UNIVERSITY OF ECONOMICS HO CHI MINH CITY

ACCOUTING DEPARTMENT

COURSE: INTERNAL CONTROL

TOPIC:

CONTROL OVER FIXED ASSETS OF VINA YEN ECO

PART INVESTMENT JOIN STOCK COMPANY

Lecturer: Ms. Pham Thi Ngoc Bich

Assigned by: Group 2

Ho Chi Minh City, 15th February 2024

 LIST OF MEMBERS

Full Name ID Degree of Completion

1 Hồ Trâm Anh 31221022791 100%

2 Đỗ Minh Hương 31221022662 100%

3 Bùi Thị Kim Ngân 31221021581 100%

4 Nguyễn Thị Thanh Nhã 31221023587 100%

5 Trương Quế Nhiên 31220121299 100%

6 Ngô Trần Thanh Thủy 31221025255 100%

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 TABLE OF CONTENTS

INTRODUCTION ......................................................................................................... 3

Chapter 1: Introduction to the Company ................................................................... 3

1.1. Introduction to the company ............................................................................... 3

1.2. Businesses ........................................................................................................... 4

1.3. Organizational structure ...................................................................................... 5

1.4. Departments ........................................................................................................ 5

1.5. Vision and mission .............................................................................................. 6

1.6. Fixed assets ......................................................................................................... 6

CHAPTER 2: ................................................................................................................. 8

2.1. Objectives of Internal Control ............................................................................ 8

2.2. The company’s Internal control system .............................................................. 8

2.2.1. Control Environment .................................................................................. 8

2.2.2. Risk Assessment ......................................................................................... 9

2.2.3. Control Activities ....................................................................................... 9

2.2.4. Information & Communication ................................................................ 10

2.2.5. Monitoring Activities ............................................................................... 10

Chapter 3: Control over the cycle: Fixed assets within Vina Yen .......................... 11

3.1 Investment and Acquisition ............................................................................ 11

3.1.1 Recognition of the need ............................................................................. 11

3.1.2 Approval of purchase orders ..................................................................... 12

3.1.3 The selection of the supplier ..................................................................... 12

3.1.4 Purchase order (PO) .................................................................................. 12

3.1.5 Receiving and inspection of the assets ...................................................... 13

3.1.6 Recording .................................................................................................. 13

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 Summary: ........................................................................................................... 13

3.2. Management .................................................................................................... 14

3.2.1. Assigned responsibility for fixed asset management ............................... 14

3.2.2. Fixed asset inventory ................................................................................ 14

3.2.3. Repair and maintenance of fixed assets ................................................... 15

Summary: ........................................................................................................... 15

3.3. Depreciation ..................................................................................................... 16

3.3.1. Verify the accurate recording of the type of fixed assets: ........................ 16

3.3.2. Determine appropriate depreciation for fixed assets. ............................... 16

3.3.3. Store information on fixed asset depreciation: those information are

stored in each particular fixed asset’s documents. ...................................................... 16

❖ Applied to Vina Yen .Co ............................................................................... 16

Evidence 1: According to Financial Statements Audited 2022 – Note 1.

Summary of Accounting Policy ............................................................................ 16

Evidence 2: According to the answers of an accountant in Vina Yen.Co .... 16

Summary: ........................................................................................................... 17

3.4 Fixed Asset Disposal......................................................................................... 18

3.4.1 Fixed Asset Disposal Process: ................................................................... 18

3.4.2. Process Evaluation: .................................................................................. 19

3.4.3 Solutions to Improve Control over Tangible Fixed Asset Disposal: ........ 19

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 INTRODUCTION

The trend of global economic integration brings many opportunities for market
development and economic expansion but also poses many challenges when Vietnam is
developing an economy with a young capital market. However, creative accounting behavior
- the use of accounting knowledge to influence financial reporting data through which to
reflect the financial situation and business results of the enterprise in a way that the board of
directors desires, becomes a painful problem. Many business administrators have abused
creative accounting for illegal activities, by changing the authenticity of numbers in financial
reports, and "beautifying" financial statements, thereby concealing the company's actual
situation, and deceiving the public and investors. Notable in creative accounting behavior is
the false and fraudulent reflection of a business's real assets, specifically increasing fixed
assets, to create a solid basis for development strategy. long-term and the ability to expand
the company's production and business. This issue raises questions for lawmakers and the
need for company internal control, especially control of fixed assets. To better understand
fixed asset control within the company, let's learn about " The fixed asset control process at
Vina Yen Eco Park Investment Joint Stock Company".

THANK YOU

First of all, our team would like to express our deep gratitude to Ms. MSc. Pham Thi
Ngoc Bich, who has brought us an interesting, useful, and very practical subject - "Internal
Control", especially in today's 4.0 era. Through your dedicated and enthusiastic guidance, we
have acquired a lot of knowledge and thereby gained a deeper understanding of the role of
Internal Control and applied skills to real cases. This is a valuable knowledge base for us to
further develop in our future studies and work.

Eugene P. Bertin once said: “Teaching is putting one person's mark on the development
of another person. And certainly, students are the bank where you can deposit your most
precious treasure.” Now, our group thanks you for placing your trust in and imparting a lot of
valuable knowledge, which is a premise for us to rely on, carry out, and complete the essay
according to the set goals.

However, due to a lack of experience and limited knowledge, it is difficult to avoid

mistakes. We look forward to receiving your feedback to help us complete the essay.

Finally, we would like to sincerely thank you and wish you good health and more and
more success on the journey of leading our students to the shore of knowledge.

5
CHAPTER 1:

INTRODUCTION TO THE COMPANY

1.1. Introduction to the company

Vina Yen Eco Park Investment Joint Stock Company, a member of Hung Thuan Group,
was established and operates under the company registration certificate No. 1101400006
issued by the Long An Provincial Planning and Investment Department for the first time on
September 12, 2011.

During its operations, the Company has changed its business registration 14 times. The
14th modified business registration certificate issued by the Long An Provincial Planning and
Investment Department on May 12, 2022, contains the following content:

- Head Office: Zone F, Viet Phat Industrial Park, Highway N2, Tan Lap Village, Thu
Thua District, Long An Province.

- Tax code: 1 1 0 1 4 0 0 0 0 6.

- Chapter capital: 300.000.000.000 VND.

- The form of capital ownership: joint stock company.

+ Mr. Lam Truc Nho: 40%;

+ Mrs. Lam Tran Tran: 30%;

+ Mr. Lam Bao Bao: 28%;

+ Mr. Lam Thanh Dao: 2%.

1.2. Businesses
- Poultry farming (main industry);
- Production of fertilizers and nitrogen compounds;
- Mining stone, sand, gravel, clay (not operating at headquarters);
- Processing products from bird's nest;
- Production of construction wooden furniture (not operating at the headquarters);
- Hotel services, villas or apartments, guest houses, motels, motel rooms, and similar
accommodation facilities (not operating at the headquarters);
- Wholesale of materials and other installation equipment in construction;
- Trading and processing products from bird's nest;
- Restaurants and mobile food services (not operating at headquarters);
- Providing catering services under occasional contracts with customers;
- Construction of other civil engineering works;

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 - Freight transport by road;
- Water exploitation, treatment, and supply;
- Construction of railways and road projects;
- Other food and beverage services;
- Architectural activities and related technical consulting;
- Other remaining unclassified business support service activities;
- Installation of machinery and industrial equipment;
- Drainage and wastewater treatment;
- Construction of factories of all kinds;
- Install water supply, drainage, heating, and air conditioning systems;
- Finish construction;
- Installation of electrical systems;
- Real estate business, land use rights belonging to the owner, user, or tenant;
- Wholesale of other machinery, equipment, and spare parts;
- Other specialized construction activities;
- Consulting, brokerage, real estate auction, land use rights auction;

- Investment in construction, business, and development of housing and technical

infrastructure in urban areas, industrial parks, economic zones, and concentrated residential
areas; projects to develop industry, transportation, river ports, seaports, irrigation, electricity,
water supply, and drainage; BOT, BO, BOO projects in the fields of electricity, transportation,
and port development./.

1.3. Organizational structure

1.4. Departments
- Financial Accounting:
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 + Manage and operate all finance and accounting activities;
+ Advise the Board of Directors on financial situation and financial strategies;
+ Prepare financial reports according to accounting standards and accounting regimes;
+ Prepare budget estimates, allocate and control budgets for all production and business
activities of the Company;
+ Forecasting financial data, analyzing information, financial and accounting data;
+ Capital management aims to ensure the company's production, business, and
investment activities are effective.
- Administrative offices
+ Receive and process internal affairs within the enterprise and official dispatches sent
by customers;
+ Organizing seminars and company conferences;
+ Store and issue legal documents and seals and be responsible to the board of directors
and the law for legality;
+ Plan recruitment, organize personnel recruitment, organize rewards and criticism, and
organize capacity training classes for employees;
+ Resolve benefits for employees by company regulations and labor laws;
+ Ensure labor safety, inspect, and plan training on labor protection.
- Technical Department:
+ Research and develop technical options for technical projects for businesses;
+ Prepare and develop technical design documents arising in the enterprise;
+ Set technical standards and ensure technical issues such as machinery and other
equipment;
+ Coordinate with other departments to complete and build technical systems;
+ Solve all problems related to technology or machinery and equipment.
- Business Department:
+ Set business goals, develop business strategies and plans, monitor and implement
business plans;
+ Research, build, and develop distribution channel network, distribution policy, and
price policy;
+ Propose measures on product strategy.

1.5. Vision and mission

Applying traditional methods combined with modern scientific methods in raising and
hatching bird's nests along with the advanced production process of products from bird's nests,
Vina Yen Ecology Investment Joint Stock Company hopes to successfully build a modern
and large-scale service center model for bird's nests, with the purpose that this center will
support strategic planning, branding, and develop products related to bird's nests to Serving
the domestic and export markets.

With the business motto "Investing for Prosperity and Health" as well as working for
the benefit of customers, Vina Yen Ecological Investment Joint Stock Company always puts
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research, improvement, and application methods first. Using modern processing technology,
strict management processes from creating bird nests, exploiting, harvesting, screening, and
processing bird nests... to improve operational efficiency as well as product quality.

1.6. Fixed assets

According to Circular 45/2013/TT-BTC on the regime of management, use, and

depreciation of fixed assets: Fixed assets are assets of great value, participating in many
business cycles and not consumed or destroyed during the production process to create
economic benefits for businesses. Fixed assets play an important role in the production and
business activities of the company. Accurate and complete recording of fixed assets is
important in determining the value of an enterprise's assets, calculating production and
business costs, and preparing financial reports.

Fixed assets in businesses are mainly classified according to physical form criteria,
including tangible fixed assets and intangible fixed assets.

- Tangible fixed assets: These are assets that have physical form, and can be seen and
touched. For example: Houses, architectural objects; devices; means of transport and
transmission;...

- Intangible fixed assets: These are assets that have no physical form, represent an
amount of invested value, and bring economic benefits to the business. For example, land use
rights.

According to the provisions of Circular 45/2013/TT-BTC, fixed assets are recorded

when the following conditions are simultaneously satisfied:

- Future economic benefits will be obtained from the use of that asset.

- Fixed assets are used in many business cycles, with a useful life of 1 year or more.

- The original cost of the asset must be determined reliably and be worth VND
30,000,000 or more.

Identify fixed assets:

- Determining the original cost of fixed assets: Includes the total cost of purchasing the
asset, transportation costs, installation costs, test runs and other costs directly related to
bringing the asset into a ready-to-use state. Enterprises need to rely on valid documents and
records to accurately determine the original price of fixed assets.

- Determine the depreciation time of fixed assets: Based on the fixed asset depreciation
framework according to Appendix 1 issued with Circular 45/2013/TT-BTC for administrators

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to determine the depreciation time of fixed assets most accurately. According to the actual
situation at Vina Yen:

+ Houses and structures: 20 - 50 years

+ Machinery and equipment: 05 - 08 years

+ Means of transport and transmission: 05 - 08 years

+ Other fixed assets: 04 - 08 years.

- Determine the method of depreciation of fixed assets: Straight line method.

- Determining the remaining value of fixed assets: The remaining value of fixed assets
is the value of fixed assets after full depreciation. Calculating the remaining value of fixed
assets is to ensure the accuracy of financial statements.

- Determining the time to record fixed assets: This is the time when the enterprise is
eligible to record fixed assets according to the provisions of law. Normally, the time to record
fixed assets is after the enterprise completes the procurement, construction, manufacturing,
acceptance, handover, and putting into use.

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 CHAPTER 2:

THE COMPANY’S INTERNAL CONTROL SYSTEMS

2.1. Objectives of Internal Control

Internal control is a process influenced by the Board of Directors, managers, and other
employees of an organization, designed to provide reasonable assurance in carrying out its
objectives—operations, reporting, and compliance. Thereby, determining the goals of internal
control helps administrators control risks and improve business efficiency in the right
direction of strong business development.

Objectives of internal control:

- Operations Objectives: Enterprises need to ensure the efficiency and effectiveness of

activities such as:

● Effective use of assets and other resources of the enterprise;

● Limit risks and avoid unnecessary costs;

● Ensure the coordination and work of all employees in the enterprise's

departments.

- Reporting Objectives: Reliability, completeness, and updating financial and

management information specifically and accurately on financial statements.

● Business reports need to be prepared on time and reliably;

● Information sent to the Board of Directors, Board of Directors, shareholders and

management agencies of the enterprise must have quality and consistency;

● Financial statements and other management reports are presented appropriately

and are based on clearly defined accounting policies.

- Compliance Objectives: Ensure compliance with applicable laws and regulations such
as:

● State laws and regulations;

● Management requirements;

● Policies and business processes set out by the business.

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 2.2. The company’s Internal control system

2.2.1. Control Environment

The control environment is the set of standards, processes, and structures that underpin
the implementation of internal control throughout the organization, including the
organization's integrity and ethical values; criteria that enable the board of directors to carry
out its governance oversight responsibilities; organizational structure and assignment of
powers and responsibilities; the process of attracting, developing and retaining qualified
individuals; and rigor around performance measures, incentives, and rewards to drive
accountability for performance. Therefore, the board of directors is aware of the role of the
internal control system and regularly emphasizes the importance of internal control in
meetings. Company leaders establish management and control over the entire enterprise's
activities, not omitting any areas and ensuring relative independence and no overlap between
departments to achieve efficiency, the highest level of performance of functional departments;
focusing on promulgating regulations and regulations on economics, finance, technology,
labor, wages... and widely disseminate those regulations to all employees throughout the
company. Planning and estimating work are always emphasized and the implementation of
proposed plans and projects is regularly monitored. The planning of leadership staff in each
period and salary policy is increasingly improved in improving the material and spiritual life
of officials and employees.

2.2.2. Risk Assessment

Every business entity faces many different risks from external and internal sources. Risk
is defined as the possibility that an event will occur and adversely affect the achievement of
objectives. Concerning achieving unit-wide objectives, risk is considered relative to the
established level of risk tolerance. Therefore, risk assessment is the basis for determining how
to manage risk. A prerequisite for risk assessment is the establishment of objectives, linked
at different levels of the entity. The Company has carried out regular risk assessments and
effectively updated its internal control system to respond to changes in the business
environment. At the same time, the company identifies potential risks that may affect the
company, including financial risks, operational risks, compliance risks, and strategic risks to
assess their severity and the likelihood of risks occurring to come up with a timely,
appropriate, and most effective risk control strategy.

2.2.3. Control Activities

Control Activities - are actions established through policies and procedures to ensure
that management’s risk mitigation directives are executed. These activities occur at all
organizational levels, various business process stages, and across the tech environment. They
can be preventive or detective, involving a range of manual and automated tasks such as
authorizations, approvals, verifications, reconciliations, and business performance reviews.
Where task segregation isn’t practical, alternative control activities are developed.
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 ● Planning, Developing, Marketing, and Constructing Swiftlet Ranching:
The company is engaged in a complex and detailed process, which includes strategic
planning, developing advanced methods, marketing effectively, and constructing the
necessary physical facilities for swiftlet farming. Swiftlet farming is not merely about
nurturing swiftlets but also involves the harvesting of bird’s nests - a high-value food item
that is highly regarded in many cuisines around the world. They are constantly striving to
ensure that every aspect of this process is carried out as professionally and efficiently as
possible.

● Collecting, Processing, and Researching Bird Nest Products: The company

is a professional organization, they not only focus on collecting bird’s nests from swiftlets but
also invest a lot of effort into processing bird’s nests into high-quality products. They also
conduct research to develop and improve our products, aiming to bring the best bird’s nest
products to our customers. Bird’s nest is a rare and highly valued dish in traditional Chinese
cuisine. It not only has a unique taste but is also believed to have many health benefits. The
company is always striving to maximize these benefits and bring them to our customers.

● Branding and Eco-Tourism Development: The company is not only focused

on swiftlet farming, but we are also making efforts to develop our brand and related eco-
tourism projects. This includes creating sustainable and educational experiences for tourists
interested in learning about swiftlets and their habitats. They believe that learning about
swiftlets and their environment will provide a unique and educational tourism experience,
while also raising awareness about the value of bird’s nests and the work we are doing.

2.2.4. Information & Communication

Information & Communication – are necessary for the entity to carry out internal control
responsibilities in achieving its objectives. Communication occurs both internally and
externally and provides the organization with the information needed to carry out day-to-day
internal control activities. Communication enables personnel to understand internal control
responsibilities and their importance to the achievement of objectives

● Data security and access controls: This involves safeguarding sensitive

information through data encryption, access restrictions, and user authentication. It’s crucial
for protecting the organization’s data from unauthorized access and breaches.

● Change management procedures: These procedures ensure that there’s

proper authorization and documentation for changes to systems and data. It helps maintain
the integrity of the systems and data.

● Information accuracy and integrity: Implementing data validation and

reconciliation processes helps maintain data accuracy and integrity. It ensures that the data
used and reported by the organization is reliable.

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 ● Communication channels and protocols: Establishing clear channels for
internal and external communication and information sharing protocols is important for
effective communication within the organization and with external parties.

● Incident response: Having a defined plan for responding to security incidents

involving information and communication systems is crucial for timely and effective response
to incidents.

● Training and awareness: Providing employees with regular training on

information security policies and procedures helps them understand their roles and
responsibilities in maintaining information security.

2.2.5. Monitoring Activities

Monitoring Activities – are ongoing evaluations, separate evaluations, or some

combinations of the two used to ascertain whether each of the five components of internal
control, including controls to effect the principles within each component, is present and
functioning. Findings are evaluated and deficiencies are communicated in a timely manner,
with serious matters reported to senior management and to the board.

● Regular internal audit engagements: This involves conducting internal audits

at planned intervals to assess the adequacy and effectiveness of controls. It’s a proactive
approach to identify any potential issues or weaknesses in the control environment.

● Management reviews: These are periodic reviews conducted by management

to evaluate the control environment and identify areas for improvement. It helps in
maintaining the effectiveness of the control system.

● Continuous monitoring procedures: This involves establishing ongoing

monitoring activities for key controls and risk areas. Continuous monitoring helps in early
detection of control failures, allowing for timely corrective actions.

● Data analytics and reporting: Leveraging data analytics can help in

identifying trends and potential control weaknesses. It provides valuable insights that can
guide decision-making and strategic planning.

● Incident reporting and investigation: Having a system for reporting and

investigating internal control incidents is crucial. It ensures that any incidents are properly
documented, investigated, and resolved, and that appropriate measures are taken to prevent
recurrence.

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 CHAPTER 3:

CONTROL OVER CYCLES: FIXED ASSETS WITHIN VINA YEN

3.1 Investment and Acquisition

- Acquiring fixed assets is a crucial process for any business, as these assets have great
value and play a significant role in its operations and long-term success. An ineffective
investment wastes company resources, affecting labor productivity, business operations, and
profit generation.

- The process of investing and purchasing fixed assets is divided into 6 smaller stages,
which are: recognition of the need, approval of a purchase order, suppliers selection, purchase
order, receiving and inspection of the assets, recording.

3.1.1 Recognition of the need

- The standard process: The common process is that based on the plan built at the
beginning of the year or even a few years earlier, the department that requests to purchase
assets will prepare the asset requisition form.

The asset requisition form must be as complete as the purchase request form and must
clearly state the parts used as well as the purpose/reason for purchase.

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 The purpose of this procedure is to prevent the purchase of unnecessary assets.

- In reality: The Vina Yen company does not develop a purchasing plan in advance, but
only proposes when any department feels it is necessary.

➔ This can lead to financial shortages for the urgent demand of purchasing new assets,
failure to promptly or fully assess risks that may occur when purchasing fixed assets.

3.1.2 Approval of purchase orders

Vina Yen Company carries out the procedures of this stage quite strictly and effectively.
Specifically:

- The asset requisition form is signed by the employee and approved by the department
manager, then it will be transferred to the person responsible for approval.

- The appraiser will vary depending on the value of the property.

+ The review and approval process needs the participation of the chief accountant or
chief financial officer. The task of the chief accountant/chief financial director is to review
the conformity of the fixed asset request form with the previously approved budget and plan.

+ For assets of great value or assets used for production investment, require approval
from the director and in some special cases, approval from the board of directors.

+ If the request is different from the approved plan or budget, an explanation is required
from the requesting department.

3.1.3 The selection of the supplier

Based on the approved asset requisition form, the purchasing department will consult prices
from all possible suppliers (at least 3 price quotes from 3 different suppliers). Choosing a
supplier usually meets the following criteria:

+ There is no beneficial relationship between the purchasing department and the supplier.

+ In addition to the most reasonable price and quality criteria, it is necessary to consider
the asset delivery schedule, payment schedule, maintenance service, warranty, and supplier
reputation.

+ For assets of high value and basic construction investment projects, public bidding
should be chosen.

 Identification of more and more sources helps in selecting better and cheaper
suppliers.

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 However, it should be noted that it is not necessary to go for this process for all types of
purchases. For the repetitive orders and for the purchases of low-value, small lot items,
generally the previous suppliers with good records are preferred.

At Vina Yen company, the purchasing department consults many suppliers before choosing,
however, the company does not organize bidding for assets of great value. This can be
explained by the fact that the company is small and private, so there is no need for this form
of bidding.

3.1.4 Purchase order (PO)

- Based on the asset requisition form and the selected supplier, the purchasing
department will place the purchase order.

Orders must be pre-numbered and include all important information such as: order date,
quantity, specifications, price, payment terms, installation, maintenance, and warranty.

Each purchase order is prepared in 5 copies and each copy is sent to: the supplier, the
purchasing department, the receiving department, the accounting department and the
requesting department.

- For Vina Yen, the purchasing department is quite strict in checking information on
orders and signing sales contracts to ensure terms related to the buyer's responsibilities. and
the sale is fully presented. However, the company only sent one another copy to the supplier.

There are some risks as the company does not send copies to the remaining departments:

+The requesting department is not able to check and track the accuracy of their
request.

+The receiving department cannot know the important purchase information,

including: order date, quantity, specifications, price, payment terms,...

+The accounting department cannot track and record purchase transactions into
the system, causing delays in the budget preparation process.

3.1.5 Receiving and inspection of the assets

- To receive assets and accept payment, the purchasing department and the requesting
department together check the specifications, quantity, and technical requirements based on
the order and contract.

- After receiving, the purchasing department makes 3 copies of the fixed asset receipt:
one copy is kept by the purchasing department, one copy is kept by the receiving party, and
one copy is accompanied by a copy of the purchase request and transferred to the accounting
department.
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 - In fact, at Vina Yen, only the using department checks the fixed assets and sends the
confirmation to the purchasing department to prepare 3 delivery records as mentioned above.

This can lead to the risk that the using department may have a conflict of interest in
accepting assets without thorough inspection, especially if they are encouraged or have
personal interests in doing so.

3.1.6 Recording

This process is carried out strictly and carefully by the company, specifically:

- After completing the purchase and transfer of fixed assets, the accountant records the
purchase in the general and detailed accounting books for monitoring.

- The accounting department stores complete and accurate information about fixed
assets both in detailed books and fixed asset cards and must periodically compare them with
the general ledger.

- A copy of the fixed asset card should be sent to the administrative department and asset
use department for convenient monitoring and preservation.

Summary:

Strengthens:

- The investment and acquisition processes are relatively effective.

- There is involvement of multiple departments to ensure cross-functional coordination

and oversight throughout the acquisition process.

- The approval process for purchase orders is strict and involves multiple levels of
authorization.

- The recording is detailed and transparent.

Weaknesses:

- The company lacks the purchasing plan in advance.

- Copies of purchase orders are not distributed to all relevant departments.

- Only the using department inspects the assets when receiving.

Suggestions:

- The company considers building the purchasing plan in advance based on the
company's long-term predictions and demands.
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 - The company should send 4 more copies of the purchase order to relevant departments.

- The company promotes the involvement of more departments in the inspection and
oversight when receiving the assets for checks of quantity, quality, …

3.2. Management

Fixed asset management is the process of tracking a business’s fixed assets, allowing
businesses to monitor and evaluate the quantity, quality, and operating status of the fixed-
asset.

Fixed asset management procedures included: Assigned responsibility for fixed asset
management, Fixed asset inventory, and repair and maintenance of fixed assets.

3.2.1. Assigned responsibility for fixed asset management

Vina Yen Company carries out the procedures of this stage quite well and effectively.
Specifically:

- When putting the asset into use, Vina Yen Company assigned the responsibility of
managing this asset to the using department to ensure that the fixed asset isn’t lost or damaged.

- For internally moved assets, the company prepares documents to reflect that the assets
have been moved to another department and the previous using department is no longer
responsible for this asset.

- The company has installed a camera system to minimize loss and damage of assets.

3.2.2. Fixed asset inventory

At least annually, businesses must conduct an inventory of all fixed assets. When taking
inventory, it is necessary to compare the actual quantity with the list of fixed assets to detect
lost assets and promptly determine the responsibilities of relevant departments. In addition,
through inventory, it is possible to detect assets that are no longer usable or damaged assets.
Inventory of fixed assets helps business managers know the quantity and usage status of fixed
assets in the business, thereby taking appropriate measures to manage and use assets.

Vina Yen Company conducts an inventory of all fixed assets at the end of each fiscal
year. The inventory of the company’s fixed assets is performed by accountants. The
accountant compares the actual quantity with the data in the books and then prepares a Fixed
asset inventory report. If the actual number of fixed assets is different from the books, the
company will find out the cause and come up with solutions.

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 3.2.3. Repair and maintenance of fixed assets

To maintain the operating capacity of fixed assets throughout their use, businesses need
to repair and maintain the assets. To closely manage the repair and maintenance costs, record,
closely monitor and regularly check costs incurred during the repair process.

When there is a request for repair or maintenance, the asset management department
prepares a fixed assets repair and maintenance form signed by the department head and sends
it to the technical maintenance department of the enterprise. The maintenance department
checks and confirms assets in need of repair and estimates the costs incurred. Then, this form
is sent to the chief accountant/finance director for approval.

However, Vina Yen Company doesn’t estimate repair and maintenance costs. When
repairs and maintenance occur, all costs will be reported to the chief accountant and the
accountant will record this cost in the accounting books.

 Failure to estimate repair and maintenance costs can lead to a shortage of funding
and resources, causing assets to not be repaired and maintained promptly and
properly, affecting productivity and causing unsafe use.

❖ Summary:

Strengthens:

- The company carries out asset management procedures quite effectively.

- Assign responsibility for asset management and use to relevant departments to avoid
loss and damage of fixed assets.

- Install a system camera to monitor and promptly detect when assets are stolen.

- Conduct an inventory of fixed assets annually.

Weaknesses:

- Using only camera systems to monitor can create opportunities for employees to steal
company assets

- The company doesn’t estimate repair and maintenance costs, which can lead to a
funding shortage if repair costs are too high or other costs arise.

Suggestions:

- Although a camera system has been installed, additional measures are needed to ensure
greater safety, especially during non-working hours (e.g., an alarm system, night guard,...)

20
 - Company should prepare an estimate of repair costs. In this way, the company can
clearly understand the details of necessary costs, materials and labor, ensuring more effective
financial management and avoiding resource shortages.

3.3. Depreciation

This task is performed by the accounting department and requires ensuring the
selection of an appropriate depreciation method and useful life in line with the usage pattern
of fixed assets.

Common control procedures include:

3.3.1. Verify the accurate recording of the type of fixed assets:

Check the data recorded for fixed assets in the software and ledger to ensure that the assets
are listed correctly according to the classification.

3.3.2. Determine appropriate depreciation for fixed assets.

- Determine the useful life for depreciation of fixed assets based on legal regulations and
the unit's fixed asset policies.

- Establish the starting point for calculating depreciation.

- Select a depreciation method for assets, and this method should be consistently applied
throughout the useful life of fixed assets. Changes should only be made when the current
method is no longer suitable.

3.3.3. Store information on fixed asset depreciation: those information are stored
in each particular fixed asset’s documents.

❖ Applied to Vina Yen .Co

Evidence 1: According to Financial Statements Audited 2022 – Note 1. Summary

of Accounting Policy

- The company's tangible and intangible fixed assets are depreciated using the straight-
line method based on the estimated useful life in accordance with the guidance in Circular
45/2013/TT – BTC dated April 25, 2013, issued by the Minister of Finance.

 Select a depreciation method for assets, and this method should be consistently
applied throughout the useful life of fixed assets.

- Estimated useful life for each type of fixed assets:

+ Housing and structures: 20 – 50 years

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 + Machinery and equipment: 05 – 08 years

+ Vehicles, transmission equipment: 05 – 08 years

+ Other fixed assets: 04 – 08 years

 Determine the useful life for depreciation of fixed assets based on legal
regulations.

Evidence 2: According to the answers of an accountant in Vina Yen.Co

Vina Yen have not published any

particular policy about the useful lives
1. What is the company's policy for
of fixed assets. Other departments will
calculating and recording depreciation?
suggest to disposal the fixed asset based
on their view.

2. How does the company account for The company has not changed the
changes in depreciation estimates or depreciation method from the
assumptions? beginning until now

3. What software or systems are used

ASIA Software
to calculate and record depreciation?

4. How are records related to fixed

assets and depreciation retained and Store the documents for 10 years.
managed?

5. Are there a clear segregation

between the accountants and those
No
maintaining supporting documentation,
such as invoices and purchase orders?

6. Who is responsible for evaluating and

Chief Accountant
approving depreciation records?

Summary:

Strengthen:

- Adhering to the regulations regarding the determination of depreciation periods

- Utilizing information technology for calculation depreciation support

Weakness:
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 - The company currently lacks specific and published regulations regarding the number
of depreciation years for each type of fixed asset. Instead, it provides general estimates
following the regulations and the accounting department's judgments. Because depreciation
accounts for a large proportion, under-depreciation and incorrect depreciation periods will
lead to erroneous depreciation calculations.

- There is no clear segregation of duties between the accountants and those maintaining
supporting documentation, such as invoices and purchase orders functions

Solution:

- Separation of duties is necessary between the individuals responsible for recording in

the ledger and those involved in collecting and maintaining documentation.

- Issue regulations about the estimated lives of fixed assets (necessarily based on
guidelines and reasonable evidences, not relying on personal opinion)

3.4 Fixed Asset Disposal

❖ Objectives of Fixed Asset Disposal Control:

- Compliance with regulations: Ensure that asset disposal complies with the Law on
Enterprises, Circular 200/2014/TT-BTC, and other relevant regulations. Adhere to the correct
procedures and ensure transparency and publicity.

- Asset protection: Prevent asset loss due to fraud or lax management. Maximize the
recovery value of liquidated assets.

- Accurate financial reporting: Reflect the true operating status of the enterprise and
ensure the accuracy of financial statements.

- Improved operational efficiency: Eliminate unused assets to save management costs

and reinvest in more effective assets.

❖ Risks of Fixed Asset Disposal Control:

- Undervaluation of assets: Employees may sell assets below market value.

- Disposal of usable assets: Liquidation of assets that are still in usable condition.

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 - Incorrect accounting treatment: Continuing to depreciate liquidated assets and
failing to write them off the books after disposal.

❖ Parties involved in the disposal process at Vina Yến Company:

- Finance & Accounting Department

- Asset Disposal Department
- Manager Director

3.4.1. Fixed Asset Disposal Process:

3.4.1.1. Fixed Asset Inventory, Disposal Needs Assessment and Disposal

Proposal:

- The Finance & Accounting Department is responsible for conducting a fixed asset
inventory. The Accounting Department annually reviews and assesses the asset utilization
status. After the assessment, if the Accounting Department determines that a fixed asset is
no longer usable due to severe damage, excessive repair costs, or unsuitability for business
operation needs, they will initiate an asset disposal proposal.
- A proposal for the disposal or sale of fixed assets is then prepared and submitted to
the Manager Directors for approval, clearly stating the asset's current condition.

3.4.1.2. Proposal Approval and Establishment of a Disposal Unit:

- The Manager Directors will review and approve the fixed asset disposal.
- A disposal unit will then be established to carry out the process. This unit will find
buyers, negotiate the best price, create a fixed asset sale invoice, and finalize a disposal
report signed by the Director and Chief Accountant.

3.4.1.3. Asset Disposal and Accounting Treatment:

- Finance & Accounting Department collects all the documents related to fixed asset
disposal.
- Upon asset disposal, the accountant records the fixed asset impairment, recognizes
the asset disposal income, and cancels the corresponding fixed asset card. The accountant
carefully files all documentation related to the fixed asset for future inspection and
monitoring

3.4.2. Process Evaluation:

❖ Strengths:

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 - Simple Process: Suitable for the scale and needs of small businesses, helping to
minimize labor costs and other costs incurred during the disposal process.
- Flexibility: Businesses can adjust the process to suit each specific case, ensuring
efficiency and saving time.

❖ Weaknesses:

- Lack of independence: The Finance & Accounting Department performs both

bookkeeping and asset inventory, leading to potential fraud and inaccurate financial
reporting.
- Unreasonable division of responsibilities for reviewing asset inspection status:
The asset inspection review board only consists of the accounting department and Manager
Director. The absence of the purchasing department and the asset using department can lead
to incomplete and inaccurate assessment of the asset status.
- There are no specific regulations on determining the recovery value of liquidated
assets. Which leads to inaccurate asset valuation, affecting the interests of the enterprise.

3.4.3. Solutions to Improve Control over Tangible Fixed Asset Disposal:

● Develop a detailed asset disposal process: Specify the asset valuation

method under legal regulations and the actual situation of the enterprise. Consult with
valuation experts to ensure accuracy and objectivity.

● Add representatives from the purchasing department and the asset using
department to the asset inspection review board: Ensure the participation of
relevant departments to have a complete and accurate assessment of the asset status.
Members of the review board need to have expertise and experience related to assets,
valuation, and disposal.

● Enhance inspection and supervision of the disposal process.

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