AUDIT RISK & AUDIT RESPONSE

Fixed asset does not exist at auditing time (TSCĐ không tồn tại tại thời điểm kiểm toán) → Risk

financial statements reflect fixed asset not existing at year end; overstatement of fixed asset and depreciation

Fixed asset does not exist at auditing time (TSCĐ không tồn tại tại thời điểm kiểm toán) → Audit response

Physically verify/count a sample of these fixed assets to ensure existence of asset at reporting date

Unqualified expenses are capitalized to fixed assets (Chi phí không đủ điều kiện bị vốn hoá) → Risk

expenditures which do not meet the capitalization criteria (IAS38) are capitalized; fixed assets overstated; expenses understated; profit higher than normal

Unqualified expenses are capitalized to fixed assets (Chi phí không đủ điều kiện bị vốn hoá) → Audit response

Compare expenses between periods; review a breakdown of the costs and agree to invoices to assess the nature of the expenditure; agree capital expenditure to asset register; agree repairs to the income statement

No recognition of disposed assets (Không ghi giảm tài sản thanh lý) → Risk

fixed assets already disposed are not removed from the fixed assets register; overstatement of fixed asset balance

No recognition of disposed assets (Không ghi giảm tài sản thanh lý) → Audit response

Review the non-current asset register; confirm disposal proceeds in bank statement; recalculate the profit on disposal

Mortgaged assets for a loan (Tài sản thế chấp) → Risk

mortgaged assets for a loan are not disclosed; lack of presenting risks associated to the mortgaged assets

Mortgaged assets for a loan (Tài sản thế chấp) → Audit response

Review the loan agreement to ascertain whether any security has been given; circularise this bank as part of the bank confirmation process

Changing depreciation time/method (Thay đổi thời gian/PP khấu hao) → Risk

depreciation reduction has occurred to achieve profit targets and incentive bonus; plant and machinery overvalued; profit overstated

Changing depreciation time/method (Thay đổi thời gian/PP khấu hao) → Audit response

Discuss with the directors the rationale for extending the useful lives; compare with how often these assets are replaced

Fixed assets are revalued due to loan covenant pressure (Đánh giá lại TSCĐ vì áp lực covenant) → Risk

value of fixed assets overstated after revaluation

Fixed assets are revalued due to loan covenant pressure (Đánh giá lại TSCĐ vì áp lực covenant) → Audit response

Discuss assumptions adopted for valuation with management/valuer/expert; ensure whole class of assets was revalued

Loan covenant pressure (Áp lực vi phạm điều khoản vay) → Risk

company does not meet the loan covenant, may have to pay the loan immediately; affects going concern assumption

Loan covenant pressure (Áp lực vi phạm điều khoản vay) → Audit response

Discuss status of loan; review covenant; perform detailed going concern review

Current portion of a long-term loan misclassified (Phân loại sai phần nợ dài hạn đến hạn trả) → Risk

wrong classification; inappropriate liquidity status

Current portion of a long-term loan misclassified (Phân loại sai phần nợ dài hạn đến hạn trả) → Audit response

Review loan contract; review disclosures for compliance

Interest expense omitted (Thiếu ghi nhận chi phí lãi vay) → Risk

finance costs understated; profit overstated

Interest expense omitted (Thiếu ghi nhận chi phí lãi vay) → Audit response

Recalculate finance costs; reconcile with bank statements

Customers in financial difficulties or long outstanding receivables (Khách hàng khó khăn hoặc công nợ lâu) → Risk

receivables cannot be recovered; receivables overvalued

Customers in financial difficulties or long outstanding receivables (Khách hàng khó khăn hoặc công nợ lâu) → Audit response

Extended post-year-end cash receipts testing; review aged receivables; review correspondence; discuss assumptions on allowance

AR days increase / AR growth higher than sales (Vòng quay phải thu tăng / tăng nhanh hơn doanh thu) → Risk

recoverability issues; receivables overvalued; allowance understated

AR days increase / AR growth higher than sales (Vòng quay phải thu tăng / tăng nhanh hơn doanh thu) → Audit response

Extended cash receipts test; review aged ledger; discuss increase in allowance with finance director

Reconciliations not performed regularly (Không đối chiếu thường xuyên) → Risk

errors within trade receivables; receivables misstated

Reconciliations not performed regularly (Không đối chiếu thường xuyên) → Audit response

Detailed review of year-end sales ledger control account reconciliation

Online sales with system errors (Lỗi hệ thống bán hàng online) → Risk

revenue not completely recorded; revenue understated

Online sales with system errors (Lỗi hệ thống bán hàng online) → Audit response

Extended controls testing; detailed completeness testing of income

Customers require refund / refund term included (Khách yêu cầu hoàn tiền / hợp đồng có điều khoản hoàn tiền) → Risk

sales to be refunded not removed; revenue overstated

Customers require refund / refund term included (Khách yêu cầu hoàn tiền / hợp đồng có điều khoản hoàn tiền) → Audit response

Review cut-off of customer refunds; review contract terms; discuss refund terms

Deposit income included in revenue (Tiền đặt cọc ghi vào doanh thu) → Risk

revenue overstated; current liability understated

Deposit income included in revenue (Tiền đặt cọc ghi vào doanh thu) → Audit response

Review accounting system for deposit; increase testing over the cut-off of revenue and deferred income

Employee bonus based on sales (Thưởng nhân viên theo doanh số) → Risk

fictitious sales; aggressive revenue recognition; revenue overstated

Employee bonus based on sales (Thưởng nhân viên theo doanh số) → Audit response

Increase sales cut-off testing; review post-year-end cancellations

Contingent liability

unfair dismissal / warranty (Nghĩa vụ tiềm tàng

Contingent liability

unfair dismissal / warranty (Nghĩa vụ tiềm tàng

Provision of redundancy (Thông báo cắt giảm nhân sự) → Risk

provision not made; provision understated; expenses understated

Provision of redundancy (Thông báo cắt giảm nhân sự) → Audit response

Inspect board minute; confirm timing; obtain redundancy calculation; recalculate

Other fines or penalties (Các khoản phạt khác) → Risk

disclosure or provision not made; unreasonable estimation of provision

Other fines or penalties (Các khoản phạt khác) → Audit response

Discuss estimation method with management

Inventory decrease in value / long outstanding inventory (HTK giảm giá trị hoặc lâu luân chuyển) → Risk

NRV lower than cost; inventory overvalued

Inventory decrease in value / long outstanding inventory (HTK giảm giá trị hoặc lâu luân chuyển) → Audit response

Test cost and NRV; ensure correct valuation line-by-line

Inappropriate costing method or outdated cost standard (Phương pháp tính giá sai hoặc định mức cũ) → Risk

standard costs out of date; inventory over/undervalued

Inappropriate costing method or outdated cost standard (Phương pháp tính giá sai hoặc định mức cũ) → Audit response

Test standard cost; compare to actual cost; discuss significant variations

Work in progress difficult to value (Khó định giá sản phẩm dở dang) → Risk

the audit team may not be sufficiently qualified to assess the quantity and value of work in progress

WIP misstated

Work in progress difficult to value (Khó định giá sản phẩm dở dang) → Audit response

Consider involving expert

If need expert, this will need to be arranged with consent from management and in time for the year-end count

Inventories located in many locations (HTK ở nhiều kho) → Risk

difficult to confirm existence and completeness; inventory misstated

Inventories located in many locations (HTK ở nhiều kho) → Audit response

Attend inventory counting at all/material locations

Buying goods with long transportation (Hàng đang vận chuyển cuối kỳ) → Risk

cut-off inaccurate; inventory/payables misstated

Buying goods with long transportation (Hàng đang vận chuyển cuối kỳ) → Audit response

Detailed cut-off testing of goods in transit

Physical count without production cessation (Kiểm kê khi vẫn sản xuất) → Risk

goods omitted or counted twice; inventory over/understated

Physical count without production cessation (Kiểm kê khi vẫn sản xuất) → Audit response

Review GRN/GDN during count; trace into count records

Physical count before or after reporting date (Kiểm kê trước/sau ngày khóa sổ) → Risk

adjustments inaccurate; inventory over/understated

Physical count before or after reporting date (Kiểm kê trước/sau ngày khóa sổ) → Audit response

Review year-end inventory adjustment schedule; obtain supporting documentation; increase cut-off testing

New accounting system (Hệ thống kế toán mới) → Risk

errors/omission during changeover; balances incomplete or inaccurate

New accounting system (Hệ thống kế toán mới) → Audit response

Document new system; perform testing of data transfer

New executive (Finance Director) appointed (Bổ nhiệm giám đốc tài chính mới) → Risk

FD not sufficiently competent; errors in financial statements

New executive (Finance Director) appointed (Bổ nhiệm giám đốc tài chính mới) → Audit response

Carefully review any changes in accounting policies and key judgmental decisions

Timing pressure for audit team (Áp lực thời gian trên nhóm kiểm toán) → Risk

increased detection risk

Timing pressure for audit team (Áp lực thời gian trên nhóm kiểm toán) → Audit response

Confirm timetable; consider performing interim audit

Client requires early issuance of audit report (Khách hàng yêu cầu phát hành báo cáo sớm) → Risk

increased detection risk

Client requires early issuance of audit report (Khách hàng yêu cầu phát hành báo cáo sớm) → Audit response

Confirm timetable; consider interim audit

Management's bonus based on profit (Thưởng quản lý dựa trên lợi nhuận) → Risk

potential manipulation of judgmental areas

Management's bonus based on profit (Thưởng quản lý dựa trên lợi nhuận) → Audit response

Carefully review judgmental decisions; obtain written representation

Management bonus required to be disclosed (Thưởng quản lý phải thuyết minh) → Risk

disclosure incomplete

Management bonus required to be disclosed (Thưởng quản lý phải thuyết minh) → Audit response

Discuss with management; review disclosure for compliance

First year audit / new client (Kiểm toán năm đầu / khách hàng mới) → Risk

audit team not familiar; increased detection risk; less assurance over opening balances

First year audit / new client (Kiểm toán năm đầu / khách hàng mới) → Audit response

Ensure suitably experienced team; allocate time to understand entity; increase testing over opening balances

Cash flow issue

Main customer/ supplier issue

Executive personnel issue → Risk

Going concern issue (Vấn đề hoạt động liên tục)

financial statements may need to be restated or prepared on break-up basis

Going concern issue (Vấn đề hoạt động liên tục) → Audit response

Review cash flow forecast/business plan for foreseeable future

to assess whether the going concern basis is appropriate

or whether additional going concern disclosures are required in the financial statements.