0 UNIVERSITY OF ECONOMICS AND LAW FACULTY OF ACCOUNTING AND AUDITING BACHELOR THESIS AUDIT PROCEDURE FOR PAYROLL AUDIT BY PWC (VIETNAM) LIMITED Lecturer: Th.S Hoàng Thị Mai Khánh Student: Trịnh Gia Lam Student ID: K194050751 Class: K19405CA Ho Chi Minh City, 17th April 2023 i ACKNOWLEDGEMENTS When I was putting my thesis into practice, I received a lot of enthusiastic support and help. This helped me to overcome any obstacles and end this challenging but important time. First of all, I would like to extend my sincere gratitude to the instructors of the Accounting Department - Auditing in particular as well as the University of Economics and Laws in general for devoting their entire heart, soul, and spirit to being able to impart important knowledge that students need in order to succeed in their future career paths. I want to express my gratitude in particular to the instructor - Ms.
Hoang Thi Mai Khanh. She diligently planned, wholeheartedly counseled, commented, guided, and created favorable conditions for me to complete my report despite the fact that it was a busy period for her. With my limited education and experience, your devoted assistance gives me the chance to recognize my weaknesses and become a better version of myself. Additionally, I would like to thank the auditing department at PWC (Vietnam) Limited, which frequently sympathized with me, promptly offered advice, and assisted me in responding to inquiries about the reality of auditing activities as well as the company's policies and regulations on financial matters.
This bachelor thesis was created over the course of eight weeks, which is not a long time and does not present a wealth of information and practical experience, so it will be challenging to avoid and will need to be improved. I eagerly await your insightful criticism so that I can enhance both my report and my expertise in this area. Student Trinh Gia Lam ii TABLE OF CONTENTS ACKNOWLEDGEMENTS. i LIST OF DIAGRAMS, TABLES, FIGURE.
Research scope and subject. 2 CHAPTER 1: INTRODUCTION ABOUT THEORETICAL BASIS OF PAYROLL AUDIT .1 Definition of payroll .2 Account and transactions in payroll .3 Business functions in the cycle and related documents and records .5 Control payroll - the methodology for designing tests of controls and substantive tests .6 How to book account in salary process according to Circular 200 .1 Account 334 - payable to employees .2 Account 338 - Other Payable .9 CHAPTER 2: AUDIT PROCEDURES FOR PAYROLL BY PWC (VIETNAM) LIMITED .1 General about PwC .1 History of formation and development. Types of business .3 Organization scale and business situation of PwC Limited Liability Company Vietnam .5 PwC’s organizational structure .2 General audit procedures for financial statement at PwC VietNam .3 Audit procedure for payroll audit by PwC (VietNam) Limited .2 Process of payroll .4 Finish the audit. 36 CHAPTER 3: COMMENTS AND RECOMMENDATIONS.
40 iv LIST OF DIAGRAMS, TABLES, FIGURE List of usage diagrams Diagram 1 :PwC Line of Services .13 Diagram 2 : Organizational structure at PwC Vietnam .15 Diagram 3 : Global PwC Audit Guide 2015. 22 v List of usage tables Table 1 : Summary of Transaction-Related Audit Objectives, Key Controls, Tests of Controls, and Substantive Tests of Transactions for Payroll. 23 Table 3 : How insurance and union dues are calculated from 1/1/2022 to 30/6/2022. 33 Table 4 : How insurance and union dues are calculated from 1/7/2022 to 30/12/2022.
33 vi List of usage figures Figure 1 : Typical accounts in the payroll and personnel cycle. 3 Figure 2 : Classes of Transactions, Accounts, Business Functions, and Related Documents and Records for the Payroll and Personnel Cycle .4 Figure 3 : Risk in payroll system .5 Figure 4 : History of PwC establishment and development .11 Figure 5 : Audit procedure for FSs at PwC VietNam. 17 Figure 6 : Audit tools at PwC .18 Figure 7 : Lead schedule. 25 Figure 8 : Break down.
27 Figure 10 : Compensation for key management. 27 Figure 11 : We expect client to calculate SI, HI, UI based on the above information.28 Figure 12 : Reasonableness SHUI .28 Figure 13 : Summary of payroll sheet. 30 Figure 14 : Check posting. 31 Figure 15 :Number of employee movement in 2022.
31 Figure 16 : New joiner .32 Figure 17 : New leaver. 32 Figure 18 : Recalculate gross salary .33 Figure 19 : Recalculate SIHIUI and Trade Union .34 Figure 20 : How to calculate PIT. 34 Figure 21 : Recalculte PIT deduction .34 Figure 22 : Testing result of recalculate net salary. 35 Figure 23 : Test payment .35 Figure 24 : Reconcile with other sections.
Research rationales We are currently dealing with the effects of the COVID-19 pandemic in addition to the rapid expansion of the global economy and the influence of the fourth industrial revolution, which has slowed down the demand for investments. Therefore, in order to make the best investment choices, investors need a trustworthy source of information. Financial statements in particular are regarded as one of the most useful tools for reflecting the production and financial position of each enterprise. But for a variety of reasons, business owners frequently seek to have the Financial Statements adjusted in their favor.
Therefore, without confirmation from an impartial third party, the accuracy of the Financial Statements cannot be highly assured. The job of the auditor is critical in this circumstance. This is a crucial step in helping to improve the fairness of the information provided in the financial statements, build trust among users of financial statements, and make information more transparent. Payroll are expenses of great value and account for a high proportion in the enterprise's expense structure.
Salary, bonuses, and benefits provided to employees are major economic sectors in the functioning of most businesses. These expenses occur frequently and have a big impact on the financial statements. Therefore, the management of payroll so transparent and tight is always the top concern of the administrators. Thus, research on payroll will help practitioners have the opportunity to consolidate their knowledge and expand their understandings.
The issue was "AUDIT PROCEDURE FOR PAYROLL BY PWC (VIETNAM)" because of the item's importance and relative complexity. Experiment’s objectives Recognize and characterize PwC Vietnam Co.'s general auditing procedure. Describe and analyse PwC Vietnam Co.'s payroll auditing procedure. Research scope and subject The process of auditing payroll, including staff costs, reasonableness of SIHI, bonus, joiner-leaver, compensation for key management at PwC Vietnam Co., is the focus of the report's research.
The scope of the report is Audit procedures reviewed in the fiscal year 2022. Limitation of report: One of the major concerns in the auditing industry, especially for 2 a respected auditing firm like PwC Vietnam, is confidentiality. As a result, the firm shown in the report has been altered with data, a name, and for reference purposes. Report’s methods Since payroll process testing is a metric test, it is advised to apply fundamental testing techniques, such as the ones listed below: - Method for synthetic evaluation and analysis - Balance approach - Procedure for verifying transaction information and account balances 5.
Subject Structure The thesis is broken up into three chapters, in addition to an introduction and conclusion, as follows: - Chapter 1: Introduction about theoretical basis of payroll audit - Chapter 2: Auditing process of payroll audit item in the audit of financial statements performed by PwC Vietnam Co., Ltd - Chapter 3: Comments, assessments and recommendations to improve the audit process of payroll audit of PwC Vietnam Co., Ltd 3 CHAPTER 1: INTRODUCTION ABOUT THEORETICAL BASIS OF PAYROLL AUDIT 1.1 Definition of payroll In many Vietnamese firms and industries nowadays, the word "payroll" is used frequently. Payroll, often known as payroll, salary, etc., refers to a list of employees of a company who are qualified to receive wages and other employment benefits, specify how much each recipient will get. Payroll can refer to a company's record of previous employee payments, including wages and salaries, bonuses and tax deductions, or the company's department of compensation, in addition to the amount each employee will earn for a term of work or activities done. A business has the option of managing every step of the payroll procedure internally or outsourcing payroll development.2 Account and transactions in payroll The overall objective in the audit of the payroll and personnel cycle is, of course, to evaluate whether the account balances affected by the cycle are fairly stated in accordance with applicable accounting standards.
Figure 1: Typical accounts in the payroll and personnel cycle 4 In most systems, the accrued wages and salaries account is used only at the end of an accounting period. Throughout the period, expenses are charged when the employees are actually paid rather than when the labor costs are incurred. Accruals for labor are recorded by adjusting entries at the end of the period for any earned-but-unpaid labor costs.3 Business functions in the cycle and related documents and records The payroll and personnel cycle begins with hiring employees and ends with paying them for the services they performed and the government and other institutions for withheld and accrued payroll taxes and benefits. In between, the cycle involves obtaining services from employees consistent with company objectives, and properly accounting for the services.
- Related documents and records: Figure 2: Classes of Transactions, Accounts, Business Functions, and Related Documents and Records for the Payroll and Personnel Cycle 1.4 Risk Many audits have a minimal risk of material misstatements, even though payroll is often a significant part of total expenses. There are three reasons for this: - Employees are likely to complain to management if they are underpaid. - All payroll transactions are typically uniform and uncomplicated. - Payroll transactions are subject to audit by federal and state governments for income tax withholding, Social Security, and unemployment taxes.
5 Figure 3: Risk in payroll system 1.5 Control payroll - the methodology for designing tests of controls and substantive tests Internal control for payroll is normally highly structured and well controlled to manage cash disbursed, to minimize employee complaints and dissatisfaction, and to minimize payroll fraud. Because of relatively common payroll concerns from company to company, high-quality computerized payroll accounting programs are available. It is usually not difficult for companies to establish good control in the payroll and personnel cycle. For factory and office employees, there are usually a large number of relatively homogeneous, small-amount transactions.
For executives, there are usually fewer payroll transactions, but they are ordinarily consistent in timing and amount. Consequently, auditors seldom expect to find exceptions in testing payroll transactions. Occasionally, control test deviations occur, but most monetary misstatements are corrected by internal verification controls or in response to employee complaints. Even when there are misstatements, they are rarely material.
Tests of controls and substantive tests of transactions procedures are the most important means of verifying account balances in the payroll and personnel cycle. These tests are emphasized because of the lack of independent third-party evidence, such as confirmation, for verifying accrued wages, withheld income taxes, accrued payroll taxes, and other balance sheet accounts. Furthermore, in most audits, the 6 amounts in the balance sheet accounts are small and can be verified with relative ease if the auditor is confident that payroll transactions are correctly entered into the computer and payroll tax returns are correctly prepared. Table 1: Summary of Transaction-Related Audit Objectives, Key Controls, Tests of Controls, and Substantive Tests of Transactions for Payroll Transaction-Related Key Internal Controls Common Test of Common Substantive Audit Objectives Controls Tests of Transactions Recorded payroll - Time records are - Examine time records - Review the payroll payments are for approved by for indication of journal, general work actually supervisor.
ledger, and payroll performed by - Time clock is used - Examine time earnings records for existing employees to record time. large or unusual (occurrence).