fairness of the FS, so the auditor always evaluates the fixed asset as a key item and is subject to strict audit. With the importance of this item together with the deep concern and work experience in the fixed asset audit process, the topic "Audit procedure of fixed assets at ABC company by Deloitte Viet Nam." is chosen to be presented and discussed. Study objectives Analyse the audit procedures of fixed asset and fixed asset depreciation at Deloitte Vietnam Company Limited.
Describe fixed assets audit procedures of Deloitte Viet Nam at ABC company in reality. Recommend suggestions for audit of fixed assets at Deloitte Vietnam Company Limited. Study subject The subject of the study is the audit process of fixed assets at Deloitte Vietnam. Scope and limitation of the study The topic focuses on studying the fixed asset audit cycle and only access to a few documents about the client's fixed assets.
At the same time, due to limited practice time and not much time for research and practical work, it is not possible to fully understand the contents related to the research topic. Besides, the issue of customer information security is highly and strictly required by Deloitte Vietnam Co., so the data, information, evidence, and samples in this report are for reference only. Thus, the reality of the topic is reduced inevitable. Study method Document research: through various sources, such as: Textbooks, Vietnamese Accounting Standards, Vietnamese Standards on Auditing, Vietnamese Accounting System and related current circulars; Auditing Model Program of the Vietnam Association of Certified Public Accountants (VACPA) Get an overview of Deloitte Vietnam fixed assets audit procedures, review some audit documents and working papers provided by the company and select the specific clients.
Inquire auditors at Deloitte company. 4 CHAPTER 1: THEORETICAL BACKGROUND OF FIXED ASSETS AND FIXED ASSETS DEPRECIATION 1.1 Definition “Fixed assets are assets that contain great value and their useful life can be remarkably long which can last for many accounting periods. Fixed assets items involve in one or more production and business cycles. The fixed assets is items that account for a significant proportion of the asset item and on the financial statement in general.” In general, property, plant and equipment are considered to be equipment of the company.
They reflect the productive capacity and application of science and technology in the company's business. It is one of the most important factors in creating sustainable growth, increasing labor productivity and thereby reducing costs and reducing the cost of products and services. Furthermore, fixed assets are assets used for production and business purposes and not for business purposes. However, property, plant and equipment are gradually depreciated over their useful life.
Their value is gradually converted into operating costs and recovered after the sale of goods and services. In order to use fixed assets effectively, companies need to maintain and repair fixed assets in addition to using rationally capacity to develop production. Depending on the nature of repairment and the type of asset, the repair costs are treated differently. Fixed assets can be classified according to the following common criteria: • By Form: Fixed assets are divided into tangible and intangible fixed assets.
• By Ownership: Assets are classified into existing assets and outsourced fixed assets lease 5 • By Source: Fixed assets are classified into fixed assets invested from equity; Fixed assets are invested from loan capital; Fixed assets due to capital contribution; Fixed assets to be sponsored, donated, … • According to the form with the ownership: Fixed assets are divided into tangible fixed assets, intangible fixed assets, financial lease fixed assets. This is the most common classification and is also the classification presented on the trial balance.Therefore, this criterion will be used for the classification of fixed assets. ❖ Tangible fixed assets According to VAS 03 - Tangible fixed assets, tangible fixed assets are assets with physical form held by enterprises which would be involved in many production proccess and business activities. These assets must at the same time satisfy the following 4 recognition criteria: 1.
It is certain that future economic benefits will be obtained from the use of that asset; 2. The cost of an asset must be reliably determined; 3. The estimated usage time is over 1 year; 4. Having sufficient value criteria according to current regulations.
❖ Intangible fixed assets According to VAS 04 - Intangible fixed assets, intangible fixed assets are assets that have no physical form but can be valued and are held for use by the enterprise in production, business, service provision or lease to other entities and simultaneously satisfy the following 4 recognition criteria: 1. It is certain that future economic benefits will be obtained from the use of that asset; 2. The cost of an asset must be reliably determined; 3. The estimated usage time is over 1 year; 6 4.
Having the appropriate value according to the current regulations (valued at VND 30 million or more). ❖ Financial lease fixed assets According to VAS 06 - Lease of assets, finance lease fixed assets are fixed assets formed in the form of financial leases. Lease is an asset lease in which the lessor has transferred most of the risks and benefits associated with the ownership of the property to the lessee. Ownership of the property can be transferred at the end of the lease term 1.2 Principle of recognition and evaluation fixed assets The historical cost of tangible fixed assets due to purchase includes the purchase price (excluding commercial discounts) and expense directly related to bringing the asset to a ready-to-use state, such as initial shipping and handling expenses; expenses for installation and commissioning, expenses for experts and other directly related expenses.
The historical cost of an intangible asset includes its purchase price (excluding commercial discounts), taxes (excluding refundable taxes) and expense directly attributable to bringing the asset into service. In case the land use rights are purchased together with the purchase of houses and structures attached to land, the value of land use rights must be determined separately and recorded as intangible fixed assets.