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Introduction to Assurance & Auditing

This document provides an introduction to assurance and financial statement auditing. It outlines the learning objectives which are to understand the nature of assurance and auditing services, distinguish between different types of audits and auditors, know the development of the audit profession, understand the reasons for financial statement audits, and professional requirements for auditors and audit firms. The document defines assurance services, classifies different types of audits, and describes the roles of auditors, audit firms, and professional bodies.

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18 views11 pages

Introduction to Assurance & Auditing

This document provides an introduction to assurance and financial statement auditing. It outlines the learning objectives which are to understand the nature of assurance and auditing services, distinguish between different types of audits and auditors, know the development of the audit profession, understand the reasons for financial statement audits, and professional requirements for auditors and audit firms. The document defines assurance services, classifies different types of audits, and describes the roles of auditors, audit firms, and professional bodies.

Uploaded by

Thiện Nhân
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

BICH PHAM - UEH - ISB 5/22/2018

Topic 1
Relevant guidance

INTRODUCTION TO ISA/VSA 200 Overall objectives of the independent auditor and the conduct
of an audit in accordance with ISAs
Law on Independent Audit No 67/2011/QH12

ASSUARANCE & FS
AUDITING

2018 BICH PHAM - UEH 2

LEARNING OBJECTIVES CONTENT


Upon completion of this chapter you will
• Understand the nature of assuarance & auditing services Definition of Assurance and Auditing
• Be able to distinguish different types of audits and
auditors. Classification of audit
• Know the development of audit profession.
• Understanding the reasons giving rise to demand for The develoment of audit profession
financial statement audit.
• Understand the professional requirements of auditors and The roles of independent audit in the economy
audit firms and be able to describe internal structure of
an audit firm. Auditor, Audit firms and Professional bodies

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WHAT ARE ASSURANCE 1. WHAT IS AUDIT?


SERVICES?
Assurance services: a broad range of independent professional services
that improve the quality of information, or its context, for decision makers. Entrust resources

 enhance the degree of confidence in the information


2 types: Investors Managers
◦ Attestation services  increase the reliability of info
◦ Other assurance services  put info in a form or context that facilitates Required periodic reporting
decision making. on use of resources

Attestation services including


◦ Audit/examination
Verification by independent expert
◦ Review
◦ Agreed-upon procedures  a demand for auditing
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1. What is Auditing? 1. What is Auditing?


Auditing has been defined as: Assertions about
economic actions and
“A systematic process of objectively obtaining and evaluating events

evidence regarding assertions about economic actions and


events to ascertain the degree of correspondence between
Independent
those assertions and established criteria and communicating and
obtaining and Degree of Issuance of audit
evaluating correspondence report
the results to interested users.” competent evidence
auditor
A statement of Basis Auditing Concepts (ASOBAC)

Established criteria

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2. Audit classification 2.1. Types of audits


Operational audit Operational audit

AUDITS Compliance audit AUDITS

Financial statement audit


AUDIT AUDIT
CLASSIFICATION CLASSIFICATION
Internal auditors
Operational audit: value for money audit, performance audit or
AUDITORS Government auditors efficiency audit. Chủ thể
Operational audit is a more comprehensive activity designed to
Independent/External analyze organization structure, internal systems, work flow and
auditors
managerial performance.
It is usually associated with issues of efficiency, effectiveness and
2018 BICH PHAM - UEH 9 2018 economy. BICH PHAM - UEH 10

2.1. Types of audits [Link] of audits


Operational audit Operational audit

AUDITS AUDITS Compliance audit

AUDIT AUDIT
CLASSIFICATION CLASSIFICATION

•A systematic review of part or all of an organization’s activities to Determine the extent to which rules, policies, laws, covenants, or
evaluate whether resources are being used effectively and government regulations are followed by the entities being audited
efficiently Chủ thể Chủ thể
e.g., examination of tax returns of individuals or companies by the
•Assess performance, identify area for improvement, and develop tax authorities
recommendations

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[Link] of audits 2.2. Types of auditors


Operational audit

•Are the employees of the entities being audited


AUDITS Compliance audit
•Conduct financial, internal control, compliance, operational and
forensic audits within their organization Operational audit
Financial statement
audit •Provide assurance and consulting services to their entities
AUDIT
AUDITS Compliance audit
CLASSIFICATION

Financial statement
• To obtain reasonable assurance about whether the financial audit
Chủ thể material misstatement, AUDIT
report as a whole is free from CLASSIFICATION
whether due to fraud or error, thereby enabling the auditor to
express an opinion on whether the financial report is prepared, Internal auditor
in all material respects, in accordance with an applicable
financial reporting framework. AUDITORS
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2.2. Types of auditors 2.2. Types of auditors


• May practice as sole proprietor or as a member of a CPA/audit
firm
Operational audit
•Are employed by government agencies • Are not the employees of the entities being audited
•Tax officers, State Auditors, Government Inspectors, … • Provide a range of both assurance and non-assurance
Operational audit AUDITS Compliance services
audit
to their clients

AUDITS Compliance audit Financial statement audit


AUDIT
CLASSIFICATION
Financial statement audit Internal auditor
AUDIT
CLASSIFICATION
Internal auditor AUDITORS Government auditor

AUDITORS Government auditor Independent/External


auditor

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15

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3. History and development of audit profession in


the world 3. The development of audit
Before 1900 From 1900 until now profession in Vietnam
Objective Detect error and Give an opinion about the true
1991: the first two local audit firms, namely VACO and AASC were established
fraud of staff and fair of accounting figure
1999: the first series of 6 VSAs were issued.
Method The detailed Auditing approach where not
verification of all transactions had to be
every transaction tested- Audit sampling Till 30 May 2005, there are 33 VSAs issued, most of which were closely
Accessing the internal control adapted from ISAs.
system
Audited in Informatic 2012: Law on Independent Audit No 67/2011/QH12 took effect.
environment
2012: 2005’s VSAs were replaced by a new set of VSAs.
Extent audit approach to risk
based approach
Until now, MOF has issued a total of 47 new standards on Auditing and
User Owner Stakeholder, Investor, Debtor,
Bank… Assurance services.

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4. The roles of external audit in the economy


International Audit firms - BIG4

Entrust resources

Investors Managers

Required periodic reporting


on use of resources

Verification by independent expert


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4. The roles of external audit in the economy 4. The roles of external audit in the economy

• The difficulty in accessing information


Information is resources
• The motivation of informant
likely to be RISK • The large volume and complexity of
distorted. information
What measures
The users directly check the information
should be MEASURES
taken? Strengthen the legal responsibility of the
Board of Directors
Compulsory audited financial statements

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5. Auditors, Audit firms and Professional bodies 5. Auditor, Audit firms and Professional bodies
a. External auditors Certified Public Accountant (CPA)
An auditor must meet the following standards (Article 14 - Law on
Independent Audit):

Qualification a) Having full capacity for civil acts;


Experience
b) Having good professional ethics, sense of responsibility, integrity,
honesty, and objectivity;
CPA c) Having degree of university or higher in finance, banking,
accounting, auditing disciplines or other disciplines as prescribed by
the Ministry of Finance;
d) Having an auditor’s certificate in accordance with regulations the
Ministry of Finance.
EXTERNAL AUDITORS
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5. Auditor, Audit firms and Professional bodies 5. Auditor, Audit firms and Professional bodies
Certified Public Accountant Certified Public Accountant
Conditions for the candidates: (Circular No 129/2012/TT-BTC ) Candidates for Audit practitioner certificates must take the tests on
7 subjects:
- Professionally ethical, honest, upright, and law-abiding;
- Having the Bachelor’s degree or higher in finance, banking, accounting,
1. Economic law and the Law on Enterprise;
2. Advanced finance and financial management;
audit;
3. Advanced tax and tax administration;
- Having worked in finance or accounting for at least 60 months from the
4. Advanced public sector accounting, financial accounting;
month of graduation written on the higher education graduation decision at 5. Advanced audit and assurance services;
the time of exam registration; or having worked as an audit assistant in an 6. Advanced financial analysis;
audit enterprise for at least 48 months from the month of graduation 7. C-level qualification in one of the following foreign languages:
written on the higher education graduation decision at the time of exam English, Russian, French, Chinese, German.
registration; The candidates that pass all 7 subjects, and the total mark (except of
- Completely and correctly submit the exam application and fee as prescribed. foreign language subjects) is 38 or more, are considered passed.

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5. Auditor, Audit firms and Professional bodies SERVICES PROVIDED BY AUDIT FIRMS
b. Audit firms •Assurrance service  Audit
 Review
 Other assurance services
Partner
•Related services  Agreed-upon procedures regarding
financial information
Manager •Tax consultance  Compilation of financial information
 Tax consultancy/ Tax planning
Senior •Management consultance  Financial consultancy/ Strategy
development
•Others  Education/ Training
Staff Assistant
 Head hunter

Career Path
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5. Auditor, Audit firm and Professional bodies 5. Auditor, Audit firm and Professional bodies
Professional Organizations in Vietnam Professional Organizations in the world
The Vietnam Association of Certified Public Accountants (VACPA)
 established on 15/04/2005 and started to operate from International Federation of Accountants (IFAC) is the global
01/01/2006. organization for the accountancy profession dedicated to
 68th member of the Vietnam Union of Science and
serving the public interest by strengthening the
Technology Associations (VUSTA)
 Member of the Confederation of Asian and Pacific profession and contributing to the development of strong
Accountants (CAPA) since 2010 international economies.
 Member of the International Federation of Accountants (IFAC)
on 11 November 2015.

2018 BICH PHAM - UEH 29 2018 BICH PHAM - UEH 30

5. Auditor, Audit firm and Professional bodies 5. Auditor, Audit firm and Professional bodies
Professional Organizations in Vietnam Professional Organizations in the world
The Vietnam Association of Certified Public Accountants (VACPA)
 established on 15/04/2005 and started to operate from International Federation of Accountants (IFAC) is the global
01/01/2006. organization for the accountancy profession dedicated to
 68th member of the Vietnam Union of Science and
serving the public interest by strengthening the
Technology Associations (VUSTA)
 Member of the Confederation of Asian and Pacific profession and contributing to the development of strong
Accountants (CAPA) since 2010 international economies.
 Member of the International Federation of Accountants (IFAC)
on 11 November 2015.

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5. Auditor, Audit firm and Professional bodies


Professional Organizations in the world 5. Auditor, Audit firm and Professional bodies

Boards and Committees of IFAC:


Professional Organizations in the world
 International Auditing and Assurance Standards Board (IAASB)
 International Accounting Education Standards Board (IAESB) The American Institute of Certified Public Accountants (AICPA)
 International Ethics Standards Board for Accountants (IESBA) - 1887, the American Association of Public Accountants (AAPA)
 Professional Accountants in Business Committee (PABC) was formed.
 International Public Sector Accounting Standards Board (IPSASB) - 1917, the name was changed to the American Institute of
 Transnational Auditors Committee (TAC) Accountants
 Compliance Advisory Panel (CAP) - 1957, it changed to its current name of the American Institute
 Professional Accountancy Organization Development Committee of Certified Public Accountants
(PAODC)
 Small and Medium Practices Committee (SMPC)

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6. The process of a financial statement 6. The process of a financial statement


audit audit
Planning
Pre-planning
Completing &
Planning Performing Procedures to accept or continue relationship with clients
Reporting
Assess compliance with ethical requirements, including independence.
Understand the terms of the audit engagement.
Understanding
Pre-planning and assessing Reviewing Planning
internal control Obtain a basis understanding of the business background and internal
control system.
Tests of control Determine materiality level & perform audit risk assessment:
Auditor’s
Planning and Tests of
report Prepare an audit program which outlines the nature, timing and extent of
details
audit procedures required to gather evidence.

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6. The process of a financial statement 6. The process of a financial statement


audit audit
Performing Performing
•Tests of controls are tests designed to obtain reasonable assurance that internal
Risk assessment procedures; controls are in place and effective.
•Substantive procedures are designed to obtain evidence as to the
completeness, accuracy, and validity of the data produced by the accounting
Subsequent audit procedures: system. These tests aim to detect material misstatements on financial
statements.
oTests of control.
oSubstantive tests includes Substantive Analytical
procedures and Tests of details.

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6. The process of a financial statement 6. The process of a financial statement


audit audit
Completing and reporting Completing
Reviewing: Auditor’s report

•Was the collected audit evidence sufficient to provide an opinion? Issue auditor’s reports
◦Unmodified Opinion
•Have the aggregated effect of unadjusted audit differences been below the ◦Qualified Opinion
acceptable level? ◦Adverse Opinion
•Is the audit working paper complete? ◦Disclaimer of Opinion

•In general, the financial situation and business results are reasonable?
Resolve events occurring after issuing the auditor’s report

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THANKS FOR

YOUR LISTENING

11

Common questions

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The audit profession has evolved from focusing solely on detecting errors and fraud through detailed transaction verification to forming opinions on the truth and fairness of accounting figures using audit sampling and risk-based approaches. In Vietnam, the profession's evolution began in 1991 with the establishment of the first local audit firms. Significant milestones include the issuance of VSAs from 1999 and the implementation of the Law on Independent Audit in 2012, which updated auditing standards in compliance with international norms .

Assurance services provide a broader range of independent professional services that aim to improve the quality and context of information for decision-makers, thereby enhancing confidence. They include attestation services, like audits, intended to increase information reliability. In contrast, traditional auditing focuses specifically on verifying financial statements' compliance with established criteria, often related to detecting errors or fraud .

The main stages of a financial statement audit include planning, performing, and completing/reporting. Planning involves understanding the client's business and assessing internal controls. Performing comprises risk assessment and substantive tests to ensure data validity and detect material misstatements. Completing and reporting ensure audit evidence sufficiency before issuing an audit report that states opinions on financial disparities, ranging from unmodified to disclaimer opinions .

Audit firms offer a range of services beyond just auditing, including assurance, tax consultancy, management consultancy, and financial strategy development. These services help businesses improve operational efficiency, comply with regulations, and develop strategic initiatives, thereby adding value beyond verifying financial accuracy. Audit firms also provide advisory services that improve business decision-making and processes .

The Vietnam Association of Certified Public Accountants (VACPA) is pivotal in unifying the profession within Vietnam and integrating it into the international community. As a member of VUSTA and IFAC, VACPA aligns local practices with international standards, enhancing the quality and credibility of Vietnamese accounting. It supports the profession by promoting ethics, education, and continuing professional development for accountants in Vietnam .

The demand for financial statement audits arises from the need for verification by an independent expert to ensure the accurate reporting of resource use. This verification is essential for managers who must periodically report on resource utilization and for investors who entrust these resources and require assurance regarding their usage .

The Law on Independent Audit in Vietnam mandates that auditors have full civil capacity, good professional ethics, a degree in relevant fields, and an auditor's certificate. Candidates require at least 60 months of experience in finance or accounting, or 48 months as an audit assistant, along with passing exams in subjects like finance, tax, and audit services .

The major types of audits include operational audits, compliance audits, and financial statement audits. Operational audits assess the efficiency and effectiveness of organizational activities. Compliance audits determine adherence to laws and regulations. Financial statement audits aim to verify the accuracy of financial reports, ensuring they are free from material misstatement, allowing auditors to express an opinion on the reports' compliance with financial reporting frameworks .

International professional organizations like IFAC and its committees, such as IAASB and IESBA, contribute to global standards by developing principles that guide auditing and accounting practices. These bodies work to strengthen the profession, ensuring that global economies benefit from robust, transparent financial reporting. They establish ethical standards and promote uniform practices to enhance reliability and comparability of financial information worldwide .

External audits play a critical role in mitigating information risk by verifying financial statements, which helps ensure that information is free from distortion due to errors or fraud. This verification process increases the reliability of reported financial data, aiding investors and managers in making informed decisions. Additionally, it addresses challenges like the complexity and volume of information, enhancing the legal responsibility of directors and mandating audited financial statements .

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