1/10/2023

Fundamentals of Auditing

Chapter 1:
An introduction to Auditing

PhD. Thao Bui

2023

Chapter 1: 1.1 An introduction to Auditing

Understand what the term “Auditing” means; Describe the history of audits

An introduction to
Auditing 1.2 Types of Audits, Auditors
Classify the different types of audits and auditors

1.3 The public accounting profession

Understand characteristics of the audit profession and the requirements of
professional ethics in the audit.

1.4 The Financial Statement Auditing

Environment
Know the list of the VSA system, and ISA system.

1.5 Overview
process
of the financial statement auditing

Know the phases of the audit process

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References
Law No 67/2011/QH12
Law on Independent Audit

Degree No 17/2012/ND-CP
Detailing and guiding the implementation of a number of
articles of the law on independent audit.

VSA/ISA 200
Overall objectives of the independent auditor and the
conduct of an audit in accordance with international
standards on auditing

Basic Auditing
Faculty of Accounting and Auditing, University of Finance
– Marketing

Chapter 1: 1.1 An introduction to Auditing

Understand what the term “Auditing” means; Describe the history of audits

An introduction to
Auditing 1.2 Types of Audits, Auditors
Classify the different types of audits and auditors

1.3 The public accounting profession

Understand characteristics of the audit profession and the requirements of
professional ethics in the audit.

1.4 The Financial Statement Auditing

Environment
Know the list of the VSA system, and ISA system.

1.5 Overview
process
of the financial statement auditing

Know the phases of the audit process

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1.1. An Introduction to Auditing

1.1.1 Auditing definition

1.1.2 The role of auditing

1.1.3 The development of auditing in the world

1.1.1. Auditing definition

Spicer and Pegler:
“Auditing is such an examination of books of
accounts and vouchers of business, as will enable
the auditors to satisfy himself that the balance
Arens and Loebbecke:
sheet is properly drawn up, so as to give a true and
“Auditing is the accumulation and evaluation of
fair view of the state of affairs of the business and
evidence about information to determine and report
that the profit and loss account gives true and fair
on the degree of correspondence between the
view of the profit/loss for the financial period,
information and established criteria”.
according to the best of information and
explanation given to him and as shown by the
books; and if not, in what respect he is not
satisfied”.

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1.1.1. Auditing definition

The AAA (American Accounting Association)

Committee on Basic Auditing Concepts (1971)
Law on Independent Audit of Vietnam:
prepared the most comprehensive definition of
“Independent audit is the work done by a
auditing:
practising auditor, an audit firm, or branch of a
“An audit is a systematic process of objectively
foreign audit firm in Vietnam to check and provide
obtaining and evaluating evidence regarding
independent opinion on financial statements and
assertions about economic actions and events to
other audit work in accordance with the terms of an
ascertain the degree of correspondence between
audit engagement.”
these assertions and established criteria and
communicating the results to interested users”.

1.1.1. Auditing definition Obtaining and

evaluating
Audit evidence

Components of
Auditing definition
Established Objectivity and
criteria independence

Competence Audit report

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1.1.1. Auditing definition

Objectivity and
Obtaining, evaluating Audit Established criteria independence
evidence

Audit evidence means the
information obtained by the auditor
in arriving at the conclusions on
which the audit opinion is based,
including FS and other relevant
supporting documents, disclosures,
explanations, etc.
Established criteria dependents
on the information need to be
checked. For financial auditing,
the criteria largely consists of the
generally accepted accounting
principles such as accounting law,
standards of accounting …
Auditors should be seen to be
objective in all their dealings with
their clients. They express
opinions independent of the entity
and its directors.

Competence Audit report

This is the ability to carry out The auditor’s report (audit

professional duty with great
knowledge and skills. Auditors
should exhibit competence,
derived from the acquired
qualifications, training and
practical experience.
opinion) is the main product
or output of the audit. This
report communicates the
auditor’s findings to the users
of the financial statements.

 “What is Audit”? https://youtu.be/pkKO9ZNyOIc

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1.1.2. The role of auditing Shareholders

Going concern Profits Financial

disclosure warnings statements
Directors Employees

Communication
Stakeholders

Directors’
accountability Creditors Tax authorities

Investment
protection The public

Internal
Risk policies
control

Audits or reviews can give stakeholders a degree of assurance concerning these issues.

1.1.3. The development of auditing in the world

The use of risk-
Audit objective in based auditing
this period was and advanced
detection of fraud computing
and errors auditing tool;
provision of
advisory services

Prior to 1840 1990s – present

1920s – 1960s

1840s – 1920s 1960s – 1990s

Concept of Adoption of
Auditing was
restricted to materiality and business risk
sampling approach; objective
performing
detailed techniques were to lend creditability
used to financial and non-
verification of
every transaction in auditing during financial information
this period.

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 “History of Audit”? https://youtu.be/lThF1dBqrhs
The development of auditing in Vietnam
Legal framework
• Regulations on Independent auditing in the
national economy issued in 1994; replaced by
Decree 105/2004/NĐ-CP in 2004 and
amended by some other decrees
• Law No. 67/2011/QH12 on Independent Audit
and its decrees
• First series of 6 Vietnamese Standards on
Auditing (VSA) issued in 1999, adapted from
International Standards on Auditing (ISA)
• 47 standards issued relevant to Auditing until
now
State Audit of Vietnam
• SAV established in 1994
• An independent body to report audit results to
the Government, National Assembly or its
Standing Committee
• Law on State Audit passed on 2005, effective
from 2006; replaced by Law No.
81/2013/QH13, amended and supplemented
by Law 55/2019/QH14
1/10/2023
Independent Auditing company
• Vietnam Auditing Company (VACO), Auditing
and Accounting Financial Consultancy
Services Ltd. (AASC) established in 1991
• Ernst & Young established in 1992;
PricewaterhouseCoopers (PwC) Vietnam,
KPMG Vietnam in 1994
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Chapter 1: 1.1 An introduction to Auditing

Understand what the term “Auditing” means; Describe the history of audits

An introduction to
Auditing 1.2 Types of Audits, Auditors
Classify the different types of audits and auditors

1.3 The public accounting profession

Understand characteristics of the audit profession and the requirements of
professional ethics in the audit.

1.4 The Financial Statement Auditing

Environment
Know the list of the VSA system, and ISA system.

1.5 Overview
process
of the financial statement auditing

Know the phases of the audit process

1.2. Types of Audits, Auditors

1.2.1 Types of Audits

1.2.2 Types of Auditors

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1.2.1. Types of Audits

Audits

Financial
Operational Compliance
Statement
Audits Audits
Audits

1.2.1. Types of Audits

Operational Audits
 An operational audit involves a systematic review of an organization’s activities, or a part of
them, in relation to the efficient and effective use of resources.
 Assess performance, identify areas for improvement, and develop recommendations
 Help managers discharge their management responsibilities and improve profitability.
 Tend to require more subjective judgment than other types of audits because the criteria
for effectiveness and efficiency are not as clearly established
 Examples:
 Operational audit on efficiency of purchase department of a manufacturing company
 Operational audit on effectiveness and/or efficiency of marketing, sales divisions of a company

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1.2.1. Types of Audits

Compliance Audits
 Compliance audit is an audit where a practising auditor, audit firm or branch of a foreign audit
firm examines the compliance with laws, regulations and policies of the audited entity and
expresses an opinion thereof.
 Compliance audit determines the extent to which rules, policies, laws, covenants, or
governmental regulations are followed by the entity being audited.
 Examples:
 Compliance audit on corporate rules and policies are being followed by departments in an
organization
 Compliance audit on tax compliance of a company

1.2.1. Types of Audits

Financial Statement Audits

 A financial statement audit determines whether the overall financial statements present
fairly in accordance with specified criteria.
 This type of audit usually covers the basic set of financial statements, and accounting
standards serve as the criteria.
 This subject focus on audits of financial statements

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1.2.1. Types of Audits
Financial
statement audits
• Examine financial
statements, determine if
they give a true and fair
view or fairly present
the financial position,
results, and cash flows.
1.2.1. Types of Auditors
Auditors
1/10/2023
Operational Compliance
audits audits
• A study of a specific unit • A review of an
of an organization for the organization’s
purpose of measuring its procedures and financial
performance records performed to
(effectiveness and determine whether the
efficiency) organization is following
specific procedures,
rules or regulations set
out by some higher
authorities.
Government
Auditors
Internal Auditors
External Auditors
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1.2.1. Types of Auditors

Government Auditors
 Government auditors examine records of government agencies and of private businesses or
individuals performing activities subject to government regulations or taxation.
 The State Audit Office of Vietnam (SAV)
 was established by the Government in 1994,
 being an independent body that has a responsibility to report its audit results to the
government, national assembly, or standing committee.

1.2.1. Types of Auditors

Internal Auditors
 Internal auditors are employed by individual companies to investigate and appraise the
effectiveness of company operations for management
 Reviews of internal control systems to ensure compliance with company policies, plans, and
procedures, laws and regulations.
 Appraisals of the economy and efficiency of operations.
 Reviews of effectiveness in achieving results in comparison to pre-established objectives and goals.
 Internal auditors
 must be objective and independent,
 reporting directly to either the board of directors or the audit committee of the board or have
free access to the board.

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1.2.1. Types of Auditors

External Auditors
 External auditor – often considered as independent auditor – may practice as a sole
proprietor or as a member of a public audit firm.
 required to maintain their objectivity and independence when providing auditing or other
services to clients
 Independent audit activities aim to
 contribute to the disclosure and transparency of economic and financial information of audited
entities,
 to strengthen investment environment,
 to detect and prevent violations of law;
 to raise the effectiveness and management efficiency, administration of economy, finance of the State
and business activities of enterprises.

Chapter 1: 1.1 An introduction to Auditing

Understand what the term “Auditing” means; Describe the history of audits

An introduction to
Auditing 1.2 Types of Audits, Auditors
Classify the different types of audits and auditors

1.3 The public accounting

profession
Understand characteristics of the audit profession and the requirements of
professional ethics in the audit.

1.4 The Financial Statement Auditing

Environment
Know the list of the VSA system, and ISA system.

1.5 Overview
process
of the financial statement auditing

Know the phases of the audit process

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1.3. The public accounting profession

1.3.1 The Certified Public Accountant

1.3.2 Public Accounting Firms

1.3.3 Types of other Audit services

1.3.4 Professional Organizations

1.3.1. The Certified Public Accountant

Auditor
A person issued with an auditor’s certificate in accordance with law, Conditions for audit
or in Vietnam, Auditor also is a person who holds a foreign practising
professional certificate recognized by the Ministry of Finance and who
Meet the specified
passes an examination on the law of Vietnam. Standards for standards to register
auditors for the audit practice
and to be granted the
Meet the specified Certificate of
Examination for standards to be an
certificates registration of auditing
auditor practice
Candidates for Audit Pass the required
practitioner exams to get the Audit
certificates practitioner certificates
Meet the conditions for
Candidates for Audit
practitioner certificates

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1.3.1. The Certified Public Accountant

 Candidates for Audit practitioner certificates must satisfy the following conditions
(Article 4 of Circular 91/2017/TT-BTC):
1. Meet standards in professional ethics, truthfulness, integrity, and high sense of law observance;
2. Obtain at least a bachelor's degree in finance, banking, accounting, or audit; or a bachelor's degree in
other majors with total units of study (or classes) of subjects: Finance, accounting, audit, financial
activity analysis, or taxation accounting for at least 7% of total units of study (or classes) of the entire
course; or obtain a bachelor's degree in other majors and audit or accounting certificates or degrees
awarded by international audit or accounting associations as prescribed in Article 9 hereof;
3. Have at least 36 months’ experience in finance, accounting, or audit field, which is determined in the
period beginning from the month of graduation specified in the bachelor's degree (or postgraduate
degree) to the time of application for taking exams.
4. Submit sufficient and required application for examination and exam fees as prescribed;

1.3.1. The Certified Public Accountant

 Candidates for Audit practitioner certificates must take the tests on the following
subjects:
1) Economic law and the Law on Enterprise;
2) Advanced finance and financial management;
3) Advanced tax and tax administration;
4) Advanced administrative accounting, financial accounting;
5) Advanced audit and guarantee 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. A test is considered passed when it is given at least 5 marks on the
scale of 1 to 10.

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1.3.1. The Certified Public Accountant

 Auditors must meet the following standards (Article 14 of Law on Independent Audit):
1) Having full civil act capacity;
2) Having good morals, sense of responsibility, integrity, honesty, objectivity;
3) Having degree of university or higher to be of financial, banking, accounting, auditing disciplines or
other disciplines as prescribed by the Ministry of Finance;
4) Having certificates of auditors in accordance with regulations the Ministry of Finance.
Where person who have foreign certificates recognized by the Ministry of Finance, passing the
examinations in Vietnamese on Vietnam law and meeting fully the standards specified in point a and
point b clause 1 of this Article shall be recognized as auditors.

1.3.1. The Certified Public Accountant

 The recognized foreign professional organizations (Article 10 of Circular 91/2017/TT-BTC):
a) The Association of Chartered Certified Accountants – ACCA;
b) Certified Public Accountants in Australia (CPA Australia);
c) Institute of Chartered Accountants in England and Wales (ICAEW).
d) Other foreign professional organizations meeting conditions prescribed [(i) be a member of
International Federation of Accountants (IFAC); (ii) there are learning contents and examination to
obtain accounting expert certificate or audit practicing certificate must equivalent or higher than those
prescribed) – whose accounting expert certificates or audit practicing certificates are recognized by the
Ministry of Finance of Vietnam.

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1.3.1. The Certified Public Accountant

 Person who meets fully the following conditions can register for audit practice (Article
14 of Law on Independent Audit):
a) Being auditor;
b) Having actual working time as auditor for full thirty-six months or more;
c) Participating fully in the programs of updating knowledge.
Person who meets fully the conditions specified above shall be entitled to register the audit practice
and to be granted the certificate of registration of auditing practice in accordance with regulations
of the Ministry of Finance.

1.3.2. Public Accounting Firms

 Audit firm is an enterprise which is eligible for providing audit services in accordance with this Law
and other relevant laws.
 Audit firm in Vietnam is a firm established and operating in accordance with Vietnamese law, and
fully meeting the prescribed conditions for providing audit services and issued with a certificate of
eligibility for providing audit services (hereinafter called audit business certificate) by the Ministry of
Finance.
 Forms of enterprise shall be permitted to provide audit services in Vietnam include:
• Multiple member limited liability companies;
• Partnerships; and
• Private enterprises. (Article 20 of Law on Independent Audit)

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1.3.2. Public Accounting Firms

 An enterprise must satisfy all the following conditions when applying for an audit
business certificate:
 Having business registration certificate, enterprise registration certificate or investment certificate in accordance
with law.
 Having at least five (5) practising auditors including:
 A minimum of two capital contributing members who are practising auditors (multi-member limited liability company).
 A minimum of two partners who are practising auditors (partnership).
 The owner of the enterprise (private enterprise).
 The legal representative, and director or general director of the company must be:
 Practising auditors (multi member limited liability company).
 Practising auditors (partnership).
 The owner of the enterprise (private enterprise).

1.3.2. Public Accounting Firms

 The four largest international public accounting firms in the world (Big Four) are Deloitte, KPMG,
Pricewaterhouse Coopers (PwC), and Ernst & Young.
 Big Four Accounting Firms Ranking by Revenue

Big 4 Accounting
2021 2020 2019 2018
Firms

Deloitte $50 billion $47.6 billion $46.2 billion $43.2 billion

PwC $45.1 billion $43 billion $42.4 billion $41.3 billion
Ernst and Young $40 billion $37.2 billion $36.4 billion $34.8 billion
KPMG $32.1 billion $29.22 billion $29.8 billion $28.96 billion
Source: https://big4accountingfirms.com/big-4-accounting-firms-ranking

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1.3.2. Public Accounting Firms

Revenue of the Big Four accounting firms worldwide in 2021, by function

1.3.2. Public Accounting Firms

Top Audit Firms Ranking by Revenue in 2018
No. Audit Firms Revenue Ratio
1 Deloitte Vietnam 1.256.876 16,15%
2 PwC Vietnam 1.137.208 14,61%
3 Ernst and Young Vietnam 1.033.629 13,28%
4 KPMG Vietnam 496,177 6,37%
5 AASC 222.117 2,85%
6 A&C 160.777 2,07%
7 Grant Thornton Vietnam 150.861 1,94%
8 RSM Vietnam 125.950 1,62%
9 An Viet 123.863 1,59%
10 Mazars Vietnam 113.051 1,45%
Unit: million VND, Source: Ministry of Finance

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 “Who are the Big Four”? https://youtu.be/3_IoHkvPlpM

1.3.2. Public Accounting Firms

 Audits are usually conducted by teams of auditors, typically composed of, in order of authority, a partner, a
manager, a senior, and staff members.
Audit team member Selected duties
Partner - Reaching agreement with the client on the scope of the service to be provided.
- Ensuring that the audit is properly planned; Ensuring that the audit team has the required
skills and experience; Supervising the audit team, reviewing the working papers, and quality
control; Signing the audit report.
Manager - Ensuring that the audit is properly planned, including scheduling of staff; Supervising the
preparation and approving the audit program; Reviewing the working papers, financial
statements, and audit report.
Senior/Auditor in - Assisting in the development of the audit plan; Preparing budgets; Assigning audit tasks to
charge staff and directing the day-to-day performance of the audit; Supervising and reviewing the
work of the staff.
Staff - Performing the audit procedures assigned to them; Preparing adequate and appropriate
working papers; Informing the senior about any auditing or accounting problems encountered.

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1.3.3. Types of other Audit services

Audit and Assurance services Tax services
Audits of financial statements, performance Tax compliance and advisory services; tax
audits, compliance audits, audits of planning to individuals and corporates
finalization reports of completed projects,
audits of financial statements for tax
purposes and the other audits;
Engagements to review financial statements,
financial information and other assurance
engagements.
Types of other
Audit services
Accounting and Review services Management Advisory services
Accounting services for their non-audit or Advice and assistance concerning an entity’s
nonpublic clients, including bookkeeping, organization, personnel, finances, operations,
payroll, processing, and preparing financial systems, or other activities.
statements

1.3.3. Types of other Audit services

 Scope of activities of auditing firms, branches of foreign auditing firms in Vietnam
(Article 40 of Law on Independent Audit)

1) The audit services, including audit of financial statements and audit of activities, audit of compliance, audit of
reports on the settlement of completed projects, audit of financial statements for tax purposes and the other
audits;
2) Service of reviewing financial statements, financial information and other assurance services.
3) Consultancy of economy, finance, taxes;
4) Consultancy of management, conversion, and restructuring of enterprises;
5) Consultancy of information technology application in the management of enterprises and organizations;
6) Accounting services in accordance with provisions of accounting legislation;
7) Valuation of assets and business risk assessment;
8) Services of fostering knowledge of finance, accounting, and auditing;
9) Other related services in finance, accounting, tax as prescribed by law.

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1.3.4. Professional Organizations

International
Federation of IFAC
Accountant

International
organizations International
Accounting
IASB
Standards
Board

International
Organization
of Supreme INTOSAI
Audit
Institutions

1.3.4. Professional Organizations

 International Federation of Accountant – IFAC
International • IFAC is an international non-governmental organization (INGO), for
Federation of IFAC
Accountant the accountancy profession, comprising 180 member and associate
organizations in 135 countries and jurisdictions, representing more
than 3 million professional accountants.
International
Accounting • IFAC supports the development, adoption, and implementation of
IASB
Standards
Board international standards for accounting education, ethics, and the
public sector as well as audit and assurance.
International • It supports four independent standard-setting boards, which establish
Organization
of Supreme INTOSAI international standards on ethics, auditing and assurance, accounting
Audit
Institutions
education, and public sector accounting.
• It also issues guidance to encourage high-quality performance by
professional accountants in small and medium business accounting
practices.

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1.3.4. Professional Organizations

International Federation of Accountant – IFAC
The International
Auditing and Assurance
Standards Board
(IAASB)
sets high-quality
international standards for
auditing, assurance, and
quality management that
strengthen public
confidence in the global
profession.
The International The International Ethics The International Public
Accounting Education Standards Board for Sector Accounting
Standards Board Accountants (IESBA) Standards Board (PABC)
(IAESB) sets high-quality, develops standards,
established standards for internationally appropriate guidance, and resources
professional accountancy ethics standards for for use by public sector
education that prescribe professional accountants, entities around the world
technical competence and including auditor for preparation of general
professional skills, values, independence purpose financial
ethics, and attitudes. requirements. statements.

1.3.4. Professional Organizations

International Accounting Standards Board
International
Federation of IFAC
(IASB)
Accountant
• IASB is an independent, private-sector body that develops and
approves International Financial Reporting Standards (IFRSs), operating under
the oversight of the IFRS Foundation. IASB was formed in 2001 to replace
International the International Accounting Standards Committee (IASC).
Accounting
IASB
Standards
Board • Under the IFRS Foundation Constitution, the IASB has complete responsibility
for all technical matters of the IFRS Foundation including:

International  full discretion in developing and pursuing its technical agenda, subject to
Organization certain consultation requirements with the Trustees and the public
of Supreme INTOSAI
Audit
Institutions  the preparation and issuing of IFRSs (other than Interpretations) and
exposure drafts, following the due process stipulated in the Constitution
 the approval and issuing of Interpretations developed by the IFRS
Interpretations Committee.

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1.3.4. Professional Organizations

International Organization of Supreme Audit
Institutions (INTOSAI)
International
Federation of IFAC
Accountant
• INTOSAI is a non-governmental organization with special consultative
status with the Economic and Social Council (ECOSOC) of the United
Nations, operating as an umbrella organization for the external
International government audit community.
Accounting
IASB Standards
Board
• INTOSAI’s members are supreme audit institutions. Depending on the
type of system used in their home country, the members of INTOSAI may
be variously titled the Chief Financial Controller, the Office of
International
Organization
the Comptroller General, the Office of the Auditor General, the Court of
of Supreme INTOSAI Accounts, or the Board of Audit.
Audit
Institutions
• At present, INTOSAI has 195 Full Members (including Vietnam), 5
Associate Members and 1 Affiliate Member.

1.3.4. Professional Organizations

American
Institute of
Certified AICPA
Public
Organizations Accountants

in foreign Association
countries ACCA
of Chartered
Certified
Accountants

Certified
Practising CPA Australia
Accountant

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1.3.4. Professional Organizations

 Association of International Certified Professional
American
Institute of
Accountants (AICPA)
Certified AICPA
Public
Accountants
• AICPA is the national professional organization of Certified Public
Accountants (CPAs) in the United States, with more than 428,000
Association
members in 130 countries in business and industry, public
ACCA
of Chartered
Certified
practice, government, education, student affiliates and
Accountants
international associates.
• Founded in 1887 as American Association of Public Accountants
Certified
Practising CPA Australia
(AAPA), the organization sets ethical standards for the profession
Accountant
and U.S. auditing standards for audits of private companies, non-
profit organizations, federal, state and local governments.

1.3.4. Professional Organizations

 Association of Chartered Certified Accountants (ACCA)
American
Institute of
Certified AICPA
• ACCA is the global professional accounting body offering the
Public
Accountants Chartered Certified Accountant qualification (ACCA), and also the
is the Global Chartered Accountants' body
Association of
Chartered
• ACCA works through a network of over 104 offices and centres in
ACCA Certified
Accountants
52 countries - with 323 Approved Learning Partners (ALP) and
more than 7,300 Approved Employers worldwide, who provide
employee development.
Certified
Practising CPA Australia
Accountant

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1.3.4. Professional Organizations

 CPA Australia ("Certified Practising Accountant”)
American
Institute of
Certified AICPA
• CPA Australia is a professional accounting body in Australia
Public
Accountants founded in 1886.
• As of 31 December 2019, it has 166,166 members working in 150
Association of
Chartered
countries and regions around the world.
ACCA Certified
Accountants
• CPA Australia currently has 19 staffed offices across Australia,
China, Hong Kong, Malaysia, Singapore, Indonesia, Vietnam, New
Certified
Zealand and the UK
Practising CPA Australia
Accountant

1.3.4. Professional Organizations

 Vietnam Association of Accountants and Auditors (VAA)
• VAA was established in 1994 as the first professional accountancy
organization (PAO) in Vietnam and formally named as the Vietnam
Association of Accountants and Auditors.
Organizations
• VAA’s objectives are to unite organizations and individuals
in Vietnam involved in the accountancy practice to develop the profession;
upgrade professional skills; uphold ethics for Vietnam’s
management of economic and financial issues, and integration into
the community of accountancy bodies around the world.
• In addition to being a member of IFAC, VAA is a member of the
ASEAN Federation of Accountants (AFA).

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1.3.4. Professional Organizations

 Vietnam Association of Certified Public Accountants (VACPA)
• VACPA is the professional body of Vietnamese citizens holding
certificates of auditors and audit firms in Vietnam.

Organizations • VACPA is voluntarily established to assemble and unite its

members for mutual support to perform productively and contribute
in Vietnam to maintain, develop and upskill practicing auditors, improve the
quality of accounting and auditing services, and uphold reputation
and professional credentials and ethics for it to be regionally and
internationally recognized as a professional body.
• The Association also aims to help provide transparency into
corporate economic and financial data, protect the interests of
users of financial data of audited companies and organizations in
accordance with applicable laws, and contribute to the country’s
social and economic development.

EXERCISE
Assume types of auditors: Independent auditor (CPA),
government auditor, bank examiner, tax examiner and
internal auditor.
Classifications of audit work: audits of financial statements,
compliance audits, operational audits, accounting services,
and consulting services.
Required: For each of the following cases, you are to state
the type of auditor and the work of auditors.
1. FSs of a small business to be submitted to a bank in support of
a loan application.
2. FSs of a large bank listed on the New York Stock Exchange to
be distributed to stockholders.
3. Review of the management directive stating the goals and
responsibilities of a corporation’s mail-handling department.
4. Review of costs and accomplishments of a military research
program carried on within the air force to determine whether the
program was cost effective.
5. Examination on a surprise basis of ABC Bank. Emphasis
placed on verification of cash, marketable securities, and loans
receivable and on consistent observation of the banking code.
6. Analysis of the accounting system of a small business with the
objective of making recommendations concerning installation of a
computer-based system.
7. Determination of fairness of FSs for public distribution by a
corporation that has a professional level internal auditing staff.
8. Review of the activities of the receiving department of a large
manufacturing company, with special attention to efficiency of
materials inspection and promptness of reports issued.
9. Review of the tax return of the corporate president to determine
whether charitable contributions are adequately substantiated.
10. Review of daily attendance during spring term at Blue Ridge
Consolidated School District to ascertain whether payments
received from the state were substantiated by pupil-day data and
whether disbursements by the district were within authorized
limits.
11. Review of transactions of a government agency to determine
whether disbursements under the intent of Ministry of Finance.
12. Compilation of quarterly FSs for a small business that does not
have any accounting personnel capable of preparing FSs.

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Chapter 1: 1.1 An introduction to Auditing

Understand what the term “Auditing” means; Describe the history of audits

An introduction to
Auditing 1.2 Types of Audits, Auditors
Classify the different types of audits and auditors

1.3 The public accounting profession

Understand characteristics of the audit profession and the requirements of
professional ethics in the audit.

The Financial Statement

1.4 Auditing Environment
Know the list of the VSA system, and ISA system.

1.5 Overview
process
of the financial statement auditing

Know the phases of the audit process

1.4. The Financial Statement Auditing Environment

1.4.1 Regulatory environment

1.4.2 Auditing standards

1.4.3 Ethics, independence, and the code of

professional conduct

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1.4.1. Regulatory environment

The Law on Independent Auditing No 67/2011/QH12
• governs the audit practice in Vietnam,
• regulates the principles, conditions, scope, and form of independent audit activities; the rights
and obligations of practising auditors, audit firms and branches of foreign audit firms in
Vietnam, and of audited entities.
• applies to auditors, professional accountants in public practice (hereinafter called
practising auditors or practitioners), audit firms, branches of foreign audit firms in Vietnam,
audited entities, professional auditing organisations and other organisations and individuals
involved in independent audit activities.

1.4.2. Auditing standards

Auditing standards mean the rules and
guidelines on the requirements, principles, basis for
auditing procedures, and handling of the controlling, legal foundation
relationship arising from audit activities that inspecting and for professional
evaluating the training
members participating in the audit and the audit quality
auditing firms, branches of foreign auditing
firms in Vietnam must comply with. (Article 6 of
Law on Independent Audit)
basis for providing
independent audit
service

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1.4.2. Auditing standards

• International Standard on Quality Control
(ISQC) [1]
• Auditing Standards (ISA) [36]
• International Standard on Review
Engagements (ISRE) [2]
• International Standard on Assurance
Engagements (ISAE) [5]
• International Standard on Related Services
(ISRS) [2]
IAASB
MOF
• Standard on Quality Control (VSQC) [1]
• Auditing Standards (VSA) [37]
• International Standard on Review Engagements
(VSRE) [2]
• International Standard on Assurance Engagements
(VSAE) [3]
• International Standard on Related Services (VSRE) [2]

1.4.1. Ethics, independence, and the code of professional conduct

Professional ethical standards

of accounting and auditing: Provisions for
rules and guidelines on General Provisions for
practicing
principles, contents of the provisions and certified
accountants,
basic ethical accountants,
application of professional professional
principles auditors
ethical standards for members auditors
participating in the audit and
auditing firms, branches of foreign
auditing firms in Vietnam. Ethical standard for
(Article 6 of Law on Independent Audit) accounting and auditing
practice
(Circular No. 70/2015/TT-BTC)

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1.4.1. Ethics, independence, and the code of professional conduct

Integrity

Objectivity
Fundamental
principles of
professional Professional competence and due care
ethics
Confidentiality

Professional behavior

1.4.1. Ethics, independence, and the code of professional conduct

Professional
competence and
Integrity Objectivity due care
Auditors should be Auditors should not Auditors have to
straightforward and compromise their maintain
honest in all professional or professional
professional and business judgment knowledge and skill
business because of bias, at the level required
relationships conflict of interest or to ensure that a client
the undue influence or employer receives
of others. competent
professional
services.

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1.4.1. Ethics, independence, and the code of professional conduct
Confidentiality
Auditors should respect
the confidentiality of
information acquired
during the course of
performing professional
services.
1.4.1. Ethics, independence, and the code of professional conduct
Auditors are
required to be
Independence of mind independent
of the entity
subject to the
Independence of mind audit
• Permitting the expression of a conclusion
without being affected by influences that
compromise professional judgment,
• Allowing to act with integrity and
exercise objectivity and professional
skepticism.
1/10/2023
Professional
behavior
Auditors should comply
with relevant laws and
regulations and avoid
any action that the auditor
knows or should know
may discredit the
profession
Independence in appearance
Independence in appearance
• Avoidance of facts and circumstances
that are so significant that a reasonable
and informed third party would be likely
to conclude, weighing all the specific
facts and circumstances, that a firm's, or
a member of the audit team, integrity,
objectivity or professional
skepticism has been compromised.
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Chapter 1: 1.1 An introduction to Auditing

Understand what the term “Auditing” means; Describe the history of audits

An introduction to
Auditing 1.2 Types of Audits, Auditors
Classify the different types of audits and auditors

1.3 The public accounting profession

Understand characteristics of the audit profession and the requirements of
professional ethics in the audit.

1.4 The Financial Statement Auditing

Environment
Know the list of the VSA system, and ISA system.

1.5 Overview of the financial

statement auditing process
Know the phases of the audit process

1.5. Overview of the financial statement auditing process

To accept, keep clients and make audit

1.5.1 planning

1.5.2 To perform audit (audit performing)

Audit Audit Audit
Planning Performing Completion
To terminate the audit, make the audit
1.5.3 statement and handle the after-audit (audit
completion)

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1.5.1. To accept, keep clients and make audit planning

Accept client and Understand the
Assess client
perform initial client’s business and
business risk
planning industry

Perform preliminary
Set materiality &
assess acceptable
Understand internal
control and assess
Audit
analytical procedures audit risk & inherent
risk
control risk
Planning

Develop overall audit

Gather information to
plan and audit
assess fraud risks
program

1.5.1. To accept, keep clients and make audit planning

• Evaluate level of risk to
the firm: bad reputation,
questionable ethics,
material
misrepresentation of
business and accounting
records
Assessment of
engagement risks
• Auditors’ independence,
objectivity and integrity
to ensure a quality audit
and to earn people’s
trust in the audit reports
Relationship
conflicts
• Qualification of the
auditor,
• Time constraint,
• Extra reports and
• Estimated budget, etc.
Requirements of
the clients

• Available auditors and • compare the potential

staff to perform the costs of the engagement
audits to clients with the audit fee offered
Pre – from the client
• professional staff charge

planning
Sufficient competent Cost-Benefit
personnel available Analysis

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1.5.1. To accept, keep clients and make audit planning

obtain a basic understanding of the
client’s business

perform analytical procedures

determine the riskiness
Audit of the engagement and
set materiality levels
planning prepare an audit program

Effective audit in an
efficient and timely manner

1.5.1. To accept, keep clients and make audit planning

Clients:
• provide reasonable Control
environment
assurance on its control
objectives

Auditors: Monitoring
Risk
assessment
• assess the risk that they Internal
will not prevent to detect a
material misstatement in control
the FSs
• directly impact the scope
of work Information and
Control activities
Communication

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1.5.2. To perform audit (audit performing)

Audit
Performing
Plan to reduce No
assessed level of
control risk? Low Medium High or unknown
Yes
Perform tests of controls Perform analytical procedures

Perform substantive tests of transactions Perform tests of key items

Assess likelihood of misstatements in financial statements Perform additional tests of details of balances

1.5.2. To terminate the audit, make the audit statement and handle the
after-audit (audit completion)

Perform additional
Accumulate final
tests for presentation Evaluate results
evidence
& disclosure
Audit
Completion Communicate with
Issue audit report audit committee and
management

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Q&A

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