must take place before March 31 every year. Then, based on the qualifications of the inspection team, accounting staff, business scale, and management organization characteristics, the administrator builds a time plan for the remaining work stages of the process. Issuing a time plan not only serves the work of inspecting financial reports well, strengthening corporate governance, but also helps the accounting work of small and medium-sized enterprises to be carried out in a systematic and orderly manner.
3.3.2. Complete the content of financial report inspection
As presented in section 2.3.2 of this chapter, the content of financial statement audits of small and medium enterprises in Vietnam currently often focuses only on some indicators of the Business Performance Report related to profit, profit distribution, and some indicators of the Balance Sheet, related to revenue and expenditure. This limitation leads to the audit results not being really objective, useful and almost meaningless for financial management in these enterprises.
Therefore, according to the thesis's point of view, the completion of financial statement audits must be linked to the objectives of corporate financial management. More specifically, to do this, the contents of financial statement audits must be linked to the contents of corporate financial management. From this point of view, small and medium-sized enterprises need to build a system of financial statement audit indicators corresponding to the system of indicators of corporate financial management.
The content of financial report inspection in relation to the system of financial management indicators, associated with the goal of strengthening financial management of small and medium enterprises, is summarized through model 3.1:
Table 3.1. Model for building financial statement inspection content associated with corporate governance content
STT
Financial management content | Test content | Method and test scope | |
1 | Managing the capital mobilization situation of the enterprise | - Balance and increase, decrease of Liabilities (short-term, long-term) - Equity Balance and Changes | - Check the accuracy of arithmetic calculations |
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ownership (by capital contribution, capital withdrawal, source transfer, profit distribution) - Undistributed Earnings Balance and Profit Distribution Status - Enterprise funds: status of provision, usage and balance of funds - Exchange rate difference | - Check sample documents - Compare previous period data - Compare with corresponding indicators of different financial statements - Compare with other documents | ||
2 | Situation management | - Detailed original price of fixed assets | - Check for accuracy |
management and use | by type (tangible fixed assets) | of arithmetic | |
edge | tangible, intangible, financial lease, | - Sample testing | |
- Investment management, | investment real estate) | documents, books | |
long term asset exploitation | - Depreciation of fixed assets, investment real estate | - Compare previous period data | |
- Working capital management | - Depreciation calculation method | - Compare with the indicators | |
dynamic (capital management) | - Remaining value of fixed assets, | Correspondence of financial statements | |
in money, financial investment | Real estate investment | different | |
main, debt must | - Increase, decrease of fixed assets, investment real estate | - Debt reconciliation | |
revenue, inventory) | - Inventory balance and fluctuations | client | |
warehouse | - Actual inventory of fixed assets, | ||
- Balance and revenue, expenditure, circulation | Real estate investment, inventory | ||
money | - Compare price information | ||
- Receivable balance and status | market | ||
debt collection period | - | ||
- Balance and volatility increase, | |||
reduce financial investments |
main - Balance, provision, reversal of provisions | |||
3 | Situation management and | - Cost of goods sold, cost of goods sold | - Check for accuracy |
business results | returned goods | of arithmetic | |
- Cost management | - Selling expenses | - Sample testing | |
- Revenue management | - Business management costs | documents, books | |
- Profit management | - Financial costs and expenses | - Compare previous period data | |
other | - Compare with the indicators | ||
- Sales revenue and supply | Correspondence of financial statements | ||
service level | different | ||
- Business deductions | - Debt reconciliation | ||
collect | client | ||
- Financial operating revenue | - Compare price information | ||
main | market | ||
- Other income | - Compare collection regulations, | ||
- Profit before corporate income tax | business expenses, regulations | ||
- Profit after corporate income tax | Revenue and expenditure of the Laws related tax | ||
- Check recording time | |||
receive revenue | |||
- Compare with the results | |||
Check inventory |
The content of the financial statement audit in the above model is only general in nature according to the basic financial management contents of each small and medium enterprise in general. Each specific small and medium enterprise needs to base on this general model to
Build your own detailed financial management content, from there, determine the necessary information sources for management, as a basis for determining the content of financial inspection work. The process of determining the financial inspection content also needs to pay attention to the importance of each issue in financial management, the importance of each indicator on the report. After determining the inspection content suitable for the information needs for financial management, the next step, the inspector will choose the inspection scope and the corresponding inspection method. Corresponding to each inspection content, the selected inspection method can be oriented according to the above model.
The above solutions to improve financial reporting audits in small and medium-sized enterprises mainly focus on financial reporting audits as an independent process in general corporate financial management and financial accounting in particular. For financial reporting audits to be highly effective, the financial reporting audit process cannot be separated from other components of the management information system, especially financial reporting analysis. Through financial reporting analysis, management entities can once again check the indicators on the financial reports, check the implementation of financial plans and policies in a deeper and more comprehensive way. Therefore, the solutions to improve audits and solutions to improve financial reporting analysis of small and medium-sized enterprises cannot be separated from each other and must always aim at a common goal of strengthening corporate financial management.
3.4. Solutions to improve financial statement analysis in small and medium enterprises in Vietnam
3.4.1. Perfecting the system of regimes and policies related to financial reporting and financial reporting analysis
The system of regimes and policies related to financial statement analysis includes many different issues, of which the main and most important are the accounting regime and the
financial reporting level
From a theoretical perspective, the financial reporting system is a direct product of the accounting system. According to general principles, to ensure the analysis of financial statements is convenient,
To be beneficial and effective, the accounting system needs to be designed to suit the needs of reporting and the needs of analyzing financial statements. Accordingly, when building an accounting system, in fact, it is necessary to start from the needs of analytical information, from which to determine the necessary indicators on the financial statements. Once the system of financial reporting indicators has been determined, then the stage of designing the system of accounts, accounting books and accounting methods can be carried out. This process can be summarized through the following diagram:
Flowchart of the process of building an accounting system associated with the goal of analyzing corporate financial statements
User information analysis needs
Financial statement analysis indicators system
System of financial reports
Specific indicators system on financial statements
Accounting system, books, accounting methods
Diagram 3.3: Process of building an accounting regime associated with the goal of analyzing financial statements
If the accounting system is built according to the above process, the analysis of financial statements in enterprises will be strict but easy to implement, complying with accounting and financial systems but still suitable for the requirements of users of analytical information.
Currently, most small and medium enterprises as well as regulatory agencies
The main concern is how to prepare financial reports at the end of the business period, but not really how to use and the usefulness of the information in the reports. Enterprises prepare reports as a mandatory task to deal with legal regulations, not as their own needs.
To overcome this problem, to perfect the process of issuing regimes or implementation instructions, it is necessary to carry out the following specific solutions:
- Increase awareness of small and medium enterprises, especially business administrators, business owners, and stakeholders with interests in the enterprise about the importance and role of transparent and accurate financial information. This measure aims to strengthen the needs of analyzing financial statements of enterprises, creating motivation and promoting enterprise accounting as well as agencies issuing regulations to perfect the financial information system of enterprises.
- Building a system of financial reporting analysis indicators to guide businesses, this responsibility belongs to the agencies issuing the regime and vocational training institutions in accounting, auditing, investment and finance. This solution will
are presented in detail in the following section.
- Complete the set of financial statements that businesses are required to prepare. According to regulations
According to current regulations, small and medium-sized enterprises only have to prepare a Balance Sheet, a Business Performance Report, a Financial Statement Explanation, and a Balance Sheet. However, in reality, enterprises are exempted from preparing a Financial Statement Explanation by competent authorities (especially the Tax Authority). Thus, in the system of 5 basic reports, enterprises only prepare 3 reports. Financial Statement Explanation and Cash Flow Statement are not prepared in most enterprises (only prepared when there is a special request from other organizations such as Banks, investors). Ignoring these two reports also means that the data for financial statement analysis is seriously lacking, because these two reports contain a lot of important information about the financial situation.
financial situation of the enterprise. In the author's opinion, there should be regulations requiring all small and medium enterprises to prepare a complete set of 5 basic financial statements.
This is completely within the ability of the regime as well as the enterprise. Thus, the new financial reporting system can properly perform its role of providing key information for the work of checking and analyzing reports.
- Perfecting the form system of each report: since its initial issuance until now, the financial reporting form system applied to small and medium enterprises has been updated, supplemented and perfected many times. However, as analyzed above, in the form system, the arrangement and calculation of some indicators on the reports are not really reasonable. The financial reporting form system can be perfected in one of the following two solutions:
+ Complete the financial reporting system according to the current unified forms issued by the Ministry of Finance. If we continue to use this financial reporting system, we need to change the way the indicators are presented and calculated in the direction of linking them to the analytical indicator system, avoiding the situation of using a general indicator for too many economic contents, because when analyzing, the analyst must separate the detailed indicators. However, it is not always possible to access the data on the detailed books of the enterprise to do this. Specific indicators that need to be separated: Other short-term assets indicator (item 158) should be separated into smaller indicators: Advances (calculated from the debit balance of account 141), Short-term prepaid expenses (calculated from the debit balance of account 142), Short-term assets awaiting processing (calculated from the debit balance of account 1381), Short-term deposits and bets (calculated from the debit balance of account 1388 - details for short-term deposits and bets).
Similarly, the Inventory index (number 141) also needs to be separated into many indexes for each specific inventory group: Goods in transit, Raw materials, Tools, equipment, Unfinished products, Finished products, Goods, Goods on consignment. This separation will directly serve the analysis of ratios and indexes related to inventory, because to ensure the accuracy of the index, avoid fraud that distorts the data of the report, in some cases,
The analyst should remove the value of Goods in Transit or Goods on Consignment from the total inventory value. At the same time, the presentation of the value of each of these items in the Notes to the Financial Statements (item III.02) can be removed.
The Other Long-term Assets (item 248) should also be separated into Long-term Prepaid Expenses and Long-term Deposits and Bets (currently item 248 has not been explained in the financial statement notes).
Indicators reflecting the balance of Cash, Bank deposits, Cash in transit, Cash equivalents should be presented in detail on the Balance Sheet for convenience in checking and comparing with other accounting reports, rather than explaining the data on the Notes to the financial statements.
In addition, to provide sufficient information for reporting analysis, on the Notes to the Financial Statements, it is necessary to explain detailed information about the following items:
+ Situation of increase and decrease in loan capital, borrowing costs, capitalization of loan interest...
+ Detailed explanation of sales revenue, credit sales revenue, cash collection revenue.
+ Explain revenue deductions (trade discounts, sales discounts, sales returns) and the business's revenue deduction policy.
+ Explain financial revenue, payment discounts received and payment discounts accepted for customers.
+ Explain receivables by customer, by debt period, by product, and explain in detail the provisions set aside.
Furthermore, in the author's opinion, small and medium enterprises need to calculate some basic analytical indicators and present them on the Notes to the financial statements. Users will have preliminary analytical information to be able to assess more accurately the financial situation of the enterprise.
+ Perfecting the financial reporting system in an open direction: in this direction, the agency issuing the regime does not necessarily have to prescribe a standard financial reporting form.