Chapter
1
INTRODUCTION TO ASSURANCE
& AUDITING SERVICES
Uyen Nguyen
• Relevant guidance
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
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LEARNING OBJECTIVES
Upon completion of this chapter you will:
• Understand the nature of assurance & auditing services
• Be able to distinguish different types of audits and
auditors.
• Know the development of audit profession.
• Understanding the reasons giving rise to demand for
financial statement audit.
• Understand the professional requirements of auditors
and audit firms and be able to describe internal
structure of an audit firm.
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CONTENT
Definition of Assurance and Auditing
Classification of audit
The development of audit profession
The roles of independent audit in the economy
Auditor, Audit firms and Professional bodies
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• [Link]
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WHAT ARE ASSURANCE SERVICES?
• Assurance services: are a type of independent professional
services that improve the quality of information, or its context,
for decision makers.
à enhance the degree of confidence in the information
• 2 types:
– Attestation services à increase the reliability of info
– Other assurance services à put info in a form or context that facilitates
decision making.
• Attestation services including
– Audit/examination: reasonable assurance
– Review: limited assurance
– Agreed-upon procedures
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1. What is Auditing?
Auditing has been defined as:
“A systematic process of objectively obtaining and
evaluating evidence regarding assertions about economic
actions and events to ascertain the degree of
correspondence between those assertions and established
criteria and communicating the results to interested users.”
A statement of Basis Auditing Concepts (ASOBAC)
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1. What is Auditing?
Assertions about
economic actions and
events
Independent obtaining and Degree of Issuance of audit
and competent evaluating correspondence report
auditor evidence
Established criteria
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Audit vs Review
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• PROFESSIONAL JUDGMENT: An assurance service
engagement requires the exercise of professional
judgment, which involves the application of relevant
training, knowledge and experience in making decisions.
• PROFESSIONAL SKEPTICISM: The auditor should also plan
and perform the assurance engagement with professional
skepticism, which is an attitude that includes a questioning
mind, being alert to conditions that may indicate possible
misstatement due to error or fraud, and a critical
assessment of audit evidence.
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2. Audit classification
Operational audit
AUDITS Compliance audit
Financial statement audit
AUDIT
CLASSIFICATION
Internal auditors
AUDITORS Government auditors
Independent/External
auditors
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2.1. Types of audits
Operational audit
AUDITS
AUDIT
CLASSIFICATION
Operational audit: value for money audit, performance audit or
efficiency audit. Chủ thể
Operational audit is a more comprehensive activity designed to
analyze organization structure, internal systems, work flow and
managerial performance.
It is usually associated with issues of efficiency, effectiveness and
economy. 12
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2.1. Types of audits
Operational audit
AUDITS
AUDIT
CLASSIFICATION
•A systematic review of part or all of an organization’s activities to
evaluate whether resources are being used effectively and
efficiently Chủ thể
•Assess performance, identify area for improvement, and develop
recommendations
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[Link] of audits
Operational audit
AUDITS Compliance audit
AUDIT
CLASSIFICATION
Determine the extent to which rules, policies, laws, covenants, or
government regulations are followed by the entities being audited
Chủ thể
e.g., examination of tax returns of individuals or companies by the
tax authorities
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[Link] of audits
Operational audit
AUDITS Compliance audit
Financial statement
AUDIT audit
CLASSIFICATION
• To obtain reasonable assurance about whether the financial
Chủ thể
report as a whole is free from material misstatement,
whether due to fraud or error, thereby enabling the auditor to
express an opinion on whether the financial report is prepared,
in all material respects, in accordance with an applicable
financial reporting framework.
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2.2. Types of auditors
•Are the employees of the entities being audited
•Conduct financial, internal control, compliance, operational and
forensic audits within their organization Operational audit
•Provide assurance and consulting services to their entities
AUDITS Compliance audit
Financial statement
AUDIT audit
CLASSIFICATION
Internal auditor
AUDITORS
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2.2. Types of auditors
•Are employed by government agencies
•Tax officers, State Auditors, Government Inspectors, …
Operational audit
AUDITS Compliance audit
Financial statement
AUDIT audit
CLASSIFICATION
Internal auditor
AUDITORS Government auditor
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2.2. Types of auditors
• May practice as sole proprietor or as a member of a CPA/audit
firm
Operational audit
• Are not the employees of the entities being audited
• Provide a range of both assurance and non-assurance services
AUDITS Compliance audit
to their clients
Financial statement audit
AUDIT
CLASSIFICATION
Internal auditor
AUDITORS Government auditor
Independent/External
auditor
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Other applications of the assurance function
Ø Comprehensive audits- Integrated audit
Ø Forensic audits: trained in detecting,
investigating and deterring fraud and white-
collar crime.
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3. History and development of audit
profession in the world
Before 1900 From 1900 until now
Objective Detect error and Give an opinion about the true and
fraud of staff fair of accounting figure
Method The detailed Ø Auditing approach where not
verification of all transactions had to be
every transaction tested- Audit sampling
Ø Accessing the internal control
system
Ø Audited in Informatic
environment
Ø Extent audit approach to risk
based approach
User Owner Stakeholder, Investor, Debtor,
Bank…
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3. The development of audit profession
in Vietnam
• 1991: the first two local audit firms, namely VACO and AASC
were established
• 1999: the first series of 6 VSAs were issued.
• Till 30 May 2005, there are 33 VSAs issued, most of which
were closely adapted from ISAs.
• 2012: Law on Independent Audit No 67/2011/QH12 took
effect.
• 2012: 2005’s VSAs were replaced by a new set of VSAs.
• Until now, MOF has issued a total of 47 new standards on
Auditing and Assurance services.
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International Audit firms - BIG4
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4. The roles of external audit in the economy
Entrust resources
Investors Managers
Required periodic reporting
on use of resources
Verification by independent expert
à a demand for auditing
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4. The roles of external audit in the economy
Information is
likely to be
distorted.
What measures
should be
taken?
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4. The roles of external audit in the economy
• The difficulty in accessing information
resources
• The motivation of informant
RISK • The large volume and complexity of
information
The users directly check the information
MEASURES Strengthen the legal responsibility of the
Board of Directors
Compulsory audited financial statements
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DISCUSSION
1.8 Who benefits from the services of
independent auditors- society as a
whole, or are the benefits restricted
to individual third parties?
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5. Auditors, Audit firms and Professional bodies
a. External auditors
Qualification
Experience
CPA
EXTERNAL AUDITORS
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5. Auditor, Audit firms and Professional bodies
Certified Public Accountant (CPA)
An auditor must meet the following standards (Article 14 - Law on
Independent Audit):
a) Having full capacity for civil acts;
b) Having good professional ethics, sense of responsibility,
integrity, honesty, and objectivity;
c) Having degree of university or higher in finance, banking,
accounting, auditing disciplines or other disciplines as
prescribled by the Ministry of Finance;
d) Having an auditor’s certificate in accordance with
regulations the Ministry of Finance.
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5. Auditor, Audit firms and Professional bodies
Certified Public Accountant
Conditions for the candidates: (Circular No 129/2012/TT-BTC )
- Professionally ethical, honest, upright, and law-abiding;
- Having the Bachelor’s degree or higher in finance, banking, accounting,
audit;
- Having worked in finance or accounting for at least 60 months from the
month of graduation written on the higher education graduation
decision at the time of exam registration; or having worked as an audit
assistant in an audit enterprise for at least 48 months from the month of
graduation written on the higher education graduation decision at the
time of exam registration;
- Completely and correctly submit the exam application and fee as
prescribed.
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5. Auditor, Audit firms and Professional bodies
Certified Public Accountant
Candidates for Audit practitioner certificates must take the tests on 7 subjects:
1. Economic law and the Law on Enterprise;
2. Advanced finance and financial management;
3. Advanced tax and tax administration;
4. Advanced public sector accounting, financial accounting;
5. Advanced audit and assurance services;
6. Advanced financial analysis;
7. C-level qualification in one of the following foreign
languages: English, Russian, French, Chinese, German.
The candidates that pass all 7 subjects, and the total mark
(except of foreign language subjects) is 38 or more, are
considered passed.
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5. Auditor, Audit firms and Professional bodies
b. Audit firms
Partner
Manager
Senior
Staff Assistant
Career Path
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SERVICES PROVIDED BY AUDIT FIRMS
ü Audit
• Assurance service
ü Review
ü Other assurance services
• Related services ü Agreed-upon procedures regarding
financial information
ü Compilation of financial information
• Tax consultance
ü Tax consultancy/ Tax planning
• Management ü Financial consultancy/ Strategy
consultance development
• Others ü Education/ Training
ü Head hunter
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5. Auditor, Audit firm and Professional bodies
Professional Organizations in Vietnam
The Vietnam Association of Certified Public Accountants (VACPA)
üestablished on 15/04/2005 and started to operate from
01/01/2006.
ü68th member of the Vietnam Union of Science and
Technology Associations (VUSTA)
üMember of the Confederation of Asian and Pacific
Accountants (CAPA) since 2010
üMember 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
International Federation of Accountants (IFAC) is
the global organization for the accountancy profession
dedicated to serving the public interest by
strengthening the profession and contributing to the
development of strong international economies.
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5. Auditor, Audit firm and Professional bodies
Professional Organizations in the world
Boards and Committees of IFAC:
ü International Auditing and Assurance Standards Board (IAASB)
ü International Accounting Education Standards Board (IAESB)
ü International Ethics Standards Board for Accountants (IESBA)
ü Professional Accountants in Business Committee (PABC)
ü International Public Sector Accounting Standards Board (IPSASB)
ü Transnational Auditors Committee (TAC)
ü Compliance Advisory Panel (CAP)
ü Professional Accountancy Organization Development Committee
(PAODC)
ü Small and Medium Practices Committee (SMPC)
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5. Auditor, Audit firm and Professional bodies
Professional Organizations in the world
The American Institute of Certified Public Accountants
(AICPA)
- 1887, the American Association of Public Accountants
(AAPA) was formed.
- 1917, the name was changed to the American Institute of
Accountants
- 1957, it changed to its current name of the American
Institute of Certified Public Accountants
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6. The process of a financial statement
audit
Planning Performing Completing
Understanding
Pre-planning and assessing Reviewing
internal control
Tests of control
Auditor’s
Planning and Tests of
report
details
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6. The process of a financial statement
audit
Planning
Pre-planning
•Procedures to accept or continue relationship with clients
•Assess compliance with ethical requirements, including independence
(Independence Checklist).
•Understand the terms of the audit engagement.
Planning
•Obtain a basis understanding of the business background and internal
control system.
•Determine materiality level & perform audit risk assessment:
•Prepare an audit program which outlines the nature, timing and extent
of audit procedures required to gather evidence.
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6. The process of a financial statement
audit
Performing
• Risk assessment procedures;
• Subsequent audit procedures:
o Tests of control (TOC)
o Substantive tests includes Substantive
Analytical procedures (SAP) and Tests of details
(TOD)
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6. The process of a financial statement
audit
Performing
• Tests of controls are tests designed to obtain reasonable
assurance that internal 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 system. These tests aim to
detect material misstatements on financial statements.
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6. The process of a financial statement
audit
Completing
Reviewing:
• Was the collected audit evidence sufficient to provide an
opinion?
• Have the aggregated effect of unadjusted audit differences
been below the acceptable level?
• Is the audit working paper complete?
• In general, the financial situation and business results are
reasonable?
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6. The process of a financial statement
audit
Completing
Auditor’s report
•Issue auditor’s reports
–Unmodified Opinion
–Qualified Opinion
–Adverse Opinion
–Disclaimer of Opinion
• Resolve events occurring after issuing the auditor’s report
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THANKS FOR
YOUR LISTENING
DISCUSSION
1.1 Who is responsible for the preparation and presentation
of the financial report?
1. 4 According to ISA 200, what is the objective of the auditor
in undertaking an audit of a financial report?
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Exercise
• 1.26
• 1.17
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