This Study Resource Was: Individual Assignment

Name: Nguyễn Phúc Thiện
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Id: 11174452
Class: Auditing 59A
Subject: Contemporary Issues of Auditing
Individual assignment
Topic 1: Choose one of the five fundamental principles of audit professional ethics to: (i)
present the content of the principle; (ii) illustrate the practical application in Vietnam; (iii)
draw lessons learned for auditors and audit firms.
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Introduction
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There are five fundamental principles of ethics for professional accountants:
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1) Integrity
2) Objectivity
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3) Professional Competence and Due Care

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4) Confidentiality
5) Professional Behavior
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In my opinion, I think Integrity is the most important fundamental principle of ethics.

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Because of that, I will demonstrate and analysis about Integrity in this assignment.
I. Content of Integrity
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1. Definition
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 A professional accountant should be straightforward and honest in all

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professional and business relationships.

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 A professional accountant should not be associated with reports, returns,

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communications or other information where they believe that the information:

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o Contains a materially false or misleading statement;

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o Contains statements or information furnished recklessly; or

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o Omits or obscures information required to be included where such

omission or obscurity would be misleading.

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 For example, the accountant complies with the principle of integrity by: Being
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straightforward and honest when raising concerns about a position taken by a

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client; ll
 Pursuing inquiries about inconsistent information and seeking further audit ll ll ll ll ll ll ll ll
evidence to address concerns about statements that might be materially false or

misleading in order to make informed decisions about the appropriate course

of action in the circumstances.

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 In doing so, the accountant demonstrates the critical assessment of audit

evidence that contributes to the exercise of professional skepticism.

2. The Importance of Integrity

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A report by Cornerstone Research indicated that in 2014, the number of

accounting case filings increased by 47 percent over the previous year, despite the
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fact that the overall number of class action filings experienced little change. “The
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proportion of settlements with accounting allegations increased over the prior year
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and represented the vast majority of the total value of settlements approved in
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2014,” the report noted.

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Given the ever-present threat of a lawsuit, many companies might seek to protect
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themselves by focusing on hiring job candidates who demonstrate above-average

dedication to ethics. Integrity is often a challenge in a highly competitive

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corporate environment, and individuals who possess the mettle to stand up to such
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challenges may be difficult for employers to find.

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Integrity could be especially vital for accountants because they often play a direct
role in how a company’s money is managed. A blog post for Insightful

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Accountant listed trustworthiness as one of the most important qualities for

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accountants. The post explained, “Your clients are trusting you with matters they
would consider to be very private. You’re handling their personal information, and
they’ll take comfort in knowing that they’re putting it in the right hands. They
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need to know that, no matter the circumstances, no one else will ever be privy to
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their financial matters. It’s your job to show them your level of commitment.”
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3. The Benefits of Integrity

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It is possible that having an accountant on board who possesses a high level of

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integrity could protect companies from lawsuits. However, there are further
benefits of integrity that employers might factor in when they are screening job
candidates.
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An article posted on PayScale commented on the key benefits of integrity in
business. Although the information was geared toward business leaders

specifically, the benefits of integrity could be applied to workers at any level.

Such benefits include the following:

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 Stability. If you have integrity, you will likely treat others fairly, and they ll ll ll ll ll ll ll ll ll ll ll ll
can depend on you to do the right thing even when circumstances might
tempt you to do otherwise.

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 Safety. Your attitude is more likely to promote an atmosphere of open

communication.
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 Reference. You can serve as a role model for those around you. ll ll ll ll ll ll ll ll ll ll ll
The benefits of integrity go beyond what happens within the office; this quality
can also affect how customers view a business. An article posted on the
AZCentral website noted that a good reputation can stem from integrity. Such a
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reputation encourages customers to come back again and again and form a lasting
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relationship with the business. The loyalty that is thus built up can play a role in
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enhanced earning potential for the business, and a company’s avoidance of
scandals via integrity may also aid the bottom line.
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Furthermore, when an employer has a dedication to integrity, they are likely to
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attract employees who have a similar outlook. This can lead to a company that is
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trustworthy from top to bottom.

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II. Illustrate the practical application in Vietnam ll ll ll ll ll
There are many cases that the auditors have violated the integrity in auditing
such as the SGI Capital case, the Bach Tuyet company case, the Vien Dong
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Pharmaceutical Joint Stock Company case,… I will analyze some particular

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cases to demonstrate how important integrity in auditing is.

1. SGI Capital Case

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a. Introduction ll
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 SGI Capital is a fund management company specializing in listed equity in

Vietnam
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 SGI Capital was established in 2008 with the shareholder’s equity is

30.000.000.000 VND
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b. Violation
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 The FS 2010 of SGI Capital was audited by the team of auditor Tô Đình
Hoài of Hanoi Company Profession Of Auditing & Accounting LTD (CPA

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 On 9/12/2011, State Security Commission of Vietnam sanctioned

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administrative violations of SGI Capital:

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 The company had not yet made full depository; not separately managed the
assets of entrusting investors with the company's assets.

 The company uses the assets entrusted by investors to guarantee the loan
from related companies.

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=> SGI Capital was fined total160.000.000 VND ll ll ll ll ll ll
c. Consequence
 The assets recorded in the company’s FS were completely misleading.
 The assets of the investors would be possibly lost or embezzled.

d. Responsibilities of auditor ll ll
 Auditor issued an opinion of full acceptance with FS of the company.

 Auditor did not comment about the violation of companyll ll ll ll ll ll ll ll
2. Bach Tuyet company case

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a. Introduction
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 The main production company of medical cotton and tampons for women
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and was established in 1960.
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 In 1997, Bach Tuyet cotton company chartered capital of 11.4 billion, and
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in 2002, the company's charter capital to 68.4 billion.
b. Violation
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 Recording cost of goods sold. ll ll ll ll
 Record an increase in revenue with the amount recorded

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 Record an increase in selling expenses. ll ll ll ll ll ll ll

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 A decrease in financial expenses.

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 Submit late financial statements to the securities department.

 The financial statements of 2006 are inaccurate financial statements.

c. Consequence
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 The revenue, expenses, cost of goods sold in Bach Tuyet’s financial

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statement were all false.

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 The financial statement did not inflex the true of Bach Tuyet Company.
 Investors were fooled and their investment was not stabilized. ll ll ll ll ll ll ll ll

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 On 31/12/06 AISC is not involved in inventory, therefore auditors 06

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excluded the effect of inventory balance related to revenue and earnings.

 AISC has released the audit report with partial acceptance comments
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3. Vien Dong Pharmaceutical Joint Stock Company case

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a. Introduction
 Formerly known as Dai Ha Thanh Pharmaceutical Joint Stock Company, ll ll ll ll ll ll ll ll ll
was established on June 23, 2004

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 The main business is trading in pharmaceutical and cosmetic products, the
company is headquartered in TP. Ho Chi Minh

b. Violation ll
 Specifically, in March 2010, when the VND 100 billion loans of DVD at ll ll ll ll ll ll ll ll ll ll ll ll
An Binh Commercial Joint Stock Bank was due, in order to have money to
repay the debt, Mr. Le Van Dung and his accomplices faked papers and
other documentation.
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 This action is able to borrow money from banks is with the policy of
pledging over 600,000 of its shares and 540,000 shares of Dao Xuan
Huong. ( a subsidiary with DVD holding 97% of the capital), By using the
tricks of Mr. Dung and accomplices, fake documents and documents allow
him to refinance the debt of the bank

c. Consequence
 This situation is a major fraud
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 Auditor did not comment about the dealings with the subsidiary companies
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as well as the original of that company.

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 Auditor hide the evidence and papers of the related parties
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III. Lessons learned for auditors and audit firms.
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 It is important to improve the professional skills of auditors and develop

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sound audit methodologies, as audit practices require a high level of

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professionalism. Professionalization also increases audit reliability by

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enhancing audit acceptance from audited organizations; improves audit

transparency by establishing objective audits and inspection methodologies

in partnership with external professionals; and develops systematic audit

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approaches that include joint inspections or peer reviews.

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 The State Audit Office of Viet Nam attempt to provide audited

organizations with consistent recommendations and to act as the assurance

institution. This may require establishing feasibility guidelines; upgrading

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basic database input; introducing advanced project assurance schemes; and

assuring the efficient execution of individual projects.

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 The State Audit Office of Viet Nam attempted to build systematic risk
management methods for all risk factors typically causing errors and
fallacies. These methods will enable optimum responses to technical, social

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and economic, political, and ethical risks.

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 The State Audit Office of Viet Nam’s recommendations are checked and
consistently tracked through recommendation management and follow-up

audits. The State Audit Office of Viet Nam will continue conducting audits
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based on objective audit techniques and auditor professionalism to ensure
integrity and transparency.

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Name: Nguyễn Phúc Thiện

3) Professional Competence and Due Care

In my opinion, I think Integrity is the most important fundamental principle of ethics.

 A professional accountant should be straightforward and honest in all

professional and business relationships.

 A professional accountant should not be associated with reports, returns,

communications or other information where they believe that the information:

o Contains a materially false or misleading statement;

o Contains statements or information furnished recklessly; or

o Omits or obscures information required to be included where such

omission or obscurity would be misleading.

straightforward and honest when raising concerns about a position taken by a

 Pursuing inquiries about inconsistent information and seeking further audit ll ll ll ll ll ll ll ll

evidence to address concerns about statements that might be materially false or

misleading in order to make informed decisions about the appropriate course

of action in the circumstances.

 In doing so, the accountant demonstrates the critical assessment of audit

evidence that contributes to the exercise of professional skepticism.

2. The Importance of Integrity

A report by Cornerstone Research indicated that in 2014, the number of

2014,” the report noted.

themselves by focusing on hiring job candidates who demonstrate above-average

dedication to ethics. Integrity is often a challenge in a highly competitive

challenges may be difficult for employers to find.

role in how a company’s money is managed. A blog post for Insightful

Accountant listed trustworthiness as one of the most important qualities for

3. The Benefits of Integrity

It is possible that having an accountant on board who possesses a high level of

business. Although the information was geared toward business leaders

specifically, the benefits of integrity could be applied to workers at any level.

Such benefits include the following:

tempt you to do otherwise.

 Safety. Your attitude is more likely to promote an atmosphere of open

scandals via integrity may also aid the bottom line.

trustworthy from top to bottom.

II. Illustrate the practical application in Vietnam ll ll ll ll ll

Pharmaceutical Joint Stock Company case,… I will analyze some particular

cases to demonstrate how important integrity in auditing is.

1. SGI Capital Case

 SGI Capital is a fund management company specializing in listed equity in

 SGI Capital was established in 2008 with the shareholder’s equity is

Hoài of Hanoi Company Profession Of Auditing & Accounting LTD (CPA

 On 9/12/2011, State Security Commission of Vietnam sanctioned

administrative violations of SGI Capital:

assets of entrusting investors with the company's assets.

from related companies.

=> SGI Capital was fined total160.000.000 VND ll ll ll ll ll ll

 The assets of the investors would be possibly lost or embezzled.

 Auditor issued an opinion of full acceptance with FS of the company.

 Auditor did not comment about the violation of companyll ll ll ll ll ll ll ll

2. Bach Tuyet company case

 Recording cost of goods sold. ll ll ll ll

 Record an increase in revenue with the amount recorded

 Record an increase in selling expenses. ll ll ll ll ll ll ll

 A decrease in financial expenses.

 Submit late financial statements to the securities department.

 The financial statements of 2006 are inaccurate financial statements.

 The revenue, expenses, cost of goods sold in Bach Tuyet’s financial

statement were all false.

 Investors were fooled and their investment was not stabilized. ll ll ll ll ll ll ll ll

 On 31/12/06 AISC is not involved in inventory, therefore auditors 06

excluded the effect of inventory balance related to revenue and earnings.