5.1.1.2. Audit implementation phase
AA performs general control procedures in parallel with basic tests, is flexible in application and proactively adjusts sample sizes accordingly. The goal is not to ignore errors but still save time.
AA audit staff are clearly assigned, based on the capacity, expertise and experience of each person. The assigned tasks do not overlap. During the audit process, the members of the audit team always exchange and discuss with each other, especially the related parts, to help the work be done quickly, collect complete evidence and save records without duplication.
During the implementation process, the main auditor always closely monitors the progress of the group, coordinates and guides the assistant auditors. In case of errors or fraud, the assistant auditor must report to the team leader for review and resolution. The unit may be requested to explain.
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General Manufacturing Cost Document Circulation Process:
Integrating Excel office software into auditing work is quite effective. Applying software to analyze counterpart accounts (using the PivotTable function) helps auditors easily identify unusual items (in this case, expense items), and creates a foundation for auditors to have a general view and apply detailed tests.
In case the client does not provide additional documents in time for the auditor to complete the audit file, the auditor will often remind and request the unit to provide them later.
5.1.1.3. Audit completion stage
The work of synthesizing files (excel files) and working papers of the group is printed out and signed by the relevant people. Then the group leader reviews and signs for confirmation. Ensure the timely release of the Audit Report to the customer.
The review work before issuing the report is conducted carefully at many levels, detecting problems and making timely adjustments. In order to limit problems that may arise that are disadvantageous to AA after issuing the audit report.
The company has strict regulations on arranging, presenting working papers and records systematically and storing them scientifically and not disclosing them to the outside.
Science helps facilitate review or capture information when serving audits in the following years.
5.1.2. About disadvantages
5.1.2.1. Audit preparation stage
Due to time constraints, the arrangement of time to visit the unit before conducting the audit has not been made. This limits AA's understanding of the actual situation of the unit. Observations and interviews are conducted by auditors during the official audit, which may make the results of the internal control system assessment analysis not focused and accurate.
AA does not keep records of survey results, which creates difficulties for others to directly perform the audit because they may not fully grasp the key elements of the unit's internal control system, which can slow down the evidence collection process.
The study of internal control systems using only a general questionnaire for businesses and the implementation of control tests are only applied internally within the audit unit. However, they have not been applied to third parties, so they do not increase the independence and reliability of the assessed internal control systems.
Regarding the audit program, AA does not have a specific program applicable to all types of enterprises. The AA audit program closely follows the VACPA model program, so when applied to a client company, there are some procedures that are not applied or the auditors carry out a few additional procedures based on their professional experience. Thus, the effectiveness of the audit program depends largely on the experience of the auditors in charge of the detailed implementation. On the other hand, this takes a lot of time to think about and apply the audit procedures.
The time for the audit is not very reasonable. The reason is that the company only conducts the audit for 2 to 3 days. That shows that the auditor is under a lot of time pressure. It can affect the quality of the audit.
5.1.2.2. Audit implementation phase
Due to time constraints, auditors pay little attention to and apply non-financial ratios. In this case, they skip the analytical procedures and only focus on applying detailed tests.
The auditor does not focus on performing control tests and reassessing control risks, which means that the assessment of internal control systems may not yield results as assessed by the auditor, and the auditor only increases the sample size or scope of testing when he finds that risks are not properly assessed.
In detailed testing, the auditor's sampling is largely based on experience and large occurrences. The sum of small occurrences can exceed the materiality level. This can affect the auditor's conclusion on the financial statements.
And the auditor only focuses on the reconciliation from books to documents (the auditor only carefully checks January, November and December because the auditor thinks these months often have the most violations) and rarely verifies the documents on the books. This leads to actual transactions that arise but the unit does not record them and the auditor also does not detect errors or fraud in this case.
The test to re-check the method of calculating the cost of goods sold and estimating the interest expense in the year in this case was effectively performed by AA. However, the application of the weighted average monthly inventory method of ABC Company was estimated by the auditor using the average annual inventory method and then comparing the difference with the value on the import-export report. As for the estimate of interest expense, the use of many average values plus the estimate of interest did not combine with the loan balance. Therefore, the differences from these two tests are sometimes very large. Commenting on the reasonableness of the difference value depends a lot on the auditor's judgment.
For the Cut-off test applied to ABC Joint Stock Company, the auditor only applied it 10 days before and after the fiscal year-end period. However, the number of transactions occurring in the last 10 fiscal years is not very large. In order to limit customers from transferring accounting after the last 10 fiscal years, the auditor has not actively expanded the scope of checking large transactions.
5.1.2.3. Audit completion stage
The synthesis of errors in cost items or other items is rarely compared to the materiality level because in reality, the errors discovered are discussed by the auditor with the customer and are requested to be adjusted and most units accept the adjustment.
After completing the audit, the auditor is the one who collects the errors and checks the results of the audit assistants. Because they check many items at the same time in a short time, it also partly affects the time and quality of the audit.
5.2. COMPARISON OF AUDIT PROCESS BETWEEN THEORY AND PRACTICE CURRENTLY APPLIED AT THE COMPANY
5.2.1. Similarities
As in theory, in practice, AA's audit process also follows the same general steps. First, it is customer survey, signing of audit contract, audit planning, audit completion, audit record keeping and audit report preparation. In addition, auditors must comply with the standards mentioned in theory.
5.2.2. Different
The general audit procedure is presented in a very general way. But when applied in practice, there are many steps in the process including tests and procedures that are not performed due to time and cost constraints.
In the theoretical audit process, control testing is conducted separately from the implementation of substantive tests. But in AA, these two tests are conducted in parallel. This is often applied by auditing companies in practice, it increases the time for important detailed tests.
AA focuses on the method of checking the corresponding accounts, it helps the auditor identify unusual provisions and business values. Instead of just checking documents and comparing the books as usual.
The sampling method at AA rarely uses statistical sampling but mainly checks samples of transactions with large numbers of occurrences. This will help reduce errors in the audit, but for clients with few transactions and the importance of the item, 100% inspection is done. For clients with many transactions but small amounts of money, the sample size is selected from a specific amount of money up to the decision of the audit team leader.
5.3. SOLUTION TO IMPROVE THE AUDIT PROCESS OF EXPENSES AT MY AUDITING COMPANY LIMITED
After studying the US auditing process, the author would like to propose some solutions to improve the auditing process and bring better quality. Based on the above mentioned disadvantages, the author proposes a complete solution, the following are the solutions in each stage:
5.3.1. Audit preparation stage
* About customer reception:
Auditors should spend a few days visiting the unit before the audit to gain a more practical understanding of the design and operation of the internal control system and to record the results of customer surveys.
Results achieved: Increased accuracy and efficiency in understanding and evaluating internal control systems. Reduced risk levels in audit contracts.
* About learning about HTKSNB:
- Auditors should combine questionnaires, flowcharts, and narratives to learn about the internal control system. And the design of specific questionnaires based on each type, characteristics, and business sector of the enterprise should be conducted by experienced auditors who have audited the previous year.
- Based on the auditor's qualifications and experience from audits at other companies, the auditor should compare the audited unit's indicators with other units in the same industry.
- The company should approach customers through third parties, other businesses in the same industry and field.
Results achieved: This helps auditors to more easily assess "areas" with high risk of errors, to focus testing to save time while still ensuring audit quality.
- Create the best conditions to grasp important information and key points that auditors suspect, increase audit procedures.
- This creates for the auditor a database for comparison, identifies high risks to take appropriate measures, and helps in judging the suitability of the
accounting policies and evaluating the sufficiency and appropriateness of audit evidence.
* About the audit program
Since its establishment until now, AA has had many customers with many types of businesses and many different business characteristics,... to ensure the best audit quality. AA should build a separate audit program, specific to each customer.
Results achieved: Limiting the time spent thinking and applying audit procedures to suit the audited entity. Suitable for young auditors who are new to the profession to be able to perform the audit process easily and conveniently, while still ensuring audit quality. The test results will be more accurate and practical.
5.3.2. Audit implementation phase
* About the analysis procedure
Additional expansion applies basic procedures, analyzing relative and absolute fluctuations over two years or more. Because some cases of previous years have cost fluctuations due to fundamental market reasons, economic crisis or some objective impact, the ratio may have a large difference.
Or collect more business information applying non-financial indicators in the analysis process.
Results achieved: The auditor's evaluation of the previous year brings higher accuracy. Or incorporate cost-to-profit ratios. Thus, helping the analysis to be more effective and convincing. Eliminate objective impacts, to make comments and explain fluctuations closer to reality, limiting dependence on the auditor's judgment.
Have a more general view of the business and its capacity, prospects and development potential over the years.
* About performing tests:
- Auditors should focus on performing more control tests to accurately reassess risks. This work should be carried out by auditors with a certain understanding of accounting software and computer systems to reduce audit time and costs, then keep audit records to prove.
The results of the test. Based on these results, the auditor has a more accurate view of the internal control of the audit unit, thereby minimizing or increasing detailed tests more appropriately.
- For testing the method of calculating the warehouse price as the monthly weighted average like ABC Company, the auditor should borrow the file (Excel file) of the monthly inventory report. Then, the auditor recalculates the average warehouse price to easily see the difference and give more accurate and convincing comments.
- For loans with continuous increases and decreases in the unevenness between loan repayment and interest expenses or additional borrowing, combined with constant fluctuations in interest rates, borrowing from many entities, this test is almost ineffective, because the difference is often very large. In this case, the auditor can estimate the loan interest based on the loan documents, and the interest of this loan document is accounted for in the audit year's expenses.
- For Cut-off testing, the auditor should expand the scope instead of just 10 days in case the number of occurrences is small during this period because the auditor mainly checks large occurrences so expanding the test will not take much more time. The purpose is to avoid customers taking advantage of this test and accounting after 10 days of the end of the fiscal year, in order to limit the auditor's inspection.
* Regarding detailed inspection and audit sample selection:
When checking the details of the business, the auditor should select samples to check from books to documents to ensure the arising target and from documents to books to ensure the complete target. The auditor should also focus on checking documents in the middle months of the year.
When checking the audit sample, the auditor should base on the materiality level to determine the sample elements to be checked, and should plan different sample selections for each part. The company can combine the use of statistical sampling software when performing the sampling operation based on the number of occurrences or design a pre-designed program on the computer.
Results achieved: Avoid customers grasping the auditing method of the Auditing Company. Ensure the audit objective of cost items.
Regarding the above sampling method, this reduces errors for small numbers, and the sampling work is more scientific, convenient and faster.
5.3.3. Audit completion stage
The main auditor, after collecting the documents, errors and studying the adjusting entries, informs the results to the audit assistants who perform their part. Then, discuss the reasons or problems and the impact of those entries. Or the audit team leader organizes a small meeting with the audit team to give comments on the audit such as: is the amount of evidence collected sufficient to form a basis for giving opinions; is the number of test samples reasonable; is the presentation of information on the working papers clear and easy to understand;... State what has been achieved and what has not been achieved, and propose solutions for the audit team to overcome.