CM Kiem Toan Viet Nam - Eng

Vietnam Standards on Auditing
1
Standard Number
1.
Objective and general principles governing an audit of financial statements
200
2.
Audit contract
210
3. Quality control of auditing activities 220
4.
Documentation
230
5. Fraud and error 240
6. Considering the observance of laws and regulations in the audit of financial
reports
250
7. Planning 300
8. Understanding of Business situation 310
9. Audit Materiality 320
10. Risk assessments and internal control 400
11. Auditing evidences 500
12. Additional audit evidences for special items and events 501
13. First year's auditing Fiscal year Start's Balance 510
14. Analytical process 520
15. Auditing sampling and other selective testing procedures 530
16. Auditing of accounting estimates 540
17. Events occurring after the date of closing accounting books and making
financial statements
560
18. Director's expositions 580
19. Use of other auditor's materials 600
20. Considering the work of internal auditing 610
21.
The auditor's report on financial statements Representation
700
22. Auditing in a computer information systems environment 401
23. Related Parties 550
24. Going concern 570
25. The auditor's report on special purpose audit engagements 800
26. Engagements to review financial statements 910
27. Engagements to perform agreed upon procedures regarding financial
information
920
28. Audit considerations relating to entities using service arganizations 402
29. Using the work of an expert 620
30. Comparatives 710
31. Other information iin documents containing audited financial statements 720
32. Engagement to compile financial information 930
33. Audit of final accounts of investment 1000
34. Communication of audit matters with those charged with governance 260
35. The auditor's procedures in response to assessed risks 330
36. External confirmation 505
37. Auditing fair values measurements and disclosures 545
38.
39.
40.
Standard No 250 - Considering the observance of Iaws and reguIations in the audit of financiaI
reports
1
STANDARD No. 250
CONSIDERING THE OBSERVANCE OF LAWS AND REGULATIONS IN THE AUDIT OF
FINANCIAL REPORTS
GENERAL PROVISIONS
1. This standard aims to prescribe the basic principles and procedures and guide ways oI applying the
basic principles and procedures related to the auditors and auditing companies when considering the
observance oI laws and regulations by the audited units in the process oI auditing the Iinancial reports.
2. When drawing up plans and carrying out procedures Ior audit, when evaluating the results and making
reports on audit, auditors and auditing companies must pay attention to the question that the non-
observance oI laws and relevant regulations by audited units may greatly aIIect the Iinancial reports,
though in an audit oI Iinancial reports all acts oI non-observance oI laws and relevant regulations cannot
be Iully detected.
3. The assessment and determination oI acts oI non-observance oI laws and regulations generally do not
proIessionally rest with auditors and auditing companies. Where it must be determined whether acts oI
non-observance oI laws and regulations greatly aIIect the Iinancial reports or not, the auditors and
auditing companies shall have to consult with the legal experts or concerned Iunctional bodies.
4. The regulations and guidance on responsibilities oI auditors and auditing companies in considering
"Irauds and errors" in an audit oI Iinancial reports are prescribed in another speciIic standard but not in
this standard.
5. This standard shall apply to the audit oI Iinancial reports and also to the audit oI other Iinancial
inIormation as well as relevant services oI auditing companies. This standard shall not apply to the audit
oI the observance, which is perIormed by auditing companies under separate contracts.
Auditors and auditing companies must abide by the provisions oI this standard when considering the
observance oI laws and regulations in the process oI auditing the Iinancial reports.
The audited units and the parties using the auditing results must have necessary knowledge about the
principles and procedures prescribed in this standard in order to IulIill their duties and coordinate with
auditors and auditing companies in dealing with relations in the auditing process.
Terms used in this standards are construed as Iollows:
6. Laws and regulations mean legal documents promulgated by competent bodies (the National Assembly,
the National Assembly Standing Committee, the State President, the Government, the Prime Minister, the
ministries and ministerial-level agencies, the agencies attached to the Government; joint documents oI
competent agencies, organizations, People?s Councils and People?s Committees oI all levels and other
agencies prescribed by law); documents issued by the superiors oI proIessional societies, Management
Boards and directors, which are not contrary to laws and related to production and business activities as
well as economic and Iinancial and accounting management belonging to the units? domains.
7. Non-observance means acts oI wrongly implementing, omitting, inadequately and/or untimely
implementing or not implementing laws and regulations, whether unintentionally or intentionally, by
units. These acts committed by collectives, individuals in the names oI units or the units? representatives.
This standard does not mention acts oI non-observance committed by collectives or individuals oI units
but not relating to the Iinancial reports oI units.
reports
2
CONTENTS OF THE STANDARD
The audited units? responsibility in the observance oI laws and regulations
8. Directors (or the heads) oI the audited units have the responsibility to ensure that their units strictly
observe laws and current regulations; to prevent, detect and handle acts oI non-observance oI laws and
regulations in their units.
9. The audited units must apply measures and procedures to prevent and detect acts oI non-observance oI
laws and regulations, including:
- Grasping in time the requirements oI laws and regulations related to activities oI units and applying
measures to satisIy such requirements;
- Establishing and operating an appropriate and eIIicient internal control system;
- Elaborating and Iollowing the rules in business activities oI units, applying measures Ior monitoring,
timely commendation and discipline;
- Using legal consultancy services, including Iinancial and accounting consultancy services in order to
properly meet the requirements oI laws and regulations;
- Organizing the internal audit sections suitable to the sizes and requirements oI units;
- Fully achieving legal documents and relevant regulations which the units have to abide by and
documents related to cases oI dispute, lawsuits.
Auditors? scrutiny oI the observance oI laws and regulations
10. The audited units have the responsibility to observe laws and regulations. Through the audit oI annual
Iinancial reports, the auditors and auditing companies shall help the audited units prevent and detect acts
oI non-observance oI laws and regulations.
11. The risk which always conIronts the audit is that it is very diIIicult to detect all errors that greatly
aIIect the Iinancial reports, even when the audit has been careIully mapped out and carried out in strict
accordance with the auditing standards. The causes oI the auditing risk include:
- The units? internal control systems and accounting systems Iail to Iully satisIy the requirements oI the
legal documents and regulations related to their operations and Iinancial reports;
- The internal control systems and accounting systems are handicapped with potential limitations in
preventing and detecting errors and violations, particularly errors and violations committed as the result oI
non-observance oI laws and regulations;
- Auditors use the sampling method;
- The auditing evidences are oIten characterized more by judging and convincing than sure conIirmation;
- Units may deliberately cover their acts oI violation (Example: collusion, cover-up, Iorgery oI
documents, deliberately making wrong accounting?) or deliberately supply Ialse inIormation to auditors.
12. When drawing up plans Ior and perIorming the audit, auditors and auditing companies must take
proIessionally cautious attitude (as provided Ior in Vietnamese audit standard No. 200), and must pay
reports
3
attention to acts oI non-observance oI laws and regulations, thus leading to errors which greatly aIIect the
Iinancial reports. When detecting an act oI intentional non-observance oI laws and regulations, auditors
shall have to take into account the possibility oI other violations committed by such unit. On the contrary,
iI such act is unintentional, the auditors must not necessarily apply the above caution.
13. Where the law or an auditing contract requires the report on the observance oI given provisions oI law,
auditors and auditing companies shall have to draw up plans Ior inspection oI the observance oI such
provisions by the audited units.
14. In order to draw up auditing plants, auditors must have the general knowledge oI law and regulations
related to the business activities and lines oI the audited units; must thoroughly grasp the units? ways and
measures to implement laws and regulations. Auditors shall have to pay attention to the regulations the
violation oI which will greatly aIIect the Iinancial reports, or aIIect the audited units? capability Ior
constant operation.
15. In order to obtain the overall understanding oI laws and regulations related to the audited units, the
auditors shall apply the Iollowing measures:
- Using the available knowledge related to business activities and lines oI units;
- Requesting units to provide and explain their internal regulations and procedures related to the
observance oI laws and regulations;
- Exchanging opinions with units? leadership on the laws and regulations which greatly aIIect the
Iinancial reports oI units;
- Scrutinizing the units? speciIic regulations on and procedures Ior the settlement oI disputes upon their
occurrence or sanctions;
- Discussing with relevant Iunctional bodies, law consultants and other individuals Ior Iurther
understanding oI laws and regulations related to the units? activities.
16. Basing themselves on the overall understanding oI laws and regulations related to activities oI audited
units, the auditors and auditing companies shall have to proceed with necessary procedures Ior
determining acts oI non-observance oI laws and regulations related to the process oI elaborating Iinancial
reports, paying special attention to the Iollowing procedures:
- Exchanging ideas with directors (or heads) oI the audited units on the observance oI laws and
regulations;
- Consulting with relevant Iunctional bodies.
17. Auditors shall have to gather all appropriate auditing evidences on the non-observance oI laws and
regulations by units, thus greatly aIIecting the Iinancial reports. Auditors must have adequate
understanding oI laws and regulations with a view to considering the observance oI laws and regulations
when auditing databases related to inIormation on the Iinancial reports.
18. When legal documents and regulations related to units? business activities and lines see changes in
each period, the auditors and auditing companies shall have to examine the observance oI these
regulations in their proper temporal relations with the elaboration oI the Iinancial reports.
reports
4
19. Apart Irom the principles and procedures already mentioned in paragraphs 16, 17 and 18, the auditors
and auditing companies need not carry out other procedures Ior inspecting the observance oI laws and
regulations by units iI those procedures Iall outside the scope oI auditing the Iinancial reports.
20. The carrying out oI procedures Ior auditing Iinancial reports will help auditors and auditing companies
detect acts oI non-observance oI laws and regulations.
21. Auditors shall have to gather the directors? written expositions and the units? documents related to
acts oI non-observance oI laws and regulations which have actually occurred or may occur and aIIect the
truthIulness and logic oI the Iinancial reports.
22. AIter carrying out the examination procedures as required by this standard, iI being unable to gather
evidences on acts oI non-observance oI laws and regulations, the auditors may regard the units as having
observed laws and regulations.
Procedures which must be carried out upon the detection oI acts oI non-observance oI laws and
regulations
23. Auditors must always attach importance to clues leading to acts oI non-observance oI law and
regulations by units. A number oI these clues are mentioned in Appendix No.1.
24. When detecting inIormation related to acts oI non-observance oI laws and regulations, the auditors
and auditing companies must inquire into the nature oI such acts, the circumstance in which such acts are
committed and the relevant inIormation Ior the assessment oI possible impacts on the Iinancial reports.
25. When deeming that acts oI non-observance oI laws and regulations have aIIected the Iinancial reports,
the auditors shall have to take into account:
- The possible Iinancial consequences, even risks, which Iorce the audited units to cease their operation;
- The necessity to explain the Iinancial consequences in the section on explanation oI Iinancial reports;
- The degree oI eIIect on the truthIulness and logic oI the Iinancial reports.
26. When having any doubts about or detecting acts oI non-observance oI laws and regulations, the
auditors shall have to note down and keep in auditing dossiers such detection and discuss with the
directors (or heads) oI the audited units. Such a dossier shall include the extract oI accounting vouchers
and books, minutes oI meetings and other relevant documents.
27. Where directors (or heads) oI the units Iail to adequately supply inIormation proving that their units
have strictly observed laws and regulations, the auditors and auditing companies should discuss and
consult with legal experts or concerned Iunctional bodies about acts oI suspected non-observance oI laws,
thus aIIecting the Iinancial reports. These discussions and exchanges shall help auditors and auditing
companies Iurther understand the consequences and measures to be Iurther implemented.
28. Where it is unable to gather adequate inIormation in order to do away with doubts about acts oI non-
observance oI laws and regulations, the auditors and auditing companies must examine the impact oI the
lack oI evidences and present such in the auditing report.
29. Auditors and auditing companies shall have to analyze the consequences oI the non-observance oI
laws and regulations related to auditing work, particularly on the reliability oI the expositions oI the
directors. Auditors shall have to re-evaluate the risks and re-examine the directors? expositions in the
Iollowing cases where:
reports
5
- The internal control system Iail to detect and Iail to prevent acts oI non-observance;
- Acts oI non-observance have not been mentioned in the expositions, particularly acts which the units
have deliberately concealed.
NotiIication on acts oI non-observance oI laws and regulations.
NotiIication to directors (or heads) oI the audited units.
30. In the course oI audit, the auditors shall have to notiIy the directors (or the heads) oI the units oI the
acts oI non-observance oI laws and regulations, which have been detected by the auditors. The auditors
are allowed not to notiIy non-observance acts iI they are determined as not having caused considerable
consequences, except otherwise agreed upon by the auditors and the units.
31. II auditors and auditing companies determine that acts oI non-observance oI laws and regulations are
intentionally committed and greatly aIIect the Iinancial reports, they must immediately notiIy their
Iindings in writing to the directors (or the heads) oI the units.
32. II auditors and auditing companies detect that directors (or heads) oI units are involved in acts oI non-
observance oI laws and regulations, thus greatly aIIecting the Iinancial reports, they must consult with
legal experts and report such to the superior authorities oI the audited units.
NotiIication to the auditing report users oI the Iinancial reports.
33. II auditors conclude that acts oI non-observance oI laws and regulations have greatly aIIected the
Iinancial reports but not been correctly reIlected in the Iinancial reports though the auditors have
requested the amendments and adjustments, such auditors shall have to state their opinions oI partial
acceptance or non-acceptance.
34. II units Iail to create conditions Ior auditors to adequately gathers appropriate auditing evidences Ior
the assessment oI acts oI non-observance oI laws and regulations, which greatly aIIect the Iinancial
reports, the auditors shall have to give their opinions oI partial acceptance or their reIusal to give opinions
as they have been restricted in auditing scope.
35. II being unable to gather adequate evidences on acts oI non-observance oI laws and regulations, which
have occurred, auditors must examine their impacts on the Iinancial reports.
NotiIication to concerned Iunctional bodies.
36. Auditors and auditing companies have the responsibility to keep conIidential the customers?
inIormation and data. Yet, iI audited units have committed acts oI non-observance oI laws and
regulations, depending on the legal requirements, the auditors and auditing companies must notiIy such
acts to concerned Iunctional bodies. For this case, the auditors are allowed to make prior consultation with
legal experts.
Auditors and auditing companies withdraw Irom auditing contracts.
37. When deeming that the audited units Iail to take necessary measures to handle acts or signs oI non-
observance oI laws and regulations, including acts which do not greatly aIIect the Iinancial reports, the
auditing companies are allowed to terminate the auditing contracts. The auditing companies shall have to
careIully consider and consult with legal experts beIore making such decisions.
reports
6
38. When substitute auditors request the incumbent auditors to supply inIormation on customers, the latter
have the responsibility:
- II allowed by customers to discuss about their work, to supply the substitute auditors with inIormation
on acts oI non-observance oI laws and regulations, the reasons Ior termination oI contracts as well as their
recommendations on whether to reIuse or accept the contracts.
- II not allowed by customers to discuss about their work, to notiIy such disallowance to the substitute
auditors./.
Appendix No. 1
MAIN CLUES TO ACTS OF NON-OBSERVANCE OF LAWS AND REGULATIONS
- Examination, inspection and investigation were already conducted by concerned Iunctional bodies
regarding the violations oI laws and regulations such as borrowing and lending, payment relations,
Iines,...;
- Payments were made without clear reasons or loans were provided to people with positions, powers;
- Payments Ior services were too high as compared to other enterprises oI the same branches or to the
actual value oI the provided services themselves;
- Purchase/ sale prices are too high or too low as compared to market prices;
- Enterprises have maintained unusual ties with companies which have had many special rights, Iavorable
business or companies which have been suspected oI meeting with problems;
- Payment has been made to a country other than the country which has produced or supplied such goods,
services;
- Having no valid and proper purchase/ sale vouchers upon the payment;
- Failing to strictly and Iully observe the prescribed accounting regimes;
- Revenue and expenditure operations have not been approved or the operation oI recording has been
conducted in contravention oI regulations;
- The units have already been denounced or ill-rumored by mass media or people;
- The enterprises? production and/or business results have not been stable, their business result reports
have seen constant changes;
- The expenses Ior management and advertisements have been too high;
- The appointment oI chieI accountants has been made in contravention oI regulations;
- The inventory regime has been implemented in contravention oI regulation.
Standard No 310 - Understanding of business situation
7
STANDARD No. 310
UNDERSTANDING OF BUSINESS SITUATION
(Issued together with the Finance Minister?s Decision No. 219/2000/QD-BTC oI December 29, 2000)
GENERAL PROVISIONS
1. This standard aims to prescribe the basic principles and procedures and guide ways oI applying the
basic principles and procedures in order to inquire into the business situation and the use oI such
knowledge in the process oI auditing the Iinancial reports.
2. To perIorm the auditing oI Iinancial reports, the auditors must have necessary and adequate
understanding oI the business situation in order to be able to assess and analyze events, operations and
practical activities oI the audited units, which, according to the auditors, greatly aIIect the Iinancial
reports, the inspection by auditors or the auditing reports. Example: Auditors use their knowledge oI
business situation to determine potential risks as well as controlled risks and determine the contents, order
and scope oI auditing procedures.
3. The auditors? knowledge needed Ior perIorming an audit shall include their overall knowledge oI the
economy, the units? operation spheres, more speciIic knowledge oI organization and operation oI the
audited units. The auditors? knowledge oI the units must not necessary up to the level oI the directorate oI
the audited units.
The speciIic contents oI matters to be understood when auditing the Iinancial reports are presented in
Appendix No.1. The auditors may add contents to this list and may not apply this entire list to a speciIic
audit.
inIormation as well as relevant services oI the auditing companies.
The auditors and auditing companies must abide by the provisions oI this standard in the process oI
auditing Iinancial reports.
InIormation gathering
5. BeIore accepting the auditing contracts, auditors and auditing companies shall have to gather
preliminary inIormation on the operation spheres, enterprise type, ownership Iorm, production
technologies, management apparatus organization and practical operation oI the units, thereby evaluating
the possibility oI gathering necessary inIormation (knowledge) about business situation in order to carry
out the auditing work.
6. AIter accepting the auditing contracts, the auditors shall have to gather necessary detailed inIormation
right Irom the time the auditing work starts. In the course oI audit, the auditors shall have to always
examine, evaluate, update and supplement new inIormation.
7. The gathering oI necessary inIormation on units? business situation is a process oI continuous
accumulation, including the gathering, evaluation and comparison oI the gathered inIormation with the
auditing evidences at all stages oI the auditing process. Example: InIormation gathered at the stage oI plan
elaboration must still be continuously updated and Iurther supplemented at the subsequent stages so that
the auditors Iully understand the units? activities.
8
8. For auditing contracts oI the subsequent year, the auditors shall have to update and re-evaluate the
inIormation gathered previously, particularly the inIormation in the auditing dossiers oI the previous
years. The auditors shall have to pay attention to the existing problems detected in the previous year and
complete all procedures with a view to detecting considerable changes which have arisen aIter the
previous audit.
9. The auditors gather inIormation on business situation Irom the Iollowing sources:
- The practical experiences about the units and the business lines oI the audited units in the sum-up
reports, working minutes, the press;
- The previous year?s auditing dossiers;
- The consultation with the directors, chieI accountants or oIIicials as well as employees oI the audited
units;
- The consultation with the internal auditors and the examination oI internal audit reports oI the audited
units;
- The consultation with other auditors and consultants who have provided services Ior the audited units or
work in the same Iields with the audited units;
- The consultation with experts, outside subjects, who are knowledgeable about the audited units
(Example: economic experts, superior bodies, customers, suppliers, competition rivals?);
- The consultation oI publications relating to the audited units? operation domains (Example: Statistical
Iigures oI the Government, specialized press, banks? inIormation, securities market?s inIormation?);
- The legal documents and regulations which aIIect the audited units;
- Field surveys oI the oIIices, workshops oI the audited units;
- The documents supplied by the audited units (Example: Resolutions and minutes oI meetings, materials
sent to shareholders or superior bodies, internal management reports, periodical Iinancial reports, policies
on economic management, Iinance, tax, accounting system, internal control documents, regulations on
powers, Iunctions and tasks oI each section in the units?).
Use oI knowledge
10. The knowledge oI business situation constitutes an important basis Ior the auditors to make
proIessional assessments. The level oI business situation knowledge and the rational use oI such
knowledge will help the auditors in the Iollowing job:
- Assessing risks and determining noteworthy issues;
- Drawing up plans and conducting the auditing work eIIiciently;
- Assessing the auditing evidences;
- Providing better services Ior the audited units.
11. In the auditing process, understanding the business situation is very important, which helps the
auditors assess the Iollowing speciIic aspects:
9
- Evaluation oI possible risks and controlled risks;
- Analysis oI business risks and handling options oI the directors (or the heads);
- Elaboration oI auditing plans and programs;
- Determination oI the importance and evaluation oI its compatibility in the auditing process;
- Evaluation oI the adequacy and appropriateness oI the auditing evidences;
- Evaluation oI accounting estimates and expositions oI the directors;
- Determination oI areas which require special attention in auditing and necessary auditing skills;
- Determination oI concerned parties and operations arising among the concerned parties;
- Determination oI contradicting inIormation;
- Determination oI unusual circumstances (Example: Fraudulence or non-observance oI laws and
regulations; statistical Iigures contradicting the Iigures oI Iinancial reports?);
- Making questionnaires and evaluation oI the reasonability oI the answers;
- Consideration oI the compatibility oI the accounting regime, inIormation presented on the Iinancial
reports.
12. Audit assistants who are employed by auditors and auditing companies and assigned to perIorm
auditing work must have certain knowledge oI the business situation so as to perIorm their work. Besides,
the assistants must gather supplementary inIormation to meet the requirements oI their work and exchange
such inIormation with other members oI their groups.
13 In order to eIIectively use the knowledge oI business situation, the auditors shall have to evaluate and
examine the overall impacts oI their knowledge on the units? Iinancial reports as well as the consistency
oI the data in the Iinancial reports as compared with the auditors? knowledge oI the business situation./.
Appendix No. 1
THE SPECIFIC CONTENTS OF AUDITORS? KNOWLEDGE ABOUT THE AUDITED UNITS?
BUSINESS SITUATION
A. GENERAL KNOWLEDGE OF THE ECONOMY
- The real situation oI the economy (Example: Economic recession, growth,?);
- Interest rates and Iinancial capability oI the economy;
- The inIlation rate and currency unit value;
- The Government?s policies:
Monetary and banking policies (Example: Interest rates, exchange rates, credit limits,?);
10
Financial policies;
Tax policies (Example: value added tax, import and export tax; enterprise income tax,?);
Investment promotion policies (Example: The Government?s support programs,?);
- Fluctuation oI the securities market and the ratios to secure saIety in business activities oI the audited
units;
- Control oI Ioreign exchange and exchange rates.
B. ENVIRONMENT AND FIELDS OF OPERATIONS OF THE AUDITED UNITS
- Requirements on the environment and relevant matters;
- Market and competition;
- Characters oI business operation (constant or seasonal);
- Changes in production technology and business;
- Business risks (Example: High technologies, market?s tastes, competition,?);
- Shrinkage or expansion oI business scale;
- UnIavorable conditions (Example: Rise or Iall oI supply and demand, war, prices,?);
- Important rates and statistical Iigures on annual business activities;
- Accounting standards, regimes and relevant matters;
- Relevant law provisions and policies as well as speciIic regimes;
- Sources oI supply (Example: Commodities, services, labor,?) and prices thereoI.
C. INTERNAL FACTORS OF THE AUDITED UNITS
1. Important ownership and management characters
- The Management Board:
The number oI its members and composition;
The prestige and experience oI each individuals;
The independence Irom the director and the control oI the director?s activities;
Periodical meetings;
The existence and operation scope oI the Control Board;
The existence and eIIect oI the regulation on the unit?s operation;
11
Changes in proIessional advisers (iI any).
- The director (or the head) and the executive apparatus:
Personnel change (Example: the director, deputy-director, chieI accountant,?);
Experience and prestige;
Income;
Key Iinance oIIicials and their positions in the unit;
ChieI accountant and accounting personnel;
Regimes oI material incentives, commendation, discipline;
Using accounting draIts and estimates;
Assignment oI powers and responsibilities in the executive apparatus;
Pressure on the director (or the head);
Management inIormation systems.
- Type oI enterprise (Example: State-run, collective, private, equitized, limited liability, Ioreign-invested?
enterprises);
- Permitted business Iields, scope and subjects;
- Permitted operation duration;
- Capital owners and concerned parties (Example: Domestic, Ioreign, prestige and experience,?);
- Capital structure (recent or anticipated changes,?);
- Chart on organization oI production and business apparatus;
- Operation scope;
- Principal production and/or business establishment and branches, agents;
- Chart on organization oI the managerial apparatus;
- Management targets and strategic plans;
- Shrinkage or expansion oI business operation (already planned or recently implemented);
- Financial sources and measures;
- Function and operational quality oI the internal audit section (iI any);
- The director?s views on and attitude toward the internal control system;
12
- The auditing companies and auditors in the previous years.
2. The units? business situation
(Products, markets, suppliers, expenditure, proIessional activities)
- Characters and scale oI production and/or business operation;
- Production conditions, warehouses and storing yards, oIIices;
- Issues concerning human resources (Example: Labor quantity and quality, human resource distribution,
supply sources, wage levels, employee regulation, collective labor contract and trade union, the
implementation oI the retirement regime and the Government?s regulations on labor,?);
- Products, services and markets (Example: Customers and principal contracts, terms on payments, rates
oI accumulative proIits, percentage oI dominant markets, competitive rivals, export, pricing policies, Iame
oI goods articles, warranty, goods order, marketing trends, strategy and targets, production process,?);
- Key goods and service suppliers (Example: long-term contracts, the stability oI suppliers, payment
terms, Iorms oI import, Iorms oI supply,?);
- Goods in stock (Example: Location, quantity, quality, speciIications,?);
- Commercial advantages, the right to use labels, invention patents?;
- Important expenses;
- Research and development;
- Assets, debts, operations in Ioreign currencies and Ioreign exchange risk insurance operations;
- Laws and regulations which greatly aIIect the audited units;
- Management inIormation systems (present status, anticipated changes,?);
- Loan debt structure, terms on debt narrowing and restriction.
3. Financial capability
(Factors relating to the Iinancial situation and proIit-generating capability oI the audited units).
- Important rates and statistical data on business operation;
- Trends oI Iluctuation oI the Iinancial results.
4. Environment Ior making reports
(Objective impacts on the units? directors (or heads) in making the Iinancial reports.
5. Legal Iactors
- Legal environment and provisions;
- Financial policies and tax policies;
- Requirements on the auditing reports;
- Users oI Iinancial reports.
Standard No 500- Auditing evidences
13
STANDARD No. 500
AUDITING EVIDENCES
GENERAL PROVISIONS
1. This standard aims to prescribe the basic principles and procedures and guide the ways oI applying the
basic principles and procedures to the quantity and quality oI auditing evidences to be gathered when
auditing Iinancial reports.
2. The auditors and auditing companies shall have to adequately gather the appropriate auditing evidences
Ior use as basis to state their opinions on the Iinancial reports oI the audited units.
inIormation and relevant services oI the auditing companies.
The auditors and auditing companies shall have to abide by the provisions oI this standard in the process
oI gathering and processing the auditing evidences.
The audited units (customers) and the parties using the auditing results must have necessary knowledge oI
this standard Ior coordination in work and the handling oI relations related to the process oI supplying and
gathering the auditing evidences.
4. The auditing evidences shall be gathered through the proper combination between controlled
experiment and basic experiment procedures. In a number oI cases, the auditing evidences can only be
gathered through basic experiments.
Terms used in this standard shall be understood as Iollows:
5. Auditing evidences mean all materials and inIormation gathered by auditors and related to the audit and
on the basis oI such inIormation the auditors shall Iormulate their opinions.
The auditing evidences include accounting materials, vouchers and books, the Iinancial reports and
materials and inIormation Irom other sources.
6. Controlled experiment (inspection oI control system) means the inspection conducted to gather auditing
evidences on the conIormability and eIIicient operation oI the accounting system and the internal control
system.
7. Basic experiment (basic inspection) means the inspection conducted to gather auditing evidences
related to Iinancial reports, aiming to detect key errors which aIIect the Iinancial reports. "Basic
experiments" shall include:
a/ Detailed inspection oI operations and balances;
b/ Analytical process.
Adequate and appropriate auditing evidences
14
8. The auditors shall have to adequately gather the appropriate auditing evidences Ior each kind oI their
opinion. The "adequacy" and "appropriateness" must always go hand in glove and shall apply to the
auditing evidences gathered Irom controlled experiments and basic experiments. "Adequacy" is the
criteria indicating the quantity oI auditing evidences. "Appropriateness" is the criteria indicating the
quality and reliability oI the auditing evidences. Usually, the auditors shall base themselves more on the
evidences oI critical and persuasive character than on evidences oI aIIirmative character. The auditing
evidences are oIten gathered Irom various sources and in various Iorms, serving as basis Ior the same
database.
9. In the course oI Iormulating their opinions, the auditors must not necessarily check all available
inIormation. The auditors may make conclusions on the account balances, economic operations or internal
control systems on the basis oI sampling inspection by the statistical method or personal judgment.
10. The auditors? assessment oI the adequacy and appropriateness oI the auditing evidences largely
depends on:
. The nature, content and extent oI the potential risks oI the whole Iinancial report, oI each account
balance or each type oI operation;
. The accounting system, the internal control system and the evaluation oI controlled risks;
. The importance oI the inspected clauses and items;
. Experiences Irom previous inspections;
. Results oI auditing procedures, including detected errors or Irauds;
. The sources and reliability oI materials and inIormation.
11. When gathering auditing evidences Irom controlled experiments, the auditors shall have to examine
the adequacy and appropriateness oI the auditing evidences which serve as basis Ior their assessment oI
controlled risks.
12. Auditors should gather auditing evidences Irom the accounting system and the internal control system
in terms oI:
Designing: The accounting system and the internal control system are designed in a way so as to be able
to ward oII, detect and correct key errors;
Implementation: The accounting system and the internal control system exist and operate eIIiciently
throughout the period oI examination.
13. When gathering auditing evidences Irom basic experiments, the auditors shall have to examine the
adequacy and appropriateness oI the evidences gathered Irom basic experiments together with evidences
gathered Irom controlled experiments with a view to conIirming the database oI the Iinancial reports.
14. Database oI Iinancial reports means the basis oI clauses, items and inIormation presented in the
Iinancial reports, which the directors (oI the heads) oI the units have the responsibility to elaborate on the
basis oI the prescribed standards and accounting regimes, which must be expressed clearly or with
grounds Ior each index in the Iinancial reports.
The database oI a Iinancial report must meet the Iollowing criteria:
15
a/ Tangibility: An asset or a debt reIlected in the unit?s Iinancial report must actually exist (availability) at
the time oI making the report;
b/ Rights and duties: An asset or a debt reIlected in the unit?s Iinancial report must have the ownership
right or liability to return at the time oI making the report;
c/ Occurrence: An operation or an event, which is already recorded, must occur and relate to the unit
during the period oI examination;
d/ Adequacy: All assets, debts, operations or transactions, which have occurred and related to Iinancial
reports must be reported Iully with all relevant events;
e/ Assessment: An asset or a debt is recorded according to appropriate value on the basis oI existing
standards and accounting regimes (or acknowledged);
I/ Accuracy: An operation or an event is inscribed strictly according to its value, turnover or expenditures
are acknowledged according to prescribed periods, correct clauses and items and mathematically correct.
g/ Presentation and announcement: Clauses and items are classiIied, expressed and announced in
conIormity with the existing accounting standards and regime (or accepted).
15. The auditing evidences must be gathered Ior each database oI a Iinancial report. Evidences related to a
database (such as the actual existence oI goods in stock) can not make up Ior the lack oI evidences related
to other databases (such as the value oI such stocked goods). The content, order and scope oI basic
experiments vary according to each database. Experiments may supply auditing evidences Ior various
databases at a time (like the recovery oI collectible amounts may supply evidences Ior the actual existence
and value oI such collectible amounts).
16. The reliability oI auditing evidences depends on their sources (inside or outside), Iorms (image,
documents or voices) and each speciIic case. The evaluation oI the reliability oI auditing evidences rely
on the Iollowing principles:
. Evidences originating Irom outside the units are more reliable than evidences originating Irom the inside;
. Evidences originating Irom inside the units shall be more reliable when the accounting system and the
internal control system operate eIIiciently;
. Evidences gathered by auditors themselves are more reliable than evidences supplied by units;
. Evidences in Iorms oI documents and images are more reliable than evidences recorded verbally.
17. Auditing evidences shall be more convincing when they are conIirmed by inIormation Irom various
sources and in various Iorms. In this case, the auditors may have higher reliability Ior auditing evidences
than cases where inIormation are obtained Irom separate evidences. On the contrary, where the evidences
Irom this source contradict with evidences Irom other sources, the auditors shall have to determine
procedures Ior necessary supplementary inspection to solve the above-said contradiction.
18. In the auditing process, the auditors must take into account the relationship between the expenses Ior
the gathering oI auditing evidences and the proIits gained Irom such inIormation. Arising diIIiculties and
expenses Ior gathering evidences must not be the reasons Ior ignoring a number oI necessary inspection
procedures.
16
19. When having doubts about databases which may greatly aIIect the Iinancial reports, the auditors shall
have to gather more auditing evidences to get rid oI such doubts. II unable to adequately gather
appropriate evidences, the auditors shall have to give their opinions oI whether to accept them partially or
not to give any comments.
Methods oI gathering auditing evidences
20. The auditors shall gather auditing evidences by the Iollowing methods: examination, observation,
investigation, certiIication, calculation and analytical process. The application oI these methods depends
partially on the time oI gathering auditing evidences.
21. Examination: means the scrutiny oI accounting vouchers and books, Iinancial reports and relevant
documents or the inspection oI tangible assets. The above-said examination supply evidences oI high or
low reliability depending on the contents and sources oI the evidences and on the eIIectiveness oI the
internal control system Ior the process oI treating such documents. Four Iollowing major sources oI
documents shall supply the auditors with evidences oI varied reliability:
. Documents compiled and kept by the third party;
. Documents compiled by the third party and kept by the audited units;
. Documents compiled by the audited units and kept by the third party;
. Documents compiled and kept by the audited units.
The inspection oI tangible assets shall supply reliable evidences on the actual existence oI the assets,
which are, however, not necessary the reliable evidences on the ownership and value oI such assets.
22. Observation: means the monitoring oI a phenomenon, a process or a procedure perIormed by other
people (Example: Auditors observe the actual inventory or the control procedures carried out by units?).
23. Investigation: means the search Ior inIormation Irom knowledgeable people inside and outside the
units. The investigation carried out by oIIicially sending documents, interviews or exchanges oI
investigation results will supply auditors with inIormation not yet available, or supplementary inIormation
Ior the consolidation oI already obtained evidences.
24. CertiIication: means the reply to a request Ior the supply oI inIormation aiming to veriIy again the
inIormation already available in the accounting documents (Example: Auditors request the units to send
letters to customers Ior direct veriIication oI the balances oI collectible amounts oI the customers?).
25. Calculation: means the examination oI mathematical accuracy oI data in the accounting vouchers and
books, Iinancial reports and other relevant documents or the independent calculation by auditors.
26. Analytical process: means the analysis oI data, inIormation and important rates thereby to Iind out
trends and Iluctuations and to Iind out relations contradicting with other relevant inIormation or the big
disparity with the anticipated value./.
Standard No 510- First year's auditing- FiscaI year- Start's baIance
17
STANDARD No. 510
FIRST YEAR?S AUDITING- FISCAL YEAR-START?S BALANCE
GENERAL PROVISIONS
basic principles and procedures, which are related to the Iiscal year- start?s balance when examining the
Iinancial report oI the Iirst year. This standard also requires the auditors to know uncertain events or
existing commitments at the time oI the beginning oI the Iiscal year in case oI auditing the Iinancial report
oI the Iirst year.
2. When auditing the Iirst year?s Iinancial report, the auditors shall have to adequately gather appropriate
auditing evidences in order to ensure that:
a) The year-start?s balance contains no errors which greatly aIIect the current year?s Iinancial report;
b) The year-end balance oI the previous Iiscal year is accurately carried Iorward or properly re-classiIied
in case oI necessity;
c) The accounting regime has been consistently applied or the changes in the accounting regime have been
adjusted in the Iinancial reports and Iully presented in the explanation oI the Iinancial report.
3. This standard shall apply to auditing the Iinancial report oI the Iirst year and also to the Iirst-year
auditing oI other Iinancial inIormation.
The auditors and auditing companies must abide by the provisions oI this standard in the process oI
auditing the Iirst year?s Iinancial report.
the provisions oI this standard Ior coordination in work with the auditing companies and auditors as well
as in handling relations related to the Iirst year?s audited Iinancial report.
4. The year-start balance: means the balance oI the book-keeping account at the time oI the beginning oI
the Iiscal year. The year-start balance is elaborated on the basis oI the balance at the end oI the previous
Iiscal year.
The year-start balance is subject to the impact oI:
a/ Economic events and operations in the previous years;
b/ The accounting regimes applied in the previous year.
5. The Iirst year: means the year oI auditing when the Iinancial report oI the previous year:
- Has not yet been audited; or
- Has been audited by other auditing companies.
18
The auditing procedures
6. The adequacy and appropriateness oI the to be-gathered auditing evidences on the year-start balances
depend on:
- The accounting regime applied by units;
- The previous year?s Iinancial report either audited or not yet audited and the content oI the previous
year?s auditing report (iI already audited);
- The content and nature oI accounts and risks with major errors aIIecting the current year?s Iinancial
report;
- The importance oI the year-start balance relating to the current year?s Iinancial report.
7. The auditors must examine the year-start balances already reIlected according to the accounting regime
applied in the previous year and applied consistently in the current year. II there are changes in the
accounting regime, the auditors shall have to examine such changes as well as the implementation and
presentation thereoI in the current year?s Iinancial report.
8. When the previous year?s Iinancial report is audited by another auditing company, the auditors oI the
current year may gather the auditing evidences on the year-start balance by way oI examining the auditing
Iiles oI the auditors oI the previous year. In this case, the current year?s auditors should pay attention to
the proIessional capability and independence oI the previous year?s auditors. II the auditing report oI the
previous year?s auditors has not Iully accepted the Iinancial report, the current year?s auditors must pay
attention to the reasons Ior non-total acceptance by the previous year?s auditors.
9. When the previous year?s Iinancial report has not yet been audited or has already been audited but
Iailed to satisIy the current year?s auditors, aIter Iilling in the procedures prescribed in Paragraph 08 but
Iailing to adequately gather appropriate auditing evidences, the auditors shall have to carry out the
auditing procedures speciIied in Paragraph 10 and Paragraph 11.
10. For the year-start balances regarding the short-term debts and working assets, auditors may gather
auditing evidences when carrying out the current year?s auditing procedures.
Example 1: "When examining the settlement oI collectible and payable amounts in the current year, the
auditors shall be able to gather the auditing evidences on the year-start balances oI collectible and payable
amounts".
Example 2: "For goods in stock at the beginning oI the year, the auditors shall have to carry out
additional auditing procedures by way oI supervising the actual inventory in the year or at the year-end,
comparing the quantity, import and export value Irom the year-start to the time oI actual inventory and
Iind out the year-start?s goods in stock".
Example 3: "For bank deposit credit balance, collectible and payable amounts, the procedure Ior
certiIication oI the year-start balance by the third person may be carried out".
The combination oI these auditing procedures will provide auditors Iully with appropriate auditing
evidences.
11. For Iixed assets, investment amounts and long-term debts, the auditors shall have to examine the
vouchers proving the year-start balances. In a number oI certain cases, Ior investment amounts and long-
19
term debts, the auditors may get the certiIication oI the year-start balances Irom the third party or carry
out additional auditing procedures.
Conclusion and making oI auditing reports
12. AIter carrying out the above-mentioned auditing procedures, iI the auditors are still unable to
adequately gather appropriate auditing evidences on the year-start balances, the report on the auditing oI
the Iirst year?s Iinancial report shall be made according to one oI the Iollowing types:
a/ The auditing report oI type "Opinion oI partial acceptance" (or "Exclusion opinion")
Example 1:
"?We could not supervise the actual inventory oI goods in stock on December 31, X1, as by that time we
had not been appointed auditors. The additional auditing procedures also do not permit us to examine the
truthIulness oI the volume oI goods in stock by above-said time.
To us, excluding impacts (iI any) on the Iinancial report Ior the above-said reasons, the Iinancial report
has reIlected truthIully and reasonably the key aspects oI the Iinancial situation oI the company by the
time oI December 31, X2 as well as the business results and sources oI currency Ilow in the Iiscal year
ending on December 12, X2, in conIormity with the current Vietnamese standards and accounting regimes
and relevant law provisions".
b/ The auditing report oI type "Opinion oI reIusal" (or "Opinion oI being unable to give opinions")
Example 2:
"?We could not supervise the actual inventory oI goods in stock on December 31, X1, as by that time we
had not been appointed auditors. Due to the unit?s limitation we could not examine the goods in stock at
the beginning oI the year with the value oI VND XX as well as we did not receive the certiIications oI
debts to be recovered at the beginning oI the year with the value oI VND XY on the accounting balance
sheet on December 31, X1. To us, because oI the importance oI these events, we reIuse to give our
opinions (or cannot give our opinions) on the unit?s Iinancial report ending on December 31, X2".
13. Where the year-start balance contains many errors which greatly aIIect the current year?s Iinancial
report, the auditors shall have to notiIy such to the director (or the head) oI the unit and, aIter getting the
consent oI the director, to the previous year?s auditors (iI any).
Where the year-start balance contains many errors which greatly aIIect the current year?s Iinancial report
as mentioned above, but the audited unit has Iailed to treat and present them in the Iinancial report, the
auditors shall give the "Opinion oI partial acceptance" or "Opinion oI non-acceptance".
14. Where the current year?s accounting regime sees changes as compared with the previous year?s
accounting regime and such changes have not been handled and Iully presented in the explanation oI the
Iinancial report, the auditor shall give the "Opinion oI partial acceptance" or "Opinion oI non-acceptance".
15. Where the previous year?s auditing report Iails to give the " Opinion oI total acceptance", the auditor
shall have to examine the reasons thereIor and its impact on the current year?s Iinancial report. Example,
due to the auditing scope limit or the inability to determine the year-start balance oI goods in stock but
such does not greatly aIIect the current year?s Iinancial report, the auditor may give the opinion oI total
acceptance. II the reasons Ior non-total acceptance oI the previous year?s Iinancial report remain and
greatly aIIect the current year?s Iinancial report, the auditor shall have to give proper opinion in the
current year?s auditing report./.
Standard No 520- AnaIyticaI process
20
STANDARD No. 520
ANALYTICAL PROCESS
(Promulgated together with the Finance Minister?s Decision No. 219/2000/QD-BTC oI December 29,
2000)
GENERAL PROVISIONS
basic principles and procedures related to the analytical process (procedures) in the course oI auditing the
Iinancial reports.
2. The auditors must carry out the analytical process when making the auditing plans and the overall
examination oI the audit.
The analytical process is also carried out at other stages oI the auditing process.
The auditors and auditing companies must abide by the provisions oI this standard in the course oI
perIorming the audit and providing relevant services.
The audited units (customers) must have necessary knowledge oI this standard Ior coordination with
auditors in supplying necessary inIormation and documents related to the audit.
4. Analytical process: means the analysis oI data, inIormation and important rates, in order through which,
to Iind out trends and Iluctuations as well as relations, which contradict other relevant inIormation or see
great disparity with the anticipated value.
Contents and purposes oI the analytical process
5. The analytical process covers the comparison oI Iinancial inIormation, such as:
- Comparing corresponding inIormation in the period with those oI the previous periods;
- Comparing reality with the unit?s plan (Example: Production plan, sales plan?);
- Comparing reality with the auditor?s estimates (Example: Estimated depreciation expense?);
- Comparing the reality oI the unit with those oI other units oI the same operation scale in the same
branch, or with the statistical Iigures, norms oI the same branch (example: Investment rate, combined
proIit percentage?).
6. The analytical process also includes the consideration oI relations:
- Between Iinancial inIormation (Example: The relation between combined proIit and turnover?);
21
- Between Iinancial inIormation and non-Iinancial inIormation (Example: The relation between the labor
expense and the number oI employee?).
7. In the course oI eIIecting the analytical process, the auditors may use various methods oI Irom simple
comparison to complicated analysis requiring advanced statistical techniques. The analytical process also
applies to integrated Iinancial report, member units? Iinancial reports or each separate inIormation oI the
Iinancial reports.
The selection oI the analytical process, method and extent oI application shall depend on the proIessional
assessment oI the auditors.
8. The analytical process shall be used Ior the Iollowing purposes:
- Assisting the auditors to determine the contents, order and scopes oI other auditing procedures;
- The analytical process is applied as a basic experiment when the use oI this measure is more eIIicient
than the detailed examination in reducing the detected risks relating to the database oI the Iinancial report;
- Examining the entire Iinancial report in the Iinal assessment oI the audit.
The analytical process shall apply when making the auditing reports
9. The auditors shall have to apply the analytical process in the course oI making auditing reports in order
to inquire into the business situation oI units and determines areas prone to risks.
The analytical process shall assist the auditors to determine the contents, order and scopes oI other
auditing procedures.
10. The analytical process applicable in the course oI making auditing reports is based on Iinancial
inIormation and non-Iinancial inIormation (Example: The relation between turnover and sale volume or
between the quantity oI products turned out and the capacity oI machinery, equipment?).
The analytical process in basic experiments
11. In the course oI auditing, with a view to reducing detected risks related to the database oI the Iinancial
reports, the auditors shall have to implement the analytical process or detailed examination or both. In
order to determine appropriate auditing procedures Ior a speciIic auditing purpose, the auditors shall have
to assess the eIIiciency oI each auditing procedure.
12. The auditors shall have to discuss with the directors, chieI accountants or representatives oI the
audited units about the capability to supply inIormation and the reliability oI necessary inIormation Ior the
application oI the analytical process, including the analytical results already achieved by the units. The
auditors may use the analytical data oI the units iI they believe in such data.
13. When applying the analytical process, the auditors shall have to consider the Iollowing Iactors:
- The objectives oI the analysis and the reliability oI the obtained results;
- The units? characters and the extent oI inIormation details (Example: The analytical process applicable
to the Iinancial inIormation oI each member unit shall yield more eIIiciency than the application only to
the general inIormation oI units?);
- The availability oI Iinancial inIormation and non-Iinancial inIormation;
22
- The reliability oI inIormation (Example: The correctness oI plans or estimates?);
- The appropriateness oI inIormation (Example: The Ieasibly Iormulated plans are better than those which
contain only targets to be achieved);
- The sources oI inIormation (Example: InIormation Irom the outside is more reliable than inIormation
supplied by units?);
- The comparability oI inIormation (Example: InIormation supplied by units are comparable with
inIormation oI other units in the same branch?);
- Knowledge gained Irom audits oI the previous periods together with the knowledge oI the eIIiciency oI
the accounting system and the internal control system, and arising matters, which have led to the adjusted
book-entries in the previous period.
The analytical process applicable in the stage oI overall assessment oI the audits
14. During the stage oI overall assessment oI the audits, the auditors shall have to apply the analytical
process in order to get the overall conclusion on the compatibility oI the major aspects oI the Iinancial
report with their own knowledge about the business situation oI the units. The analytical process shall
assist auditors to reconIirm the conclusions obtained throughout the process oI examining accounts or
clauses, items on the Iinancial report. On that basis, the auditors shall be assisted in making general
conclusions on the truthIulness and logic oI the entire Iinancial report. However, the analytical process
also points to matters which require the auditors to conduct the supplementary audit.
The reliability oI the analytical process
15. The analytical process shall apply to inIormation which are real and interrelated. The results oI
analyzing the relations shall provide the auditors with auditing evidences on the adequacy, accuracy and
reasonability oI the data compiled by the accounting system. The reliability oI the analytical process
depends on the auditors? assessment oI risks which cannot be detected by the analytical process
(Example: The analytical results do not reIlect the big Iluctuation or disparity but there are in Iact
important errors?).
16. The reliability on the results oI the analytical process depends on the Iollowing Iactors:
- The importance oI accounts or operations (Example: For goods in stock , which are considered
important, not only the analytical process but also other procedures Ior detailed inspection shall be applied
beIore making conclusions. On the contrary, Ior collectable debts which are considered unimportant, only
the analytical results may be used as basis Ior making conclusions...);
- Other auditing procedures Ior the same auditing target (Example: The procedure Ior inspection oI the
money-collecting operation beIore the date oI book closure Ior collectable amounts shall conIirm or deny
the results oI the process oI analyzing debts to be collected according to time-limits,?);
- The anticipated accuracy oI the analytical process (Example: Auditors oIten preIer the comparison and
analysis oI the combined proIit percentages between the current year and the previous year to the
comparison oI irregular expenses between the previous year and the current year?);
- The evaluation oI potential risks and controllable risks (Example: II the internal control oI the sale
section is weak, it is better to rely on the detailed inspection than on the analytical process?).
23
17. The auditors must re-check the control procedures in order to create inIormation Ior use in the
analytical process. Where the control procedures are eIIective, the auditors shall put more trust on the
reliability oI the inIormation and the analytical results are also more reliable. The auditors must examine
simultaneously the accounting control procedures and the non-Iinancial inIormation control procedures
(Example: Where the units control the making oI sale invoices together with the quantity oI sold goods,
the auditors shall check simultaneously the procedures Ior control oI sale invoices and control oI the
quantity oI sold goods).
Investigation oI unusual Iactors
18. Where the analytical process detects important disparities or irrational relationships among
corresponding inIormation, or big disparities with the estimated data, the auditors shall have to carry out
the investigation procedures in order to adequately collect appropriate auditing evidences.
19. The investigation oI import disparities or irrational relationships oIten start by requesting the directors
(or heads) oI the audited units to supply inIormation and proceed with the Iollowing procedures:
- Reexamining the answers oI the directors (or the heads) by comparing them with other auditing
evidences already obtained in the course oI auditing;
- Considering and implementing other procedures iI the directors (or the heads) are still unable to give the
explanation or have given unsatisIactory explanation./.
Standard No 580- Directors' expositions
24
STANDARD No. 580
DIRECTORS? EXPOSITIONS
GENERAL PROVISIONS
basic principles and procedures to the gathering and use oI the expositions oI the directors (oI the heads)
oI the audited units as auditing evidences, the procedures applicable to evaluate and archive the
expositions oI the directors (or the heads) oI the units, the handling measures when the directors (or the
heads) oI the units reIuse to supply appropriate expositions in the process oI auditing Iinancial reports.
2. The auditors shall have to gather expositions oI the directors (or the heads) oI the audited units.
The auditors and auditing companies shall have to abide by the provisions oI this standard in the course oI
auditing the Iinancial reports.
this standard Ior coordination with the auditors and auditing companies in work as well as in handling oI
relations in auditing.
4. Directors (or the heads) are the highest representatives at law oI enterprises or organizations such as
directors, general directors, owners, heads oI units. In a number oI cases, the heads are chairmen oI the
Managing Councils or the Management Boards (hereinaIter called collectively the directorates).
The audited unit directors? acknowledge oI the responsibility Ior the Iinancial reports
5. The auditors shall have to gather evidences on the acknowledgement by the directors oI the audited
units oI their responsibility Ior making and presenting the Iinancial reports truthIully, reasonably and in
conIormity with the current (or accepted) accounting standards and regimes and having approved the
Iinancial reports. The auditors shall gather the above-said evidences in the minutes oI meetings oI the
Management Boards (or directorates) related to this matter, or by way oI requesting the directors so
supply the "expositions ", the "director?s report" or the "Iinancial reports" already signed Ior approval by
the directors.
Using directors? expositions as auditing evidences
6. In case oI lack oI appropriate auditing evidences, the auditors shall have to gather the written
expositions oI the directors oI the audited units on matters which are deemed to greatly aIIect the Iinancial
reports. In order to limit the misunderstanding between auditors and directors oI the units, the written
explanations must be re-certiIied in writing by the directors. Appendix No.1 gives examples on matters
expressed in the written expositions oI directors or in the auditors? written requests Ior certiIication by the
directors.
25
07. Matters requested to be explained in writing by directors are restricted to speciIic or general matters
which greatly aIIect the Iinancial reports. For matters which are deemed necessary, the auditors shall have
to inIorm the directors clearly oI their opinions on the importance oI the matters which should be
explained.
08. In the course oI auditing, the directors (or heads) oI the audited units shall send their written
expositions to the auditors and auditing companies voluntarily or at the request oI the auditors. When the
expositions are related to matters which greatly aIIect the Iinancial reports, the auditors shall have to do
the Iollowing:
- Gathering auditing evidences Irom inIormation inside or outside the units Ior veriIication oI the
directors? expositions;
- Assessing the reasonability and consistency between the directors? expositions and other gathered
auditing evidences;
- Determining the extent oI understanding about the explained matters by the exposition makers.
9. The directors? expositions cannot substitute the auditing evidences gathered by auditors. (Example: The
director?s explanation about the cost price oI a Iixed asset cannot substitute the auditing evidence on the
cost price oI that asset such as invoice issued by the seller or the approved report on settlement oI
completed project). The auditors? Iailure to adequately gather appropriate auditing evidences on a matter
which greatly aIIects the Iinancial report while such evidences can be gathered will lead to the restriction
on the auditing scope though that matter has already been explained by the director.
10. In a number oI cases, the directors? expositions are the only gathered auditing evidence. (Example:
Auditors must not gather other evidences to prove the director?s decision to make some long-term
investment?).
11. The auditors shall have to inquire into the reasons when the directors? expositions contradict other
auditing evidences and, when necessary, have to re-veriIy the reliability oI the auditing evidences and the
director?s expositions.
Archiving into the auditing Iiles the directors? expositions
12. The auditors shall have to keep in the auditing Iiles the directors? expositions in Iorm oI summarizing
the verbal exchanges or written explanations Ior use as auditing evidences.
13. The written expositions evaluated as auditing evidences are more valuable than the verbal
explanations. The written expositions are demonstrated in the Iollowing Iorms:
- The director?s written exposition;
- The auditor?s letter listing all his/her understanding oI the director?s explanations, which are certiIied by
the director as correct;
- The minutes oI meetings oI the Management Boards or Iinancial reports already signed Ior approval by
the directors.
Basic details oI a written exposition
26
14. When requesting the unit?s director to make the exposition, the auditor shall have request that such
documents be addressed directly to him/her with the contents: the inIormation to be explained, day,
month, Iull name and signature oI the exposition maker oI his/her certiIication in the exposition.
15. Usually, the director?s written exposition is inscribed with the same day and month inscribed on the
auditing report. Some cases require the making oI written explanations right in the course oI auditing or
aIter the date inscribed on the Iinancial report but beIore the date inscribed on the auditing report. In
speciIic cases, the explanation is made and announced aIter the issuance oI the auditing report. (Example:
the date oI issuance oI shares?).
16. The director?s exposition is usually signed by the director (or the head) oI the unit. In a number oI
cases, auditors are allowed to receive the explanations Irom other members authorized by the directors.
(Example: Auditors wish to gather the written certiIication oI the adequate supply oI all the minutes oI the
shareholders? congresses, the minutes oI meetings oI the directorates or the Management Boards Irom
people who are in charge oI keeping these minutes?).
Handling measures to be applied iI directors reIuse to supply explanations
17. II directors reIuse to supply explanations requested by auditors, thus restricting the auditing scope, the
auditors must give their "opinion oI partial acceptance" or "opinion oI reIusal". In this case, the auditors
shall have to re-evaluate the reliability oI all other explanations oI the directors in the course oI auditing
and consider the extent oI their eIIect on the Iinancial report.
Standard No 240- Fraud and error
27
STANDARD 240
FRAUD AND ERROR
(Issued in pursuance of the Minister of Finance Decision No. 143/2001/QD-BTC
dated 21 December 2001)

GENERAL

01. The purpose oI this Vietnamese Standard on Auditing (VSA) is to establish standards and
Iundamental principles and provide guidance on the auditor and the audit Iirm`s responsibility to
consider Iraud and error in an audit oI Iinancial statements.

02. When planning and perIorming audit procedures and in evaluating and in evaluating and
reporting the results thereoI, the auditor and the audit Iirm should consider the risk oI material
misstatements in the Iinancial statements resulting Irom Iraud or error.

03. This VSA applies to audits oI Iinancial statements and also applies to an audit oI other Iinancial
inIormation and related services rendered by the audit Iirm.

The auditor and the audit Iirm should comply with this VSA in conducting an audit oI Iinancial
statements.

It is expected that the client entity and users oI the audit report should possess essential
knowledge as to the objectives and principles set out in this VSA in working with auditor and the
audit Iirm, and dealing with the relations maintained in respect oI the inIormation under audit.

In this VSA, the Iollowing terms have the meaning attributed below:

04. Fraud reIers to an intentional act to cause economic, Iinancial inIormation to be misleading by
one or more individuals among the Board oI Management and Directors employees, or third
parties, which results in a misrepresentation oI Iinancial statements.

Fraud may involve the Iollowing acts:

- Manipulation, IalsiIication oI records or documents relating to Iinancial statements;
- Alteration oI records or documents, which causes misrepresentations oI Iinancial
statements;
- Misappropriation oI assets;
- Suppression or intentional omission oI inIormation, records oI documents and
transactions which causes misrepresentations oI Iinancial statements;
- Recording oI transactions without substance;
- Misapplication oI accounting standards, principles, procedures and policies and Iinancial
regulations;
- Intentional commitment oI mathematical mistakes.

05. Error reIers to unintentional mistakes in Iinancial statements, such as:
- Mathematical or clerical mistakes in the underlying records;
- Oversight or misinterpretation oI amounts and transactions;
- Misapplication oI accounting standards, principles, procedures and policies and Iinancial
regulations.

CONTENTS OF THE VSA
Responsibility of the Director (or leader)
28

06. The responsibility Ior the prevention, detection and handling oI Iraud and error in the entity rests
with the Director (or leader) through the implementation and continued operation oI adequate
accounting and internal control systems. Because oI the inherent limitations oI the accounting
and internal control systems, it is impossible to eliminate the possibility oI Iraud and error.

Responsibility of the Auditor and the Audit Firm

07. Through the audit, the auditor and the audit Iirm are to assist the client entity in detecting,
handling and deterring Iraud and error. However, the auditor and the audit Iirm are not and
cannot be held responsible Ior the prevention oI Iraud and error in the client entity.

Risk Assessment

08. In planning and perIorming the audit, the auditor and the audit Iirm should assess the risk that
Iraud and error may exist that materially impact the Iinancial statements and should inquire oI the
Director (or leader) as to any Iraud or signiIicant error which has been discovered.

09. In addition to weaknesses in the design and perIormance oI the accounting and internal control
systems, conditions or events which increase the risk oI Iraud and error include:

- Questions with respect to the integrity or competence oI management;
- Unusual pressures within or on an entity;
- Unusual transactions and events;
- Problems in obtaining suIIicient appropriate audit evidence.
- Factors unique to computer inIormation system environment relating to the above
conditions and events.
(Examples oI these conditions or events are set out in Appendix 01).

Detection

10. Based on the risk assessment, the auditor should design audit procedures to obtain reasonable
assurance that Iraud and error that are material to the Iinancial statements taken as a whole are
detected.

11. Consequently, the auditor seeks suIIicient appropriate audit evidence that Iraud and error which
may be material to the Iinancial statements have not occurred or that, iI they have occurred, the
eIIect oI Iraud is properly reIlected in the Iinancial statements or the error is corrected. The
auditor should point out the impacts oI such Iraud and error on the Iinancial statements. The
likelihood oI detecting errors ordinarily is higher than that oI detecting Iraud, since Iraud is
higher than that oI detecting Iraud, since Iraud is ordinarily accompanied by acts speciIically
designed to conceal its existence.

12. Due to the inherent limitations oI an audit, although the auditor adheres to all audit principles and
procedures, there is an unavoidable risk that material misstatements in the Iinancial statements
resulting Irom Iraud and error may not be all detected. When such a risk occurs that causes
material impact on the Iinancial statements, the auditor would consider compliance with
principles and audit procedures undertaken in the circumstances and the suitability oI the audit
report based on the results oI those audit procedures.

Inherent Limitations of an Audit

13. An audit is subject to the unavoidable risk that some material misstatements oI the Iinancial
statements will not be detected, even though the audit is properly planned and perIormed in
29
accordance with Vietnamese Standards on Auditing or International Standards on Auditing
generally accepted.

14. The risk oI not detecting a material misstatement resulting Irom Iraud is higher than the risk oI
not detecting a material misstatement resulting Irom error, because Iraud ordinarily involves acts
designed to conceal it. Unless the audit reveals evidence to the contrary, the auditor is entitled to
accept representations as truthIul and records and documents as genuine. However, the auditor
should plan and perIorm the audit with an attitude oI proIessional skepticism, recognizing that
conditions or events may be Iound that result in material misstatements in the Iinancial
statements.

15. Because oI the inherent limitations oI the accounting and internal control systems, there will
always be some risk oI Iraud and error occurring that is material to the Iinancial statements. An
internal control system may be ineIIective against Iraud involving collusion among employees or
Iraud committed by management.

Procedures When there is an Indication that Iraud or Error May Exist

16. When the application oI audit procedures indicates the possible existence oI Iraud or error, the
auditor and the audit Iirm should consider the potential eIIect on the Iinancial statements. II the
auditor and the audit Iirm believe the indicated Iraud or error could have a material eIIect on the
Iinancial statements, the auditor should perIorm appropriate modiIied or additional procedures.

17. The extent oI such modiIied or additional procedures depends on the auditor`s judgment as to:
(a) the types oI Iraud and error indicated;
(b) the Irequency oI their occurrence; and
(c) the likelihood that re-occurrence; and

Unless circumstances clearly indicate otherwise, the auditor cannot assume that an instance oI
Iraud or error is an isolated occurrence. II necessary, the auditor adjusts the nature, timing and
extent oI substantive procedures.

18. PerIorming modiIied or additional procedures would ordinarily enable the auditor to conIirm or
dispel a suspicion oI Iraud or error. Where suspicion oI Iraud or error is not dispelled by the
results oI modiIied or additional procedures, the auditor and the audit Iirm should discuss the
matter with management and consider whether the matter has eIIected on the Iinancial statements
and the audit report.

19. The auditor should consider the implications oI Iraud and signiIicant error in relation to other
aspects oI the audit, particularly the reliability oI management representations. In this regard, the
auditor reconsiders the risk assessment and the validity oI management representations, in case oI
Iraud and error not detected by the accounting and internal control systems or not included in
management representations. The implications oI particular instances oI Iraud oI error discovered
by the auditor will depend on the relationship oI the perpetration and concealment, iI any, oI the
Iraud or error to speciIic control procedures and the level oI management or employees involved.

Reporting of Fraud and Error

To the Director (or leader)

20. The auditor and the audit Iirm should communicate Iactual Iindings to the Director (or leader) oI
the client entity as soon as practicable prior to the date oI publication oI the audited Iinancial
statements or the issuance oI the audit report iI:
a) the auditor suspects Iraud may exist, even iI the potential eIIect on the Iinancial statements has
not been measured;
30
b) Iraud is Iound to exist; or
c) signiIicant error is Iound to exist.

21. Suspecting Iraud exist or having detected any occurrences oI possible oI actual Iraud or
signiIicant error, the auditor would consider all the circumstances as to which level oI authority
to report the case to. With respect to Iraud, the auditor would assess which management level is
likely to involve. In most cases involving Iraud, it would be appropriate to report the matter to a
level in the organization structure oI the entity above that responsible Ior the persons believed to
be implicated. When doubts are raised as to the involvement oI the highest authority, the auditor
would ordinarily seek legal advice to assist in the determination oI procedures to Iollow.

To Users of the Audit Report on the Financial Statements

22. II the auditor and the audit Iirm conclude that the Iraud or error has a material eIIect on the
Iinancial statements and has not been properly reIlected or corrected in the Iinancial statements,
the auditor should express a qualiIied or an adverse opinion.
The auditor and the audit Iirm should clearly state in the audit report Iraud and error that may be
material to the Iinancial statements even though they are adequately reIlected in the Iinancial
statements.

23. II the auditor is precluded by the entity Irom obtaining suIIicient appropriate audit evidence to
evaluate whether Iraud or error that may be material to the Iinancial statements, has, or is likely
to have, occurred, the auditor and the audit Iirm should express a qualiIied opinion or a
disclaimer oI opinion on the basis oI a limitation on the scope oI the audit.

24. II the auditor is unable to determine whether Iraud or error has occurred because oI limitations
imposed by the circumstances or by the entity, the auditor should consider the eIIect on the audit
report.

To Regulatory and Enforcement Authorities

25. The auditor and the audit Iirm are to keep the client`s inIormation and data conIidential, except
when the client entity has committed Iraud or error which, as statutorily required, the auditor and
the audit Iirm are to report to the supervisory authorities. In this case, the auditor and the audit
Iirm may need to seek legal advice in advance in such circumstances.

Withdrawal from the Engagement

26. The auditor and the audit Iirm may conclude that withdrawal Irom the engagement is necessary
when the entity does not take the remedial action regarding Iraud that the auditor considers
necessary in the circumstances, even when the Iraud is not material to the Iinancial statements.
Factors that would aIIect the auditor`s conclusion include the implications oI the involvement oI
the highest authority within the entity, and the eIIects on the auditor oI continuing association
with the entity. In reaching such conclusion, the audit Iirm would consider the case and seek
legal advice.

27. On receipt oI an inquiry Irom the proposed auditor Ior inIormation on the client entity, the
existing auditor should advise any proIessional reasons Ior withdrawal Irom the engagement. The
existing auditor would, taking account oI the legal and ethical constraints including where
appropriate permission oI the client, give details oI and discuss Ireely with the proposed auditor
such inIormation. II permission Irom the client to discuss its aIIairs with the proposed auditor is
denied by the client, the existing auditor and the audit Iirm should disclose that Iact to the
proposed auditor.

31
APPENDIX 01

Examples of Conditions or Events
Which Increase the Risk of Fraud or Error

Questions with respect to the integrity or competence oI management

- Management is dominated by one person (or a small group) an there is no eIIective oversight oI
the Directors oI Board oI Management;
- There is a complex corporate structure where complexity suggests a deliberate act;
- There is a continuing Iailure to correct major weaknesses in internal control and accounting
systems where such corrections are practicable;
- There is a signiIicant and prolonged understaIIing oI the accounting department;
- Accounting work is assigned to incompetent persons or those prohibited by law; and
- There are Irequent changes oI legal counsel or auditors.

Unusual pressures within or on an entity

- The industry is declining and Iailures are increasing;
- There is inadequate working capital due to declining proIits or too rapid expansion;
- The quality oI earnings is deteriorating,
- The entity needs a rising proIit trend to support business operations;
- The entity has such a signiIicant investment in an industry or product line that its Iinance loses
balance;
- The entity is heavily dependent on one or a Iew products or customers;
- Financial pressure on investors or top managers;
- Pressure is exerted on accounting personnel to complete Iinancial statements in an unusually short
time period.

Unusual transaction and events

- Unusual transactions, especially near the year-end, that have an eIIect on sales, expenses and
earnings;
- Complex transactions oI accounting treatments;
- Transactions with related parties;
- Payments Ior services (Ior example, to lawyers, consultants or agents) that appear excessive in
relation to the services provided;

!roblems in obtaining sufficient appropriate audit evidence

- Inadequate records or untimely provision oI records (Ior example, incomplete Iiles, excessive
adjustments to books and accounts, transactions recorded inadequately and out oI balance control
accounts;
- Inadequate documentation oI transactions (Ior example, lack oI proper authorization or supporting
documents Ior large or unusual transactions);
- An excessive number oI diIIerences between accounting records and third party conIirmations,
conIlicting audit evidence and unexplainable changes in operating ratios;
- Evasive or unreasonable responses by management to audit inquiries.
Some Iactors unique to a computer inIormation systems environment which relate to the conditions
and events described above include:

- Inability to extract inIormation Irom computer Iiles;
- Large numbers oI program changes that are not documented, approved and tested;
- Data out oI the computer are not matched with the Iinancial statements;
- Print-outs oI one account give diIIerent results.
Standard No 300- PIanning
32
STANDARD 300
PLANNING

GENERAL

Iundamental principles and provide guidance on planning an audit oI Iinancial statements.

02. The auditor and the audit Iirm should plan the audit work so that the audit will be perIormed in
an eIIective manner.


In the case oI the Iirst-year audit Ior a client, the auditor should expand the procedures oI
planning based upon the contents oI this VAS.

The auditor and the audit Iirm should comply with this VSA in preparing and realizing an audit
plan.

It is expected that the client entity should possess essential knowledge oI this VSA in joining the
audit and dealing with the relations maintained during the audit planning.


04. General strategy means the core direction, Iocal content and general approach developed at the
top level oI an audit based upon their knowledge oI the client entity`s business operations and
environment.

05. Overall audit plan means developing the general strategy and detailed approach Ior the expected
nature, timing and extent oI the audit. It is the objective oI an overall plan to enable the auditor to
perIorm the audit in an eIIicient and timely manner.

06. Audit program reIers to a set oI instructions to the auditor and assistants involved in an audit and
a means to control and record the proper execution oI the work. The audit program may also
contain the audit objectives Ior each area, the nature, timing and extent oI planned audit
procedures and the time needed Ior each area oI work.

07. Multi-year audit is an audit conducted at time oI the current year`s Iinancial statements and those
oI the prior year (s). For example, in 2001, an audit is conducted oI the Iinancial statements oI
2000, 1999 and 1998.

CONTENT OF THE VAS

Planning the Work

08. Planning should be developed Ior each audit.
Adequate planning oI the audit work helps to ensure that appropriate attention is devoted to
important areas oI the audit, that Irauds, errors and potential problems are identiIied and that the
work is completed expeditiously. Planning also assists in proper assignment oI work to assistants
and in coordination oI work done by other auditors and experts.
33

09. The extent oI planning will vary according to the size oI the entity, the complexity oI the audit
and the auditor`s experience with the entity and knowledge oI the business.

10. Obtaining knowledge oI the business is an important part oI planning the work to assist in the
identiIication oI events, transactions and practices which may have a material eIIect on the
Iinancial statements.

11. Planning remains the auditor and the audit Iirm`s responsibility. To plan the audit, the auditor
can require discussion with the entity`s internal auditors, management and staII oI issues
associated with the audit plan and procedures to improve the eIIectiveness and eIIiciency oI the
audit and to coordinate audit procedures with work oI the entity`s personnel.

12. Planning has three components:
- General strategy;
- Overall audit plan;
- Audit program.

General strategy

13. A general strategy should be developed Ior an audit oI big size, and with complexity and large
coverage, or Ior a multi-year audit.

14. An audit oI big size is an audit oI combined Iinancial statements (or consolidated Iinancial
statements) oI a corporation with a number oI subsidiary entities oI the same or diIIerent
industry.
15. An audit with complexity means an audit which reveals indication oI dispute and litigation or
which deals with new business launches about which the auditor and audit Iirm are not
experienced enough.

16. An audit with large coverage is an audit oI an entity with subsidiaries in various provinces and
municipalities, including those across the border.

17. A multi-year audit is conducted as a consequence oI an audit Iirm signing a contract Ior audit oI
some consecutive years, Ior example, in 2000, an audit contract is signed in regard to 2000, 2001
and 2002. In this case, a general strategy should be developed Ior directing the work and
combining the audits oI respective years.
For its special management purpose, an audit Iirm may wish to develop a general strategy Ior an
audit having no Ieatures discussed in paragraph 13 through 17 herein.

18. The general strategy contains key objectives, core direction, Iocal content, general approach and
intended progress oI an audit (see Appendix 01)

19. The general strategy is prepared by the in-charge personnel and ratiIied by the Director (or
leader) oI the audit Iirm. The general strategy underlies planning the audit, monitoring the
implementation and reviewing the audit results.

20. A general strategy will be documented into a separate Iile or as part oI the overall audit plan.

Overall Audit Plan

21. An overall audit plan is developed Ior each audit, with description oI the expected scope and
conduct oI the audit. The overall audit plan will need to be suIIiciently detailed to guide the
development oI the audit program. The Iorm and content oI an audit plan will vary depending on
34
the size oI the entity, the complexity oI the audit and the speciIic methodology and technology
used by the auditor.

22. Matters to be considered by the auditor in developing the overall audit plan include:

nowledge of the Business
- General economic Iactors and industry conditions aIIecting the entity`s business;
- Important characteristics oI the entity, its business, its Iinancial perIormance and its reporting
requirements including changes since the date oI the prior audit;
- The general level oI competence oI management.

Understanding the Accounting and Internal Control Systems

- The accounting policies adopted by the entity and changes in those policies;
- The eIIect oI new accounting or auditing pronouncements;
- The auditor`s cumulative knowledge oI the accounting and internal control systems and the
relative emphasis expected to be placed on tests oI control and substantive procedures.

Risk and Materiality
- The expected assessments oI inherent and control risks and the identiIication oI signiIicant audit
areas;
- The setting oI materiality levels Ior audit purposes;
- The possibility oI material misstatement, including the experience oI past periods, or Iraud and
common error;
- The identiIication oI complex accounting transactions and events including those involving
accounting estimates.

Nature, Timing and Extent of !rocedures
- Possible change oI emphasis on speciIic audit areas;
- The eIIect oI inIormation technology on the audit;
- The work oI internal auditing and its expected eIIect on external audit procedures.

Coordination, Direction, Supervision and Review
- The involvement oI other auditors in the audit oI components, Ior example, subsidiaries, branches
and divisions;
- The involvement oI experts in other areas;
- The number oI locations;
- StaIIing requirements.

ther Matters
- The possibility oI the business` going concern;
- Conditions requiring special attention, such as the existence oI related parties;
- The terms oI the engagement and any statutory responsibilities;
- The nature and timing oI reports or other communication with the entity that are expected under
the engagement.

23. In case oI a general strategy already prepared, its content would not need to be re-stated in the
overall audit plan. (see Appendix 02 Ior sample overall audit plan).

Audit !rogram

24. An audit program should be developed Ior each audit, setting out the nature, timing and extent oI
planned audit procedures required to implement the audit plan.
35
25. In preparing the audit program, the auditor would consider the speciIic assessments oI inherent
and control risks and the required level oI assurance to be provided by substantive procedures.
The auditor would also consider:
- the timing oI tests oI controls and substantive procedures;
- the coordination or any assistance expected Irom the entity, the availability oI assistants and the
involvement oI other auditors or experts.

(see Appendix 03 Ior sample audit program).

Changes to the Audit Plan and Audit Program

26. The overall audit plan and the audit program should be revised as necessary during the course oI
the audit because oI changes in conditions or unexpected results oI audit procedures. The
contents oI and reasons Ior signiIicant changes would be recorded as part oI audit
documentation.

27. An audit Iirm using a sample audit program either in the computer or on paper should have
additional contents to the audit program relevant to each audit.

APPENDIX 01

SAMPLE GENERAL STRATEGY
(for guidance and reference)

AUDIT FIRM:
GENERAL STRATEGY

Client entity:....Prepared by...Date:
Year:..... Approved by:....Date:

Client Ieature: (large scale audit, multi-year audit or complexity audit)

Requirement

- General strategy is developed Ior an audit oI big size, and with complexity and large coverage, or
Ior a multi-year audit.
- General strategy is prepared by the in-charge personnel and approved by the Director (or leader)
oI the audit Iirm.
- The audit team shall comply with the Iirm`s relevant regulations and the directions ratiIied by the
Director in connection with the general strategy.
- Any departures Irom management`s initial estimation noticed during the process oI developing an
overall audit plan and implementing the audit should be promptly reported to management Ior
timely solutions.

Contents and procedures oI a general strategy

1. Understand the client entity`s business (inIormation gathered on industry, business type,
ownership title, production technology, management structure and business operations)
particularly the main Iactors, such as competition drive, business superiority analysis as well as
production, market, prices and post sales services;
2. Locate areas concerned with the Iinancial statements, such as accounting regimes and systems,
accounting standards in use, Iinancial reporting constraints and the entity`s rights;
3. Locate main risk areas oI the entity and their eIIects on the Iinancial statements (initial assessment
oI inherent risk and control risk);
36
4. Assess the internal controls;
5. IdentiIy the Iocal objectives and audit approach;
6. Determine the need Ior expertise coordination with legal advisors, internal auditors, other auditors
and experts in such Iield as construction, agriculture.;
7. Nominate team head and time the work;
8. The Director approves and notiIies the audit team oI the general strategy, based on which the team
head develops an overall audit plan and audit program.

APPENDIX 02

SAMPLE OVERALL AUDIT PLAN

AUDIT FIRM:

OVERALL AUDIT PLAN
Client entity:....Prepared by:......Date:....
Year:..... Approved by:....Date.....
1. InIormation about the entity`s business operation:
- Client audit:
First year Recurrent Year:....
- Client name:.......................
- Head oIIice:.......................
Branches (number and locations)................

- Phone no:.............
Fax no:..............Email:.........
- Tax code:.......................
- Operation license (Investment license, business registration
certiIicate)..................
- Industry: (steel production, hospitality service, golI court
service,.)..................
- Geographic Ieature: (nation-wide, Ioreign operations.).....
- Total legal capital:.........Investment capital:.....
- Total loan capital:..........Financial lease:......
- Business duration: (Irom...to...., no time limit).......
- Board oI Management: (number oI members, list oI key
personnel).........................
- Board oI Directors: (number oI members, list oI members) ....
- ChieI accountant; (name, years with the company).........
- Holding company, partners (joint businesses)..........
- Client internal controls outlined................
- Management`s competence:................
- General understanding oI the economic conditions aIIecting the entity`s
business:....................................................................
..................................................................................................
..................................................................................................

- Client business lines and environments:
Environmental requirements:
Market and competition:.................
Operational Ieatures and technological changes:
Business risk:....................
Change in business size and disadvantages:
37
..........................
..........................
- PerIormance Ieatures (products, market, suppliers, expenses, transactions):
Changes in application oI advancements or new technologies to
production:.......................
Change oI suppliers:..................
Expansion oI sales network: (establishments)
...........................
2. Understanding oI accounting and internal control systems:
Based on the review oI client Iinancial statements and understanding oI its business to consider
the level oI eIIects on the preparation oI Iinancial statements in terms oI:

The accounting policies adopted by the entity and changes in those
policies:.........................
The eIIect oI inIormation technology and computer system:....
The eIIect oI new policies on accounting and auditing:......
Accounting staII:...................
Reporting requirement:..................

Assessing and rating the control environment, accounting system, and internal controls as reliable and
eIIective:

High Medium Low

3. Risk assessment and materiality measurement:
- Risk assessment:
Inherent risk:

High Medium Low
Assessment oI internal controls operations:
......................

- Materiality measurement:

Key indicators Ior measuring materiality levels include:

Current year Preceding year
- Sales
- Expenses
- Post-tax income
- Current assets and short-term
investments

- Fixed assets and long-term
investments

- Funds
- Other indicators

Reason Ior choice oI materiality level:...............
Assessment oI materiality levels Ior each audit objective.......
- The possibility oI material misstatement, including the experience oI past periods, or common
Iraud and error; The identiIication oI complex accounting transactions and events including those
involving accounting estimates.
- Account audit approach:
38
Sample test.....................
Key item test.....................
100 examination:..................
4. Nature, Timing and Extent oI Procedures
- IdentiIication oI signiIicant changes oI audit areas.
- The eIIect oI inIormation technology on the audit.
- The work oI internal auditing
5. Coordination, Direction, Supervision and Examination
- The involvement oI other auditors..........
- The involvement oI legal and other experts .......
- The number oI locations..............
- StaIIing requirements...............
In-charge director (deputy director)..........
In-charge manager................
Audit team head.................
Audit assistant 1.................
Audit assistant 2.................
.......................

. Other matters
- Interim audit;
Inventory taking;
- The possibility oI the business going concern:
- Conditions requiring special attention;
- The contractual terms and any statutory responsibilities;
- The nature and timing oI the report audit or other communication with the entity.
. Overall audit plan summary

No. SigniIicant Iactors
or items
Inherent
risk
Control
risk
Mat`lity level Audit
approach
Audit
pro`dure
ReI.
1
2
3
4 ...

- General classiIication oI client
Very important Important Not important
- Other:...

APPENDIX 03
SAMPLE AUDIT PROGRAM

AUDIT FIRM:

AUDIT PROGRAM

Client entity:....Prepared by......Date.....
Year........Approved by......Date....

LIST OF WORK PARTS
39

1. General ReIerence A
2. Accounting and internal control B
3. Cash C
4. Short-term investment D
5. Accounts receivable E
6. Inventory F
7. Other current assets G
8. Non proIit expenditure H
9. Fixed assets I
10. Intangible assets and other Iixed assets J
11. Long-term investment K
12. Construction in progress L
13. Long-term deposits and mortgages M
14. Current liabilities N
15. Taxes payable O
16. Long-term borrowings and debts P
17. Funds and undistributed earnings Q
18. Budget sources R
19. Revenues S
20. Cost oI sales T
21. Selling expenses, administrative
expenses
U
22. Other incomes V
23. Other expenses X
24. Others W

AUDIT FIRM:

TEST-CASH PROGRAM

Client name:........Financial year:.............
Team head:..........Date:................
Team members
Reviewer 1:.........Date:...............
Reviewer 2:..........Date:................

I. Documents to be produced by client:
1. Period-end count minute
(Where the auditor did not observe the counting on the intended date, it is necessary Ior him/her
to combine with the client entity to conduct a surprise count oI cash by the time oI audit and
backdate addition () or deduction (-) Ior the actual cash balance at year-end).
2. Basis oI discrepant treatment (as a consequence oI cash count):
3. Bank reconciliation oI account balance
4. Bank ledgers
5. General ledger
6. Cash journal
7. Petty cash ledger and bank ledger
8. Relative papers

C
40
II. Audit targets:

- Existence, completeness, accuracy

Cash balance which represents the total sum on
hand, in bank and in transit at the time oI
observation is existing and properly recorded.
- Ownership and obligation All existing cash is owned by the entity.
- Valuation Cash balance disclosed on the balance sheet is
properly valued.
- Presentation and disclosure Cash balance is adequately presented,
classiIied and disclosed

III. Audit procedures:
Procedures ReIerence Exception PerIormer
signing
Yes/no IdentiIied
A. Analytical procedures
1. Test movement oI cash on
hand and cash in bank through
the years
2. Inquire the entity`s settlement
system iI it is made in cash or by
bank
3. Review internal controls on
the entity`s capital in cash to
ensure adherence to the principle
oI:
- Segregation oI tasks and
responsibilities
- Freedom Irom other
responsibility
- Approval and assignment oI
management oI cash
B. Substantive test procedures
I. Petty cash
1. Compare cash count minute
with cashbook, ledger and
general ledger to ascertain iI cash
balance on the balance sheet is
adequately disclosed.
2. Screen cash book Ior irregular
items and trace them to source
documents to ensure Iair
presentation thereoI.
3a.Randomly take ....... months
and Ior each month choose ...
transactions Irom ledger (or sub-
ledger) Ior sure oI the matching
between the book and documents
as to nature, date and amount. At
the same time check the
acceptance oI the entity`s
relevant personnel.
. II results are good: accept it
. II results are unsatisIactory,
expand substantive tests.

41
3b. Randomly take.months and
Ior each month
choose.documents to make
sure records kept (in cash book,
ledger and sub-ledger) are
appropriate.
4. Take.transactions occurring
beIore date and .transactions
aIter date to veriIy whether
cutoII procedures are correct and
appropriate.
II. Bank balance and cash in
transit
1. Review iI any account has
been conIirmed which leIt no
balance in the prior year. Every
account is to be conIirmed.
2. Draw up bank balance
reconciliation.
a. Check additions. Consider
unusual items (oI signiIicant
value).
b. Agree sub-account balances to
the ledger and bank ledger at
year-end.
c. Examine the reconciliation oI
any two months Ior each account
to observe unusual items and re-
consider the timing and
accuracy. Also examine
relevancy personnel`s approval.
3. Collect bank conIirmations
and test records in the entity`s
accounting books.
- Account Ior diIIerences (iI any)
at the closing date.
- Reconcile all deposits which
are yet to be recorded at year end
to bank ledger aIter date.
4. See iI amounts being
transIerred listed under 'Cash in
transit are appropriate (only
signiIicant items).
a. Trace them to deposit book,
and transIer notes as to date,
amount, description.
b. Trace them to year-end bank
ledger. Make notes oI deposits
which are recorded by the bank
aIter date.
c. Consider deposits which are
recorded by the bank on a proper
date (1-2 days aIter date oI
posting by the entity).
d. Review prior year`s Iinancial
42
statements and current year`s
working papers to ensure
reconciled Iigures are included in
documentation.
C. Additional audit procedures
- See iI balances in Ioreign
currencies have been revalued
using average inter-bank rates oI
the closing date.
-Other procedures (iI
any)........

IV. Conclusion and recommendations
A. Conclusions and audit objectives:
...................
...................
B. Recommendations:
....................
...................
C. Matters that need Iollowing up in subsequent audits:
......................
.....................
Date oI completion:........
PerIormer:............
Standard No 400- Risk assessments and internaI controI
43
STANDARD 400
RISK ASSESSMENTS AND INTERNAL CONTROL

GENERAL

Iundamental procedures and provide guidance on obtaining an understanding oI the accounting
and internal control systems and on assessing audit risk and its components: inherent risk, control
risk and detection risk during an audit oI Iinancial statements.

02. The auditor should obtain an understanding oI the accounting and internal control systems
suIIicient to prepare an overall audit plan and develop an eIIective, appropriate audit approach.
The auditor should use proIessional judgment to assess audit risk and to design audit procedures
to ensure it is reduced to an acceptably low level.

03. This VSA applies to audits oI Iinancial statements and also applies to audits oI other Iinancial
statements and rendering related services
It is expected that the client entity and users oI the audit report should possess essential
knowledge as to the principles set out in this VSA in working with the auditor and the audit Iirm,
and dealing with the relations maintained during the audit.

04. Inherent risk is the susceptibility oI an account balance or class oI transactions to misstatement
that could be material individually or when aggregated with misstatements in other balances or
classes, assuming that there were no related-internal controls.

05. Control risk is the risk that a misstatement, that could occur in an account balance or class oI
transactions and that could be material individually or when aggregated with misstatement in
other balances or classes, will not be prevented or detected and corrected on a timely basis by the
accounting and internal control systems.

06. Detection risk is the risk that misstatement exists in an account balance or class oI transactions
that could be material individually or when aggregated with misstatements in other balances or
classes that the auditor and the audit Iirm Iail to detect.

07. Audit risk means the risk that the auditor and the audit Iirm give an inappropriate audit opinion
when the Iinancial statements are materially misstated. Audit risk has three components: inherent
risk, control risk and detection risk.

08. Audit risk assessment is the work carried out by the auditor and audit Iirm to assess the degree in
which audit risks may occur, which include the assessment oI inherent risk, control risk and
detection risk. Audit risk is assessed beIore the planning stage and beIore audit perIormance.

09. Materiality is a term which denotes the importance oI inIormation or a disclosure in the Iinancial
statements.
InIormation is material iI its omission or misstatement could inIluence the economic decisions
oI users taken on the basis oI the Iinancial statements. Materiality depends on the size oI the
44
item or error judged in the particular circumstances oI its omission or misstatement. Thus,
materiality should be viewed in respect oI both quantitative and qualitative characteristics.

10. Internal control system means all the policies and procedures designed and adopted by an entity
to assist compliance with the provisions oI law and relevant regulations Ior prevention and
detection oI Iraud and error, preparation oI Iinancial statements that give a true and Iair view, and
eIIective saIeguarding, management and use oI its assets. The internal control comprises the
control environment, accounting system, and control procedures.

11. Accounting system means the series oI policies and procedures oI an entity by which records are
maintained and Iinancial statements prepared.

12. Control environment means the understanding, attitude, awareness and actions oI members oI the
boards oI Management and Directors regarding the internal control system and its importance in
the entity.
The control environment has an eIIect on the eIIectiveness oI the speciIic control procedures. A
strong control environment can signiIicantly complement speciIic control procedures. However, a
strong environment is not synonymous with a strong internal control system. Such environment
does not, by itselI, ensure the eIIectiveness oI the internal control system.

13. Control procedures are those policies and procedures which management has established to
achieve the entity`s speciIic objectives.

CONTENTS OF THE VSA

14. When developing the audit approach, the auditor considers the preliminary assessment oI
inherent risk and control risk to determine the appropriate detection risk to accept Ior the
Iinancial statement assertions and to determine the nature, timing and extent oI substantive
procedures Ior such assertions.

Inherent Risk

15. In developing the audit plan, the auditor and the audit Iirm should assess inherent risk at the
Iinancial statement level. In developing the audit program, the auditor should relate such
assessment to material account balances and classes oI transactions at the assertion level, or
otherwise assume that inherent risk is high Ior the assertion. Based on the assessment on the
inherent risk, the auditor estimates the work to conduct and procedures to Iollow Ior material
balances and transactions in the Iinancial statements, or balances and transactions Ior which, in
the auditor`s judgment, inherent risk is high (see Appendix 01).

16. To assess inherent risk, the auditor uses proIessional judgment to evaluate the Iollowing major
Iactors:
At the Financial Statement Level
- The integrity, experience and knowledge oI management and changes in management during the
period;
- The experience and competence oI the chieI accountant, key accounting personnel and internal
audit staII and changes (iI any) with them;
- Unusual pressures on management and the chieI accountant, in particular circumstances that
might predispose management and the chieI accountant to misstate the Iinancial statements;
- The nature oI the entity`s business, Ior example, technological designs, capital structure, the
number oI locations, geographical spread and seasonal Ieature oI production;
- Factors aIIecting the industry in which the entity operates, Ior example, changes in economic and
competitive conditions, in purchasing and selling market and in accounting practices common to
the industry.
At the Account Balance and Class of Transactions Level
45
- Financial statement accounts likely to be susceptible to misstatement, Ior example, accounts
which required adjustment in the prior period or which involve a high degree oI estimation; or
changes in accounting practice which took place during the period;
- Measurement oI account balances and business transactions, such as balances oI provision
accounts, transactions with extra-ordinary repairs either expensed or added to the cost oI Iixed
assets.
- Susceptibility oI assets to loss or misappropriation, Ior example, numerous receipts and
expenditures in cash, cash advanced in large amounts and over a long time,.
- The complexity oI underlying transactions and other events which might require using the work
oI an expert, Ior example litigations or theIts.
- The completion oI unusual and complex transactions, particularly at or near period end;
- Other unusual Iinancial and business transactions.

Accounting and Internal Control Systems

17. Internal controls relating to the accounting system are maintained to ensure:
- Transactions are executed in accordance with the authorization oI relevant personnel;
- All transactions are promptly recorded in the correct amount, in the appropriate accounts and in
the proper accounting period so as to permit preparation oI Iinancial statements in accordance
with the prevailing accounting regulations;
- Access to assets and records is permitted only in accordance with management`s authorization;
- Recorded assets are compared with the existing assets counted at reasonable intervals and
appropriate action is taken regarding any diIIerences.

Inherent Limitations of Internal Controls

18. Accounting and internal control systems cannot provide management with conclusive evidence
that objectives are reached because oI inherent limitations, such as:
- Management`s usual requirement that the cost oI an internal control does not exceed the expected
beneIits to be derived;
- Most internal controls tend to be directed at routine transactions rather than non-routine
transactions;
- The potential Ior human error due to carelessness, distraction, mistakes oI judgment and the
misunderstanding oI instructions;
- The possibility oI circumvention oI internal controls through the collusion oI a member oI
management or an employee with parties outside or inside the entity;
- The possibility that a person responsible Ior exercising an internal control could abuse that
responsibility;
- The possibility that procedures may become inadequate due to changes in the existing mechanism
and management requirement and compliance with procedures may deteriorate.


19. Within the scope oI a Iinancial statement audit, the auditor is mainly concerned with the
accounting and internal control policies and procedures pertaining to assertions in the Iinancial
statements.
Understanding oI the accounting and internal control systems oI the entity under audit and the
assessment oI inherent risk and control risk would assist the auditor in:
- Locating the audit scope required Ior material misstatements likely to exist in the Iinancial
statements;
- Reviewing Iactors which may result in material misstatements; and,
- Designing relevant audit procedures.

20. When obtaining an understanding oI the accounting and internal control systems to develop an
audit plan, the auditor obtains a knowledge oI the design oI the accounting and internal control
46
systems and their operation. This would enable the auditor measure the quantity oI transactions to
be audited and design necessary testing procedures.

21. The nature, timing and extent oI the procedures perIormed by the auditor to obtain an
understanding oI the accounting and internal control systems will vary with, among other things:
- The size and complexity oI the entity and oI its computer system, Ior example wholly or party
computerized application; computers operated separately or in a network,.)
- Materiality considerations by the auditor and the audit Iirm;
- The type oI internal controls involved (Ior example control oI purchases, sales or cash,.);
- The entity`s regulation on respective control procedures (Ior example, procedures oI purchases,
sales, and those on goods received and dispatched);
- The number oI transactions and the entity`s documentation oI speciIic internal controls;
- The auditor`s assessment oI inherent risk as high or low.

22. Ordinarily, the auditor`s understanding oI the accounting and internal control systems is obtained
through:
- previous experience with the entity and its operations;
- inquiries oI appropriate management, supervisory and other personnel at various organizational
levels within the entity, together with reIerence to documentation;
- inspection oI documents and records produced by the accounting and internal control systems;
and
- observation oI the entity`s activities and operations, including observation oI the organization oI
computer operations, management personnel, internal controls and the nature oI internal
transaction processing.

23. Internal control includes control environment, accounting system and control procedures.

Control Environment

24. The auditor should obtain an understanding oI the control environment oI the entity in evaluating
the Boards oI Management and Director`s attitudes, awareness and actions regarding the internal
controls.

ey factors reflected in the control environment include.

- The Iunction oI the Boards oI Management and Directors and their committees and divisions;
- The Boards oI Management and Director`s philosophy and operating style;
- The entity`s organizational structure and the authority and responsibility oI the components
thereoI;
- Management`s control system including the managing and control structure, internal audit
Iunction, personnel policies and procedures segregation oI duties;
- External impacts, such as Government policies, and higher levels and proIessional bodies`
instruction.
Accounting System

25. The auditor should obtain an understanding oI the accounting system suIIicient to identiIy and
understand:
- Major classes oI transactions in the entity`s operations;
- How such transactions are initiated;
- Organization oI the accounting mechanism;
- Organization oI the accounting practice, including accounting documents, chart oI accounts,
accounting books and Iinancial reporting; and
- The accounting Ior signiIicant transactions and other events, Irom their initiation to inclusion in
the Iinancial statements.

47
Control !rocedures
26. The auditor should obtain an understanding oI the control procedures suIIicient to develop the
audit plan and program. The auditor would consider knowledge oI the control environment to
deIine the control procedures in place and those absent that require application (Ior example in
understanding accounting Ior cash in bank, the auditor would consider whether reconciliation
procedures are available and properly perIormed).

Mafor control procedures are.
- drawing up, veriIying, reconciling and approving oI data and relevant documents;
- testing the accuracy oI data;
- reviewing computerized programs and environment;
- comparing data between control account ledgers and sub-ledgers
- reviewing and approving oI accounting documents;
- comparing data between control account ledgers and sub-ledgers;
- reviewing and approving oI accounting documents;
- comparing internal documents to external documents;
- reconciling count results to book Iigures;
- limits oI access to assets and accounting documents;
- comparing actuality to accounting estimates and budgets.

When reviewing the control procedures, the auditor should consider whether they have been
established upon Iundamental principles, such as leadership regime, work assignment, duty
segregation, authorization and approval.

Control Risks

Preliminary Assessment of Control Risks

27. The preliminary assessment oI control risk is the process oI evaluating the eIIectiveness oI an
entity`s accounting and internal control systems in preventing or detecting and correcting
material misstatements. There will always be some control risk because oI the inherent
limitations oI any accounting and internal control system.

28. After obtaining an understanding of the accounting and internal control systems, the
auditor and the audit firm should make a preliminary assessment of control risk, at the
assertion level, for each material account balance or class of transactions.

29. The auditor ordinarily assesses control risk at a high level Ior some or all assertions when:
- the entity`s accounting and internal control systems are not adequate;
- the entity`s accounting and internal control systems would not be eIIicient;
- the auditor is not provided with an adequate basis Ior evaluation oI the adequacy and eIIectiveness
oI the accounting and internal control systems oI the client entity.

30. The assessment oI control risk Ior a Iinancial statement assertion should normally be at less than
high iI the auditor:
- is able to identiIy internal controls relevant to the assertion which are likely to prevent or detect
and correct a material misstatement; and
- plans to perIorm tests oI control to support the assessment oI control risk.

Documentation of Assessment of Control Risks

31. The auditor should document in the audit working papers:
- the understanding obtained of the entity`s accounting and internal control systems; and
- the assessment of control risk. When control risk is assessed at less than high, the auditor would
also document the basis Ior the conclusions.
48

32. DiIIerent techniques may be used to document inIormation relating to accounting and internal
control systems. The Iorm and extent oI this documentation is inIluenced by the size and
complexity oI the entity and the nature oI the entity`s accounting and internal control systems
(Ior example, the more complex the entity`s accounting and internal control systems and the
more extensive the auditor`s procedures, the more extensive the auditor`s documentation will
need to be).

Tests of Control
33. Tests oI control are perIormed to obtain audit evidence about the eIIectiveness oI the accounting
and internal control systems in respect oI:
- design oI the accounting and internal control systems, that is, whether they are suitably designed to
prevent or detect and correct material misstatements; and
- operation oI the accounting and internal control systems throughout the period.

34. Apart Irom tests oI control, the auditor may perIorm other audit procedures to obtain audit
evidence about the eIIectiveness oI the design and operation oI the accounting and internal
control systems, such as evidence collected through inquiry and observation.

35. When the auditor concludes that procedures provide audit evidence about the eIIectiveness oI the
accounting and internal control systems relevant to a particular Iinancial statement assertion, the
auditor may use that audit evidence to support a control risk assessment at a low and medium
level.

36. Tests oI control may include:
- Inspection oI documents supporting transactions and other events to gain audit evidence that the
accounting and internal control systems have operated properly, Ior example, veriIying that
payment related documents have been authorized;
- Inquiries about, and observation oI, the perIormance oI those who carry out internal control
assignments to determine whether any audit trails are leIt;
- ReperIormance oI internal controls, Ior example, reconciliation oI bank accounts, petty cash and
inventory count minutes and accounts receivable and payable, to ensure they were correctly
perIormed by the entity.

3. The auditor should obtain audit evidence through tests of control support any assessment
of control risk which is less than high. The lower the assessment of control risk, the more
support the auditor should obtain that accounting and internal control systems are suitably
designed and operating effectively.

38. When obtaining audit evidence about the eIIective operation oI internal controls, the auditor
considers how they were applied, the consistency with which they were applied during the period
and by whom they were applied. The concept oI eIIective operation recognizes that some
deviations may have occurred due to changes in key personnel, signiIicant seasonal Iluctuations
in volume oI transactions and human error. When deviations are detected the auditor makes
speciIic inquiries regarding these matters, particularly the timing oI staII changes in key internal
control personnel. The auditor then ensures that the tests oI control appropriately cover such a
period oI change or Iluctuation.

39. In a computer inIormation systems environment, the objectives oI tests oI control do not change
Irom those in a manual environment; however, some audit procedures may change. In case the
accounting work and internal auditing is perIormed using computers the auditor may Iind it
necessary, or may preIer, to use computer-assisted audit techniques to collect evidence about the
eIIectiveness oI the internal controls.

49
40. Based on the results oI the tests oI control, the auditor should evaluate whether the internal
controls are designed and operating as contemplated in the preliminary assessment oI control
risk. The evaluation oI deviations may result in the auditor concluding that the assessed level oI
control risk needs to be revised, thus to modiIy the nature, timing and extent oI planned
substantive procedures.

Final Assessment of Control Risk

41. BeIore the conclusion oI the audit, based on the results oI substantive procedures and other audit
evidence obtained by the auditor should consider whether the assessment oI control risk is
conIirmed.
Relationship Between the Assessments oI Inherent and Control Risks

42. Inherent risk and control risk are highly interrelated; and thereIore the auditor should assess
inherent and control risks together.

Detection Risks

43. The level oI detection risk relates directly to the auditor`s substantive procedures.
The auditor`s control risk assessment, together with the inherent risk assessment, inIluences the
nature, timing and extent oI substantive procedures to be perIormed to reduce detection risk, and
thereIore audit risk, to an acceptably low level.

To reduce audit risk to an acceptably low level, the auditor would consider:
- nature oI substantive procedures, Ior example, using tests directed toward independent parties
outside the entity rather than tests directed toward parties or documentation within the entity, or
using tests oI details Ior a particular audit objective in addition to analytical procedures;
- the timing oI substantive procedures, Ior example, perIorming inventory procedures at period end
rather than at an earlier date with adjustment; and
- the extent oI substantive procedures, Ior example, using a larger sample size.
It is impossible however to entirely eliminate the detection risk even when the auditor has
checked all the transactions and account balances

44. There is an inverse relationship between detection risk and the combined level oI inherent and
control risks. For example, when inherent and control risks are high, acceptable detection risk
needs to be low to reduce audit risk to an acceptably low level. On the other hand, when inherent
and control risks are low, an auditor can accept a higher detection risk and still reduce audit risk
to an acceptably low level (see Appendix 01)
45. While tests oI control and substantive procedures are distinguishable as to their purpose, the
results oI either type oI procedure may contribute to the purpose oI the other regarding
assessment oI inherent risk and control risk. For example misstatements discovered in conducting
substantive procedures may cause the auditor to modiIy the previous assessment oI control risk
(see Appendix 01).

46. Regardless oI the assessed levels oI inherent and control risks, the auditor should perIorm some
substantive procedures Ior material account balances and classes oI transactions.

47. The auditor`s assessment oI the components oI audit risk may change during the course oI an
audit, Ior example, inIormation may come to the auditor`s attention when perIorming substantive
procedures that diIIers signiIicantly Irom the inIormation on which the auditor originally
assessed inherent and control risks. In such cases, the auditor would modiIy the planned
substantive procedures based on a revision oI the assessed levels oI inherent and control risks.
48. The higher the assessment oI inherent and control risk, the more audit evidence the auditor
should obtain Irom the perIormance oI substantive procedures. When the auditor determines that
detection risk regarding a Iinancial statement assertion Ior a material account balance or class oI
50
transactions can not be reduced to an acceptable level, the auditor should express a qualiIied
opinion or a disclaimer oI opinion.

Audit Risk in the Small Business

49. The auditor needs to obtain the same level oI assurance in order to express an unqualiIied opinion
on the Iinancial statements oI both small and large entities. However, many internal controls
which would be relevant to large entities are not practical in the small business. (For example, in
large businesses, those involved in the supervisory controls are separate Irom the accounting staII
while in small businesses, accounting procedures may be perIormed by a Iew persons.
Accountants may take charge oI the supervisory controls, and thus the internal controls are
impaired). In circumstances where internal controls are limited due to the absence oI segregation
oI duties, the audit evidence necessary to support the auditor`s opinion on the Iinancial
statements may have to be obtained entirely through the perIormance oI substantive procedures.

Communication oI Weaknesses

50. As a result oI obtaining an understanding oI the accounting and internal control systems and tests
oI control, the auditor may become aware oI weaknesses in the systems. The auditor should make
management aware, as soon as practical and at an appropriate level oI responsibility, oI material
weaknesses in the design or operation oI the accounting and internal control systems.

Such communication would ordinarily be in writing. However, iI oral communication is Iound
appropriate, the communication would be documented in the audit working papers.

APPENDIX 01
Interrelationship of the Components of Audit Risk

The Iollowing table shows how the acceptable level oI detection risk may vary based on assessment
oI inherent and control risks.

Auditor`s assessment oI control risk
High Medium Low
Auditor`s
assessment oI
inherent risk
High Lowest Lower Medium
Medium Lower Medium Higher
Low Medium Higher Highest

Notes:
- Both inherent risk and control risk are set at three levels: higher, medium and lower.
- The shaded areas relate to detection risk.
- Detection risk is set at Iive levels: highest, higher, medium, lower and lowest.
There is an inverse relationship between detection risk and the combined level oI inherent control
risks. For example when inherent risk is assessed as high and control risk is low, acceptable levels
oI detection risk need to be medium to reduce audit risk to an acceptable low level. On the other
hand, when inherent risk is low and control risk is medium, the auditor can accept detection risk
as higher and still reduce audit risk to an acceptably low level.
Standard No 530- Audit sampIing and other seIective testing procedures
51
STANDARD 530
AUDIT SAMPLING AND OTHER SELECTIVE TESTING PROCEDURES

GENERAL

Iundamental principles and provide guidance on the selection oI an audit sample and
procedures other to gather audit evidence in an audit oI Iinancial statements.

02. When designing audit procedures, the auditor should determine appropriate means for
selecting audit sample so as to gather audit evidence to meet the objective of audit
testing.

03. This VSA applies to audits oI Iinancial statements and also applies to an audit oI other
Iinancial inIormation and related services rendered by the audit Iirm.
The auditor and the audit Iirm should comply with this VSA in conducting an audit oI
Iinancial statements and other related services.

Following this standard, the audit Iirm is to prescribe policies and procedures on audit
sampling and other selective procedures Ior use by its staII.


04. Audit sampling (sampling) means the application oI audit procedures to less than 100 oI the
items with in an account balance or class oI transactions such that all sampling units have a
chance oI selection. This will enable the auditor to obtain and evaluate audit evidence about
some characteristic oI the items selected in order to Iorm oI assist in Iorming a conclusion
concerning the population. Audit sampling can use either a statistical or a non-statistical
approach.

05. Deviation means either control deviations, when perIorming tests oI control, or
misstatements, when perIorming substantive procedures. These deviations may be caused
intentionally (Iraud) or unintentionally (error) by an individual or an organization. Similarly,
total deviation is used to mean either the rate oI deviation or total misstatement.
06. Anomalous error means an error that arises Irom an isolated event that has not recurred other
than on speciIically identiIiable occasions and is thereIore not representative oI errors in the
population.

07. !opulation means the entire set oI data Irom which a sample is selected and about which the
auditor wishes to draw conclusions. For example, all oI the items in an account balance or a
class oI transactions constitute a population. A population may be divided into strata, or sub-
populations, with each stratum being examined separately. The term 'population is used to
include the term 'stratum.

08. Sampling risk arises Irom the possibility that the auditor`s conclusion, based on a sample,
may be diIIerent Irom the conclusion reached iI the entire population were subjected to the
same audit procedure. There are two types oI sampling risk:
(a) the risk the auditor will conclude, in the case oI a test oI control, that control risk is lower
than it actually is, or in the case oI a substantive test, that a material error does not exist when
in Iact it does. This type oI risk aIIects audit eIIectiveness and is more likely to lead to an
inappropriate audit opinion; and
52
(b) the risk the auditor will conclude, in the case oI a test oI control, that control risk is higher
than it actually is, or in the case oI substantive test, that a material error exists when in Iact it
does not. This type oI risk aIIects audit eIIiciency as it would usually lead to additional work
to establish that initial conclusions were incorrect.

09. Non-sampling risk arises Irom Iactors that cause the auditor to reach an erroneous conclusion
Ior any reason not related to the size oI the sample. For example, the auditor might use
inappropriate procedures, or the auditor might misinterpret evidence and Iail to recognize an
error.

10. Sampling unit means the individual items constituting a population, Ior example checks listed
on deposit slips, credit entries on bank statements, sales invoices or debtor`s balances. Form
oI sampling unit could be either a monetary unit, quantity or a physical thing.

11. Statistical sampling means any approach to sampling that has the Iollowing two
characteristics:
(a) random selection oI a sample; and
(b) use oI probability-statistical theory to evaluate sample results, including measurement oI
sampling risk.
Non-statistical sampling` is a sampling approach that does not have either or both oI the
above characteristics.

12. Stratification is the division oI a population into sub-populations, each oI which is a group oI
sampling units with similar characteristics (oIten monetary value).

13. Tolerable error means the maximum error in a population that the auditor and audit Iirm are
willing to accept. Tolerable error is normally immaterial.

CONTENT OF THE VSA

Audit Evidence

14. In accordance with VSA 500 'Audit Evidence, audit evidence is obtained Irom an
appropriate mix oI tests oI control and substantive procedures.

Tests of Control

15. In accordance with VSA 400 'Risk Assessments and Internal Control tests oI control are
perIormed iI the auditor plans to assess control risk less than high Ior a particular assertion.

16. Based on the auditor`s understanding oI the accounting and internal control systems, the
auditor identiIies the characteristics or attributes that indicate perIormance oI a control, as
well as possible deviation conditions which indicate departures Irom adequate perIormance.
The presence or absence oI attributes can then be tested by the auditor.

17. Audit sampling Ior tests oI control is generally appropriate when application oI the control
leaves evidence oI perIormance (Ior example, initials oI the credit manager on a sales invoice
indicating credit approval, or evidence oI authorization oI data input to a micro-computer
based data processing system).

Substantive Procedures

18. Substantive procedures are oI two types: analytical procedures and tests oI details oI
transactions and balances. Substantive procedures are only relevant to monetary value. The
purpose oI substantive procedures is to obtain audit evidence to detect material misstatements
53
in the Iinancial statements. When perIorming substantive tests oI details, audit sampling and
other means may be used to veriIy one or more assertions about a Iinancial statement amount
(Ior example, the existence oI accounts receivable), or to make an independent estimate oI
some amount (Ior example, the value oI obsolete inventories).

Risk Considerations in Obtaining Evidence

19. In obtaining evidence, the auditor should use proIessional judgment to assess audit risk and
design audit procedures to ensure this risk is reduced to an acceptably low level.

20. Audit risk: means the risk that the auditor and the audit Iirm give an inappropriate audit
opinion when the Iinancial statements are materially misstated. Audit risk has three
components: inherent risk, control risk and detection risk.

Inherent risk is the susceptibility oI an account balance or class oI transactions to
misstatement that could be material individually or when aggregated with misstatements in
other balances or classes, assuming that there were no related internal controls.

Control risk is the risk that a misstatement that could occur in an account balance or class oI
transactions and that could be material individually or when aggregated with misstatement in
other balances or classes will not be prevented or detected and corrected on a timely basis by
the accounting and internal control systems.

Detection risk is the risk that misstatement exists in an account balance or class oI
transactions that could be material individually or when aggregated with misstatements in
other balances or classes that the auditor and the audit Iirm Iail to detect.

These three components oI audit risk are considered during the planning process in the
design oI audit procedures in order to reduce audit risk to an accept ably low level.

21. Sampling risk and non-sampling risk can aIIect the components oI audit risk. For example,
when perIorming tests oI control, the auditor may Iind no errors in a sample and conclude
that control risk is low, when the rate oI error in the population is, in Iact, unacceptably high
(sampling risk). Or there may be errors in the sample which the auditor Iails to recognize
(non-sampling risk). With respect to substantive procedures, the auditor may use a variety oI
methods to reduce detection risk to an acceptable level. Depending on their nature, these
methods will be subject to sampling and/or non-sampling risks. For example, the auditor may
choose an inappropriate analytical procedure (non-sampling risk) or may Iind only minor
misstatements in a test oI details when, in Iact, the population misstatement is greater than
the tolerable amount (sampling risk). For both tests oI control and substantive tests, sampling
risk can be reduced by increasing sample size, while non-sampling risk can be reduced by
proper engagement planning, supervision, and review.

Procedures for Obtaining Evidence

22. Procedures Ior obtaining audit evidence include inspection, observation, inquiry and
conIirmation, computation and analytical procedures. The choice oI appropriate procedures is
a matter oI proIessional judgment in the circumstances. Application oI these procedures will
oIten involve the selection oI items Ior testing Irom a population.

Selecting Items for Testing to Gather Audit Evidence

23. When designing audit procedures, the auditor should determine appropriate means oI
selecting items Ior testing. The means available to the auditor are:
(a) Selecting all items (100 examination);
54
(b) Selecting speciIic items, and
(c) Audit sampling.

24. The application oI any one or combination oI the above means may be appropriate in
particular circumstances. The decision as to which approach to use will depend on
assessment oI audit risk and the eIIectiveness oI an audit. The auditor needs to be satisIied
that methods used are eIIective in providing suIIicient appropriate audit evidence to meet the
objectives oI the test.

Selecting All Items (100 examination)

25. The auditor may decide that it will be most a appropriate to examine the entire population oI
items that make up an account balance or class oI transactions (or a stratum within that
population). Selecting all items is unlikely in the case oI tests oI control; however, it is more
common Ior substantive procedures. For example, 100 examination may be appropriate
when:
- the population constitutes a small number oI large value items;
- both inherent and control risks are high and other means do not provide suIIicient appropriate
audit evidence;
- the repetitive nature oI a calculation or other process perIormed by a computer inIormation
system makes selecting all items cost eIIective;
- there is probable indication oI dispute or law suit;
- the client requires.

Select Specific Items

26. The auditor may decide to select speciIic items Irom a population based on such Iactors as
knowledge oI the client`s business, preliminary assessments oI inherent and control risks, and
the characteristics oI the population being tested. The judgmental selection oI speciIic items
is subject to non-sampling risk. SpeciIic items selected may include:
O High value or key items. The auditor may decide to select speciIic items within a population
because they are oI high value, or exhibit some other characteristic, Ior example items that are
suspicious, unusual, particularly risk-prone or that have a history oI error.
O All items over a certain amount. The auditor may decide to examine items whose values
exceed a certain amount so as to veriIy a large proportion oI the total amount oI an account
balance or class oI transactions.
O Items to obtain inIormation. The auditor may examine items to obtain inIormation about
matters such as the client`s business, the nature oI transactions, accounting and internal
control systems.
O Items to test procedures. The auditor may use judgment to select and examine speciIic items
to determine whether or not a particular control procedure is being perIormed.

27. While selective examination oI speciIic items Irom an account balance or class oI
transactions will oIten be an eIIicient means oI gathering audit evidence, it does not
constitute audit sampling. The results oI procedures applied to items selected in this way
cannot be projected to the entire population. The auditor considers the need to obtain
appropriate evidence regarding the remainder oI the population when that remainder is
material.

Audit Sampling

28. The auditor may decide to apply audit sampling to an account balance or class oI
transactions. Audit sampling can be applied using either non-statistical or statistical sampling
methods. Audit sampling is discussed in detail in paragraphs 29 through 56.
55

Statistical Versus Non-Statistical Sampling Approaches

29. The decision whether to use a statistical or non-statistical sampling approach is a matter Ior
the auditor`s judgment regarding the most eIIicient manner to obtain suIIicient appropriate
audit evidence in the particular circumstances. For example, in the case oI tests oI control the
auditor`s analysis oI the nature and cause oI errors will oIten be more important than the
statistical analysis oI the mere Irequency oI errors. In such a situation, non-statistical
sampling may be most appropriate.

30. When applying statistical sampling, the sample size can be determined using either
probability theory or proIessional judgment. Moreover, sample size is not a valid criterion to
distinguish between statistical and non-statistical approaches. Sample size is a Iunction oI
Iactors such as those identiIied in Appendices 1 and 2. When circumstances are similar, the
eIIect on sample size oI Iactors will be similar regardless oI whether a statistical or non-
statistical approach is chosen. (see Appendices 01 and 02).

31. When applying non-statistical sampling, the auditor can still use elements oI a statistical
approach, Ior example the use oI random selection using computer generated random
numbers. However, only when the approach adopted has the characteristics oI statistical
sampling statistical measurements oI sampling risk are valid.

Design of the Sample

32. When designing an audit sample, the auditor should consider the objectives of the test
and the attributes of the population from which the sample will be drawn.

33. The auditor Iirst considers the speciIic objectives to be achieved and the combination oI audit
procedures which is likely to best achieve those objectives. Consideration oI the nature oI the
audit evidence sought and possible error conditions or other characteristics relating to that
audit evidence will assist the auditor in deIining what constitutes an error and what
population to use Ior sampling.
34. The auditor considers what conditions constitute an error by reIerence to the objectives oI the
test. A clear understanding oI what constitutes an error is important Ior projecting and
arriving at a conclusion oI errors. For example, (1) in a substantive procedure relating to the
existence oI accounts receivable, iI payments are made by the customer beIore the
conIirmation date but received shortly aIter that date by the client the case is not considered
an error. (2) A misposting between customer accounts that does not aIIect the total accounts
receivable balance is an error, but should not be seen as material.

35. When perIorming tests oI control, the auditor generally makes a preliminary assessment oI
the rate oI error the auditor expects to Iind in the population to be tested and the level oI
control risk. This assessment is based on the auditor`s prior knowledge or the examination oI
a small number oI items Irom the population. Similarly, Ior substantive tests, the auditor
generally makes a preliminary assessment oI the amount oI error in the population. These
preliminary assessments are useIul Ior designing an audit sample and in determining sample
size. For example, iI the expected rate oI error is unacceptably high, selecting all items

Population

36. It is important Ior the auditor to ensure that the population should be appropriate and
complete:
(a) Appropriate: population should be appropriate to the objective oI the sampling
procedure. For example, iI the auditor`s objective is to test Ior overstatement oI
accounts payable listing. On the other hand, when testing Ior understatement oI
56
accounts payable, the population is not the accounts payable listing but rather
subsequent disbursements, unpaid invoices, suppliers` statements, unmatched
receiving reports or other populations that provide audit evidence oI understatement
oI accounts payable; and
(b) Complete: population should be complete. For example, iI the auditor intends to
select payment vouchers Irom a Iile, the auditor should be satisIied that all vouches
have in Iact been Iiled. Similarly, iI the auditor intends to use sample to draw
conclusions about the operation oI an accounting and internal control system during
the Iinancial reporting period, the population needs to include all relevant items Irom
the entire period. A diIIerent approach may be to stratiIy the population and use
sampling only to draw conclusions about the control during a certain period oI time,
(Ior example, the Iirst 9 months oI a year), and to use alternative procedures or a
separate sample regarding the remaining time (three months). In this case, the
population does not need to be complete.

Stratification

37. Audit eIIiciency may be improved iI the auditor stratiIies a population by dividing it into
discrete sub-populations oI similar characteristics. The objective oI stratiIication is to reduce
the variability oI items within each stratum and thereIore allow sample size to be reduced
without a proportional increase in sampling risk. Sub-populations need to be careIully
deIined such that any sampling unit can only belong to one stratum.

38. When perIorming substantive procedures, an account balance or class oI transactions is oIten
stratiIied by monetary value. This allows greater audit eIIort to be directed to the larger value
items which may contain the greater potential monetary error in terms oI overstatement.
Similarly, a population may be stratiIied according to a particular characteristic that indicates
a higher risk oI error, Ior example, when testing the valuation oI accounts receivable,
balances may be stratiIied by age.

39. The results oI procedures applied to a sample oI items within a stratum can only be projected
to the items that make up that stratum. To draw a conclusion on the entire population, the
auditor will need to consider risk and materiality in relation to whatever other strata that
make up the entire population. For example, 20 oI the items in a population may make up
90 oI the value oI an account balance. The auditor may decide to examine a sample oI
these items. The auditor evaluates the results oI this sample and reaches a conclusion on the
90 oI value separately Irom the remaining 10. On this remaining, a Iurther sample or
other means oI gathering evidence will be used, or which may be considered immaterial.

Jalue weighted selection

40. It will oIten be eIIicient in substantive testing, particularly when testing Ior overstatements
Under this method, the sampling unit is identiIied as an individual monetary value (e.g.VND
10 million) oI the units that make up an account balance or class oI transactions. Having
selected speciIic monetary units Irom within the population, the auditor then examines the
particular items that contain those are equal or higher the monetary units. This approach to
deIining the sampling unit ensures that audit eIIort is directed to the larger value items and
can result in smaller sample sizes. This approach is ordinarily used in conjunction with the
systematic method oI sample selection (see Appendix 03) and is most eIIicient when
selecting Irom computerized database.

Sample Size

41. In determining the sample size, the auditor should consider whether sampling risk is reduced
to an acceptably low level. Sample size is aIIected by the level oI sampling risk that the
57
auditor is willing to accept. The lower the risk the auditor is willing to accept, the greater the
sample size will need to be.

42. The sample size can be determined by the application oI a statistically-based Iormula or
through the exercise oI proIessional judgment objectively applied to the circumstances.
Appendices 01 and 02 indicated the inIluences that various Iactors typically have on the
determination oI sample sized in tests oI control and substantive procedures.

Selecting the Sample Items

43. The auditor should select items Ior the sample with the expectation that all sampling units in
the population have a chance oI selection. Statistical sampling requires that sample items are
selected at random so that each sampling unit has a known chance oI being selected. The
sampling units might be physical items (such as invoices) or monetary units. With non-
statistical sampling, an auditor uses proIessional judgment to select the items Ior a sample.
Because the purpose oI sampling is to draw conclusions about the entire population, the
auditor endeavors to select a representative sample by choosing sample items which have
characteristics typical oI the population, and the sample needs to be selected so that bias is
avoided.

44. The principal methods oI selecting samples are the use oI random number tables or computer
programs, systematic selection and haphazard selection. Each oI these methods is discussed
in Appendix 03.

Performing the Audit Procedure

45. The auditor should perform audit procedures appropriate to the particular test
objective on each item selected.

46. II a selected item is not appropriate Ior the application oI the procedure, the procedure is
ordinarily perIormed on a replacement item. For example, a voided check may be selected
when testing Ior evidence oI payment authorization. II the auditor is satisIied that the check
had been properly voided such that it does not constitute an error, an appropriately chosen
replacement is examined.

47. When the auditor is unable to apply the planned audit procedures to a selected item because,
Ior instance, documentation relating to that item has been lost and suitable alternative
procedures cannot be perIormed on that item, the auditor ordinarily considers that item to be
error.

Nature and Cause of Errors

48. The auditor should consider the sample results, the nature and cause oI any errors identiIied,
and their possible eIIect on the particular test objective and on other areas oI the audit.

49. In analyzing the errors discovered, the auditor may observe that many have a common
Ieature, Ior example, as to transactions, locations, products or period oI time. In such
circumstances, the auditor may decide to identiIy all items in the population that possess the
common Ieature, and extend audit procedures in that stratum. Such errors may be intentional,
and may indicate the possibility oI Iraud.

50. Sometimes, the auditor may be able to establish that an error arises Irom an isolated event
that has not recurred other than on speciIically identiIiable occasions and is thereIore not
representative oI similar errors in the population (an anomalous error). For error to be
58
considered an anomalous error, not representative oI the population, the auditor should
perIorm additional work. The additional work depends on the situation, but is adequate to
provide the auditor with suIIicient appropriate evidence that the error does not aIIect the
remaining part oI the population. (1) One example is an error caused by a computer
breakdown that is known to have occurred on only one day during the period. In that case,
the auditor assesses the eIIect oI the breakdown, Ior example by examining speciIic
transactions processed on that day, and considers the eIIect oI the cause oI the break-down on
audit procedures and conclusions. (2) Another example is an error that is Iound to be caused
by use oI an error that is Iound to be caused by use oI an incorrect Iormula in calculating all
inventory values at one particular branch. To establish that this is an anomalous error, the
auditor needs to ensure the correct Iormula has been used at other branches.

Projecting Errors

51. When perIorming substantive procedures, the auditor should project monetary errors Iound in
the sample to the population, and should consider the eIIect oI the projected error on the
particular test objective and on other areas oI the audit. The auditor projects the total error Ior
the population to obtain a broad view oI the scale oI errors, and to compare this to the
tolerable error. For substantive procedures, tolerable error is the tolerable misstatement, and
will be an amount less than or equal to the auditor`s preliminary estimate oI materiality used
Ior the individual account balances being audited.

52. When an error has been established as an anomalous error, it may be excluded when
projecting sample errors to the population. The eIIect oI any such error, iI uncorrected, still
needs to be considered in addition to the projection oI the non-anomalous errors. II an
account balance or class oI transactions has been divided into strata, the error is projected Ior
each stratum separately. Projected errors plus anomalous errors Ior each stratum are then
combined when considering the possible eIIect oI errors on the total account balance or class
oI transactions.

53. For tests oI control, no explicit projection oI errors is necessary since the sample error rate is
also the projected rate oI error Ior the population as a whole.

Evaluating the Sample Results

54. The auditor should evaluate the sample results to conIirm the population`s appropriateness
and completeness or to decide whether to revise the preliminary assessment thereoI. In the
case oI a test oI control, an unexpectedly high sample error rate may lead to an increase in
the assessed level oI control risk, unless Iurther evidence substantiating the initial assessment
is obtained. In the case oI a substantive procedure, an unexpectedly high error amount in a
sample may cause the auditor to believe that an account balance or class oI transactions is
materially misstated, in the absence oI Iurther evidence that no material misstatement exists.

55. II the total amount oI projected error plus () anomalous error is less than but close to that
which the auditor deems tolerable, the auditor considers the persuasiveness oI the sample
results in the light oI other audit procedures, and may consider it appropriate to obtain
additional audit evidence. The total oI projected error plus () anomalous error is the
auditor`s best estimate oI error in the population. However, sampling results are aIIected by
sampling risk. Thus when the best estimate oI error plus () anomalous error is close to the
tolerable error, the auditor recognizes the risk that a diIIerent sample would result in a
diIIerent best estimate that could exceed the tolerable error. Considering the results oI other
audit procedures helps the auditor to assess this risk, while the risk is reduced iI additional
audit evidence is obtained.

59
56. II the evaluation oI sample results indicates that the preliminary assessment oI the relevant
characteristic oI the population needs to be revised, the auditor may:
(a) request the client`s management to investigate identiIied errors and the potential Ior
Iurther errors, and to make any necessary adjustments;
(b) modiIy planned audit procedures. For example, in the case oI a test oI control, the
auditor might extend the sample size, test an alternative control or modiIy related
substantive procedures;
(c) consider the eIIect on the audit report.

APPENDIX 1:
Examples of Factors Influencing Sample Size for Tests of Control

The Iollowing are Iactors that the auditor considers when determining the sample size Ior a test oI
control. These Iactors need to be considered together and should never be separated:

FACTOR EFFECT ON SAMPLE SIZE
1. An increase in the auditor`s intended
reliance on accounting and internal control
systems

Increase
2. An increase in the rate oI deviation Irom the
prescribed control procedure that the auditor is
willing to accept

Decrease
3. An increase in the rate oI deviation Irom the
prescribed control procedure that the auditor
expects to Iind in the population

Increase
4. A decrease in the risk that the auditor will
conclude that the control risk is lower than the
actual control risk.

Increase
5. An increase in the number oI sampling units
in the population

Negligible effect

1. The auditor`s intended reliance on accounting and internal control systems: The more
assurance the auditor intends to obtain Irom accounting and internal control systems, the
lower the auditor`s assessment oI control risk will be, and the large the sample size will need
to be. For example, a preliminary assessment oI control risk as low indicates that the auditor
plans to place considerable reliance on the eIIective operation oI particular internal controls.
Te auditor thereIore needs to gather more audit evidence to support this assessment than
would be the case iI control risk were assessed at a higher level.
2. The rate oI deviation Irom the prescribed control procedure the auditor is willing to accept
(tolerable error):
The lower the rate oI deviation that the auditor is willing to accept, the larger the sample size
needs to be.
3. The rate oI deviation Irom the prescribed control procedure the auditor expects to Iind in the
population: The higher the rate oI deviation that the auditor expects, the larger the sample size
needs to be. Factors relevant to the auditor`s consideration oI the expected error rate include
the auditor`s understanding oI the business (in particular, procedures undertaken to obtain an
understanding oI the accounting and internal control systems), changes in personnel or in the
accounting and internal control systems, the results oI audit procedures applied in prior
periods and the results oI other audit procedures applied Ior the current period. High expected
error rates ordinarily warrant little, iI any, reduction oI control risk, and thereIore in such
circumstances tests oI controls would ordinarily be omitted.
4. The auditor`s conclusion oI control risk as lower than it is: The greater the degree oI
conIidence that the auditor requires that the results oI the sample are in Iact indicative oI the
actual incidence oI error in the population, the larger the sample size needs to be.
60
5. The number oI sampling units in the population. For large populations, the actual size oI the
population has little, iI any, eIIect on sample size. For small populations however, audit
sampling is oIten not as eIIicient as alternative means oI obtaining suIIicient appropriate audit
evidence.

APPENDIX 2
Examples of Factors Influencing Sample Size for Substantive Procedures

The Iollowing are Iactors that the auditor considers when determining the sample size Ior a
substantive procedure.

FACTOR

EFFECT ON SAMPLE SIZE
1. An increase in the auditor`s assessment
oI inherent risk
Increase
2. An increase in the auditor`s assessment
oI control risk
Increase
3. An increase in the use oI other
substantive procedures directed at the same
Iinancial statement assertion

Decrease
4. The risk that the auditor will conclude
that a material error does not exist, when in
Iact it does exist.
Increase
5. An increase in the total error that the
auditor is willing to accept (tolerable error)
Decrease
6. An increase in the amount oI error the
auditor expects to Iind in the population
Increase
7. StratiIication oI the population when
appropriate
Decrease
8. The number oI sampling units in the
population
Negligible
Effect

1. The auditor`s assessment oI inherent risk: The higher the auditor`s assessment oI inherent
risk, the larger the sample size needs to be. Higher inherent risk implies that a lower
detection risk is needed to reduce the audit risk to an acceptable low level, thus increasing
sample size.
2. The auditor`s assessment oI control risk. The higher the auditor`s assessment oI control risk,
the larger the sample size needs to be. For example, an assessment oI control risk as high
indicates that auditor cannot place much reliance on the eIIective operation oI internal
controls with respect to the particular Iinancial statement assertion. ThereIore, in order to
reduce audit risk to an acceptably low level, the auditor needs a low detection risk and will
rely more on substantive tests. The more reliance that is placed on substantive tests, the larger
the sample size will need to be.
3. The use oI other substantive procedures directed at the same Iinancial statement assertion.
The more the auditor is relying on other substantive procedures (test oI detail or analytical
procedures) to reduce detection risk to an acceptable level, the less assurance the auditor will
require Irom sampling and, thereIore, the smaller the sample size can be.
61
4. The auditor`s conclusion that a material error does not exist when in Iact it does exist: The
greater the degree oI conIidence that the auditor requires that the results oI the sample are in
Iact indicative oI the actual amount oI error in the population, the larger the sample size
needs to be.
5. The total error the auditor is willing to accept (tolerable error). The lower the total error that
the auditor is willing to accept, the larger the sample size needs to be.
6. The amount oI error the auditor expects to Iind in the population: The greater the amount oI
error the auditor expects to Iind in the population, the larger the sample size needs to be in
order to make a reasonable estimate oI the actual amount oI error in the population. Factors
relevant to the auditor`s consideration oI the expected error amount include the extent to
which item values are determined subjectively, the results oI tests oI control, the results oI
audit procedures applied in prior periods, and the results oI other substantive procedures
applied in the current period.
7. StratiIication when there is a wide range in the monetary size oI items in the population: It
may be useIul to group items oI similar size into separate sub-populations or strata. When a
population can be appropriately stratiIied, the aggregate oI the sample sizes Irom the strata
generally will be less than the sample size applied to the whole population notwithstanding
sampling risk being unchanged.
8. The number oI sampling units in the population. For large populations, the actual size oI the
population has little, iI any, eIIect on sample size. Thus, Ior small populations, audit
sampling is oIten not as eIIicient as alternative means oI obtaining suIIicient appropriate
audit evidence.

APPENDIX 3
Sample Selection Methods

The principal methods oI selecting samples are:

(a) Use oI a computerized random number generator or random number tables.
(b) Systematic selection, in which the number oI sampling units in the population is divided by
the sample size to give a sampling interval (Ior example Ior a population oI 10,000 and the
necessary sampling size oI 200, the intervals would be 50). Having determined a starting
point within the Iirst 50, each 50
th
sampling unit thereaIter is selected. Given that the starting
point is 23, the items selected would be 23, 73, 123 and so Iorth. When using systematic
selection, the auditor would need to determine that sampling units within the population are
not structured in such a way that the sampling interval corresponds with a particular pattern in
the population.
(c) Haphazard selection, in which the auditor selects the sample without Iollowing a structured
technique and would nonetheless avoid any conscious bias or predictability (Ior example
avoiding diIIicult to locate items, or always choosing or avoiding the Iirst or last entries on a
page) and thus attempt to ensure that all items in the population have a chance oI selection.
Haphazard selection is not appropriate when using statistical sampling.
Block selection involves selecting a block (s) oI contiguous items Irom within the population.
Block selection cannot ordinarily be used in audit sampling because most populations are
structured such that items in a sequence can be expected to have similar characteristics in the
population. Although in some circumstances it may be an appropriate audit procedure to
examine a block oI items, it would rarely be an appropriate sample selection technique when
the auditor intends to draw valid inIerences about the entire population based on the sample.
Standard No 540- Audit of accounting estimates
62
STANDARD 540
AUDIT OF ACCOUNTING ESTIMATES

GENERAL

Iundamental principles and provide guidance on the audit oI accounting estimates contained in

02. The auditor should obtain suIIicient appropriate audit evidence regarding accounting estimates.

03. This VSA applies to audits oI accounting estimates contained in Iinancial statements; it does not
apply to veriIication oI Iinancial estimates (plans) oI the entity.
The auditor and the audit Iirm should comply with this VSA in auditing accounting estimates
contained in Iinancial statements.


04. Accounting estimate means an approximation oI the amount oI an item in the Iinancial statements
which either has occurred in the absence oI a precise means oI measurement, or is likely to occur but
already estimated Ior Iinancial reporting. Examples are:
* Estimates of items that have occurred.
- Allowance Ior bad debts
- Allowance Ior long-term investment dimunition
- Provision Ior stock items devaluation
- Provisions oI depreciation oI Iixed assets.
- Prepaid expenses
- Estimates oI work-in-process
- Accrued revenue
- Revenue oI construction in progress.
* Estimates oI items likely to occur:
- Provision to meet warranty claims.
- Estimates oI accrued expenses

05. The Director (or leader) oI the entity is responsible Ior accounting estimates included in the Iinancial
statements. These estimates are oIten made in conditions oI uncertainty regarding the outcome oI
events that have occurred or are likely to occur and involve the use oI judgment. As a result, the risk
oI material misstatement is greater when accounting estimates are involved.

CONTENT OF THE VSA

Nature of Accounting Estimates

06. The determination oI an accounting estimate may be simple or complex depending upon the
nature oI the item. For example, accruing a charge Ior rent may be a simple calculation, whereas
estimating a provision Ior slow-moving inventory may involve considerable analyses oI current data
and a Iorecast oI Iuture sales. In complex estimates, there may be a high degree oI special knowledge
and judgment required.

07. Accounting estimates may be determined as part oI the routine accounting system operating
on a continuing basis, or may be nonroutine, operating only at period end. In many cases, accounting
estimates are made by using a Iormula based on experience, such as the use oI standard percentage oI
63
sales revenue Ior computing a warranty provision. In such cases, the Iormula needs to be reviewed
regularly by management by comparing actual results with the estimate and adjusting the Iormula
when necessary.

08. The uncertainty associated with an item, or the lack oI objective data may make it incapable
oI reasonable estimation, in which case, the auditor needs to consider whether the auditor`s report
needs modiIication to comply with VSA 700 'The Auditor`s Report on Financial Statements.

Audit Procedures

09. Accounting estimates will oIten be related directly to the operating results and tax obligations
to the State. ThereIore, they may be made in accordance with management`s subjective judgments, so
as to create a better view Ior the company. The auditor and the audit Iirm should obtain suIIicient
appropriate audit evidence as to whether an accounting estimates is reasonable in the circumstances
and, when required, inIormation relevant to accounting estimates is appropriately disclosed in the
notes to the Iinancial statements.

The evidence available to support an accounting estimate will oIten be more diIIicult to obtain and
less conclusive than evidence available to support other items in the Iinancial statements.

10. An understanding oI the procedures and methods, including the accounting and internal
control systems, used by management in making the accounting estimates is oIten important Ior the
auditor to plan the nature, timing and extent oI the audit procedures.
11. The auditor should adopt one or a combination of the following approaches in the audit
of an accounting estimate:
(a) review and test the process used by management to develop the estimate;
(b) use an independent estimate Ior comparison with that prepared by management; or
(c) review events subsequent to the closing date but prior to the date oI the audit report which
conIirm the estimate made.
Reviewing and Testing the Process Used by Management

12. The steps ordinarily involved in reviewing and testing oI the process used by management
are:
(a) evaluation oI the data and consideration oI assumptions on which the estimate is based;
comparison oI the data or assumptions to the prevailing regulations or to the practical experience oI
similar entities in the industry or the locality.
(b) Testing oI the calculations involved in the estimate;
(c) Comparison, when possible, oI estimates made Ior prior periods with actual results oI those
periods; and
(d) Consideration oI management`s approval procedures.

Evaluation of Data and Consideration of Assumptions

13. The auditor would evaluate whether the data on which the estimate is based is accurate,
complete and relevant. When accounting data is used, it will need to be consistent with the data
processed through the accounting system. For example, in substantiating a warranty provision, the
auditor would obtain audit evidence that the data relating to products still within the warranty period
at period end agree with the sales inIormation within the accounting system.

14. The auditor may also seek evidence Irom sources outside the entity. For example, when
examining a provision Ior inventory obsolescence calculated by reIerence to anticipated Iuture sales,
the auditor may, in addition to examining internal data (such as past levels oI sales, orders on hand
and marketing trends), seek evidence Irom industry-proceduced sales projections and market
analyses. Similarly, when examining management`s estimates oI the Iinancial implications oI
litigation and claims, the auditor would seek direct communication with the entity`s lawyers.
64

15. The auditor would evaluate whether the data collected is appropriately analyzed and projected
to Iorm a reasonable basis Ior determining the accounting estimate. Examples are the analysis oI the
age oI accounts receivable and the projection oI the number oI months oI supply on hand oI an item
oI inventory based on past and Iorecast usage.

16. The auditor would evaluate whether the entity has an appropriate base Ior the principal
assumptions used in the accounting estimate. In some cases, the assumptions will be based on
industry or government statistics, such as Iuture inIlation rates, interest rates, and growth rates. In
other cases, the assumptions will be based on internally generated data.
17. In evaluating the assumptions on which estimate is based, the auditor would consider, among
other things, whether they are:
- Reasonable in light oI actual results in prior periods.
- Consistent with those used Ior other accounting estimates.
- Consistent with management`s plans which appear appropriate.
The auditor would need to pay particular attention to assumptions which are sensitive to variation,
subjective or susceptible to material misstatement.

18. In the case oI complex estimating processes involving specialized techniques, it may be
necessary Ior the auditor to use the work oI an expert, Ior example, engineers Ior estimating
quantities in stock piles oI mineral ores.

19. The auditor would review the continuing appropriateness oI Iormulae used by
management in the preparation oI accounting estimates. Such a review would reIlect the auditor`s
knowledge oI the Iinancial results oI the entity in prior periods, practices used by other entities in the
industry and the Iuture plans oI management as disclosed to the auditor.

20. For data and assumptions that have been stated in legal documents (i.e. useIul lives over
which Iixed assets are to be depreciated), the auditor needs to relate such regulations to the
assumptions used by the entity to develop accounting estimates.

1esting of Calculations

21. The auditor would test the calculation procedures used by management. The nature,
timing and extent oI the auditor`s testing will depend on such Iactors as the complexity involved in
calculating the accounting estimate, the auditor`s evaluation oI the procedures and methods used by
entity in producing the estimate and the materiality oI the estimate in the context oI the Iinancial
statements.

Comparison of Previous Estimates with Actual Results

22. When given, access to the accounting books oI the prior periods, the auditor would
compare the accounting estimates made thereIore with actual results oI those periods to assist in:
(a) obtaining evidence about the general reliability oI the entity`s estimating procedures;
(b) considering whether adjustments to estimating Iormulae may be required; and
(c) evaluating whether diIIerences between actual results and previous estimates have been quantiIied
and that, where necessary, appropriate adjustments or disclosures have been made to the notes to the
Iinancials statements.

Consideration of Management's Approval Procedures

23. Material accounting estimates are ordinarily reviewed and approved by the Director (or
leader) oI the entity. The auditor would consider whether such review and approval is perIormed by
the appropriate level oI management and that it is evidenced in the documentation supporting the
determination oI the accounting estimate.
65

Use of an Independent Estimate

24. The auditor may make or obtain an independent estimate and compare it with the
accounting estimate prepared by management. When using an independent estimate the auditor
would ordinarily evaluate the data, consider the assumptions and test the calculation procedures used
in its development. It may also be appropriate to compare accounting estimates made Ior prior
periods with actual results oI those periods.

Review of Subsequent Events

25. Transactions and events which occur aIter period end, but prior to completion oI the audit,
may provide audit evidence regarding an accounting estimate made by management. The auditor`s
review oI such transactions and events may reduce, or even remove, the need Ior the auditor to
review and test the process used by management develop the accounting estimate or to use an
independent estimate in assessing the reasonableness oI the accounting estimate.

Evaluation of Results of Audit Procedures

2. The auditor should make a final assessment of the reasonableness of the estimate based
on the auditor`s knowledge of the business and whether the estimate is consistent with other
audit evidence obtained during the audit.

27. The auditor would consider whether there are any signiIicant subsequent transactions or
events which aIIect the data and the assumptions used in making the accounting estimate.

28. Because oI the uncertainties inherent in accounting estimates, evaluating diIIerence can be
more diIIicult than in other areas oI the audit. When there is a diIIerence between the auditor`s
estimate oI the amount best supported by the available audit evidence and the estimated amount
included in the Iinancial statements, the auditor would determine whether such a diIIerence requires
adjustment. II the diIIerence is reasonable or immaterial, it may not require adjustment. However, iI
the auditor believes the diIIerence is unreasonable or could give material impact on the Iinancial
statements, management would be requested to revise the estimate. II management reIuses to revise
the estimate, the diIIerence would be considered a misstatement and would be considered with all
other misstatements in assessing whether the eIIect on the Iinancial statements is material.

29. The auditor would also consider whether individual diIIerences which have been accepted as
reasonable are biased in one direction, so that, on a cumulative basis, they may have a material eIIect
on the Iinancial statements. In such circumstances, the auditor would evaluate the accounting
estimates taken as a whole.
Standard No 610 - Considering the work of internaI auditing
66
STANDARD 10
CONSIDERING THE WORK OF INTERNAL AUDITING

GENERAL

Iundamental principles and provide guidance to external auditors and the audit Iirm on considering
the work oI internal auditing when auditing Iinancial statements. This VSA does not deal with
instances when personnel Irom internal auditing assist the external auditor in carrying out external
audit procedures.

02. The external auditor should consider the activities oI internal auditing and their eIIect, iI any, on
external audit procedures.

03. This VSA applies to the auditors and the audit Iirms in using the work oI internal audit to support
audit oI the Iinancial statements, and also applies to an audit oI other Iinancial inIormation and
related services rendered by the audit Iirm.

The external auditor can use the work oI internal auditing to support his/her audit oI the Iinancial
statements, but holds responsibility Ior the nature, timing and extent oI the audit and Ior the opinion
expressed on the audited Iinancial statements.

Internal auditors and the entity under audit are expected to possess essential knowledge on the
principles and procedures prescribed in this VSA in exercising their responsibility Ior providing
documents and inIormation to and joining work with the external auditor in auditing the Iinancial
statements.


04. Internal auditing is part oI internal controls established within an entity with the Iunctions oI
examining and evaluating the adequacy and eIIectiveness oI the accounting and internal control
systems, and consideration oI compliance with law and regulations.

CONTENT OF THE VSA

Scope and Objective of Internal Auditing

05. The scope and objective oI internal auditing vary widely and depend on the size and structure oI the
entity and the requirements oI its management. Ordinarily, internal auditing activities include one or
more oI the Iollowing:
- Review oI the relevance, eIIectiveness and eIIiciency oI accounting and internal control systems. The
establishment oI adequate accounting and internal control systems is a responsibility oI management
which demands proper attention on a continuous basis. Internal auditing is ordinarily assigned
speciIic responsibility Ior reviewing these systems, monitoring their operation and recommending
improvements thereto.
- Examination and assessment oI the quality and reliability oI Iinancial and operating inIormation in
the Iinancial statements and managerial accounting reports. This may include review oI the means
used to identiIy, measure, classiIy and report such inIormation and speciIic inquiry into individual
items including detailed testing oI transactions, balances and procedures.
- Review oI the proIitability, eIIiciency and eIIectiveness oI operations including non-Iinancial
activities oI an entity, identiIication oI weaknesses and loopholes, and recommendation Ior
improvement.
67
- Review oI compliance with laws, regulations and other external requirements and with management
policies and other internal requirements.

Relationship Between Internal Auditing and the External Auditor

06. The role oI internal auditing is determined by the Director (or leader) oI the entity and subject to
change as required by management over time. An external auditing objective is to report
independently and objectively on the Iinancial statements with primary concern as to whether the
Iinancial statements are Iree oI material misstatements.
In achieving the objectives, external and internal audits would oIten apply similar approaches and
procedures; certain aspects oI internal auditing may be useIul to external auditors in determining the
nature, timing and extent oI external audit procedures.

07. Internal auditing opinions on the Iinancial statements cannot achieve the same degree oI
independence as required oI that oI the external auditor. The external auditor has sole responsibility
Ior the audit opinion expressed, and that responsibility is not reduced by any use oI the work oI
internal auditing.

Understanding and Preliminary Assessment of Internal Auditing

08. The external auditor should obtain a suIIicient understanding oI internal audit activities to assist in
planning the audit and developing an eIIective audit approach.

09. EIIective internal auditing will oIten allow a modiIication in the nature and timing, and a reduction in
the extent oI procedures perIormed by the external auditor but cannot eliminate them entirely. In
some cases, however, having considered the activities oI internal auditing, the external auditor may
decide that internal auditing will have no eIIect on external audit procedures.

10. During the course oI planning the audit, the external auditor should perIorm a preliminary assessment
oI the internal audit Iunction when it appears that internal auditing is relevant to the external audit oI
the Iinancial statements in speciIic audit areas.

11. The external auditor`s preliminary assessment oI the internal audit Iunction will inIluence the
external auditor`s judgment about the use oI the work oI internal auditing in modiIying the nature,
timing and extent oI external audit procedures.

12. A preliminary assessment oI the internal audit Iunction is based on the important criteria below:
(a) rgani:ational Status of Internal Auditing
The external auditor should consider the status oI internal in the entity and the eIIect it has on its
ability to be independent and objective. Independence and objectiveness oI internal auditing should
be insured when internal auditing has the rights to (1) reporting to the highest level oI management,
(2) being Iree oI any other operating responsibility and (3) being Iree to communicate Iully with the
external auditor.
(b) Scope of Function
The external auditor would assess internal auditing assignments perIormed, and consider
management`s attitude and acts on internal audit recommendations.
(c) Technical Competence of Internal Auditors
The external auditor would consider technical training, proIessional qualiIications and experience oI
internal auditing and review the policies Ior hiring and training the internal auditing staII.
(d) Due !rofessional Care
The external auditor would consider whether internal auditing is properly planned, supervised,
reviewed and documented. The external auditor would also consider the existence oI adequate audit
manuals, work programs and working papers oI internal auditing.
(e) Activities and Efficiency of Internal Auditing in !rior Years
68
The external auditor need to consider the perIormance and the eIIiciency oI internal auditor in prior
years. The consideration should cover the extent oI work perIormed; the ability oI identiIying and
detecting Iraud and error; and internal auditing report.

Liaison and Coordination

13. When planning to use the work oI internal auditing, the external auditor will need to consider internal
auditing`s tentative plan Ior the period and discuss it at as early a stage as possible. Where the work
oI internal auditing is to be a Iactor in determining the nature, timing and extent oI the external
auditor`s procedures, it is desirable to agree in advance the timing oI such work, the extent oI audit
coverage, test levels and proposed methods oI sample selection, documentation oI the work
perIormed and review and reporting procedures.

14. Liaison with internal auditing should be held at appropriate intervals during the period. Either auditor
should be kept inIormed by the other oI any signiIicant matter which may aIIect the work oI the two.
The external auditor has the rights to access to internal auditing documentation. In case oI the internal
auditor`s reIusal to coordinate, the external auditor also has the rights to deal with the case as a
limitation on the audit scope.

Evaluating and Testing the Work of Internal Auditing

15. When the external auditor intends to use specific work of internal auditing, the external
auditor should evaluate and test that work to confirm its adequacy for the external auditor`s
purposes.

16. The evaluation oI speciIic work oI internal auditing involves consideration oI the adequacy oI the
scope oI work and related programs and whether the preliminary assessment oI the internal auditing
remains appropriate. This evaluation may include consideration oI whether:
(a) the work is perIormed by persons having adequate technical training and proIiciency as internal
auditors and the work oI internal auditing is properly supervised, reviewed and documented;
(b) suIIicient appropriate audit evidence is obtained to aIIord a reasonable basis Ior the conclusions
reached;
(c) conclusions reached are appropriate in the circumstances and any reports prepared are consistent
with the results oI the work perIormed; and
(d) any exceptions or unusual matters disclosed by internal auditing are properly resolved.

17. The nature, timing and extent oI the testing oI the speciIic work oI internal auditing will depend on
the external auditor`s judgment as to the risk and materiality oI the area concerned, the preliminary
assessment oI internal auditing and the evaluation oI the speciIic work by internal auditing.

18. The external auditor would record conclusions regarding the speciIic internal auditing work that has
been evaluated and tested.
Standard No 220 - QuaIity controI of auditing activities
69
STANDARD No. 220
QUALITY CONTROL OF AUDITING ACTIVITIES

(!romulgated together with the Finance Ministers Decision No. 28/2003/QD-BTC of March 14, 2003)
GENERAL PROVISIONS
01. The purpose oI this standard is to prescribe the basic principles and procedures and guide the
application thereoI to the quality control oI audit work in the Iollowing aspects:
a/ The audit Iirms` policies and procedures relating to auditing activities;
b/ Procedures relating to the work assigned to auditors and audit assistants in speciIic audits.
02. Auditors and audit Iirms must implement quality control policies and procedures Ior all auditing
activities oI audit Iirms and Ior each audit.
03. This standard shall apply to the audit oI Iinancial statements and also to the audit oI other Iinancial
inIormation and related services oI audit Iirms.
Auditors and audit Iirms must comply with the provisions oI this standard in the process oI auditing and
providing related services.
The audited units (clients) and the users oI audit results must possess necessary knowledge oI the
principles and procedures prescribed in this standard so as to IulIil their duties and cooperate with auditors
and audit Iirms in dealing with relationships in the auditing process.
The terms in this standard are construed as Iollows:
04. Audit Iirm means an enterprise established and operating under the law provisions on the
establishment and operation oI enterprises in the Iield oI provision oI independent auditing services.
05. Director (or head) oI an audit Iirm means the highest representative at law oI that audit Iirm, who
bears the Iinal responsibility Ior the audit.
06. ProIessional personnel means leaders oI all levels, auditors, audit assistants and consultants oI an audit
Iirm.
07. Auditor means a person who possesses the auditor`s certiIicate granted by the Ministry oI Finance, has
made practice registration with an independent audit Iirm, participates in the auditing process, may sign
the auditing reports and bears responsibility Ior the audit beIore law and the director oI the audit Iirm.
08. Audit assistant means a person who participates in the auditing process but is not permitted to sign the
auditing reports.
09. Quality oI auditing activities means the degree oI satisIaction oI the users oI audit results in terms oI
objectivity and reliability oI the audit opinions oI auditors; and also satisIaction oI the audited units`
expectations oI the auditors` opinions in order to improve the business eIIiciency within a pre-determined
period and with reasonable charges.

Audit firms
10. Audit Iirms must establish and implement quality control policies and procedures with a view to
ensuring that all audits are conducted in accordance with the Vietnamese auditing standards or
international auditing standards accepted by Vietnam so as to constantly improve the quality oI audits.
11. The contents, timetable and scope oI an audit Iirm`s quality control policies and procedures depend on
a number oI Iactors such as the size and nature oI its operation, geographical area oI operation,
organizational structure and cost and beneIit considerations. The quality control policies and procedures
adopted by individual Iirms may vary but must comply with this standard`s provisions on the quality
control oI auditing activities.
Examples oI quality control policies and procedures are presented in Appendix No. 01.
12. In order to achieve the objectives oI quality control oI auditing activities, the audit Iirms normally
apply the Iollowing policies in combination:
a/ Compliance with principles on proIessional ethics
ProIessional personnel oI audit Iirms must adhere to the audit proIession`s principles on ethics oI the audit
proIession, including independence, integrity, objectivity, proIessional capability, prudence,
conIidentiality, proIessional behavior and compliance with proIessional standards.
b/ ProIessional skills and competence
ProIessional personnel oI audit Iirms must possess proIessional skills and competence, regularly maintain,
update and raise their knowledge so as to IulIil their assigned tasks.
70
c/ Assignment
Audit work must be assigned to trained proIessional personnel who have adequate proIessional skills and
competence meeting the practical requirements.
d/ Guidance and supervision
The audit work must be adequately guided and supervised Ior personnel at all levels to secure that it has
been conducted in accordance with the auditing standards and relevant regulations.
e/ Consultation
When necessary, auditors and audit Iirms must consult with experts inside or outside the Iirms.
I/ Retention and acceptance oI clients
In the process oI retaining existing clients and evaluating potential ones, the audit Iirms must take into
consideration their independence and ability to serve clients as well as the integrity oI the clients`
management boards.
g/ Examination
The audit Iirms must regularly monitor and examine the adequacy and eIIiciency in the process oI
implementing their policies and procedures Ior quality control oI their auditing activities.
13. The audit Iirms` policies and procedures Ior quality control oI their auditing activities must be
communicated to all oI their personnel so that they can be Iully understood and implemented.
Individual audit contracts
14. Auditors and audit assistants must apply their Iirms` quality control policies and procedures to each
audit contract in an appropriate manner.
15. Auditors shall have to consider the proIessional capability oI audit assistants perIorming the work
assigned to them so as to provide guidance, supervision and examination appropriate to each audit
assistant.
16. When assigning work to audit assistants, it must be ensured that such work is assigned to persons with
adequate proIessional capability as required.
Guidance
17. Auditors must guide audit assistants on the necessary contents relating to each audit such as their
responsibilities Ior the assigned work, the objectives oI the procedures they are to perIorm, characteristics
and nature oI the clients` production and business activities as well as accounting or auditing matters that
may aIIect the contents, time table and scope oI auditing procedures which they are perIorming.
18. The overall audit plans and the audit programs shall serve as an important tool Ior guiding auditors
and audit assistants to perIorm the audit procedures.
Supervision
19. Supervision is closely related to guidance and examine and may involve both oI these elements.
20. The audit Iirms` personnel assigned to supervise the quality oI an audit must perIorm the Iollowing
Iunctions:
a/ Supervising the auditing process so as to determine whether or not:
- Auditors and audit assistants have adequate proIessional skills and capability needed to IulIil their
assigned tasks;
- Audit assistants understand the audit guidelines;
- The audit work is being conducted according to the overall audit plan and the audit program;
b/ Grasping and identiIying important accounting and auditing questions arising in the auditing process so
as to adjust the overall audit plan and the audit program appropriately;
c/ Handling the diIIerence oI proIessional opinions between auditors and audit assistants jointly
participating in the audits and considering whether consultation with experts is needed or not.
21. The persons assigned to supervise the quality oI audits must perIorm the Iollowing responsibilities:
a/ II detecting that auditors and/or audit assistants breach the audit proIession`s ethics or show signs oI
colluding with clients to distort Iinancial statements, to report such to competent persons Ior handling;
b/ II deeming that auditors or audit assistants Iail to have the required proIessional skills and competence
Ior carrying out the audits, to propose competent persons to replace such auditors and/or audit assistants
so as to ensure the quality oI the audits according to the set overall audit plans and audit programs.
Examination
22. The work perIormed by the auditors and audit assistants must be examined by persons having equal or
higher proIessional capability in order to determine whether or not:
a/ The work has been perIormed in accordance with the audit program;
71
b/ The work perIormed and the results obtained have been Iully documented into audit dossiers;
c/ All important audit matters have been settled or reIlected in audit conclusions;
d/ The objectives oI the audit procedures have been achieved;
e/ The conclusions made in the auditing process are consistent with the results oI the work perIormed and
support the audit opinions.
23. Auditors and audit Iirms must regularly examine the Iollowing:
a/ The implementation oI the overall audit plan and the audit program;
b/ The assessments oI inherent and control risks, including the results oI tests oI control and the
modiIications (iI any) made to the overall audit plan and the audit program;
c/ The documentation in audit dossiers oI the obtained audit evidences, including consultants` opinions,
and the conclusions drawn Irom the basic tests;
d/ Financial statements, proposed amendments thereto and draIt auditing reports.
24. When examining the quality oI audits, especially big and complicated audit contracts, proIessional
personnel outside the audit teams may be requested to carry out certain additional procedures beIore the
issuance oI the auditors` report.
25. Where there still exist divergent opinions on the quality oI an audit, the audit team should discuss
collectively so as to reach agreement on the evaluation thereoI and draw experiences. II the audit team Iail
to reach agreement, such should be reported to the director Ior handling or presented at a meeting oI the
Iirm`s key members.
APPENDIX 01
EXAMPLE OF THE POLICIES AND PROCEDURES FOR QUALITY CONTROL OF
AUDITING ACTIVITIES OF AUDIT FIRMS
A. COMPLIANCE WITH THE PRINCIPLES ON PROFESSIONAL ETHICS
Policy
All proIessional personnel oI audit Iirms must adhere to the principles on ethics oI the audit proIession,
including independence, integrity, objectivity, proIessional capability, prudence, conIidentiality,
proIessional behavior and compliance with proIessional standards.
!rocedures
1. Assigning an individual or group to guide and settle questions regarding independence, integrity,
objectivity and conIidentiality.
a/ IdentiIying cases where matters regarding independence, integrity, objectivity and conIidentiality
should be represented in writing;
b/ Consulting with experts or competent persons, when necessary.
2. Disseminating policies and procedures regarding independence, integrity, objectivity, proIessional
capability, prudence, conIidentiality, proIessional behavior and proIessional standards to all proIessional
personnel oI the Iirms.
a/ InIorming them oI the policies and procedures and requesting them to Iirmly grasp these policies and
procedures;
b/ Emphasizing independence and proIessional behavior in the training programs and the process oI
guiding, supervising and examining audits;
c/ InIorming them on a regular and timely basis oI the list oI clients to which independence policies apply.
- The list oI clients to whom the Iirms must apply independence, including clients` aIIiliates, parent
companies, joint-venture companies and associated companies;
- NotiIying such list to all proIessional personnel in the Iirms so that they can determine their
independence;
- Establishing procedures Ior notiIication oI changes in the list.
3. Monitor and examine the implementation oI policies and procedures related to the adherence to the
principles on proIessional ethics: independence, integrity, objectivity, proIessional capability, prudence,
conIidentiality, proIessional behavior and compliance with proIessional standards.
a/ Annually requesting proIessional personnel to submit written representations stating that:
- They have Iirmly grasped the Iirms` policies and procedures;
- They have no prohibited investments at present and in the year when Iinancial statements are audited;
- Relationships and transactions prohibited by the Iirms are not established.
b/ Assigning a person or group with competence to check the completeness oI dossiers on independence
compliance and to deal with exceptional cases.
72
c/ Periodically reviewing the relationships between the Iirms and clients regarding matters which may
aIIect the audit Iirms` independence.
B. PROFESSIONAL SKILLS AND COMPETENCE
Policy
ProIessional personnel oI audit Iirms must possess proIessional skills and competence, continuously
maintain, update and raise their knowledge so as to accomplish their assigned tasks.
Procedures
Recruitment:
1. Audit Iirms must maintain a process oI recruiting proIessional personnel by planning the personnel
needs, setting recruitment objectives and requirements on qualiIication as well as compatibility oI persons
who perIorm the recruiting Iunction.
a/ Planning the needs oI personnel in diIIerent posts and determining the recruitment objectives based on
the existing number oI clients, the projected growth rate and the number oI personnel who may be laid oII.
b/ To achieve the recruitment objectives, designing a recruitment program with the Iollowing contents:
- IdentiIying sources oI potential personnel;
- Methods oI contacting potential personnel;
- Methods oI determining speciIic inIormation on each potential personnel;
- Methods oI attracting potential personnel and inIorming them oI the Iirms;
- Methods oI evaluating and selecting potential personnel so as to achieve the necessary number oI
applicants Ior selection.
c/ InIorming the people related to the recruitment oI the Iirms` personnel needs and recruitment
objectives.
d/ Assigning competent persons to decide on the recruitment.
e/ Checking the eIIectiveness oI the recruitment program:
- Periodically evaluating the recruitment program to determine whether or not the Iirms have complied
with policies and procedures Ior recruiting qualiIied personnel;
- Periodically reviewing the recruitment results to determine whether or not the Iirms have achieved
personnel recruitment objectives and needs.
2. Establish criteria and guidelines Ior evaluating applicants Ior each post.
a/ IdentiIying the attributes to be sought in the applicants, Ior example: intelligence, integrity, honesty,
dynamism and aptitude Ior the proIession.
b/ IdentiIying achievements and experiences the Iirms require Irom applicants who are new graduates or
experienced ones; Ior example:
- Academic background;
- Personal achievements;
- Work experiences;
- Personal interests.
d/ Making written guidelines Ior recruiting personnel in speciIic cases such as:
- Recruiting relatives oI the Iirms` personnel, persons who have close relationships with or relatives oI
clients;
- Re-recruiting Iormer employees;
- Recruiting clients` employees;
- Recruiting employees oI competing Iirms.
d/ Gathering basic inIormation on the applicants` qualiIications by appropriate means, such as:
- Resumes;
- Job applications;
- Educational diplomas;
- Personal reIerences;
- ReIerences oI Iormer agency (ies);
- Interviews.
e/ Evaluating the qualiIications oI new personnel, including those employed not through normal
recruitment procedures (Ior example: those joining the Iirms in the capacity oI supervisors, through
merger or acquisition or joint ventures) to determine whether they meet the Iirms` requirements or not.
3. InIorm the applicants and new personnel oI the Iirms` policies and procedures relevant to them.
a/ Using a brochure or other means to introduce the Iirms to applicants and new personnel;
73
b/ Preparing and distributing a manual describing the Iirms` policies and procedures to all personnel;
c/ Conducting an proIessional orientation program Ior new personnel.
ProIessional training
4. Establish guidelines and requirements Ior continued proIessional Iostering and notiIy them to all
personnel oI the audit Iirms.
a/ Assigning a person or group the responsibility Ior the proIessional development oI personnel;
b/ The Iirms` training programs must be scrutinized by proIessionally qualiIied persons and they must set
Iorth the training objectives and education and experience requirements;
c/ Setting Iorth orientations Ior the development oI the Iirms and the proIession Ior oI new employees.
- Preparing materials on the orientation Ior the development oI the Iirms and the proIession in order to
inIorm new employees oI their proIessional responsibilities and opportunities;
- Assigning responsibility Ior conducting orientation workshops to introduce the proIessional
responsibilities and the Iirms` policies.
d/ Designing proIessional training and reIresher programs Ior all personnel at each level in the Iirms:
- Taking into consideration compulsory regulations and voluntary guidelines oI laws and proIessional
organizations when designing proIessional training and reIresher programs;
- Encouraging participation in proIessional training programs outside the Iirms, including the Iorm oI selI-
study;
- Encouraging participation in proIessional associations and determining whether the Iirms would pay the
whole or part oI expenses;
- Encouraging personnel to serve on proIessional boards oI proIessional associations, write articles, books
and participate in other proIessional activities.
e/ Periodically examining proIessional training programs and archiving dossiers on the training situation
oI the entire Iirms and each individual.
- Periodically reviewing the participation oI each employee in the training program so as to determine
his/her compliance with the Iirms` requirements;
- Periodically examining the evaluation reports and other records regarding the advanced training
programs to evaluate whether or not these programs are eIIective and have achieved the Iirms` objectives.
Considering the needs Ior new programs and Ior revision oI on-going programs or elimination oI
ineIIective training programs.
5. Provide in time all personnel with inIormation on proIessional technical standards and materials
containing the Iirms` technical policies and procedures. Encourage them to engage in selI-development
activities.
a/ Providing all personnel with proIessional technical materials, even those on changes, including:
- National and international specialized materials on accounting and auditing;
- Documents on current laws in speciIic domains, Ior employees who take charge oI such domains;
- Materials on the Iirms` technical and proIessional policies and procedures.
b/ For training programs designed by the Iirms, preparing materials and selecting instructors:
- The programs should clearly state the objectives, requirements on participants` education and
experience;
- The training course instructors must Iirmly grasp the program content and teaching methods;
- Asking participants to evaluate training course contents, instructors and training conditions;
- The training program must spare time Ior instructors to test and evaluate training course contents,
teaching methods and trainees;
- The training programs must be updated to accommodate new developments and renovations, and
relevant evaluation reports;
- Archiving, and creating conditions Ior exploiting, proIessional and technical materials on the Iirms`
regulations relating to proIessional technical matters.
6. In order to train a contingent oI experts in specialized domains and branches, the Iirms must:
a/ Organize on their own specialized training programs such as in banking auditing, computer-aided
auditing, sampling methods.
b/ Encourage personnel to attend external training programs, workshops to raise their proIessional levels;
c/ Encourage personnel to participate in proIessional associations concerned with specialized domains and
branches.
d/ Provide materials relating to the specialized domains and branches.
74
7. Audit Iirms must assign persons to see that all the Iirms` auditors participate in annual Iostering and
reIresher programs conducted by the Ministry oI Finance or by organizations authorized by the Ministry
oI Finance.
Advancement opportunities:
8. Audit Iirms must establish criteria Ior each rank oI employee in the Iorms:
a/ Regulations on responsibilities and qualiIications Ior each rank oI employees, including:
- Titles and responsibilities thereoI;
- Criteria on qualiIication and experience (or seniority) Ior each title.
b/ Determining qualiIication criteria to be used as a basis Ior considering and evaluating the results oI
actual perIormance and capability oI each rank, Ior example:
- ProIessional knowledge;
- Analytical and judgmental abilities;
- Communication skills;
- Training skills;
- Leadership methods;
- Client relations;
- Personal attitude and proIessional behavior (characters, intelligence, judgment and dynamism);
- Supervisory ability.
c/ Compiling a personal manual or other means to disseminate the Iirms` advancement procedures and
policies to all employees.
9. Evaluate the work perIormance results oI all employees and notiIy them thereoI.
a/ Gathering inIormation on and evaluating the work perIormance results:
- IdentiIying evaluation responsibilities and requirements at each level, indicating who will make these
evaluations and when the evaluation results will be presented;
- Guiding the evaluation objectives;
- Using standardized Iorms Ior evaluating work perIormance results by selI-evaluation by employees
according to such Iorms and review by persons with higher authority.
- Re-examining previous evaluations oI each employee;
- Personnel evaluations must be done by diIIerent persons;
- Determining that evaluations are completed on schedule;
- Filing written evaluations in personal dossiers;
- Evaluations oI leading oIIicials must include consultations with their subordinates to determine whether
these oIIicials continue to have the qualiIications to IulIill their responsibilities or not.
b/ Periodically inIorming all employees oI their progress and career prospect, clearly stating:
- PerIormance results;
- Personal and career prospects;
- Advancement opportunities oI each person.
c/ Periodically promoting personnel on the basis oI the evaluation results.
C. ASSIGNMENT
Policy
Audit work must be assigned to trained proIessional personnel who have adequate proIessional skills and
competence to satisIy the practical requirements.
Procedures
1. Assign work to personnel:
a/ Planning the personnel needs Ior each oI the Iirm`s divisions;
b/ Determining the personnel need Ior each speciIic audit contract;
c/ Arranging personnel and allocating time Ior each audit contract;
d/ When assigning work to employees, the Iollowing Iactors must be considered:
- Auditing size and complexity;
- Number oI existing personnel;
- Special capability and expertise required;
- Schedule oI the work to be perIormed;
- Continuity and rotation oI personnel;
- Prospect oI on-the-job training.
2. Assign work to a person or group in a speciIic audit.
75
a/ Persons with responsibility Ior work assignment must consider the Iollowing Iactors:
- StaIIing and timing requirements oI the audit contract;
- QualiIications, experiences, positions, educational background and special abilities oI personnel;
- The participation plans oI persons assigned the supervisory responsibilities;
- Projected time required Ior oI each individual;
- Circumstances which may aIIect independence, Ior example: assignment oI work to proIessional
personnel who have economic or kin relation with the leaderships oI the audited units.
b/ When assigning work, consideration should be given to continuity and rotation to enable personnel to
perIorm their work eIIectively, as well as to capabilities, qualiIications and experiences oI other
personnel.
3. The timing and personnel plan Ior an audit must be approved beIore implementation.

D. GUIDANCE AND SUPERVISION
Policy
Audit work must be adequately guided and supervised Ior personnel at all levels to ensure that it has been
perIormed in compliance with the auditing standards and relevant regulations.
Procedures
1. Procedures Ior planning audits
a/ Assigning responsibility Ior planning audits;
b/ Reviewing inIormation obtained Irom previous audits and updating new inIormation;
c/ Working out the overall audit plan and the audit program.
2. Procedures Ior maintaining the quality standards:
a/ Conducting supervision at all levels; considering the training process, abilities and experiences oI the
assigned personnel;
b/ Issuing guidelines Ior the Iorms and contents oI working papers;
c/ Using appropriate standardized Iorms, checklists, and questionnaires to assist in the audit work;
d/ Establishing procedures Ior settling diIIerences oI proIessional judgment.
3. Provide on-the-job training in the auditing process.
a/ Regularly discussing with audit assistants the relationships between the work perIormed by each person
and the audit as a whole and arranging assistants to participate in many portions oI the audit;
b/ Incorporating the content oI 'personnel management skills into the Iirms` training program;
c/ Encouraging personnel to participate in the 'programs on training and developing subordinates;
d/ Monitoring the assigned work to determine whether personnel have grasped proIessional technical
knowledge and auditing experiences in each domain or not.

E. CONSULTATION
Policy
When necessary, auditors and audit Iirms must consult with experts inside and outside the Iirms
Procedures
1. IdentiIy domains and situations where consultation is required and encourage personnel to consult with
experts and competent persons.
a/ InIorming personnel oI the Iirms` consultation policies and procedures;
b/ SpeciIic domains or complex proIessional requiring consultation, such as:
- Application oI newly promulgated legal documents relating to proIessional technical matters;
- Business lines with special accounting, auditing and reporting requirements;
- Newly arising problems;
- Requirements oI law and regulations oI Iunctional bodies, especially the requirements oI international
law.
c/ Maintaining the operation oI the archival section and reIerring to web sites or other means, such as:
- ReIerring to materials at various sections or the Iirms;
- Establishing a proIessional manual and circulating proIessional instruction materials, including
documents relating to particular business lines and other specialties;
- Maintaining consultation with other Iirms and individuals;
- ReIerring, when necessary, complicated problems to a group oI specialists.
2. Assign persons in specialized charge and deIine their powers in the consultation areas.
76
a/ Assigning archivists to work with law agencies;
b/ Assigning personnel to monitor each particular business line;
c/ InIorming all personnel oI the powers oI persons in specialized charge and oI the procedures Ior dealing
with divergent opinions.
3. SpeciIy the archival oI documents on the results oI consultation:
Archival responsibility;
Place oI archival and conditions Ior use oI archived documents;
Archiving dossiers relating to the consultation results Ior reIerence and research purposes.

F. RETENTION AND ACCEPTANCE OF CLIENTS
Policy
In the process oI retaining existing clients and evaluating potential clients, audit Iirms must consider their
independence and ability to serve clients and the integrity oI the clients` management boards.
Procedures
1. Establish procedures Ior evaluating and accepting potential clients.
a/ Procedures Ior evaluating potential clients, including:
- Gathering and reviewing available documents relating to potential clients, such as Iinancial statements
and tax payment declaration Iorms;
- Exchanging with third parties inIormation on potential clients, their directors (or heads) and key
personnel;
- Exchanging with the previous years` auditors on matters relating to the directorates` honesty, on
disagreements among the directorates concerning accounting policies, audit procedures or other important
matters, and on the reasons Ior the change oI auditors;
- Considering special circumstances or possible risks oI contracts;
- Assessing the audit Iirms` independence and ability to serve their potential clients;
- It must be determined that acceptance oI clients must not violate the audit proIession`s ethical principles.
b/ Assigning a person or group at appropriate management levels to evaluate inIormation and make
decisions whether to accept clients or not.
c/ InIorming personnel oI the Iirms` policies and procedures Ior accepting clients.
d/ Assigning persons to inspect and supervise the observance oI the Iirms` policies and procedures Ior
accepting clients.
2. Evaluate clients upon the occurrence oI special events to determine whether to maintain the
relationships therewith or not.
a/ Special events when clients should be evaluated include:
- The expiry oI a certain period;
- A major change in one or more oI the Iollowing Iactors:
The management board;
Directors (oI heads);
Capital owners;
Legal advisers;
Financial status;
Litigation and disputes;
Contractual breaches;
Nature oI the clients` business lines.
b/ Assigning a person or group at appropriate management levels to evaluate inIormation and make
decisions whether to retain these clients or not.
c/ InIorming personnel oI the Iirms` policies and procedures Ior retaining clients.
d/ Assigning persons with responsibility to examine and supervise the observance oI the Iirms` policies
and procedures Ior retaining clients.

G. EXAMINATION
Policy
Audit Iirms must regularly monitor and examine the adequacy and eIIectiveness in the process oI
implementing the Iirms` policies and procedures Ior controlling their operational quality.
Procedures
77
1. Establish the Iirms` examination procedures, contents and program.
a/ Examination procedures include:
- Determining the examination objectives and working out the examination program;
- Issuing guidelines on the scope oI examination and criteria Ior selecting contents to be examined;
- Setting the Irequency and time oI examination;
- Establishing procedures Ior settling disagreements when they arise.
b/ Setting criteria oI proIessional qualiIications and competence Ior selecting examiners.
c/ Conducting examination activities:
- Scrutinizing and examining the adherence to the Iirms` policies and procedures Ior controlling the
quality oI audit work;
- Scrutinizing and examining the compliance with the proIessional standards and with the Iirms`
procedures Ior controlling quality applicable to a selected audit contract.
2. Providing Ior reporting on Iindings in the examinations to the appropriate management levels, Ior
examining activities already implemented or planned to be implemented, and Ior examining the Iirms`
audit work quality control system.
a/ Discussing Iindings in the examination process with responsible persons;
b/ Discussing Iindings in the process oI examining selected audit contracts with the Iirms` persons
assigned with supervisory responsibility;
c/ Reporting on general Iindings and speciIic Iindings oI selected audit contracts and proposing to the
directorates remedial measures already taken or planned to be taken;
d/ IdentiIying needs Ior modiIication oI audit work quality control policies and procedures on the basis oI
the examination results and other relevant matters.
Standard No 320 - Audit MateriaIity
78
STANDARD No. 320
AUDIT MATERIALITY

GENERAL PROVISIONS
01. The purpose oI this standard is to prescribe the basic principles and procedures and guide the modes oI
application thereoI to the responsibilities oI auditors and audit Iirms when determining materiality in
auditing Iinancial statements and the relationship between materiality and audit risk.
02. When conducting audits, auditors must pay attention to materiality and its relationship with audit risk.
03. This standard shall apply to the audit oI the Iinancial statements and also to the audit oI other Iinancial
inIormation oI audit Iirms.
Auditors and audit Iirms must observe the provisions oI this standard in the process oI auditing the
The audited units (clients) and the users oI audit results must possess necessary knowledge oI this
standard so as to cooperate in working and handling relationships relating to the determination oI
materiality oI audited inIormation.
The terms in this standard shall be construed as Iollows:
04. Materiality is the concept used to express the importance oI a piece oI inIormation (an accounting
Iigure) in the Iinancial statements.
InIormation is regarded as material iI its omission or inaccuracy could inIluence the decisions oI users oI
the Iinancial statements. Materiality depends on the magnitude and nature oI inIormation or error judged
in particular circumstances. Materiality is a threshold or cut-oII point rather than a content which
inIormation must have. InIormation materiality must be considered both quantitatively and qualitatively.

Materiality
05. The objective oI the audit oI Iinancial statements is to enable auditors and audit Iirms to conIirm
whether or not the Iinancial statements have been made in accordance with the current (or accepted)
accounting standards and regimes, with relevant laws and honestly or rationally reIlect material aspects.
The determination oI the level oI materiality is a matter oI proIessional judgment oI auditors.
06. When planning audits, auditors must determine an acceptable materiality level to serve as a basis Ior
detecting quantitatively material errors. However, to judge errors as material, auditors must consider them
both quantitatively and qualitatively. For example, non-compliance with the current accounting regimes
may be considered a material error iI it leads to the incorrect presentation oI indexes in the Iinancial
statements, thus making users oI Iinancial inIormation misunderstand the nature oI the matters; or the
Iinancial statements Iail to describe matters relating to non-continuous activities oI enterprises.
07. Auditors should consider the possibility oI relatively small errors that, iI added up, could have a
material eIIect on the Iinancial statements, such as an error in a month-end accounting procedure may
become a potential material error iI it is repeated each month.
08. Auditors should consider materiality in terms oI the extent oI erroneousness oI the Iinancial statements
as a whole in relation to detailed errors in individual account balances, transactions and inIormation
disclosed in the Iinancial statements. Materiality may be inIluenced by other Iactors such as legal
requirements or matters related to diIIerent Iinancial statement items and the relationships between these
items. In the process oI consideration, diIIerent materiality levels may be discovered, depending on the
nature oI matters put Iorward in the audited Iinancial statements.
09. Auditors must determine materiality when:
a/ Determining the contents, timing and scope oI auditing procedures;
b/ Evaluating the eIIect oI errors.
The relationship between materiality and audit risk
10. When planning audits, auditors must consider Iactors which may give rise to material errors in the
Iinancial statements. The auditors` assessment oI materiality relating to account balances and major
transactions shall help the auditors determine which items to be examined and decide to use sampling or
analytical procedures. The materiality assessment relating to account balances and major transactions
shall help the auditors select suitable audit procedures that, when combined, shall reduce audit risk to an
acceptable level.
Standard No 320 - Audit MateriaIity
79
11. There is an inverse relationship between materiality and audit risk in an audit: The higher the
materiality level is, the lower the audit risk would be and vice versa. Auditors should take this relationship
into account when determining the contents, timing and scope oI audit procedures in an appropriate
manner, such as when planning audits, iI auditors determine that the acceptable materiality level is low,
audit risk is increased. In this case, auditors may:
a/ Reduce the assessed level oI control risk by carrying out extended or additional tests oI control so as to
prove the reduced level oI control risk; or
b/ Reduce detection risk by modiIying the contents, timing and scope oI detailed examination procedures
already planned.
Materiality and audit risk in evaluating audit evidences
12. The auditors` materiality and audit risk assessment results at the time oI initially planning the audits
may be diIIerent Irom the assessment results at diIIerent times in the auditing process. Such diIIerence
could be attributed to a change in practical circumstances or a change in the auditors` knowledge oI the
audited units on the basis oI the obtained audit results, such as when the audit is planned beIore the end oI
a Iiscal year, the auditors have assessed materiality and audit risk on the basis oI the enterprises`
anticipated operation results and Iinancial situation. II the enterprises` actual Iinancial situation and
operation results are substantially diIIerent thereIrom, the assessment oI materiality and audit risk will
also change. Moreover, when planning audits, auditors usually set the acceptable materiality level lower
than that is used to evaluate the audit results in order to increase the possibility to detect errors.
Evaluation oI the eIIect oI errors
13. When evaluating the Iinancial statements` honesty and rationality, auditors must assess whether the
aggregate oI uncorrected errors which have been detected in the auditing process constitutes a material
error or not.
14. The aggregate oI uncorrected errors comprises:
a/ Errors detected by auditors in the current year, including those detected in the previous years and not
yet corrected in the audit year;
b/ The auditors` estimation oI other errors which cannot be speciIically determined (projected errors) in
the Iinancial statements oI the audit year.
15. Auditors should consider whether the aggregate oI uncorrected errors may be material or not. II they
conclude that the aggregate oI such errors is material, they should take action to reduce audit risk by
adding necessary audit procedures or requesting the directors oI the audited units to adjust the Iinancial
statements.
16. Where the directors oI the audited units reIuse to adjust the Iinancial statements and the results oI
application oI additional audit procedures permit the auditors to conclude that the aggregate oI
uncorrected errors is material, they should consider and modiIy the auditing reports in accordance with
Vietnamese Auditing Standard No. 700 'Auditing reports on Iinancial statements.
17. II the aggregate oI uncorrected errors which have been detected approximates the set materiality level,
auditors must consider the possibility that whether the undetected errors, when combined with those
detected but uncorrected, could constitute material errors or not. In this case, auditors should reduce audit
risk by adding necessary audit procedures or requesting the directors to adjust the Iinancial statements to
correct the detected errors.

Standard No 501 - AdditionaI audit evidences for speciaI items and events
80
STANDARD 501
ADDITIONAL AUDIT EVIDENCES FOR SPECIAL ITEMS AND EVENTS
GENERAL PROVISIONS
01. The purpose oI this standard is to prescribe the basic principles and procedures and guide modes oI
application thereoI to the gathering oI additional audit evidences Ior special items and events in the
process oI auditing Iinancial statements. The principles and procedures prescribed in this standard
supplement those prescribed in Standard No. 500 'Audit evidences.
02. The application oI the principles and procedures described in this standard shall assist auditors and
audit Iirms in obtaining suIIicient appropriate audit evidences Ior special items in the Iinancial statements
and several related events.
inIormation and related services oI audit Iirms.
Auditors and audit Iirms must observe the provisions oI this standard in the process oI conducting audits.
The audited units (clients) and users oI the audit results must possess necessary knowledge oI this
standard so as to cooperate in dealing with relationships relating to the supply and gathering oI audit
evidences Ior special items and events.
04. Special items and events in the audit oI Iinancial statements normally include:
- Inventory;
- Receivables;
- Long-term investments;
- Litigation and dispute cases;
- InIormation on various domains or geographical areas.
Whether items and events are determined as special or not depends on each audited unit and the
assessment oI auditors. When determining that items or events are special, auditors must perIorm the
Iollowing:
Participation in inventory counts
05. The audited units must establish inventory counting procedures and count inventory physically at least
once a year to serve as a basis Ior checking the reliability oI the regular declaration system and Ior
preparing Iinancial statements.
06. When inventory is determined as material to the Iinancial statements, auditors must gather suIIicient
appropriate audit evidences regarding the existence and conditions oI inventory by participating in
physical inventory counts unless such participation is impossible. When the units count inventory,
auditors may only supervise the counting or directly join in counting inventory samples so as to gather
evidences regarding compliance with the counting procedures and check the reliability oI these
procedures.
07. II unable to participate in the physical inventory counts on the planned date, auditors must re-count a
number oI commodity items on another date and, when necessary, check inventory Iluctuations occurring
beIore the time oI recounting and aIter the time the units take the count.
08. II unable to participate in the count, Ior example due to the nature and location oI the count, auditors
must determine whether they can carry out alternative inspection procedures in order to gather suIIicient
appropriate evidences regarding the existence and conditions oI inventory, so that they can avoid to
express an exclusion opinion because oI the limitation in the auditing scope, Ior example, checking sale
vouchers aIter the date oI physical inventory count may provide appropriate audit evidences.
09. II auditors plan to participate in the physical inventory count or carry out alternative inspection
procedures, they must consider the Iollowing Iactors:
- The characteristics oI the accounting and internal control systems relating to inventory;
- Inherent, control and detection risks, and materiality oI the item oI inventory;
- Whether or not the inventory counting procedures have been established and instructed to inventory
counters;
- The inventory count plan;
- The locations oI inventory counting;
- The necessity to invite experts to participate in the counting.
81
10. Where auditors have participated in the physical inventory count one or more times during the year,
they only need to observe the carrying out oI counting procedures and check inventory samples.
11. II units estimate the inventory quantity, such as estimating a coal pile, auditors must consider the
reasonableness oI this method oI estimation.
12. When the physical inventory count is taken simultaneously at various locations, auditors must select
appropriate locations Ior participation in the count, depending on the materiality oI the category oI
inventory and the assessment oI inherent and control risk at these locations.
13. Auditors must check the audited units` regulations on inventory count:
a/ The application oI control procedures, such as checking oI methods oI weighing, measuring, counting,
receiving and delivering inventory; procedures Ior recording warehouse books, warehouse cards,
recording oI count cards and summing oI count results;
b/ The determination oI unIinished products, slow-moving, obsolete or damaged goods, goods sent Ior
processing, to agents or on consignment, goods received Ior processing, Ior agency sale.;
c/ The determination oI appropriate procedures relating to the internally circulated goods, goods received
and delivered beIore and aIter the counting date.
14. To ensure the inventory count procedures be strictly complied with, auditors must supervise the
carrying out oI these procedures and may directly participate in the sample count. Auditors must check
both the accuracy and completeness oI the count cards by selecting and checking a number oI commodity
items actually kept in the warehouses Ior comparison with the count cards or selecting and checking a
number oI count cards Ior comparison with the goods actually kept in the warehouses. OI the checked
count cards, auditors should consider which ones need to be retained Ior subsequent checking and
comparison.
15. Auditors should also consider period-end procedures, mostly details oI the value oI inventory moved
just beIore, during and aIter the count so that the accounting oI such value can be checked later.
16. In practice, the physical inventory count may be conducted at a time other than period end. This
method will normally apply to audits only when control risk is assessed as low or average. In this case,
auditors must carry out appropriate procedures to consider whether Iluctuations in inventory between the
count date and the period-end date are correctly accounted or not.
17. II the audited units apply the periodical count method Ior accounting inventory, the value oI inventory
is determined at the period-end, but auditors must carry out several additional procedures to assess
whether or not the reasons Ior any signiIicant diIIerences between the count data and the data in
accounting books have been determined by the units and to check whether or not such diIIerences have
been adjusted.
18. Auditors must check the year-end lists oI counted inventory to determine whether they reIlect Iully
and accurately the actual inventory quantities or not.
19. Where inventory is under the control or custody oI a third party, auditors must request the third party
to directly conIirm the quantities and conditions oI inventory held by the third party on behalI oI the unit.
Depending on materiality oI this inventory, auditors should also consider the Iollowing Iactors:
- The integrity and independence oI the third party;
- The necessity to directly participate in the count or to invite other auditors or audit Iirms to participate in
the count;
- The necessity to have other auditors` reports on the compatibility oI the third party`s accounting and
internal control systems Ior ensuring that inventory is correctly counted and careIully preserved.
- The necessity to examine inventory-related documents held by the third party, Ior example, warehouse
receipts, conIirmations Irom other parties that they are holding such inventory as collateral.
ConIirmation oI receivables
20. Where receivables are determined as material to the Iinancial statements and when it is likely that
debtors will respond, auditors must plan to request these debtors to conIirm such receivables or data
constituting the account balance oI receivables.
21. Direct conIirmation shall provide reliable audit evidences regarding the existence oI receivables and
the accuracy oI account balances. However, such conIirmation does not normally provide suIIicient
evidences regarding the recoverability oI receivables or regarding the existence oI unaccounted
receivables.
82
22. Where auditors assume that debtors will not respond to letters oI request Ior conIirmation oI
receivables, they must plan alternative procedures, Ior example, examining documents constituting the
account balance oI receivables.
23. Auditors may sort out receivables which need to be conIirmed so as to ensure the existence and
accuracy oI receivables as a whole, taking into account receivables that may aIIect identiIied audit risk
and other planned audit procedures.
24. Letters oI request Ior conIirmation oI receivables shall be sent by auditors, clearly stating the
authorization by the audited units and the permission Ior debtors to supply inIormation directly to
auditors.
25. Auditors` letters oI request Ior conIirmation oI receivables (possibly including conIirmation oI
payables) in Vietnam dong and in Ioreign currency (iI any) may take two Iorms:
- Form A: clearly stating the amount oI receivables and requesting debtors to conIirm it is correct or how
much it is;
- Form B: not stating the amount oI receivables but requesting debtors to clearly indicate the amount oI
receivables or express diIIerent opinions.
26. Form-A conIirmation (see paragraph 25) provide audit evidences more reliable than Iorm-B
conIirmation (see paragraph 25). The selection oI either Iorm depends on each speciIic circumstance and
the auditors` assessment oI potential risk and control risk. Form-A conIirmation is more appropriate when
potential risk and control risk are assessed as high.
27. Auditors may combine both Iorms oI conIirmation above. For example, when the total oI receivables
consists oI a small number oI large receivables and a large number oI small receivables, auditors may
request Form-A conIirmation Ior all or some large receivables and accept Form-B conIirmation Ior a large
number oI small receivables.
28. Past a reasonable period oI time aIter sending letters oI request Ior debt conIirmation, iI receiving no
replies Irom debtors, auditors may send a reminder letter to them. Letters oI conIirmation oI exceptional
cases should be more thoroughly investigated.
29. Auditors must perIorm alternative procedures or continue investigating and/or interviewing when:
- No reply is received;
- Replies conIirm debt amounts diIIerent Irom the balances oI the audited units;
- Replies contain diIIerent opinions.
AIter perIorming alternative procedures or continuing investigating and/or interviewing, iI Iinding that
there is still not enough reliable evidences or it is impossible to perIorm alternative procedures, any
diIIerence shall be regarded as an error. For example, perIorming alternative procedures such as
examining sales invoice and receipts oI receivables Ior which no reply is received.
30. In practice, when control risk is assessed as low, auditors may request conIirmation oI the balance oI
receivables at a time other than the last day oI the Iiscal year. For example, iI auditors must Iinish the
audit work within a very short time limit aIter the last day oI a year, they must examine all transactions
occurring between the time when the balance oI receivables is conIirmed and the last day oI the Iiscal
year.
31. Where the directors oI the audited units request auditors not to send letters oI request Ior conIirmation
to a number oI debtors, auditors must consider whether such requests are justiIied or not. For example, iI a
receivable is being disputed between the two parties or iI requests Ior conIirmation oI debts would badly
aIIect on-going negotiations between the units and debtors. BeIore accepting such requests, auditors must
consider evidences supporting the directors` explanations. In this cases, auditors must apply alternative
procedures Ior the balance oI receivables Ior which letters oI request Ior conIirmation must not be sent.
Valuation and presentation oI long-term investments
32. II long-term investments are regarded as material to the Iinancial statements, auditors must gather
suIIicient appropriate audit evidences regarding the valuation and presentation oI long-term investments.
33. The procedures Ior auditing long-term investments normally aim to determine whether or not the units
have the ability and intend to hold these long-term investments and must gather written representation to
that eIIect.
34. The audit procedures normally include the examination oI Iinancial statements and other relevant
inIormation, such as determination and comparison oI the market prices oI securities with the book value
oI long-term investments up to the date oI the auditing reports.
83
35. II the market prices are lower than the book value, auditors must consider the necessity to set up price
decrease reserves. II doubting the recoverability oI investments, auditors must take into account
appropriate adjustments and explanations presented in the Iinancial statements.
Litigation and dispute cases
36. Litigation and dispute cases involving the audited units, which may have a material eIIect on the
Iinancial statements, must be presented in the Iinancial statements as provided Ior.
37. Auditors must carry out procedures to identiIy litigation and dispute cases involving the units, which
may have a material eIIect on the Iinancial statements. These procedures include:
- Inquiring the directors, asking Ior written representations;
- Examining minutes oI meetings oI the management boards and correspondence with the units` legal
advisors;
- Examining legal advise expenses;
- Using all inIormation relating to litigation and dispute cases.
38. When litigation and/or dispute cases have been identiIied or when auditors doubt that they may exist,
they must request the units` legal advisors to directly supply inIormation. With this method, they can
obtain suIIicient appropriate audit evidences regarding the cases as well as the degree oI damage aIIecting
the units` Iinancial statements.
39. Letters oI request Ior the units` legal advisors to supply inIormation on litigation and/or dispute cases
must be signed by the audited units and sent by auditors. Such a letter contains the Iollowing contents:
- A list oI litigation and/or dispute cases;
- The assessment by the audited unit`s director oI the consequences oI the litigation and/or dispute cases
and estimation oI their Iinancial impacts, including related legal expenses.
- A request that the unit`s legal advisor conIirms the reasonableness oI the director`s assessments and
provides the auditors with Iurther inIormation
40. Auditors must consider the happenings oI litigation and/or dispute cases up to the date oI signing oI
the auditor` reports. When necessary, auditors may gather updated inIormation Irom legal advisors.
41. Where the cases are very complicated or there is disagreement between the directors oI the audited
units and their legal advisors, auditors must meet with the legal advisors to discuss the consequences oI
the cases. Such meetings must be consented by the directors oI the audited units and attended by
representatives oI the units` directorates.
42. Where the directors oI the audited units reIuse to permit auditors to meet with the units` legal advisors,
this will constitute a limitation in the auditing scope and auditors must give a partial acceptance opinion or
an opinion on reIusal to express opinion. Where the clients` legal advisors reIuse to reply with plausible
reasons and auditors are also unable to gather suIIicient audit evidences by applying alternative
procedures, the auditors must consider whether this constitutes a limitation in the auditing scope and thus
may express a partial acceptance opinion or an opinion on reIusal to express opinion
InIormation on various domains or geographical areas
43. Where inIormation relating to various domains and geographical areas is regarded as material to the
Iinancial statements, auditors must gather suIIicient appropriate audit evidences regarding the inIormation
which needs to be disclosed in the Iinancial statements in accordance with the current accounting
standards.
44. Auditors must consider inIormation relating to various domains and geographical areas in relation to
the Iinancial statements taken as a whole. Auditors are not required to apply audit procedures in order to
express their own opinions on inIormation relating to various domains and geographical areas. However,
the concept oI materiality must encompass both quantitative and qualitative Iactors and the auditors`
procedures used Ior determining material inIormation must reckon this.
45. The audit procedures Ior inIormation relating to various domains and geographical areas normally
consist oI analytical procedures and audit tests appropriate in each speciIic circumstance.
46. Auditors should discuss with the directors oI the audited units the methods used to collect inIormation
relating to various domains and geographical areas, and consider whether or not these methods are in
accordance with the current accounting standards and ensure that they are strictly applied. To realize this,
auditors must consider sale turnover, charges oI transIers between domains or geographical areas,
elimination oI amounts arising within a domain or area; comparisons with plans and other budget
estimates, Ior example, the percentage oI proIits over sale turnover, and the allocation oI assets and costs
84
among segments in consistency with previous periods and the adequacy oI the presentations in the
Iinancial statements when inconsistency exists.

Standard No 560 - Events occurring after the date of cIosing accounting books & making financiaI
statements

85
STANDARD 50
EVENTS OCCURRING AFTER THE DATE OF CLOSING ACCOUNTING BOOKS AND
MAKING FINANCIAL STATEMENTS

GENERAL PROVISIONS
01. The purpose oI this standard is to prescribe the basic principles and procedures and guide the modes oI
application thereoI to the responsibility oI auditors and audit Iirms when considering events occurring
aIter the date oI closing accounting books and making Iinancial statements Ior auditing in the process oI
auditing the Iinancial statements.
02. Auditors must consider the eIIect oI events occurring aIter the date oI closing accounting books and
making Iinancial statements on the Iinancial statements and the auditing reports.
inIormation oI audit Iirms.
Auditors and audit Iirms must observe the provisions oI this standard in the process oI auditing Iinancial
statements.
The audited units (clients) must possess necessary knowledge oI this standard so that they can cooperate
with auditors in supplying inIormation and materials relating to the events occurring aIter the date oI
closing accounting books and making Iinancial statements.
04. Events occurring aIter the date oI closing accounting books and making Iinancial statements mean
events aIIecting the Iinancial statements, which have occurred aIter the date oI closing accounting books
and making Iinancial statements till the date oI signing the auditing report; and events detected aIter the
date oI signing the auditing report.
There are two kinds oI events occurring aIter the date oI closing accounting books and making Iinancial
statements:
a/ Events that provide Iurther evidences oI the events that existed up to the date oI closing accounting
books and making Iinancial statements;
b/ Events that provide signs oI events that arose aIter the date oI closing accounting books and making
05. The date oI closing accounting books and making Iinancial statements means the date lasting till the
end oI the last day oI the accounting year. For example, iI the accounting year spans Irom January 1 to
December 31 oI the calendar year, the date oI closing accounting books and making Iinancial statements
lasts until the 24
th
hour oI December 31 oI such year.
06. The Iinancial statement date means the date inscribed on a Iinancial statement above the section
reserved Ior the director`s (or authorized person`s) signature and the stamp oI the audited unit. The
Iinancial statement date must be subsequent to the date oI closing accounting books and making Iinancial
statements.
07. The date oI signing the auditing report means the date inscribed on an auditing report above the
section reserved Ior the auditor`s signature, the director`s (or authorized person`s) signature and the stamp
oI the audit Iirm. The date oI signing the auditing report may be either the date oI actually signing the
auditing report or the date when the audit work Iinishes at the audited unit. The audit Iirms must decide on
their own the date oI signing the auditing report which, however, must be subsequent to or coincide with
the Iinancial statement date.
08. The Iinancial statement publicization date means the date oI the postmark or the earliest date oI
signing Ior receipt oI the Iinancial statements and auditing reports which are submitted to the State bodies
or publicized.

09. Events occurring aIter the date oI closing accounting books and making Iinancial statements and
relating to the responsibility oI auditors and audit Iirms are classiIied into three stages:
- Events occurring up to the date oI signing the auditing report;
- Events discovered aIter the date oI signing the auditing report but beIore the Iinancial statement
publicization date;
statements

86
- Events discovered aIter the Iinancial statement publicization date.
Events occurring up to the date oI signing the auditing report
10. Auditors must establish and perIorm audit procedures to gather suIIicient appropriate audit evidences
in order to determine all events occurring up to the date oI signing the auditing report, which may aIIect
the Iinancial statements, and request the units to make adjustment oI, or present explanations in, the
Iinancial statements. These procedures supplement routine procedures applied to special events occurring
aIter the date oI closing accounting books and making Iinancial statements in order to collect Iurther audit
evidences regarding account balances at the time oI making Iinancial statements. However, auditors are
not required to consider all matters on which previously applied procedures have provided satisIactory
conclusions. For example, examining the sale oI inventory and the settlement oI debts aIter the date oI
closing accounting books would provide evidences regarding the value oI inventory in the Iinancial
statements.
11. The procedures to identiIy events that may require the audited units to adjust the Iinancial statements
or present explanations therein should be perIormed at a time nearest to the date oI signing the auditing
report and normally include the Iollowing steps:
Reviewing procedures the units have prescribed to ensure that all events occurring aIter the date oI
closing accounting books and making Iinancial statements are identiIied.
Reading minutes oI the meetings oI shareholders, the management boards, the Control Boards and the
directorates held aIter the date oI closing accounting books and making Iinancial statements, and inquiring
about matters discussed at these meetings but not recorded in the minutes.
Reading the units` Iinancial statements oI the latest period and the Iinancial plans as well as other
management reports oI the directors.
Requesting the units or their lawyers to supply Iurther inIormation concerning the previously notiIied
litigation and/or dispute cases or other litigation and dispute cases (iI any).
Inquiring the units` directors to identiIy events which occur aIter the date oI closing accounting books
and making Iinancial statements and may materially aIIect the Iinancial statements, such as:
- Data temporarily calculated or not yet conIirmed;
- Commitments, borrowings or guarantees, which have been recently entered into;
- Sales oI assets, which have been eIIected or are planned;
- Newly issued shares or bonds;
- Merger or dissolution agreements, which have been signed or are planned;
- Assets which have been appropriated or destroyed due to Iire or Ilood.
- Risks or contingencies;
- Unusual accounting adjustments, which have been made or are planned;
- Events which have occurred or are likely to occur and thereby render inappropriate the accounting
policies already used Ior making Iinancial statements. For example, the occurrence oI bad debts would
render invalid the presumption on the continuity oI business activities.
12. Where a subordinate unit (a company`s branch or a company under a corporation) is audited by
another independent audit Iirm, auditors who audit the superior unit must consider the procedures applied
by such audit Iirm`s auditors to the events occurring aIter the date oI closing accounting books and
making Iinancial statements and examine whether or not they need to inIorm such audit Iirm oI the
expected date oI signing their auditing reports.
13. When recognizing that the events occurring aIter the date oI closing accounting books and making
Iinancial statements materially aIIect the Iinancial statements, auditors must determine whether these
events are correctly calculated and properly presented in the audited Iinancial statements.
Events discovered aIter the date oI signing the auditing report and beIore the Iinancial statement
publicization date
14. Auditors are not required to apply procedures or review matters relating to the Iinancial statements
aIter the date oI signing the auditing report. The directors oI the audited units shall, however, have to
notiIy the auditors or audit Iirms oI the events which have occurred aIter the date oI signing the auditing
report and beIore the Iinancial statement publicization date and may aIIect the audited Iinancial
statements.
15. Where auditors become aware oI an event which occurs aIter the date oI signing the auditing report
and beIore the Iinancial statement publicization date and may materially aIIect the Iinancial statements,
statements

87
they must consider whether or not the Iinancial statements and auditing reports need to be amended and
must discuss this matter with the audited units` directors so as to take appropriate measures in each
particular circumstance.
16. Where, at the auditors` request, the directors oI the audited units accept to amend the Iinancial
statements, the auditors shall perIorm necessary procedures suitable to the practical circumstances and
then provide the audited units with a new report based on the amended Iinancial statements. The new
auditing report must be signed at the same date oI the amended Iinancial statements or at a later date. In
this case, auditors must perIorm the audit procedures speciIied at paragraphs 10 and 11 till the date oI
signing the amended auditing report.
17. Where the directors oI the audited units do not amend the Iinancial statements as requested by
auditors, and the auditing reports have not yet been sent to the audited units, the auditors and audit Iirms
shall make a new auditing report expressing a partial acceptance opinion or non-acceptance opinion.
18. Where events which have a material eIIect on the Iinancial statements are discovered only aIter the
auditing reports have been sent to the audited units, the auditors shall request the heads oI the audited
units not to publicize the Iinancial statements and the auditing reports to third parties. II the units still
decide to publicize these reports, the auditors must apply appropriate measures to prevent the third parties
Irom using their auditing reports. The preventive measures taken will depend on the auditors` legal
powers and obligations as well as the recommendations oI the auditors` lawyers.
Events discovered aIter the Iinancial statement publicization date
19. AIter the Iinancial statements and the auditing reports have been publicized, auditors are not required
to consider and examine any data or events relating to the audited Iinancial statements.
20. AIter the Iinancial statements and the auditing reports have been publicized, iI auditors become aware
oI events which occurred up to the date oI signing the auditing report and cause the auditors to modiIy the
auditing reports, the auditors should consider whether the Iinancial statements and the auditing reports
need to be revised or not and must discuss this matter with the directors oI the audited units and take
appropriate measures in each particular circumstance.
21. Where the directors oI the audited units accept to revise the Iinancial statements, the auditors must
carry out necessary appropriate procedures and review the measures taken by the audited units to ensure
that any recipients oI the Iinancial statements and the auditing reports are inIormed oI this matter. At the
same time, the auditors and audit Iirms must publicize a new auditing report based on the revised Iinancial
statements.
22. The new auditing reports must contain a paragraph explaining the reasons Ior the revision oI the
previously publicized Iinancial statements and auditing reports. The new auditing reports shall be signed
at the same date oI the revised Iinancial statements or at a later date. In this case, auditors must perIorm
the audit procedures speciIied at paragraphs 10 and 11 till the date oI the revised auditing report.
23. Where the directors oI the audited units do not notiIy the matter mentioned at paragraph 21 above to
the recipients oI the previously publicized Iinancial statements and auditing reports nor revise the
Iinancial statements at the auditors` requests, the auditors and audit Iirms must notiIy the directors oI the
audited units oI the measures to be taken by the auditors to prevent the third parties Irom using the
auditing reports. The preventive measures taken will depend on the auditors` legal powers and obligations
as well as the recommendations oI the auditors` lawyers.
24. Where the Iinancial statements Ior the Iollowing Iiscal year are being audited by the audit Iirms and
are bound to be publicized, it may not be necessary to revise the Iinancial statements and auditing reports
Ior the preceding Iiscal year provided that the matter mentioned at paragraph 21 above is clearly described
in the representations on the Iinancial statements Ior the Iollowing year.
Cases where the audited units issue securities
25. Where the audited units issue securities on the market, auditors must consider any law provisions
relating to the securities issuance. For example, auditors may be required to carry out additional audit
procedures till the date when the audited units post up securities issuance inIormation. These procedures
normally include measures speciIied at paragraphs 10 and 11 till the time oI posting up inIormation and
reviewing documents on the posted inIormation to ascertain that the posted inIormation is consistent with
the Iinancial inIormation already conIirmed by the auditors.

Standard No 600 - Use of other auditor's materiaIs

88
STANDARD No. 00
USE OF OTHER AUDITOR`S MATERIALS

GENERAL PROVISIONS
01. The purpose oI this standard is to prescribe the basic principles and procedures and guide the mode oI
application thereoI to the use oI other auditors` auditing materials regarding the Iinancial inIormation oI
one or many units when auditing the Iinancial statements oI a unit, including Iinancial inIormation oI
subordinate units and oI other economic units.
02. When the principal auditors use the audit materials oI other auditors, they must determine the extent oI
inIluence oI such materials on their audits.
03. This standard shall apply to the audit oI the Iinancial statements oI a unit, which include Iinancial
inIormation oI one or many subordinate units, and other economic units. This standard shall not apply to
cases involving two or more auditors appointed as joint auditors Ior a unit, nor does it deal with the
relationship between the present auditors and the previous year`s auditors.
Where the principal auditors conclude that the Iinancial statements oI subordinate units and other
economic units have an immaterial eIIect, this standard shall not apply, except where many units, though
each having an immaterial eIIect, can together produce a material eIIect, the application oI this standard
should be considered.
The audited units (clients), units and individuals related to the use oI other auditors` materials by the
principal auditors must possess necessary knowledge oI the essential principles and procedures in this
standard so that they can cooperate with the audit Iirms and the principal auditors in the auditing process.
04. Principal auditors mean the auditors with responsibility Ior auditing the Iinancial statements and
signing the auditing reports oI units, including Iinancial inIormation oI one or many subordinate units and
other economic units audited by the other auditors.
05. Other auditors mean the auditors with responsibility Ior auditing the Iinancial statements and signing
the auditing reports oI subordinate units or other economic units, which are included in the Iinancial
statements oI the superior unit. Another auditor is the auditor working Ior another audit Iirm or Ior a
branch or oIIice oI the audit Iirm.
06. Subordinate units mean units, components, branches, subsidiaries or member companies oI the
superior units, whose Iinancial inIormation is included in the superior units` Iinancial statements audited
by the principal auditors.
07. Other economic units mean units, joint-venture companies, associated companies with economic
relations, whose Iinancial inIormation is included in the units` Iinancial statements audited by the
principal auditors.

Acceptance as principal auditors
08. To accept auditor contracts with the principal auditor`s responsibility, auditors and audit Iirms must
consider the Iollowing matters:
The materiality oI the portion oI the Iinancial statements which the principal auditors audit;
The principal auditors` knowledge about the situation oI business activities oI the subordinate units and
other economic units audited by the other auditors;
The risk oI material errors in the Iinancial statements oI the subordinate units and other economic units
audited by other auditors;
The possibility to perIorm additional procedures as prescribed in this standard, which relate to Iinancial
inIormation oI subordinate units and other economic units audited by other auditors with the participation
oI the principal auditors.
Audit procedures perIormed by the principal auditors
09. When planning the audits involving the use oI other auditor`s materials, the principal auditors must
consider the proIessional capability oI the audit Iirms and other auditors in the context oI their actual
work.
In order to consider proIessional capability oI the audit Iirms and other auditors, the principal auditors
must base themselves on the Iollowing sources oI inIormation: the audit organizations where the other

89
auditors have made practice registration; colleagues oI the other auditors; clients or people having
working relations with the other auditors, or through Iace-to-Iace meetings with the other auditors.
10. The principal auditors should perIorm necessary procedures to obtain suIIicient appropriate audit
evidences that the other auditors` work is relevant to the principal auditors` audit work and purposes in
each speciIic audit.
11. The principal auditors should advise the other auditors oI:
The independence requirements related to the superior unit, subordinate units and other economic units
and obtain written representations on compliance therewith
The use oI the other auditors` materials and reports and the coordination between the two parties right at
the audit planning stage;
Matters requiring special consideration; procedures Ior identiIication oI internal transactions that need
to be stated in written explanations, and the timetable Ior the audit;
The accounting, auditing and reporting requirements and obtain written representations on compliance
therewith.
12. The principal auditors may discuss with the other auditors the audit procedures already applied by the
latter or review the other auditors` audit dossiers. The perIormance oI these audit procedures will depend
on the speciIic context oI the audit and on the principal auditors` assessment oI the proIessional capability
oI the other auditors.
13. The principal auditors are not required to apply the procedures stated in paragraph 12 iI they have
suIIicient appropriate audit evidences that the audit procedures perIormed by the other auditors are
satisIactory and ensure the audit quality.
14. The principal auditors must consider the signiIicant Iindings oI the other auditors.
15. The principal auditors may discuss with the other auditors and the directors oI the subordinate units
and other economic units the signiIicant Iindings or other matters aIIecting the Iinancial statements oI
such units. When necessary, the principal auditors may perIorm additional procedures to check the
records or Iinancial statements oI the subordinate units. Depending on the particular circumstances, these
checking procedures may be perIormed by the principal auditors or the other auditors.
16. The principal auditors should archive in their audit dossiers documents relating to the Iinancial
statements oI the subordinate units and other economic units audited by the other auditors; documents on
the perIormance oI audit procedures and conclusions reached thereIrom; the names oI the other auditors
and any conclusions, though being immaterial, reached by the other auditors.
Cooperation between auditors
17. The other auditors must cooperate with the principal auditors in cases the principal auditors use their
auditing materials. For example, the other auditors must inIorm the principal auditors oI any portions oI
their work that cannot be carried out as requested or oI any matters signiIicantly aIIecting the other
auditors` work, which are oI the principal auditors` concern. Similarly, the principal auditors should notiIy
the other auditors oI any matters which are discovered by the principal auditors and may considerably
aIIect the Iinancial statements oI the subordinate units or other economic units audited by the other
auditors.
The cooperation between auditors should be agreed upon by the authorities managing the audits.
Conclusions and elaboration oI auditing reports
18. When the principal auditors conclude that the other auditors` materials cannot be used and they has
not been able to perIorm additional audit procedures Ior the Iinancial statements oI the subordinate units
and other economic units audited by the other auditors, iI deeming that such would materially aIIect the
audited Iinancial statements, the principal auditors should express a partial acceptance opinion or an
opinion to reIuse to express an opinion because there is a limitation in the scope oI the audit.
19. When the principal auditors have relied on the other auditors` opinions, their reports must clearly state
this and speciIy the limitation oI the Iinancial statements audited by the other auditors.
20. Where the other auditors issue or plan to issue a modiIied auditing report, the principal auditors should
consider the nature and signiIicance oI the modiIications in relation to the Iinancial statements audited by
the principal auditors and determine whether their auditing reports need to be modiIied.
Responsibility oI the principal auditors
21. The principal auditors must observe the principles and procedures prescribed in this standard when
auditing the Iinancial statements oI the superior units, which include Iinancial inIormation oI the

90
subordinate units and other economic units, and must be responsible Ior the Iinancial statement audit
risks.-
Standard No 401 - Auditing in a computer information systems environment

91
STANDARD 401
AUDITING IN A COMPUTER INFORMATION SYSTEMS ENVIRONMENT
dated 28 November 2003)

GENERAL
01. The purpose oI this Vietnamese Standard on Auditing (VSA) is to establish standards and provide
guidance on procedures to be Iollowed by the auditor and the audit Iirm when conducting an audit is
in a computer inIormation systems (CIS) environment.
02. The auditor should consider how a CIS environment affects the audit.
03. This VAS applies to audits oI Iinancial statements in a CIS environment and also applies to an audit
oI other Iinancial inIormation and related services rendered by the audit Iirm in a client`s CIS. The
overall objective and scope oI an audit does not change in a CIS environment.
The use oI a computer changes the processing, storage and communication oI Iinancial inIormation
and may aIIect the accounting and internal control systems employed by the entity. Accordingly, a
CIS environment may aIIect:
O The procedures Iollowed by the auditor in obtaining a suIIicient understanding oI the accounting and
internal control systems.
O The consideration oI inherent risk and control risk through which the auditor arrives at the risk
assessment.
O The auditor`s design and perIormance oI tests oI control and substantive procedures appropriate to
meet the audit objective.
04. It is expected that the audited (client) entity and other entities and individuals relating to the audit oI
Iinancial statements in a CIS environment should possess essential knowledge as to the Iundamental
principles and objectives set out in this VSA in working with the auditor and the audit Iirm during the
audit.
05. Computer Information Systems Environment is an environment in which the audited entity keeps
records and process Iinancial inIormation using a computer oI any type or size at a certain level oI
application, whether that computer is operated by the entity or by a third party.
CONTENTS OF THE VSA
Skills and Competence
06. The auditor and the audit firm should have sufficient knowledge of the CIS to plan, direct,
supervise and review the work performed. The auditor should consider whether specialized CIS
skills are needed in an audit.
These may be needed to:
O Obtain a suIIicient understanding oI the accounting and internal control systems aIIected by the
CIS environment.
O Determine the eIIect oI the CIS environment on the assessment oI overall risk and oI risk at the
account balance and class oI transactions level.
O Design and perIorm appropriate tests oI control and substantive procedures.
II specialized skills are needed, the auditor would seek the assistance oI a proIessional possessing such
skills, who may be either on the auditor`s staII or an outside proIessional. If the use of such a
professional is planned, the auditor should obtain sufficient appropriate audit evidence that such
work is adequate for the purposes of the audit, in accordance with VSA 20 'Using the Work of
an Expert.

92
Planning
07. In accordance with VSA 400 'Risk Assessments and Internal Control, the auditor and the
audit firm should obtain an understanding of the accounting and internal control systems
sufficient to plan the audit and develop an effective audit approach.
08. In planning the portions of the audit which may be affected by the client`s CIS environment,
the auditor and the audit firm should obtain an understanding of the significance and comple-
xity of the CIS activities and the availability of data for use in the audit.
This understanding would include such matters as:
O The signiIicance and complexity oI computer processing in each signiIicant accounting application.
SigniIicance relates to materiality oI the Iinancial statement assertions aIIected by the computer
processing. An application may be considered to be complex when, Ior example:
- The volume oI transactions is such that users would Iind it diIIicult to identiIy and correct
errors in processing.
- The computer automatically generates material transactions or entries directly to another
application.
- The computer perIorms complicated computations oI Iinancial inIormation and/or automatically
generates material transactions or entries that cannot be (or are not) validated independently.
- Transactions are exchanged electronically with other organizations without manual review.
O The organizational structure oI the client`s CIS activities and the extent oI concentration or
distribution oI computer processing throughout the entity, particularly as they may aIIect
segregation oI duties.
O The availability oI data. Source documents, certain computer Iiles, and other evidential matter that
may be required by the auditor may exist Ior only a short period or only in machine-readable
Iorm. Client CIS may generate internal reporting that may be useIul in perIorming substantive
tests. The potential Ior use oI computer-assisted audit techniques may permit increased eIIiciency
in the perIormance oI audit procedures, or may enable the auditor to economically apply certain
procedures to an entire population oI accounts or transactions.
09. When the audited entity`s CIS are complex and significant, the auditor and the audit firm
should also obtain an understanding of the CIS environment and whether it may influence the
assessment of inherent and control risks.
The nature oI the risks and the internal control characteristics in CIS environments include the
Iollowing:
O Lack of transaction trails. Some CIS are designed so that a complete transaction trail that is useIul
Ior audit purposes might exist Ior only a short period oI time or only in computer readable Iorm.
Where a complex application system perIorms a large number oI processing steps, there may not
be a complete trail. Accordingly, errors embedded in an application`s program logic may be
diIIicult to detect on a timely basis by manual (user) procedures.
O Uniform processing of transactions. Computer processing uniIormly processes like transactions
with the same processing instructions. Thus, the clerical errors ordinarily associated with manual
processing are virtually eliminated. Conversely, programming errors (or other systematic errors in
hardware or soItware) will ordinarily result in all transactions being processed incorrectly.
O Limited segregation of functions. Many control procedures that would ordinarily be perIormed by
separate individuals in manual systems may be concentrated just on one or a Iew individuals in
CIS.
O !otential for errors and irregularities. The potential Ior human error in the development,
maintenance and execution oI CIS may be greater than in manual systems. Also, the potential Ior
individuals to gain unauthorized access to data or to alter data without visible evidence may be
greater in CIS than in manual systems.
In addition, decreased human involvement in handling transactions processed by CIS can reduce the
potential Ior observing errors and irregularities. Errors or irregularities occurring during the design or

93
modiIication oI application programs or systems soItware can remain undetected Ior long periods oI
time.
O Initiation or execution of transactions. CIS may include the capability to initiate or cause the execution
oI certain types oI transactions, automatically. The authorization oI these transactions or procedures
may not be documented in the same way as those in a manual system, and management`s
authorization oI these transactions may be implicit in its acceptance oI the design oI the CIS and
subsequent application.
O Dependence of other controls over computer processing. Computer processing may produce reports
and other output that are used in perIorming manual control procedures. The eIIective- ness oI these
manual control procedures can be dependent on the eIIectiveness oI controls over the completeness
and accuracy oI computer processing. In turn, the eIIectiveness and consistent operation oI
transaction processing controls in computer applications is oIten dependent on the eIIectiveness oI
general CIS controls.
O !otential for increased management supervision. CIS can oIIer management a prompt provision
oI larger inIormation that may be used to review and supervise the operations oI the entity in a
timely and more adequate manner.
O !otential for the use of computer-assisted audit techniques. The case oI processing and analyzing
large quantities oI data using computers may provide the auditor with opportunities to apply
general or specialized computer audit techniques and tools in the execution oI audit tests.
Both the risks and the controls introduced as a result oI these characteristics oI CIS have a
potential impact on the auditor`s assessment oI risk, and the nature, timing and extent oI audit
procedures.
Assessment of Risk
audit firm should make an assessment of inherent and control risks for material financial
statement assertions.
11. The inherent risks and control risks in a CIS environment may have both a pervasive eIIect and an
account-speciIic eIIect on the likelihood oI material misstatements oI a balance or transaction, as
Iollows:
O The risks may result Irom deIiciencies in pervasive CIS activities such as program development
and maintenance, systems soItware support, operations, physical CIS security, and control over
access to special-privilege utility programs. These deIiciencies would tend to have a pervasive
impact on all application systems that are processed on the computer.
O The risks may increase the potential Ior errors or Iraudulent activities in speciIic applications, in
speciIic data bases, or in speciIic processing activities. For example, errors are not uncommon in
systems that perIorm complex logic or calculations, or that must deal with many diIIerent
exception conditions.
12. New CIS technologies are Irequently employed by clients to build increasingly complex computer
systems that may include micro-to-mainIrame links, distributed data bases, and business management
systems that Ieed inIormation directly into the accounting systems. Such systems increase the overall
sophistication oI CIS and the complexity oI the speciIic applications that they aIIect, thus increasing
risk and require Iurther consideration.
Audit Procedures
audit firm should consider the CIS environment in designing audit procedures to reduce audit
risk to an acceptably low level.
14. The auditor`s speciIic audit objectives do not change whether accounting data is processed manually
or by computer. However, the methods oI applying audit procedures to gather evidence may be
inIluenced by the methods oI computer processing. The auditor and the audit Iirm can use either
manual audit procedures, computer-assisted audit techniques, or a combination oI both to obtain

94
suIIicient evidential matter. However, in some accounting systems that use a computer Ior processing
signiIicant applications, it is relevant Ior the auditor to obtain adequate audit evidence with computer
assistance.
Standard No 550 - ReIated Parties

95
STANDARD 550
RELATED PARTIES

GENERAL
guidance on the auditor`s responsibilities when perIorming audit procedures regarding related
parties and transactions with such parties during the course oI an audit oI Iinancial statements.
02. The auditor and the audit firm should perform audit procedures designed to obtain sufficient
appropriate audit evidence regarding the identification and disclosure by management of
related parties and the effect of related party transactions that are material to the financial
statements. However, an audit cannot be expected to detect all related party transactions.
03. As indicated in VSA 200 'Objective and General Principles Governing an Audit oI Financial
Statements, in certain circumstances there are limitations that may aIIect the persuasiveness oI
evidence available to draw conclusions on particular Iinancial statement assertions. Because oI the
degree oI uncertainty associated with the Iinancial statement assertions regarding the completeness oI
related parties, the procedures identiIied in this VSA will provide suIIicient appropriate audit evidence
regarding those assertions in the absence oI any circumstance identiIied by the auditor that:
a) increases the risk oI misstatement beyond that which would ordinarily be expected; or
b) indicates that a material misstatement regarding related parties has occurred.
Where there is any indication that such circumstances exist, the auditor should perform
modified, extended or additional procedures as are appropriate in the circumstances.
04. This VAS applies to audits oI Iinancial statements and also applies to an audit oI other Iinancial
inIormation and related services rendered by the audit Iirm. The auditor and the audit Iirm shall comply
with this VSA in conducting an audit oI Iinancial statements and rendering related services.
It is expected that the client entity and users oI the audit report should possess essential knowledge as
to the objective and general principles set out in this VSA in exercising their responsibility, working
with the auditor and the audit Iirm, and dealing with the relations maintained during the audit.
05. Related party. parties are considered to be related iI one party has the ability to control the other
party or exercise signiIicant inIluence over the other party in making Iinancial and operating
decisions.
06. Related party transactions. a transIer oI resources or obligations between related parties, regardless
oI whether a price is charged.
07. Significant influence represents the outcome oI involvement in the development oI Iinancial and
operating policies oI an entity rather than controlling these policies.
Examples oI signiIicant inIluence include:
- Representation on the Board oI Management.
- Participation in the policy making process.
- Participation in material inter-company transactions.
- Interchange on managerial personnel or independence oI technical inIormation.
- Share ownership under statute or agreement.
08. Management is responsible Ior the identiIication and disclosure oI related parties and transactions with
such parties. This responsibility requires management to implement adequate accounting and internal
control systems to ensure that transactions with related parties are appropriately identiIied in the

96
accounting records and disclosed in the Iinancial statements.
09. The auditor needs to have a level oI knowledge oI the entity`s business and industry that will enable
identiIication oI the events, transactions and practices that may have a material eIIect on the Iinancial
statements. While the existence oI related parties and transactions between such parties are
considered ordinary Ieatures oI business, the auditor needs to be aware oI them because:
a) VAS 'Related parties may require disclosure in the Iinancial statements oI certain related party
relationships and transactions.
b) The existence oI related parties or related party transactions may aIIect the Iinancial statements.
c) The reliability oI audit evidence depends on the source (inside or outside) oI this evidence and each
circumstance. The auditor`s assessment oI reliability should be based on the Iollowing principles:
- A greater degree oI reliance may be placed on audit evidence that is obtained Irom external
resource than that Irom internal resource;
- A greater degree oI reliance may be placed on audit evidence that is obtained Irom internal
resource as accounting and internal control systems eIIectively operate;
- A greater degree oI reliance may be placed on audit evidence that is obtained by the auditor
than that provided by the entity.
d) A related party transaction may be motivated by other than ordinary business considerations, Ior
example, proIit sharing or even Iraud.
CONTENTS OF THE VSA
Existence and Disclosure oI Related Parties
10. The auditor should review information provided by the directors and the Board of Management
identifying the names of all known related parties and should perform the following procedures in
respect of the completeness of this information:
a) review prior year working papers for names of known related parties;
b) review the entity`s procedures for identification of related parties;
c) inquire as to the affiliation of the Board of Management members and directorsdirectors
and officers with other entities;
d) review shareholder records to determine the names of principal shareholders or, if
appropriate, obtain a listing of principal shareholders from the share register;
e) review minutes of the meetings of shareholders, directors and the Board of Management,
control department and other relevant statutory records such as capital contribution of
members or shareholders;
d)f) inquire of other auditors currently involved in the audit, or predecessor auditors, as to their
knowledge of additional related parties; and
e)g) review the entity`s income tax returns and other information supplied to regulatory
agencies.
If, in the auditor`s judgment, the risk of significant related parties remaining undetected is low,
these procedures may be modified as appropriate.
11. Where the VSA ~Related Parties requires disclosure of related party relationships, the auditor
and the audit firm should be satisfied that the disclosure is adequate.
Transactions with Related Parties
12. The auditor and the audit firm should review information provided by directors and the Board of
Management identifying related party transactions and should be alert for other material related
party transactions.
13. When obtaining an understanding of the accounting and internal control systems and making a
preliminary assessment of control risk, the auditor and the audit firm should consider the

97
adequacy of control procedures over the authorization and recording of related party
transactions.
14. During the course oI the audit, the auditor needs to be alert Ior transactions which appear unusual in
the circumstances and may indicate the existence oI previously unidentiIied related parties. Examples
include:
- Transactions which have abnormal terms oI trade, such as unusual prices, interest rates,
guarantees, and repayment terms.
- Transactions which lack an apparent logical business reason Ior their occurrence.
- Transactions in which substance diIIers Irom Iorm.
- Transactions processed in an unusual manner.
- High volume or signiIicant transactions with certain customers or suppliers as compared with
others.
- Unrecorded transactions such as the receipt or provision oI management services at no charge.
15. During the course oI the audit, the auditor and the audit Iirm carry out procedures which may identiIy
the existence oI transactions with related parties. Examples include:
- PerIorming detailed tests oI transactions and balances.
- Reviewing minutes oI meetings oI the Board oI Management and directors.
- Reviewing accounting records Ior large or unusual transactions or balances, paying particular
attention to transactions recognized at or near the end oI the reporting period.
- Reviewing conIirmations oI loans receivable and payable and conIirmations Irom banks. Such a
review may indicate guarantor relationship and other related party transactions.
- Reviewing investment transactions, Ior example, purchase or sale oI an equity interest in a joint
venture or other entity.
Examining Identified Related Party Transactions
16. In examining the identified related party transactions, the auditor and the audit firm should obtain
sufficient appropriate audit evidence as to whether these transactions have been properly recorded
and disclosed.
17. Given the nature oI related party relationships, evidence oI a related party transaction may be limited,
Ior example, regarding the existence oI inventory held by a related party on consignment. Because oI
such limited availability, the auditor would consider perIorming procedures such as:
- ConIirming the terms and amount oI the transaction with the related party.
- Inspecting evidence in possession oI the related party.
- ConIirming or discussing inIormation with persons associated with the transaction, such as banks,
lawyers, guarantors and agents.
Management Representations
18. The auditor and the audit firm should obtain a written representation from management
concerning:
a) the completeness of information provided regarding the identification of related parties; and
b) the adequacy of related party disclosures in the financial statements.
Audit Conclusions and Reporting
If the auditor and the audit firm are unable to obtain sufficient appropriate audit evidence concerning
related parties and transactions with such parties or concludes that their disclosure in the financial
statements is not adequate, the auditor should modify the audit report appropriately./.
Standard No 570 - Going concern

98
STANDARD 50
GOING CONCERN

general
guidance on the responsibilities oI the auditor and the audit Iirm in the audit oI Iinancial statements
regarding the appropriateness oI the going concern assumption as a basis Ior the preparation oI the
Iinancial statements including management`s assessments oI going concern oI the entity.
02. When planning and performing audit procedures and in evaluating the results thereof, the
auditor and the audit firm should consider the appropriateness of the going concern
assumption underlying the preparation of the financial statements.
03. This VAS applies to audits oI Iinancial statements and also applies to an audit oI other Iinancial
statements.
It is expected that the audited (client) entity and users oI the audit report should possess essential
knowledge as to the objective and general principles set out in this VSA in working with the auditor
and the audit Iirm and in using the audit results properly.
04. Going concern. An entity is assumed as a going concern Ior the Ioreseeable Iuture, normally not
exceeding one year aIter period end, that is, the entity is assumed to have neither the intention nor the
need to liquidate or curtail materially the scale oI its operations, or seek protection Irom creditors in
accordance with relevant laws and prevailing regulations.

CONTENTS OF THE VSA
Management`s Responsibility
05. The going concern assumption is the basic principles Ior preparation and disclosures oI Iinancial
statements. Accordingly, assets and liabilities are recorded on the basis that the entity will be able to
realize its assets and discharge its liabilities in the normal course oI business.
06. Vietnamese Accounting Standard (VAS) 01 "Frameworks" requires that management oI the audited
entity should speciIically review and assess the entity`s ability to continue business as a going
concern and other accounting standards regulate issues to be considered and disclosed in relation to
the entity`s continuance as a going concern.
Accounting Standards 'Presentation oI Financial Statements states ~When preparing Iinancial
statements, management should make an assessment oI an enterprise`s ability to continue as a going
concern. Financial statements should be prepared on a going concern basis unless management
intends to liquidate the enterprise or to cease trading, or has no realistic alternative but to do so.
When management is aware, in making its assessment, oI material uncertainties related to events or
conditions which may cast signiIicant doubt upon the enterprise`s ability to continue as a going
concern, those uncertainties should be disclosed. When the Iinancial statements are not prepared on a
going concern basis, that Iact should be disclosed, together with the basis on which the Iinancial
statements are prepared and the reasons why the enterprise is not considered to be a going concern.
In assessing whether the going concern assumption is appropriate, management takes into account all
available inIormation Ior the Ioreseeable Iuture, which should be at least, but is not limited to, twelve
months Irom the balance sheet date. The degree oI consideration depends on the Iacts in each case.

99
When an enterprise has a history oI proIitable operations and ready access to Iinancial resources, a
conclusion that the going concern basis oI accounting is appropriate can be reached without detailed
analysis. In other cases, management may need to consider a wide range oI Iactors surrounding
current and expected proIitability, debt repayment schedules and potential sources oI replacement
Iinancing beIore it can satisIy itselI that the going concern basis is appropriate.
07. Management`s assessment oI the going concern assumption involves making a judgment, at a
particular point in time, about the Iuture outcome oI events or conditions which are inherently
uncertain. The Iollowing Iactors are relevant:
- the degree oI uncertainty associated with the outcome oI an event or condition increases
signiIicantly the Iurther into the Iuture a judgment is being made about the outcome oI an event or
condition. For that reason, most Iinancial reporting Irameworks that require an explicit
management assessment speciIy the period Ior which management is required to take into account
all available inIormation.
- Any judgment about the Iuture is based on inIormation available at the time at which the
judgment is made. Subsequent events can contradict a judgment which was reasonable at the time
it was made.
- The size and complexity oI the entity, the nature and condition oI its business and the degree to
which it is aIIected by external Iactors all aIIect the judgment regarding the outcome oI events or
conditions.
08. Examples oI events or conditions, which individually or collectively may cast signiIicant doubt about
the going concern assumption are set out below.
Financial indications
O Net liability or net current liability position;
O Fixed-term borrowings approaching maturity without realistic prospects oI renewal or repayment;
or excessive reliance on short-term borrowings to Iinance long-term asset;
O Indications oI withdrawal oI Iinancial support by debtors and other creditors;
O Negative operating cash Ilows indicated by historical or prospective Iinancial statements.
O Adverse key Iinancial ratios;
O Substantial operating losses or signiIicant deterioration in the value oI assets used to generate cash
Ilows;
O Arrears or discontinuance oI dividends;
O Inability to pay creditors on due dates;
O Inability to comply with the terms oI loan agreements;
O Change Irom credit to cash-on-delivery transactions with suppliers; and,
O Inability to obtain Iinancing Ior essential new product development or other essential investments
perating indications
O Loss oI key management without replacement;
O Loss oI a major market, Iranchise, license, or principal supplier; and,
O Labor diIIiculties or shortages oI important supplies.
ther indications
O Non-compliance with capital or other statutory requirements;
O Pending legal or regulatory proceedings against the entity that may, iI successIul, result in claims
that are unlikely to be satisIied;
O Changes in legislation or government policy expected to adversely aIIect the entity; and,
O Other indications.
The signiIicance oI such events or conditions oIten can be mitigated by other Iactors. For example,

100
the eIIect oI an entity being unable to make its normal debt repayments may be counter-balanced by
management's plans to maintain adequate cash Ilows by alternative means, such as by disposal oI
assets, rescheduling oI loan repayments, or obtaining additional capital. Similarly, the loss oI a
principal supplier may be mitigated by the availability oI a suitable alternative source oI supply.
Responsibility of the Auditor and the Audit Firm
09. The auditor and audit Iirm`s responsibility is to consider the appropriateness oI management`s use oI
the going concern assumption in the preparation oI the Iinancial statements, and consider whether
there are material uncertainties about the entity`s ability to continue as a going concern that need to
be disclosed in the Iinancial statements.
10. The auditor and the audit Iirm cannot predict Iuture events or conditions that may cause an entity to
cease to continue as a going concern. Accordingly, the absence oI any reIerence to going concern
uncertainty in an auditor`s report cannot be viewed as a guarantee as to the entity`s ability to continue
as a going concern.
Planning Considerations
11. In planning the audit, the auditor and the audit firm should consider whether there are events
or conditions which may cast significant doubt on the entity`s ability to continue as a going
concern.
12. The auditor and the audit firm should remain alert for evidence of events or conditions which
may cast significant doubt on the entity`s ability to continue as a going concern throughout the
audit. If such events or conditions are identified, the auditor should, in addition to performing
the procedures in paragraph 2, consider whether they affect the auditor and audit firm`s
assessments of the components of audit risk.
13. The auditor and the audit Iirm consider events and conditions relating to the going concern
assumption during the planning process, because this consideration allows Ior more timely
discussions with management, review oI management`s plans and resolution oI any identiIied going
concern issues.
14. In some cases, management may have already made a preliminary assessment at the early stages oI the
audit. II so, the auditor and the audit Iirm review that assessment to determine whether management has
identiIied events or conditions, such as those discussed in paragraph 8, and management`s plans to
address them.
15. II management has not yet made a preliminary assessment, the auditor discusses with management
the basis Ior their intended use oI the going concern assumption, and inquires oI management
whether events or conditions, such as those discussed in paragraph 8, exist. The auditor may request
management to begin making its assessment, particularly when the auditor has already identiIied
events or conditions relating to the going concern assumption.
16. The auditor and the audit Iirm consider the eIIect oI identiIied events or conditions when making
preliminary assessments oI the components oI audit risk and, thereIore, their existence may aIIect the
nature, timing and extent oI the audit procedures.
Evaluating Management`s Assessment
17. The auditor and the audit firm should evaluate management`s assessment of the entity`s ability
to continue as a going concern.
18. The auditor and the audit firm should consider the same period as that used by management in
making its assessment under the financial reporting framework. If management`s assessment
of the entity`s ability to continue as a going concern covers less than twelve months from the
balance sheet date, the auditor should ask management to extend its assessment period to
twelve months from the balance sheet date.
19. Management`s assessment oI the entity`s ability to continue as a going concern is a key part oI the
auditor`s consideration oI the going concern assumption. The period Ior which management is required to

101
take into account all available inIormation should be at least, but is not limited to, twelve months Irom the
balance sheet date.
20. In evaluating management`s assessment, the auditor and the audit Iirm consider the process
management Iollowed to make its assessment, the assumptions on which the assessment is based and
management`s plans Ior Iuture action. The auditor and the audit Iirm consider whether the assessment
has taken into account all relevant inIormation oI which the auditor and the audit Iirm are aware as a
result oI the audit procedures.
21. As noted in paragraph 06, when there is a history oI proIitable operations and a ready access to
Iinancial resources, management may make its assessment without detailed analysis. In such
circumstances, the auditor and audit Iirm`s conclusion about the appropriateness oI this assessment
normally is also made without the need Ior perIorming detailed procedures. When events or conditions
have been identiIied which may cast signiIicant doubt about the entity`s ability to continue as a going
concern, however, the auditor perIorms additional audit procedures, as described in paragraph 26.
Period Beyond Management`s Assessment
22. The auditor and the audit firm should inquire of management as to its knowledge of events or
conditions beyond the period of assessment used by management that may cast significant
doubt on the entity`s ability to continue as a going concern.
23. The auditor and the audit Iirm are alert to the possibility that there may be known events, scheduled
or otherwise, or conditions that will occur beyond the period oI assessment used by management that
may bring into question the appropriateness oI management`s use oI the going concern assumption in
preparing the Iinancial statements. The auditor and the audit Iirm may become aware oI such known
events or conditions during the planning and conduct oI the audit, including subsequent events
procedures.
24. Since the degree oI uncertainty associated with the outcome oI an event or condition increases as the
event or condition is Iurther into the Iuture, in considering such events or conditions, the indications
oI going concern issues will need to be signiIicant beIore the auditor and the audit Iirm consider
taking Iurther action. The auditor may need to ask management to determine the potential
signiIicance oI the event or condition on their going concern assessment.
25. The auditor and the audit Iirm do not have a responsibility to design procedures other than inquiry oI
management to test Ior indications oI events or conditions which cast signiIicant doubt on the entity`s
ability to continue as a going concern beyond the period assessed by management which, as
discussed in paragraph 18, would be at least twelve months Irom the balance sheet date.
Additional Audit Procedures When Events or Conditions are Identified
26. When events or conditions have been identified which may cast significant doubt on the entity`s
ability to continue as a going concern, the auditor and the audit firm should:
a) review management`s plans for future actions based on its going concern assessment;
b) gather sufficient appropriate audit evidence to confirm or dispel whether or not a material
uncertainty exists through carrying out procedures considered necessary, including
considering the effect of any plans of management and other mitigating factors; and
c) seek written representations from management regarding its plans for future action.
27. Events or conditions which may cast signiIicant doubt on the entity`s ability to continue as a going
concern may be identiIied during the planning oI the engagement or in the course oI perIorming audit
procedures. The process oI considering events or conditions continues as the audit progresses. When
the auditor believes such events or conditions may cast signiIicant doubt on the entity`s ability to
continue as a going concern, certain procedures may take on added signiIicance. The auditor and the
audit Iirm inquire oI management as to its plans Ior Iuture action, including its plans to liquidate
assets, borrow money or restructure debt, reduce or delay expenditures, or increase capital. The
auditor and the audit Iirm also consider whether any additional Iacts or inIormation are available
since the date on which management made its assessment. The auditor obtains suIIicient appropriate
audit evidence that management`s plans are Ieasible and that the outcome oI these plans will improve

102
the situation.
28. Procedures that are relevant in this regard may include:
O Analyzing and discussing cash Ilow, proIit and other relevant Iorecasts with management.
O Analyzing and discussing the entity's latest available interim Iinancial statements.
O Reviewing the terms oI debentures and loan agreements and determining whether any have been
breached.
O Reading minutes oI the meetings oI shareholders, Board oI Management and Directors and
important committees Ior reIerence to Iinancing diIIiculties.
O Inquiring oI the entity's lawyer regarding the existence oI litigation and claims and the
reasonableness oI management`s assessments oI their outcome and the estimate oI their Iinancial
implications.
O ConIirming the existence, legality and enIorceability oI arrangements to provide or maintain
Iinancial support with related and third parties and assessing the Iinancial ability oI such parties to
provide additional Iunds.
O Considering the entity's plans to deal with unIilled customer orders.
O Reviewing events aIter period end to identiIy those that either mitigate or otherwise aIIect the
entity's ability to continue as a going concern.
29. When analysis oI cash Ilow is a signiIicant Iactor in considering the Iuture outcome oI events or
conditions the auditor considers:
O the reliability oI the entity's system Ior generating such inIor- mation, and;
O whether there is adequate support Ior the assumptions underlying the Iorecast.
In addition the auditor and the audit Iirm compare:
O the prospective Iinancial inIormation Ior recent prior periods with historical results, and
O the prospective Iinancial inIormation Ior the current period with results achieved to.
Audit Conclusions and Reporting
30. Based on the audit evidence obtained, the auditor and the audit firm should determine if, in the
auditor`s judgment, a material uncertainty exists related to events or conditions that alone or
in aggregate, may cast significant doubt on the entity`s ability to continue as a going concern.
31. A material uncertainty exists when the magnitude oI its potential impact is such that, in the auditor
and audit Iirm`s judgment, clear disclosure oI the nature and implications oI the uncertainty is
necessary Ior the presentation oI the Iinancial statements not to be misleading.
Coing Concern Assumption Appropriate but a Material Uncer- tainty Exists
32. If the use of the going concern assumption is appropriate but a material uncertainty exists, the
auditor considers whether the financial statements:
a) adequately describe the principal events or conditions that give rise to the signiIicant doubt on the
entity's ability to continue in operation and management`s plans to deal with these events or
conditions.
b) state clearly that there is a material uncertainty related to events or conditions which may cast
signiIicant doubt on the entity`s ability to continue as a going concern and, thereIore, that it may
be unable to realize its assets and discharge its liabilities in the normal course oI business.
33. If adequate disclosure is made in the financial statements, the auditor and the audit firm should
express an unqualified opinion but modify the auditor's report by adding an emphasis of
matter paragraph that highlights the existence of a material uncertainty relating to the event or
condition that may cast significant doubt on the entity`s ability to continue as a going concern
and draws attention to the note in the financial statements that discloses the matters set out in
paragraph 32.
34. In assessing the adequacy oI the Iinancial statement disclosure, the auditor considers whether the
inIormation explicitly draws the reader`s attention to the possibility that the entity may be unable to

103
continue realizing its assets and discharging its liabilities in the normal course oI business. The
Iollowing is an example oI such a paragraph when the auditor is satisIied as to the adequacy oI the
note disclosure:
ithout qualifying our opinion, we draw attention to Note X in the financial statements which
indicates that the Company incurred a net loss of ZZZ during the year ended December 31, 20X0
and, as of that date, the Companys current liabilities exceeded its total assets by ZZZ. These
conditions, along with other matters as set forth in Note X, indicate the existence of a material
uncertainty which may cast significant doubt about the Companys ability to continue as a going
concern`.
In extreme cases, such as situations involving multiple material uncertainties that are signiIicant to
the Iinancial statements, the auditor and the audit Iirm may consider it appropriate to express a
disclaimer oI opinion instead oI adding an emphasis oI matter paragraph.
35. If adequate disclosure is not made in the financial statements, the auditor and the audit firm
should express a qualified or adverse opinion, as appropriate, following VSA 00 ~The Auditor`s
Report on Financial Statements. The report should include specific reference to the fact that there
is a material uncertainty that may cast significant doubt about the entity`s ability to continue as a
going concern. The Iollowing is an example oI the relevant paragraphs when a qualiIied opinion is to be
expressed:
The Companys financing arrangements expire and amounts outstanding are payable on March
19, 20X1. The Company has been unable to re-negotiate or obtain replacement financing. This
situation indicates the existence of a material uncertainty which may cast significant doubt on the
Companys ability to continue as a going concern and therefore it may be unable to reali:e its
assets and discharge its liabilities in the normal course of business. The financial statements (and
notes thereto) do not disclose this fact.
In our opinion, except for the omission of the information included in the preceding paragraph,
the financial statements give a true and fair view of (present fairly, in all material respects,) the
financial position of the Company at December 31, 20X0 and the results of its operations and its
cash flows for the year then ended in accordance with.`.
The Iollowing is an example oI the relevant paragraphs when an adverse opinion is to be expressed:
The Companys financing arrangements expired and the amount outstanding was payable on
December 31, 20X0. The Company has been unable to re-negotiate or obtain replacement
financing and is considering filing for bankruptcy. These events indicate a material uncertainty
which may cast significant doubt on the Companys ability to continue as a going concern and
therefore it may be unable to reali:e its assets and discharge its liabilities in the normal course of
business. The financial statements (and notes thereto) do not disclose this fact.
In our opinion, because of the omission of the information mentioned in the preceding paragraph,
the financial statements do not give a true and fair view of (or do not present fairly) the financial
position of the Company as at December 31, 20X0, and of its results of operations and its cash
flows for the year then ended in accordance with. (and do not comply with.).`
Coing Concern Assumption Inappropriate
36. If, in the judgment of the auditor and the audit firm, the entity will not be able to continue as a
going concern, the auditor and the audit firm should express an adverse opinion if the financial
statements have been prepared on a going concern basis. II, on the basis oI the additional
procedures carried out and the inIormation obtained, including the eIIect oI management`s plans, the
auditor's judgment is that the entity will not be able to continue as a going concern, the auditor
concludes, regardless oI whether or not disclosure has been made, that the going concern assumption
used in the preparation oI the Iinancial statements is inappropriate and expresses an adverse opinion.
37. When the entity`s management has concluded that the going concern assumption used in the
preparation oI the Iinancial statements is not appropriate, the Iinancial statements need to be prepared

104
on an alternative authoritative basis. II on the basis oI the additional procedures carried out and the
inIormation obtained the auditor and the audit Iirm determine the alternative basis is appropriate, the
auditor and the audit Iirm can issue an unqualiIied opinion iI there is adequate disclosure but may
require an emphasis oI matter in the auditor`s report to draw the user`s attention to that basis.
Management Unwilling to Make or Extend its Assessment
38. If management is unwilling to make or extend its assessment when requested to do so by the
auditor and the audit firm, the auditor and the audit firm should consider the need to modify
the auditor`s report as a result of the limitation on the scope of the auditor`s work. In certain
circumstances, such as those described in paragraphs 15, 18 and 24, the auditor and the audit Iirm
may believe that it is necessary to ask management to make or extend its assessment. II management
is unwilling to do so, it is not the auditor and audit Iirm`s responsibility to rectiIy the lack oI analysis
by management, and a modiIied report may be appropriate because it may not be possible Ior the
auditor and the audit Iirm to obtain suIIicient appropriate evidence regarding the use oI the going
concern assumption in the preparation oI the Iinancial statements.
39. In some circumstances, the lack oI analysis by management may not preclude the auditor and the
audit Iirm Irom being satisIied about the entity`s ability to continue as a going concern. For example,
the auditor`s other procedures may be suIIicient to assess the appropriateness oI management`s use oI
the going concern assumption in the preparation oI the Iinancial statements because the entity has a
history oI proIitable operations and a ready access to Iinancial resources. In other circumstances,
however, the auditor and the audit Iirm may not be able to conIirm or dispel, in the absence oI
management`s assessment, whether or not events or conditions exist which indicate there may be a
signiIicant doubt on the entity`s ability to continue as a going concern, or the existence oI plans
management has put in place to address them or other mitigating Iactors. In these circumstances, the
auditor and the audit Iirm modiIy the auditor`s report as discussed in VSA 700 'The Auditor`s
Report on Financial Statements.
Significant Delay in the Signature or Approval of Financial Statements
When there is signiIicant delay in the signature or approval oI the Iinancial statements by management
aIter the balance sheet date, the auditor and the audit Iirm consider the reasons Ior the delay. When the
delay could be related to events or conditions relating to the going concern assessment, the auditor and the
audit Iirm consider the need to perIorm additional audit procedures, as described in paragraph 26, as well
as the eIIect on the auditor and audit Iirm`s conclusion regarding the existence oI a material uncertainty,
as described in paragraph 30.

Standard No 800 - The auditor's report on speciaI purpose audit engagements

105
STANDARD 800
THE AUDITOR`S REPORT ON SPECIAL PURPOSE AUDIT ENGAGEMENTS

GENERAL
01. The purpose oI this Vietnamese Standards on Auditing (VSA) is to establish standards and provide
guidance in connection with special purpose audit engagements including:
a) Financial statements prepared in accordance with a comprehensive basis oI accounting other than
Vietnamese Accounting Standards or other accounting standards accepted in Vietnam;
b) SpeciIied accounts, elements oI accounts, or items in a Iinancial statement (hereaIter reIerred to as
reports on a component oI Iinancial statements);
c) Compliance with contractual agreements; and
d) Summarized Iinancial statements.
02. The auditor should review and assess the conclusions drawn from the audit evidence obtained
during the special purpose audit engagement as the basis for an expression of opinion. The
report should contain a clear written expression of opinion.
03. This VAS applies to audits oI special purpose audit engagements rather than review oI Iinancial
statements and examination oI Iinancial inIormation on an agreed procedure basis or combination oI
Iinancial inIormation.
The auditor and the audit Iirm should comply with this VSA in conducting an audit and preparing
auditor`s reports on a special purpose audit engagements.
CONTENTS OF THE VSA
General Considerations
04. The nature, timing and extent oI work to be perIormed in a special purpose audit engagement will
vary with the circumstances. Before undertaking a special purpose audit engagement, the auditor
should ensure there is agreement with the client as to the exact nature of the engagement and
the form and content of the report to be issued.
05. In planning the audit work, the auditor will need a clear understanding oI the purpose oI using the
inIormation under audit, and who is likely to use it. To avoid the possibility oI the auditor`s report
being used Ior purposes Ior which it was not intended, the auditor may wish to indicate in the report
any restrictions on its distribution and use.
06. The auditor`s report on a special purpose audit engagement, except for a report on
summarized financial statements, should include the following basic elements, ordinarily in the
following layout:
a) Name and address of the audit firm;
b) Report number;
c) Report title;
d) Addressee;
e) opening or introductory paragraph:
- identification of the financial information audited; and
- a statement of the responsibility of the entity`s director (or leader) and the responsibility
of the auditor and the audit firm;
f) a scope paragraph:
- the reference to the VSAs applicable to special purpose audit engagements; and

106
- a description of the work the auditor performed;
g) opinion paragraph containing an expression of opinion by the auditor and the audit firm on
the financial information;
h) Issue place and date of the report;
i) Signature and seal.
A measure oI uniIormity in the Iorm and content oI the auditor`s report is desirable because it helps to
promote the reader`s understanding.
07. In the case oI Iinancial inIormation to be supplied by an entity to government authorities, relevant
organizations and individuals, insurers and other third party entities there may be a prescribed Iormat
Ior the auditor`s report. Such prescribed reports may not conIorm to the requirements oI this VSA.
For example, the prescribed report may require a certiIication oI Iact when an expression oI opinion
is appropriate, may require an opinion on matters outside the scope oI the audit or may omit essential
wording. In such circumstances, the auditor should consider the substance and wording of the
prescribed report and, when necessary, should make appropriate changes to conform to the
requirements of this VSA, either by rewording the form or by attaching a separate report.
08. When the inIormation on which the auditor has been requested to report is based on the provisions oI
an agreement, the auditor needs to consider whether any signiIicant interpretations oI the agreement
have been made by management in preparing the inIormation. An interpretation is signiIicant when
adoption oI another reasonable interpretation would have produced a material diIIerence in the
Iinancial inIormation.
09. The auditor should consider whether any significant interpretations of an agreement on which the
financial information is based are clearly disclosed in the financial information. The auditor may wish
to make reIerence in the auditor`s report on the special purpose audit engagement to the note within the
Iinancial inIormation that describes such interpretations.
Reports on Financial Statements Prepared in Accordance with a Comprehensive Basis of
Accounting other than Vietnamese Accounting Standards or other standards accepted in
Vietnam.
10. A comprehensive basis oI accounting comprises a set oI criteria used in preparing Iinancial statements
which applies to all material items and which has substantial support. Financial statements may be
prepared Ior a special purpose in accordance with a comprehensive basis oI accounting other than
Vietnamese Accounting Standards or relevant standards accepted in Vietnam (reIerred to herein as an
'other comprehensive basis oI accounting). A conglomeration oI accounting conventions devised to
suit individual preIerence is not a comprehensive basis oI accounting. Other comprehensive Iinancial
reporting Irameworks may include:
O That used by an entity to prepare its income tax return;
O The cash receipts and disbursements basis oI accounting; and,
O The Iinancial reporting provisions oI a government regulatory agency.
11. The auditor`s report on financial statements prepared in accordance with another
comprehensive basis of accounting should include a statement that indicates the basis of
accounting used or should refer to the note to the financial statements giving that information.
The opinion should state whether the financial statements are prepared, in all material
respects, in accordance with the identified basis of accounting. The terms used to express the
auditor`s opinion should be either 'give a true and Iair view or 'present Iairly, in all material
respects,. Appendix 01 to this VSA gives examples oI auditor`s reports on Iinancial statements
prepared in accordance with another comprehensive basis oI accounting.
12. The auditor would consider whether the title oI, or a note to, the Iinancial statements makes it clear to
the reader that such statements are not prepared in accordance with Vietnamese Accounting
Standards or International Accounting Standards accepted in Vietnam. For example, a tax basis
Iinancial statement might be entitled 'Statement oI Income and Expenses-Income Tax Basis. If the

107
financial statements prepared on another comprehensive basis are not suitably titled or the
basis of accounting is not adequately disclosed, the auditor should not issue an unqualified
report.
Reports on a Component of Financial Statements
13. The auditor may be requested to express an opinion on one or more components oI Iinancial
statements, Ior example, accounts receivable, inventory, or a provision. This type oI engagement may
be undertaken as a separate engagement or in conjunction with an audit oI the entity`s Iinancial
statements. However, this type oI engagement does not result in a report on the Iinancial statements
taken as a whole and, accordingly, the auditor would express an opinion only as to whether the
component audited is prepared, in all material respects, in accordance with the identiIied basis oI
accounting.
14. Many Iinancial statement items are interrelated, Ior example, sales and receivables, and inventory
and payables. Accordingly, when reporting on a component oI Iinancial statements, the auditor will
need to examine certain other Iinancial inIormation. In determining the scope of the engagement,
the auditor should consider those financial statement items that are interrelated and which
could materially affect the information on which the audit opinion is to be expressed.
15. The auditor should consider the concept of materiality in relation to the component of financial
statements being reported upon. For example, a particular account balance provides a smaller base
against which to measure materiality compared with the Iinancial statements taken as a whole.
Consequently, the auditor`s examination will ordinarily be more extensive than iI the same component
were to be audited in connection with a report on the entire Iinancial statements.
16. The auditor would advise the client that the auditor`s report on a component oI Iinancial statements is
not to accompany the Iinancial statements oI the entity.
17. The auditor`s report on a component of financial statements should include a statement that
indicates the basis of accounting in accordance with which the component is presented. The
opinion should state whether the component is prepared, in all material respects, in accordance
with the identified basis of accounting. Appendix 02 to this VSA gives examples oI 2 types oI
audit reports on components oI Iinancial statements.
18. When an adverse opinion or disclaimer of opinion on the entire financial statements has been
expressed, the auditor should report on components of the financial statements only if those
components are not so extensive as to constitute a major portion of the financial statements. To
do otherwise may overshadow the report on the entire Iinancial statements.
Reports on Compliance with Contractual Agreements
19. The auditor may be requested to report on an entity`s compliance with certain aspects oI contractual
agreements (non-audit agreements), such as bond indentures or loan agreements. Such agreements
ordinarily require the entity to comply with a variety oI covenants involving such matters as
payments oI interest, restriction oI dividend payments and the use oI the proceeds oI sales oI
property.
20. Engagements to express an opinion as to an entity`s compliance with contractual agreements
should be undertaken only when the overall aspects of compliance relate to accounting and
financial matters within the scope of the auditor`s professional competence. However, when
there are particular matters Iorming part oI the engagement that are outside the auditor`s expertise,
the auditor would consider using the work oI an expert.
21. The report should state whether, in the auditor`s opinion, the entity has complied with the
particular provisions of the agreement. Appendix 03 to this VSA gives examples oI 2 types oI
auditor`s reports on compliance given in a separate report and in a report accompanying Iinancial
statements.
Reports on Summarized Financial Statements

108
22. An entity may prepare Iinancial statements summarizing its annual audited Iinancial statements Ior
the purpose oI inIorming user groups interested in the highlights only oI the entity`s Iinancial
position and the results oI its operations. Unless the auditor has expressed an audit opinion on the
financial statements from which the summarized financial statements were derived, the auditor
should not report on summarized financial statements.
23. Summarized Iinancial statements are presented in considerably less detail than annual audited Iinancial
statements. ThereIore, such Iinancial statements need to clearly indicate the summarized nature oI the
inIormation and caution the reader that, Ior a better understanding oI an entity`s Iinancial position and the
results oI its operations, summarized Iinancial statements are to be read in conjunction with the entity`s
most recent audited Iinancial statements.
24. Summarized Iinancial statements need to be appropriately titled to identiIy the audited Iinancial
statements Irom which they have been derived, Ior example, 'Summarized Financial InIormation
Prepared Irom the Audited Financial Statements Ior the Year Ended December 31, X.
25. Summarized Iinancial statements do not contain all the inIormation required by the Iinancial
reporting Iramework used Ior the annual audited Iinancial statements. Consequently, wording such as
'true and Iair or 'present Iairly, in all material respects, is not used by the auditor when expressing
an opinion on summarized Iinancial statements.
26. The auditor`s report on summarized financial statements should include the following basic
elements ordinarily in the following layout:
b) Report number;
c) Report title;
d) Addressee;
e) an identification of the audited financial statements from which the summarized financial
statements were derived;
f) a reference to the date of the audit report on the unabridged financial statements and the
type of opinion given in that report;
g) an opinion as to whether the information in the summarized financial statements is consistent with
the audited financial statements from which it was derived. When the auditor has issued a
modified opinion on the unabridged financial statements yet is satisfied with the presentation of
the summarized financial statements, the audit report should state that the summarized financial
statements were derived from financial statements on which a modified audit report was issued;
h) a statement, or reference to the note within the summarized financial statements, which
indicates that for a better understanding of an entity`s financial performance and position
and of the scope of the audit performed, the summarized financial statements should be
read in conjunction with the unabridged financial statements and the audit report thereon;
i) issue place and date of the report;
j) signature and seal.
Appendix 04 to this VSA gives examples of 2 types of auditor`s reports on summarized
financial statements.
Appendix 1 - Examples of Reports on Financial Statements Prepared in Accordance with a
Comprehensive Basis of Accounting other than Jietnamese Accounting Standards

XYZ AUDIT FIRM Form 01
Address, tel. and fax no. ...
No. ...

AUDITOR`S REPORT ON

109
A STATEMENT OF CASH RECEIPTS AND DISBURSEMENTS
FOR THE YEAR ENDED... OF ABC COMPANY

To: The Board of Management and Directors of ABC Company
We (*) have audited the accompanying statement oI ABC Company`s cash receipts and disbursements Ior
the year ended December 31, X prepared on 9date) on pages... to... This statement is the responsibility oI
ABC Company`s management. Our responsibility is to express an opinion on the accompanying statement
based on our audit.
Basis of Opinion
We conducted our audit in accordance with Vietnamese Standards on Auditing. Those Standards require
that we plan and perIorm the audit to obtain reasonable assurance about whether the Iinancial statement is
Iree oI material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the Iinancial statement. An audit also includes assessing the current (or
accepted) accounting standards and regulations; accounting principles and methods used and signiIicant
estimates and judgments made by management as well as evaluating the overall statement presentation.
We believe that our audit provides a reasonable basis Ior our opinion.
The Company`s policy is to prepare the accompanying statement on the cash receipts and disbursements
basis. On this basis, revenue is recognized when received rather than when earned, and expenses are
recognized when paid rather than when incurred.
Opinion
In our opinion, the accompanying statement gives a true and Iair view oI (or presents Iairly, in all
material respects,`) the revenue collected and expenses paid by the Company during the year ended
December 31, X in accordance with the cash receipts and disbursements basis as described in Note X.
XYZ AUDIT FIRM ..., day... month ...year ...
Director Auditor
(Full name, signature, seal) (Full name, signature)
CPA Certificate No. ... CPA Certificate No. ...

(*) It may be relevant to specify the name of XYZ Audit Firm

No. ...
AUDITOR`S REPORT ON
FINANCIAL STATEMENTS PREPARED ON INCOME TAX BASIS
OF ABC COMPANY FOR THE YEAR ENDED.
We (*) have audited the accompanying income tax basis Iinancial statements oI ABC Company Ior the
year ended December 31, X prepared on (date) on pages... to... These statements are the responsibility oI
ABC Company`s management. Our responsibility is to express an opinion on the Iinancial statements
based on our audit.
Basis of Opinion

110
Opinion
In our opinion, the Iinancial statements give a true and Iair view oI (or present Iairly, in all material
respects,`) the Iinancial position oI the Company as oI December 31, X and its income and expenses Ior
the year then ended, in accordance with the basis oI accounting used Ior income tax purposes as described
in Note X.

XYZ AUDIT FIRM ..., day... month ... year ...
Director Auditor

Appendix 2 - Examples of Reports on Components of Financial
Statements

No. ...

AUDITOR`S REPORT ON
SCHEDULE OF ACCOUNTS RECEIVABLE OF ABC COMPANY
FOR THE YEAR ENDED...

We (*) have audited the accompanying schedule oI accounts receivable oI ABC Company Ior the year
ended December 31, X prepared on (date) on pages . to ... This schedule is the responsibility oI ABC
Company`s management. Our responsibility is to express an opinion on the schedule based on our audit.
Basis of Opinion
(here the financial statements of the Company for the same year have been audited, the auditor should
state that fact as expressing an opinion thereon and where they have not, that fact shouls also be
disclosed).
Opinion
In our opinion, the schedule oI accounts receivable gives a true and Iair view oI (or presents Iairly, in all
material respects,`) the accounts receivable oI the Company as oI December 31, X in accordance with the
current Vietnamese Accounting Standards and Regulations and other relevant legislation.
(This report is not attached to the financial statements).

XYZ AUDIT FIRM ..., day ... month ... year ...
Director Auditor

111
No. ...

AUDITOR`S REPORT ON
SCHEDULE OF PROFIT PARTICIPATION OF ABC COMPANY
FOR THE YEAR ENDED...

We (*) have audited the accompanying schedule oI DEF`s proIit participation Ior the year ended
December 31, X prepared on (date) on pages ... to ... This schedule is the responsibility oI ABC
Company`s management. Our responsibility is to express an opinion on the schedule based on our audit.
Basis of Opinion
(here the financial statements of the Company for the same year have been audited, the auditor should
state that fact as expressing an opinion thereon and where they have not, that fact shouls also be
disclosed).

Opinion
In our opinion, the schedule oI proIit participation gives a true and Iair view oI (or presents Iairly, in all
material respects,`) DEF`s participation in the proIits oI the Company Ior the year ended December 31, X in
accordance with Vietnamese Accounting Regulations, relevant legislation and the provisions oI the
employment agreement between DEF and the Company dated....
(This report is not attached to the financial statements.)

XYZ AUDIT FIRM ..., day ... month ...year ...
Director Auditor


112
Appendix 3 - Examples of Reports on Compliance with Provisions of
Indenture

XYZ AUDIT FIRM Form 01: Separate report
No. ...
AUDITOR`S REPORT ON
REPORTS ON COMPLIANCE WITH LOAN AGREEMENTS
BY ABC COMPANY
We (*) have audited ABC Company`s compliance with the interest payment provisions set out in sections
X to XX oI Loan Agreement dated May 15, 19X1 with DEF Bank.
Basis of Opinion
We conducted our audit in accordance with Vietnamese Standards on Auditing applicable to compliance
auditing oI contractual agreements. Those Standards require that we plan and perIorm the audit to obtain
reasonable assurance about whether ABC Company has complied with the relevant sections oI the Loan
Agreement. An audit includes examining appropriate evidence, on a test basis, as to payment oI loan
interest disclosed in the Iinancial statements and such other testing procedures considered necessary in the
circumstances. We believe that our audit provides a reasonable basis Ior our opinion.
Opinion
In our opinion as oI December 31, 20X1, the Company was, in all material respects, in compliance with
the interest payment provisions oI the Indenture dated May 15, 19X1 with DEF Bank.
(This report is not attached to the financial statements).

Director Auditor

XYZ AUDIT FIRM Form 02: Report Accompanying
Address, tel. and fax no. ... Financial Statements
No. ...

AUDITOR`S REPORT ON
REPORTS ON COMPLIANCE WITH LOAN AGREEMENTS
BY ABC COMPANY

We (*) have audited the accompanying balance sheet oI ABC Company as oI December 31, 20X1, and
the related statements oI income, and cash Ilows Ior the year then ended (on pages... to...) prepared on
(date). These Iinancial statements are the responsibility oI the Company`s management. Our
responsibility is to express an opinion on these Iinancial statements based on our audit. We have also
audited ABC Company`s compliance with the provisions set out in sections X to XX oI Loan agreement
dated May 15, 19X1 with DEF Bank.
Basis of Opinion
We conducted our audits in accordance with Vietnamese Standards on Auditing applicable to the audit oI
Iinancial statements and to compliance auditing. Those Standards require that we plan and perIorm the
audits to obtain reasonable assurance about whether the Iinancial statements are Iree oI material
misstatement and about whether ABC Company has complied with the relevant sections oI the Indenture.

113
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
Iinancial statements. An audit also includes assessing the accounting principles used and signiIicant
estimates made by management, as well as evaluating the overall Iinancial statement presentation. We
believe that our audits provide a reasonable basis Ior our opinion.

Opinion
In our opinion:
(a) the accompanying Iinancial statements give a true and Iair view oI (or present Iairly, in all
material respects,`) the Iinancial position oI the Company as oI December 31, 20X1, and oI the
results oI its operations and its cash Ilows Ior the year then ended in accordance with ... (and
comply with ...); and
(b) the Company was, in all material respects, in compliance with the interest payment provisions oI
Loan Agreement dated May 15, 19X1 with DEF Bank.

Director Auditor

(*) It may be relevant to speciIy the name oI XYZ Audit Firm
Appendix 4 - Examples of Reports on Summarized Financial
Statements

XYZ AUDIT FIRM Form 01: When an Unqualified
Address, tel, and fax no. ... Opinion Was Expressed
No. ... on the Annual Audited
Financial Statements

AUDITOR`S REPORTS ON
SUMMARIZED FINANCIAL STATEMENTS OF ABC COMPANY
We (*) have audited the Iinancial statements oI ABC Company Ior the year ended December 31, 20X1
prepared on (date) in accordance with Vietnamese Standards on Auditing, Irom which the summarized
Iinancial statements on pages... to... were derived. In our audit report dated March 10, 20X0 we expressed
an unqualiIied opinion on the Iinancial statements Irom which the summarized Iinancial statements were
derived.
Opinion
In our opinion, the accompanying summarized Iinancial statements are consistent, in all material respects,
with the Iinancial statements Irom which they were derived.
For a better understanding oI the Company`s Iinancial position and the results oI its operations Ior the
period and oI the scope oI our audit, the summarized Iinancial statements should be read in conjunction
with the Iinancial statements Irom which the summarized Iinancial statements were derived and our audit
report thereon.
(This report is attached to the audited summari:ed financial statements).

Director Auditor

114

XYZ AUDIT FIRM Form 02: When a Qualified
Address, tel. and fax no. ... Opinion Was Expressed
No. . on the Annual Audited
Financial Statements

AUDITOR`S REPORTS ON
SUMMARIZED FINANCIAL STATEMENTS
We have audited the Iinancial statements oI ABC Company Ior the year ended December 31, 20X1
prepared on (date) in accordance with Vietnamese Standards on Auditing, Irom which the summarized
Iinancial statements on page. to. were derived. In our audit report dated March 10, 20X2 we expressed
an opinion that the Iinancial statements Irom which the summarized Iinancial statements were derived
gave a true and Iair view oI (or presented Iairly, in all material respects,`) except that inventory had been
overstated.
Basis of Opinion
In our opinion, the accompanying summarized Iinancial statements are consistent, in all material respects,
with the Iinancial statements Irom which they were derived and on which we expressed a qualiIied
opinion.
For a better understanding oI the Company`s Iinancial position and the results oI its operations Ior the
period and oI the scope oI our audit, the summarized Iinancial statements should be read in conjunction
with the Iinancial statements Irom which the summarized Iinancial statements were derived and our audit
report thereon.
(This report is attached to the audited summari:ed financial statements).

Director Auditor

Standard No 910 - Engagements to review financiaI statements

115
STANDARD 910
ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

general
guidance on the proIessional responsibilities oI the auditor and the audit Iirm when an engagement to
review Iinancial statements is undertaken and on the Iorm and content oI the report that the auditor
issues in connection with such a review.
02. This VSA is directed towards the review oI Iinancial statements. However, it is to be applied to the
extent practicable to engagements to review Iinancial or other inIormation.
1he auditor and the audit firm should comply with this JSA in conducting engagements to review
financial statements and finance and accounting information or others.
Contents of the JSA
Objective of a Review Engagement
03. The objective of a review of financial statements is to enable an auditor and the audit firm to
state whether, on the basis of procedures which do not provide all the evidence that would be
required in an audit, anything has come to the auditor`s attention that causes the auditor to
believe that the financial statements are not prepared, in all material respects, in accordance with
Vietnamese Accounting Standards (or relevant accounting standards) (moderate assurance).
Engagements to review financial statements do not provide all audit evidence or reasonable
assurance which an audit of financial statements does.
General principles of a review engagement
04. The auditor should comply with professional ethical principles set out in VSA 200 ~Objective
and General Principles Governing an Audit of Financial Statements in reviewing financial
statements.
05. The auditor and the audit firm should conduct a review in accordance with this VSA.
06. The auditor should plan and perform the review with an attitude of professional skepticism
recognizing that circumstances may exist which cause the financial statements to be materially
misstated.
07. For the purpose of expressing moderate assurance in the review report, the auditor should
obtain sufficient appropriate evidence primarily through inquiry and analytical procedures to
be able to draw conclusions.
SCOPE OF A REVIEW
08. The term 'scope oI a review reIers to the review procedures deemed necessary in the circumstances to
achieve the objective oI the review. The procedures required to conduct a review of financial
statements should be determined by the auditor having regard to the requirements of this VSA,
relevant professional bodies, legislation, regulation and, where appropriate, the terms of the
review engagement.
Moderate Assurance
09. A review engagement provides a moderate level oI assurance that the inIormation subject to review is
Iree oI material misstatement, this is expressed in the Iorm oI moderate assurance.
Terms of Engagement
10. The audit company and the entity whose financial statements are subject to review should agree on

116
the terms of the engagement.
11. An engagement letter will be oI assistance in planning the review work. It is in the interests oI both the
client entity and the audit Iirm that the engagement letter document the key terms oI the appointment to
avoid misunderstanding regarding such matters as the objectives and scope oI the engagement, the extent
oI the auditor and audit Iirm`s responsibilities and the Iorm oI reports to be issued.
12. Matters that would be included in the engagement letter include:
O The objective oI the service being perIormed.
O Management`s responsibility Ior the Iinancial statements.
O The scope oI the review, including reIerence to this Vietnamese Standard on Auditing.
O Unrestricted access to whatever records, documentation and other inIormation requested in
connection with the review.
O A sample oI the report expected to be rendered.
O The Iact that the engagement cannot be relied upon to disclose errors, illegal acts or other
irregularities, Ior example, Iraud or deIalcations that may exist.
O A statement that an audit is not being perIormed and that an audit opinion will not be expressed.
To emphasize this point and to avoid conIusion, the auditor may also consider pointing out that a
review engagement will not satisIy any statutory or third party requirements Ior an audit.
An example oI an engagement letter Ior a review oI Iinancial statements appears in Appendix 01.
Planning
13. The auditor should plan the work so that an effective engagement will be performed.
14. In planning a review of financial statements, the auditor should obtain or update the
knowledge of the business including consideration of the entity`s organization, accounting
systems, operating characteristics and the nature of its assets, liabilities, revenues and expenses.
15. The auditor needs to possess an understanding oI such matters and other matters relevant to the
Iinancial statements, Ior example, a knowledge oI the entity`s production and distribution methods,
product lines, operating locations and related parties. The auditor requires this understanding to be
able to make relevant inquiries and to design appropriate procedures, as well as to assess the
responses and other inIormation obtained.
Work Performed by Others
16. When using work performed by another auditor or an expert, the auditor should be satisfied
that such work is adequate for the purposes of the review.
Documentation
17. The auditor should document matters which are important in providing evidence to support
the review report, and evidence that the review was carried out in accordance with this VSA.
Procedures and Evidence
18. The auditor should apply judgment in determining the specific nature, timing and extent of
review procedures. The auditor will be guided by such matters as:
O Any knowledge acquired by carrying out audits or reviews oI the Iinancial statements Ior prior
periods.
O The auditor`s knowledge oI the business including knowledge oI the accounting principles and
practices oI the industry in which the entity operates.
O The entity`s accounting systems.
O The extent to which a particular item is aIIected by management judgment.
O The materiality oI transactions and account balances.
19. The auditor should apply the same materiality considerations as would be applied to financial

117
statement audits. Although there is a greater risk that misstatements will not be detected in a review
than in an audit, the judgment as to what is material is made by reIerence to the inIormation on which
the auditor and the audit Iirm are reporting and the needs oI those relying on that inIormation, not to
the level oI assurance provided.
20. Procedures Ior the review oI Iinancial statements will ordinarily include:
O Obtaining an understanding oI the entity`s business and the industry in which it operates.
O Inquiries concerning the entity`s accounting principles and practices.
O Inquiries concerning the entity`s procedures Ior recording, classiIying and summarizing transactions,
accumulating inIormation Ior disclosure in the Iinancial statements and preparing Iinancial statements.
O Inquiries concerning all material assertions in the Iinancial statements.
O Analytical procedures designed to identiIy relationships and individual items that appear unusual.
Such procedures would include:
- Comparison oI the Iinancial statements with statements Ior prior periods.
- Comparison oI the Iinancial statements with anticipated results and Iinancial position.
- Study oI the relationships oI the elements oI the Iinancial statements that would be expected to
conIorm to a predictable pattern based on the entity`s experience or industry norm.
In applying these procedures, the auditor would consider the types oI matters that required
accounting adjustments in prior periods.
O Inquiries concerning actions taken at meetings oI shareholders, the board oI directors, committees
oI the board oI directors and other meetings that may aIIect the Iinancial statements.
O Reading the Iinancial statements to consider, on the basis oI inIormation coming to the auditor`s
attention, whether the Iinancial statements appear to conIorm with the basis oI accounting
indicated.
O Obtaining reports Irom other auditors, iI any and iI considered necessary, who have been engaged
to audit or review the Iinancial statements oI components oI the entity.
O Inquiries oI persons having responsibility Ior Iinancial and accounting matters concerning, Ior
example:
- Whether all transactions have been recorded.
- Whether the Iinancial statements have been prepared in accordance with speciIied accounting
standards.
- Changes in the entity`s business activities and accounting principles and practices.
- Matters as to which questions have arisen in the course oI applying the Ioregoing procedures.
- Obtaining written representations Irom management when considered appropriate.
Appendix 2 to this VSA provides an illustrative list oI procedures which are oIten used. The list is
not exhaustive, nor is it intended that all the procedures suggested apply to every review engagement.
21. The auditor should inquire about events subsequent to the date of the financial statements that
may require adjustment of or disclosure in the financial statements. The auditor does not have
any responsibility to perIorm procedures to identiIy events occurring aIter the date oI the review
report.
22. If the auditor has reason to believe that the information subject to review may be materially
misstated, the auditor should carry out additional or more extensive procedures as are
necessary to be able to express moderate assurance or to confirm that a modified report is
required.
Conclusions and Reporting
23. The review report should contain a clear written expression of moderate assurance. The
auditor should review and assess the conclusions drawn from the evidence obtained as the basis
for the expression of negative assurance.

118
24. Based on the work performed, the auditor should assess whether any information obtained
during the review indicates that the financial statements do not give a true and fair view (or
are not presented fairly, in all material respects,`) in accordance with the VAS.
25. The report on a review oI Iinancial statements describes the scope oI the engagement to enable the
reader to understand the nature oI the work perIormed and make it clear that an audit was not
perIormed and, thereIore, that an audit opinion is not expressed.
26. The report on a review of financial statements should contain the following basic elements,
ordinarily in the following layout:
b) Report number;
c) Report title;
d) Addressee;
e) opening or introductory paragraph including:
- identification of the financial statements on which the review has been performed; and
- a statement of the responsibility of the entity's director (or leader) and the responsibility of the
auditor and the audit firm;
f) scope paragraph, describing the nature of a review, including:
- a reference to this Jietnamese Standards on Auditing applicable to review engagements;
- a statement that a review is limited primarily to inquiries and analytical procedures; and
- a statement that an audit has not been performed, that the procedures undertaken provide
less assurance than an audit and that an audit opinion is not expressed;
g) statement of moderate assurance;
h) issue place and date of the report;
i) signature and seal.
Appendices 03 and 04 to this VSA contain illustrations oI review reports.
27. The review report should:
a) Provide moderate assurance by stating that nothing has come to the auditor`s attention
based on the review that causes the auditor to believe the financial statements do not give a
true and fair view (or are not presented fairly, in all material respects,`) in accordance with
Vietnamese Accounting Standards (or accounting standards accepted in Vietnam); or
b) if matters have come to the auditor`s attention, describe those matters that impair a true
and fair view (or a fair presentation, in all material respects,`) in accordance with
Vietnamese Accounting Standards (or accounting standards accepted in Vietnam), unless
impracticable, a quantification of the possible effect(s) on the financial statements, and
either:
- express a qualification of the moderate assurance provided; or
- when the effect of the matter is so material and pervasive to the financial statements that the
auditor concludes that a qualification is not adequate to disclose the misleading or incomplete
nature of the financial statements, give an adverse statement that the financial statements do not
give a true and fair view (or :are not presented fairly, in all material respects,') in accordance
with Jietnamese Accounting Standards (or accounting standards accepted in Jietnam); or
c) if there has been a material scope limitation, describe the limitation and either:
- express a qualification of the moderate assurance regarding the possible adjustments had
the limitation not existed; or
- when the possible effect of the limitation is so significant and pervasive that the auditor
concludes that no level of assurance can be provided, express a modified opinion.
28. The auditor should date the review report as of the date the review is completed, which

119
includes performing procedures relating to events occurring up to the date of the report.
However, the auditor should not date the review report earlier than the date on which the
financial statements were approved by management.

Appendix 01
Example of an Engagement Letter for a Review
of Financial Statements
An engagement letter Ior a review oI Iinancial statements should comply with VSA 210 'Terms oI
Audit Engagements. In addition, this letter should indicate the auditor`s understanding oI the terms
and objectives oI his engagement and the nature and limitations oI the services he will provide in
accordance with this VSA. For example:
- We will review the balance sheet oI ABC Company as oI December 31, 20X1, and the related
statements oI income and cash Ilows Ior the year then ended, in accordance with the Vietnamese
Standards on Auditing applicable to reviews. We will not perIorm an audit oI such Iinancial
statements and, accordingly, we will not express an audit opinion on them. Accordingly, we
expect to report on the Iinancial statements as Iollows: (see Appendix 3)
- Responsibility Ior the Iinancial statements, including adequate disclosure, is that oI the
management oI the Company. This includes the maintenance oI adequate accounting records and
internal controls and the selection and application oI accounting policies. As part oI our review
process, we will request written representations Irom management concerning Iinancial statement
assertions and other material matters.
- This letter will be eIIective Ior Iuture years unless it is terminated, amended or superseded as may
be mutually agreed upon.
- Our engagement cannot be relied upon to disclose whether Iraud or errors, or illegal acts, exist.
However, we will inIorm you oI any material matters that come to our attention.

Appendix 02
Illustrative Detailed Procedures that may be Performed in an Engagement to Review Financial
Statements
1. The inquiry and analytical review procedures carried out in a review oI Iinancial statements are
determined by the auditor`s judgment. The procedures listed below are Ior illustrative purposes only.
It is not intended that all the procedures suggested apply to every review engagement. This Appendix
is not intended to serve as a program or checklist in the conduct oI a review.
General
2. Discuss terms and scope oI the engagement with the client and the engagement team.
3. Prepare an engagement letter setting Iorth the terms and scope oI the engagement.
4. Obtain an understanding oI the entity`s business activities, the accounting and internal control
systems and the system Ior preparing Iinancial statements.
5. Inquire whether all Iinancial inIormation is recorded:
a) completely;
b) promptly; and
c) aIter the necessary authorization.
6. Obtain the trial balance and determine whether it agrees with the general ledger and the Iinancial
statements.
7. Consider the results oI previous audits and review engagements, including accounting adjustments
required.

120
8. Inquire whether there have been any signiIicant changes in the entity Irom the previous year.
9. Inquire about the accounting policies and consider whether:
a) they comply with Vietnamese Accounting Standards or other accounting standards accepted in
Vietnam;
b) they have been applied appropriately; and
c) they have been applied consistently and, iI not, consider whether disclosure has been made oI
any changes in the accounting policies.
10. Read the minutes oI meetings oI the Board oI Management, shareholders, directors and control
department in order to identiIy matters that could be important to the review.
11. Inquire iI actions taken at shareholder, director or Board oI Management meetings that aIIect the
Iinancial statements have been appropriately reIlected therein.
12. Inquire about the existence oI transactions with related parties, how such transactions have been
accounted Ior and whether related parties have been properly disclosed.
13. Inquire about contingencies and commitments.
14. Inquire about plans to dispose oI major assets or business segments.
15. Obtain the Iinancial statements and discuss them with management.
16. Consider the adequacy oI disclosure in the Iinancial statements and their suitability as to
classiIication and presentation.
17. Compare the results shown in the current period Iinancial statements with those shown in
Iinancial statements Ior comparable prior periods and, iI available, with budgets and Iorecasts.
18. Obtain explanations Irom management Ior any unusual Iluctuations or inconsistencies in the
Iinancial statements Irom such comparison.
19. Consider the eIIect oI any unadjusted errors - individually and in aggregate. Bring the errors to
the attention oI management and determine how the unadjusted errors will inIluence the report on
the review.
20. Consider obtaining a representation letter Irom management.
Cash
21. Obtain the bank reconciliations. Inquire oI client personnel about any old or unusual reconciling
items on the reconciliations.
22. Inquire about transIers between cash accounts Ior the period beIore and aIter the review date.
23. Inquire whether there are any restrictions on cash accounts.
Receivables
24. Inquire about the accounting policies Ior initially recording trade receivables and determine
whether any trade and sale allowances are given on such transactions.
25. Obtain a schedule oI receivables and determine whether the total agrees with the trial balance.
26. Obtain and consider explanations oI signiIicant variations in account balances Irom previous
periods or Irom those anticipated.
27. Obtain an aged analysis oI the trade receivables. Inquire about the reason Ior unusually large
accounts, credit balances on accounts or any other unusual balances and inquire about the
collectibility oI receivables.
28. Discuss with management the classiIication oI receivables, including non-current balances, net
credit balances and amounts due Irom shareholders, Board oI Management and other related
parties in the Iinancial statements.
29. Inquire about the method Ior identiIying 'slow payment accounts and setting allowances Ior
doubtIul accounts and consider it Ior reasonableness.

121
30. Inquire whether receivables have been pledged, Iactored or discounted.
31. Inquire about procedures applied to ensure that a proper cutoII oI sales transactions and sales
returns has been achieved.
32. Inquire whether accounts represent goods shipped but not yet billed and, iI so, whether
adjustments have been made to properly reIlect the goods in inventory.
33. Inquire whether any large receivables have been settled issued aIter the balance sheet date.
Inventories
34. Obtain the list oI counted inventory and determine whether:
a) any diIIerence has resulted between the list and the balance in the trial balance; and
b) the list is based on a physical count oI inventory.
35. Inquire about the method Ior counting inventory.
36. Where a physical count was not carried out on the balance sheet date, inquire
a) iI perpetual or periodic inventory system is used and whether comparisons are made with
actual quantities on hand; and
b) whether an integrated (work-in-progress and Iinished product) costing system is used and
whether it has produced reliable inIormation in the past.
37. Discuss adjustments made resulting Irom the last physical inventory count.
38. Inquire about procedures applied to control cutoII and any inventory movements.
39. Inquire about the basis used in valuing each category oI the inventory and, in particular, regarding
the elimination oI inter-branch proIits. Inquire whether inventory is valued at the lower oI cost
and net realizable value.
40. Consider the consistency with which inventory valuation methods have been applied, including
Iactors such as material, labor and overhead.
41. Compare amounts oI major inventory categories with those oI prior periods and with those
anticipated Ior the current period. Inquire about major Iluctuations and diIIerences.
42. Compare inventory turnover with that in previous periods.
43. Inquire about the method used Ior identiIying slow moving and obsolete inventory and whether
such inventory has been accounted Ior at net realizable value.
44. Inquire whether any oI the inventory has been consigned to the entity and, iI so, whether
adjustments have been made to exclude such goods Irom inventory.
45. Inquire whether any inventory is pledged, stored at other locations or on consignment to others
and consider whether such transactions have been accounted Ior appropriately.
Investments (including associated companies and marketable securities)
46. Obtain a schedule oI the investments at the balance sheet date and determine whether it agrees
with the trial balance.
47. Inquire about the valuation oI investments as oI the balance sheet date.
48. Compare the carrying values oI investments with their net realizable values.
49. Consider whether there has been proper accounting Ior gains and losses and investment income.
50. Inquire about the classiIication oI long-term and short-term investments.
!roperty and depreciation
51. Obtain a schedule oI the property indicating the cost and accumulated depreciation and determine
whether it agrees with the trial balance.
52. Inquire about the depreciation method in use and the estimated useIul lives oI property.
53. Discuss with management the additions and deletions to property accounts and accounting Ior
gains and losses on sales or retirements.

122
54. Inquire about the consistency with which the depreciation method and rates have been applied and
compare depreciation provisions with prior years.
55. Inquire whether there are any liens on the property.
56. Discuss whether lease agreements have been properly reIlected in the Iinancial statements in
conIormity with current accounting standards and regulations.
!repaid expenses, intangibles and other assets
57. Obtain schedules identiIying the nature oI these accounts and discuss with management the
recoverability thereoI.
58. Inquire about the basis Ior recording these accounts and the amortization methods used.
59. Compare balances oI related expense accounts with those oI prior periods and discuss signiIicant
variations with management.
60. Discuss the classiIication between long-term and short-term accounts with management.
Loans payable
61. Obtain Irom management a schedule oI loans payable and determine whether the total agrees with
the trial balance.
62. Inquire whether there are any loans where management has not complied with the provisions oI
the loan agreement and, iI so, inquire as to management`s actions and whether appropriate
adjustments have been made in the Iinancial statements.
63. Consider the reasonableness oI interest expense in relation to loan balances.
64. Inquire whether loans payable are secured.
65. Inquire whether loans payable have been classiIied between non-current and current.
Trade payables
66. Inquire about the accounting policies Ior initially recording trade payables and whether the entity
is entitled to any allowances given on such transactions.
67. Obtain and consider explanations oI signiIicant variations in account balances Irom previous
periods or Irom those anticipated.
68. Obtain a schedule oI trade payables and determine whether the total agrees with the trial balance.
69. Inquire whether balances are reconciled with the creditors` statements and compare with prior
period balances. Compare turnover with prior periods.
70. Consider whether there could be material unrecorded liabilities.
71. Inquire whether payables to shareholders, Board oI Manage- ment and other related parties are
separately disclosed.
Accrued and contingent liabilities
72. Obtain a schedule oI the accrued liabilities and determine whether the total agrees with the trial
balance.
73. Compare major balances oI related expense accounts with similar accounts Ior prior periods.
74. Inquire about approvals Ior such accruals, terms oI payment, compliance with terms, collateral
and classiIication.
75. Inquire about the method Ior determining accrued liabilities.
76. Inquire as to the nature oI amounts included in contingent liabilities and commitments.
77. Inquire whether any actual or contingent liabilities exist which have not been recorded in the
accounts. II so, discuss with management whether provisions need to be made in the accounts or
whether disclosure should be made in the notes to the Iinancial statements.

123
Income and other taxes
78. Inquire about the accounting procedures and the disparity between accounting-purpose and tax-
purpose incomes and disputes with taxation authorities, which could have a signiIicant eIIect on the
taxes payable by the entity.
79. Consider the tax expense in relation to the entity`s income Ior the period.
80. Inquire Irom management as to the adequacy oI the recorded deIerred and current tax liabilities
including provisions in respect oI prior periods.
Subsequent events
81. Obtain Irom management the latest interim Iinancial statements and compare them with the
Iinancial statements being reviewed or with those Ior comparable periods Irom the preceding year.
82. Inquire about events aIter the balance sheet date that would have a material eIIect on the Iinancial
statements under review and, in particular, inquire whether:
a) any substantial commitments or uncertainties have arisen subsequent to the balance sheet date;
b) any signiIicant changes in the share capital, long-term debt or working capital have occurred
up to the date oI inquiry; and
c) any unusual adjustments have been made during the period between the balance sheet date and
the date oI inquiry.
d) Consider the need Ior adjustments or disclosure in the Iinancial statements.
83. Obtain and read the minutes oI meetings oI shareholders, Board oI Management and directors
subsequent to the balance sheet date.
Litigation
84. Inquire Irom management whether the entity is the subject oI any legal actions-threatened,
pending or in process. Consider the eIIect thereoI on the Iinancial statements.
Equity
85. Obtain and consider a schedule oI the transactions in the equity accounts, including new issues,
retirements and dividends.
86. Inquire whether there are any restrictions on retained earnings or other equity accounts.
perations
87. Compare results with those oI prior periods and those expected Ior the current period. Discuss
signiIicant variations with management.
88. Discuss whether the recognition oI major sales, other incomes and expenses have taken place in
the appropriate periods.
89. Consider extraordinary and unusual items.
90. Consider and discuss with management the relationship between related items in the revenue
account and assess the reasonableness thereoI in the context oI similar relationships Ior prior
periods and other inIormation available to the auditor.


124
Appendix 03
Form of Unqualified Review Report

XYZ Audit Firm
Ao. ...

AUDITOR`S REPORT ON
RESULTS OF FINANCIAL STATEMENTS REVIEW
We have reviewed the accompanying balance sheet oI ABC Company at December 31, 20X1, and the
related statements oI income and cash Ilows Ior the year then ended. These Iinancial statements are the
responsibility oI the Company`s management. Our responsibility is to issue a report on these Iinancial
statements based on our review.
We conducted our review in accordance with the Vietnamese Standard on Auditing applicable to review
engagements. This Standard requires that we plan and perIorm the review to obtain moderate assurance as
to whether the Iinancial statements are Iree oI material misstatement. A review is limited primarily to
inquiries oI company personnel and analytical procedures applied to Iinancial data and thus provides less
assurance than an audit. We have not perIormed an audit and, accordingly, we do not express an audit
opinion.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying
Iinancial statements do not give a true and Iair view (or are not presented Iairly, in all material respects,`)
in accordance with Vietnamese Accounting Standards (or other accounting standards accepted in
Vietnam) and relevant legislation.

XYZ AUDIT FIRM ., day., month., year.
Director Auditor


125
Appendix 04
Examples of Review Reports other than Unqualified

XYZ Audit Firm Form 01
Address, tel. and fax no. . Example 01: Qualification for a
Ao. ... Departure From Vietnamese
Accounting Standards

AUDITOR` S REPORT ON
We have reviewed the accompanying balance sheet oI ABC Company at December 31, 20X1, and the
related statements oI income and cash Ilows Ior the year then ended. These Iinancial statements are the
responsibility oI the Company`s management. Our responsibility is to issue a report on these Iinancial
statements based on our review.
We conducted our review in accordance with the Vietnamese Standards on Auditing applicable to review
assurance than an audit. We have not perIormed an audit, and, accordingly, we do not express an audit
opinion.
Management has inIormed us that inventory has been stated at its cost which is in excess oI its net
realizable value. Management`s computation, which we have reviewed, shows that inventory, iI valued
at the lower oI cost and net realizable value as required by Vietnamese Accounting Standard
'Inventories, would have been decreased by XXX, and net assets and shareholders` equity would have
been decreased by YYY.
Based on our review, except Ior the eIIects oI the overstatement oI inventory described in the previous
paragraph, nothing has come to our attention that causes us to believe that the accompanying Iinancial
statements do not give a true and Iair view (or are not presented Iairly, in all material respects,`) in
accordance with Vietnamese Accounting Standards (or other accounting standards accepted in Vietnam)
and relevant legislation.

Director Auditor



126

XYZ Audit Firm Form 02
Address, tel. and fax no. ... Example 02: Adverse Report for a
Ao. . Departure From Vietnamese
Accounting Standards

AUDITOR`S REPORT ON
We have reviewed the balance sheet oI ABC Company at December 31, 20X1, and the related statements
oI income and cash Ilows Ior the year then ended. These Iinancial statements are the responsibility oI the
Company`s management. Our responsibility is to issue a report on these Iinancial statements based on our
review.
We conducted our review in accordance with the Vietnamese Standards on Auditing applicable to review
assurance than an audit. We have not perIormed an audit and, accordingly, we do not express an audit
opinion.
As noted in note X to the Iinancial statements, these Iinancial statements do not reIlect the consolidation
oI the Iinancial statements oI subsidiary companies, the investment in which is accounted Ior on a cost
basis. Under Vietnamese Accounting Standards, the Iinancial statements oI the subsidiaries are required to
be consolidated.
Based on our review, because oI pervasive eIIect on the Iinancial statements oI the entity Iailing to
comply with the accounting principles as discussed in the preceding paragraph, and to consolidate the
Iinancial statements oI its subsidiaries, the accompanying Iinancial statements do not give a true and Iair
view (or 'are not presented Iairly, in all material respects,) in accordance with Vietnamese Accounting
Standards (or other accounting standards accepted in Vietnam) and relevant legislation.

Director Auditor

Standard No 920 - Engagements to perform agreed-upon procedures regarding financiaI
information

127
STANDARD 920
ENGAGEMENTS TO PERFORM AGREED-UPON PROCEDURES REGARDING
FINANCIAL INFORMATION

GENERAL
01. The purpose oI this Vietnamese Standard on Auditing (ISA) is to establish standards and provide
guidance on proIessional responsibilities oI the auditor and audit Iirm when an engagement to
perIorm agreed-upon procedures regarding Iinancial inIormation is undertaken and on the Iorm and
content oI the report that the auditor issues in connection with such an engagement.
02. The auditor and the audit firm should conduct an agreed-upon procedures engagement in
accordance with this VSA and the terms of the engagement.
03. This VSA is directed toward engagements regarding Iinancial inIormation on agreed-upon
procedures and may provide useIul guidance Ior engagements regarding non-Iinancial inIormation,
provided the auditor has adequate knowledge oI the subject matter in question and reasonable criteria
exist on which to base Iindings.
For engagements regarding Iinancial inIormation on agreed-upon procedures, apart Irom this VSA the
auditor should reIer to other VAS.
04. An engagement to perIorm agreed-upon procedures may involve the auditor in perIorming certain
procedures concerning individual items oI Iinancial data (Ior example, accounts payable, accounts
receivable, purchases Irom related parties and sales and proIits oI a segment oI an entity), a Iinancial
statement (Ior example, a balance sheet) or even a complete set oI Iinancial statements.
Contents of the VSA
Objective of an Agreed-upon Procedures Engagement
05. The objective of an agreed-upon procedures engagement is for the auditor to carry out
procedures of an audit nature to which the auditor and the entity and any appropriate third
parties have agreed and to report on factual findings.
06. As the auditor and the audit Iirm simply provide a report oI the Iactual Iindings oI agreed-upon
procedures, no assurance is expressed as to the reliability oI Iinancial inIormation. Instead, users oI the
report assess Ior themselves the procedures and Iindings reported by the auditor and draw their own
conclusions Irom the auditor`s work.
07. The report is restricted to those parties that have agreed to the procedures to be perIormed since
others, unaware oI the reasons Ior the procedures, may misinterpret the results.
General Principles of an Agreed-upon Procedures Engagement
08. The auditor should comply with the professional ethical principles in accordance with VSA 200
~Objective and General Principles Governing an Audit of Financial Statements. Ethical principles
governing the auditor`s professional responsibilities for this type of engagement are:
a) independence
b) integrity;
c) objectivity;
d) proIessional competence and due care;
e) conIidentiality;
I) proIessional behavior; and
g) technical standards.
information

128
In certain circumstances, independence is not a requirement Ior agreed-upon procedures
engagements. Where the auditor is not independent, a statement to that eIIect would be made in the
report oI Iactual Iindings.
Defining the Terms of the Engagement
09. The auditor and the audit firm should ensure with representatives of the entity and, ordinarily,
other specified parties who will receive copies of the report of factual findings, that there is a
clear understanding regarding the agreed procedures and the conditions of the engagement.
Matters to be agreed include the:
- Nature oI the engagement including the Iact that the procedures perIormed will not constitute an
audit or a review and that accordingly no assurance will be expressed.
- Stated purpose Ior the engagement.
- IdentiIication oI the Iinancial inIormation to which the agreed-upon procedures will be applied.
- Nature, timing and extent oI the speciIic procedures to be applied.
- Anticipated Iorm oI the report oI Iactual Iindings.
- Limitations on distribution oI the report oI Iactual Iindings. When such limitation would be in
conIlict with the legal requirements, iI any, the auditor would not accept the engagement.
10. In certain circumstances, Ior example, when the procedures have been agreed to between the regulator and
representatives oI the accounting proIession, the auditor may not be able to discuss the procedures with all
the parties who will receive the report. In such cases, the auditor may consider, Ior example, discussing
the procedures to be applied with appropriate representatives oI the parties involved or sending them a
draIt oI the type oI report that will be issued.
11. The auditor should send an engagement letter documenting the key terms oI the appointment:
- A listing oI the procedures to be perIormed as agreed upon between the parties.
- A statement that the distribution oI the report oI Iactual Iindings would be restricted to the
speciIied parties who have agreed to the procedures to be perIormed.
An example oI an engagement letter appears in Appendix 01 to this VSA.
Planning
12. The auditor and the audit firm should plan the work so that an effective engagement will be
performed.
Documentation
13. The auditor should document matters which are important in providing evidence to support the
report of factual findings, and evidence that the engagement was carried out in accordance with
this VSA and the terms of the engagement.
Procedures and Evidence
14. The auditor and the audit firm should carry out the procedures agreed upon and use the
evidence obtained as the basis for the report of factual findings.
15. The procedures applied in an engagement to perIorm agreed-upon procedures may include one or
some oI the Iollowing methods in accordance with VSA 500 'Audit evidence:
- Inquiry.
- Observation.
- Inspection.
- Obtaining conIirmations.
- Recomputation, comparison and other clerical accuracy checks.
- Analysis
Reporting
16. The report on an agreed-upon procedures engagement needs to describe the purpose and the agreed-
upon procedures oI the engagement in suIIicient detail to enable the reader to understand the nature
information

129
and the extent oI the work perIormed.
17. The report of factual findings should contain:
a) Name of address of the audit firm;
b) Report number;
c) Report title;
d) Report addressee;
e) a statement that the procedures performed were those agreed upon with the recipient;
f) identification of specific financial or non-financial information to which the agreed-upon
procedures have been applied;
g) a statement that the engagement was performed in accordance with this Vietnamese Standards
on Auditing applicable to agreed-upon procedures engagements;
h) when relevant a statement that the auditor is not independent of the entity;
i) identification of the purpose for which the agreed-upon procedures were performed;
j) a listing of the specific procedures performed;
k) a description of the auditor`s factual findings including sufficient details of errors and
exceptions found;
l) statement that the procedures performed do not constitute either an audit or a review and,
as such, no assurance is expressed;
m) a statement that had the auditor performed additional procedures, an audit or a review,
other matters might have come to light that would have been reported;
n) a statement that the report is restricted to those parties that have agreed to the procedures
to be performed;
o) a statement (when applicable) that the report relates only to the elements, accounts, items or
financial and non-financial information specified and that it does not extend to the entity`s
financial statements taken as a whole;
p) issue place and date of the report;
q) name, signature and seal.
Appendix 02 to this ISA contains an example oI a report oI Iactual Iindings issued in connection with
an engagement to perIorm agreed-upon procedures regarding Iinancial inIormation.
information

130
Appendix 1
Example of an Engagement Letter for an Agreed-upon
Procedures Engagement

The Iollowing letter is Ior use as a guide in conjunction with paragraph 09 oI this VSA and is not intended
to be a standard letter. The engagement letter will need to be varied according to individual requirements
and circumstances.
XYZ AUDIT FIRM
No. .

ENGAGEMENT LETTER

To: The Board oI Management and Directors oI ABC Company
This letter is to conIirm our understanding oI the terms and objectives oI our engagement and the nature
and limitations oI the services that we will provide. Our engagement will be conducted in accordance with
VSA 920 'Engagements to perIorm agreed-upon procedures regarding Iinancial inIormation and we will
indicate so in our report.
We have agreed to perIorm the Iollowing procedures and report to you the Iactual Iindings resulting Irom
our work:
(describe the nature, timing and extent of the procedures to be performed, including specific reference,
where applicable, to the identity of documents and records to be read, individuals to be contacted and
parties from whom confirmations will be obtained).
The procedures that we will perIorm are solely to assist you in (state purpose). Our report is not to be
used Ior any other purpose and is solely Ior your inIormation.
The procedures that we will perIorm will not constitute an audit or a review made in accordance with
Vietnamese Standards on Auditing and, consequently, no assurance will be expressed.
We look Iorward to Iull cooperation with your staII and we trust that they will make available to us
whatever records, documentation and other inIormation requested in connection with our engagement.
Our Iees, which will be billed as work progresses, are based on the time required by the individuals
assigned to the engagement plus out-oI-pocket expenses. Individual hourly rates vary according to the
degree oI responsibility involved and the experience and skill required.
Please sign and return the attached copy oI this letter to indicate your understanding oI the terms oI the
engagement including the speciIic procedures which we have agreed will be perIormed.

ACKNOWLEDGED ON BEHALF OF ., date... month... year...
ABC COMPANY BY XYZ AUDIT FIRM
DIRECTOR DIRECTOR OR REPRESENTATIVE
(FULL NAME, SIGNATURE AND SEAL) (FULL NAME, SIGNATURE AND
SEAL)

information

131
Appendix 2
Example of a Report of Factual Findings in Connection
with Accounts Payable

XYZ AUDIT FIRM
No. .

REPORT OF FACTUAL FINDINGS

To: The Board oI Management and Directors oI ABC Company
We have perIormed the procedures agreed with you and enumerated below with respect to the accounts
payable oI ABC Company as at (date), set Iorth in the accompanying schedules (not shown in this
example). Our engagement was undertaken in accordance with VSA 920 'Engagements to perIorm
agreed-upon procedures regarding Iinancial inIormation. The procedures were perIormed as Iollows:
1. We obtained and checked the addition oI the trial balance oI accounts payable as at (date) prepared by
ABC Company, and we compared the total to the balance in the related general ledger account.
2. We compared the attached list (not shown in this example) oI major suppliers and the amounts
owing at (date) to the related names and amounts in the trial balance.
3. We obtained suppliers` statements or requested suppliers to conIirm balances owing at (date).
4. We compared such statements or conIirmations to the amounts reIerred to in 2. For amounts which did
not agree, we obtained reconciliations Irom ABC Company. For reconciliations obtained, we identiIied
and listed outstanding invoices, credit notes and outstanding checks, each oI which was greater than xxx.
We located and examined such invoices and credit notes subsequently received and checks subsequently
paid and we ascertained that they should in Iact have been listed as outstanding on the reconciliations.
We report our Iindings below:
a) With respect to item 1 we Iound an additional account payable which was not recorded and put it on the
list oI trade accounts payable.
b) With respect to item 2 we Iound the amounts compared to be in agreement.
c) With respect to item 3 we Iound there were suppliers` statements Ior all such suppliers.
d) With respect to item 4 we Iound the amounts agreed with supplier conIirmations, or with respect to
amounts which did not agree. We requested that ABC Company prepare reconciliations and Iound
that the credit notes, invoices and outstanding checks over xxx were appropriately listed as
reconciling items with the Iollowing exceptions: (Detail the exceptions).
Because the above procedures do not constitute either an audit or a review made in accordance with
Vietnamese Standards on Auditing, we do not express any assurance on the accounts payable as oI (date).
Had we perIormed additional procedures or had we perIormed an audit or review oI the Iinancial
statements in accordance with Vietnamese Standards on Auditing, other matters might have come to our
attention that would have been reported to you.
Our report is solely Ior the purpose set Iorth in the Iirst paragraph oI this report and Ior your inIormation
and is not to be used Ior any other purpose or to be distributed to any other parties. This report relates only
to the accounts and items speciIied above and does not extend to any Iinancial statements oI ABC
Company, taken as a whole.

XYZ Audit Firm ..., day... month ...year ...
Director Auditor
CPA CertiIicate No. ... CPA CertiIicate No. ...

Standard No 402 - Audit considerations reIating to entities using service organizations

132
STANDARD 402
AUDIT CONSIDERATIONS RELATING TO ENTITIES
USING SERVICE ORGANIZATIONS
dated 18 January 2005)

GENERAL
guidance to the audit Iirm and the auditor whose client uses a service organization. This VSA also
describes the service organization auditor`s reports which may be obtained by the audit Iirm and
auditor oI the client entity.
02. The auditor and the audit firm should consider how the services rendered by a service
organization affects the client`s accounting and internal control systems so as to plan the audit
and develop an effective audit approach.
03. A client may use services oI an organization or individual (hereinaIter reIerred jointly to as service
organization), such as record-keeping, Iinancial inIormation gathering and IT related services. II a
client uses a service organization, certain policies, procedures and records maintained by the service
organization may be relevant to the audit oI the Iinancial statements oI the client entity.
04. This VSA applies to audits oI Iinancial statements oI entities using services organizations and also
applies to an audit oI other Iinancial inIormation and related services rendered by the audit Iirm.
The auditor and the audit Iirm should comply with this VSA in conducting an audit and rendering
related services.
It is expected that the auditee (client) entity and users oI the audit report should possess essential
and the audit Iirm and in dealing with relations maintained during the audit.
05. Service organi:ation reIers an organization licensed or individual registered to do business in accordance
with the provisions oI law and liable to provide such services to other businesses and organizations on
the basis oI contract terms and conditions.
06. Service organi:ation auditor means the auditor who audits the Iinancial statements oI a service
organization as a client.
CONTENTS OF THE VSA
Considerations of the Client Audit Firm and Auditor
07. A service organization may establish and execute policies and procedures that aIIect a client
organization`s accounting and internal control systems. These policies and procedures are physically
and operationally separate Irom the client organization. When the services provided by the service
organization are limited to recording and processing client transactions and the client retains
authorization and maintenance oI accountability, the client may be able to implement eIIective policies
and procedures within its organization. When the service organization executes the client`s transactions
and maintains accountability, the client may deem it necessary to rely on policies and procedures at the
service organization.
08. The auditor and the audit firm should determine the significance of service organization activities
to the client and the relevance to the audit. In doing so, the client auditor would need to consider the
Iollowing, as appropriate:
O Nature oI the services provided by the service organization.

133
O Terms oI contract and relationship between the client and the service organization.
O The material Iinancial statement assertions that are aIIected by the use oI the service organization.
O Inherent risk associated with those assertions.
O Extent to which the client`s accounting and internal control systems interact with the systems at
the service organization.
O Client`s internal controls that are applied to the transactions processed by the service organization.
O Service organization`s capability and Iinancial strength, including the possible eIIect oI the Iailure
oI the service organization on the client.
O InIormation about the service organization such as that reIlected in user and technical manuals.
O InIormation available on general controls and computer systems controls relevant to the client`s
applications.
Consideration oI the above may lead the auditor and the audit Iirm to decide that the control risk
assessment will not be aIIected by controls at the service organization; iI so, Iurther consideration oI
this VSA is unnecessary.
09. The client auditor would also consider the report oI the service organization auditors, internal
auditors, or regulatory agencies as a means oI providing inIormation about the accounting and
internal control systems oI the service organization and about its operation and eIIectiveness.
10. If the client audit firm and the auditor concludes that the activities of the service organization
are significant to the entity and relevant to the audit, the audit firm and the auditor should
obtain sufficient information to understand the accounting and internal control systems and to
assess control risk at either the maximum, or a lower level if tests of control are performed.
11. II inIormation is insuIIicient, the client auditor would consider the need to request the service
organization to have its audit Iirm and auditor perIorm such procedures as to supply the necessary
inIormation, or the need to visit the service organization to obtain the inIormation. A client auditor
wishing to visit a service organization may advise the client to request the service organization to
give the client auditor access to the necessary inIormation.
12. The client auditor may be able to obtain an understanding oI the accounting and internal control
systems aIIected by the service organization by reading the third-party report oI the service
organization auditor. In addition, when assessing control risk Ior assertions aIIected by the systems`
controls oI the service organization, the client auditor may also use the service organization auditor`s
report. If the client auditor uses the report of a service organization auditor, the auditor should
consider making inquiries concerning that auditor`s professional competence in the context of the
specific assignment undertaken by the service organization auditor.
13. The client auditor may conclude that it would be eIIicient to obtain audit evidence Irom tests oI
control to support an assessment oI control risk at a lower level. Such evidence may be obtained by:
a) PerIorming tests oI the client`s controls over activities oI the service organization.
b) Obtaining a service organization auditor`s report that expresses an opinion as to the operating
eIIectiveness oI the service organization`s accounting and internal control systems Ior the processing
applications relevant to the audit.
c) Visiting the service organization and perIorming tests oI control.
Service Organization Auditor`s Reports
14. When using a service organization auditor`s report, the client audit firm and auditor should
consider the nature of and content of that report.
15. The report oI the service organization auditor will ordinarily be one oI two types as Iollows:
Type A - Report on suitability of design
a) a description oI the service organization`s accounting and internal control systems, ordinarily
prepared by the management oI the service organization; and

134
b) an opinion by the service organization audit Iirm and auditor that:
i) the above description is accurate;
ii) the systems` controls have been placed in operation; and
iii) the accounting and internal control systems are suitably designed to achieve their stated
objectives.
Type B - Report on suitability of design and operating effectiveness
a) a description oI the service organization`s accounting and internal control systems, ordinarily
prepared by the management oI the service organization; and
b) an opinion by the service organization audit Iirm and auditor that:
i) the above description is accurate;
ii) the systems` controls have been placed in operation;
iii) the accounting and internal control systems are suitably designed to achieve their stated
objectives; and
iv) the accounting and internal control systems are operating eIIectively based on the results
Irom the tests oI control. In addition to the opinion on operating eIIectiveness, the service
organization audit Iirm and auditor would identiIy the tests oI control perIormed and related
results.
The report oI the service organization auditor will ordinarily contain restrictions as to use (generally
to management, the service organization and its customers, and client audit Iirm and auditor).
16. The audit firm and the auditor should consider the scope of work performed by the service
organization audit firm and auditor and should assess the usefulness and appropriateness of
reports issued by the service organization audit firm and auditor.
17. While Type A reports may be useIul to the audit Iirm and the auditor in gaining the required
understanding oI the accounting and internal control systems, an auditor would not use such reports
as a basis Ior reducing the assessment oI control risk.
18. In contrast, Type B reports may provide such a basis at a lower control risk assessment since tests oI
control have been perIormed. In this case, a client auditor would consider:
a) whether the controls tested by the service organization audit Iirm and auditor are relevant to the
client`s transactions (signiIicant assertions in the client`s Iinancial statements); and,
b) whether the service organization auditor`s tests oI control and the results are adequate. With
respect to the latter, two key considerations are the length oI the period covered by the service
organization auditor`s tests and the time since the perIormance oI those tests.
19. For those specific tests of control and results that are relevant, a client audit firm and auditor
should consider whether the nature, timing and extent of such tests provide sufficient
appropriate audit evidence about the effectiveness of the accounting and internal control
systems to support the client auditor`s assessed level of control risk.
20. The auditor oI a service organization may be engaged to perIorm control procedures as requested by
the client auditor. Such engagements should be subject to agreement between the client entity, its
audit Iirm, the service organization and its audit Iirm.
21. When the client audit Iirm and auditor use a report Irom the auditor oI a service organization, no
reIerence should be made in the client auditor`s report to the auditor`s report on the service
organization.
Standard No 620 - Using the work of an expert

135
STANDARD 20
USING THE WORK OF AN EXPERT

GENERAL
guidance on using the work oI an expert as audit evidence Ior a Iinancial statement audit.
02. When using the work performed by an expert in a financial statement audit, the auditor and
the audit firm should obtain sufficient appropriate audit evidence that such work is adequate
for the purposes of the audit.
The auditor and the audit firm should comply with this VSA in using the work of an expert
during an audit of financial statements.
It is expected that the audited entity and users of the audit report should possess essential
knowledge of this VSA in working with the auditor and audit firm and in dealing with the relations
in using the work of an expert during an audit of financial statements.
04. Expert means a person or Iirm possessing special skill, knowledge and experience in a particular Iield
other than accounting and auditing.
05. An expert may be:
a) engaged by the entity;
b) engaged by the audit Iirm; or
c) employed by the entity;
d) employed by the audit Iirm, or
e) an organization or individual other than employed by the entity and the audit Iirm.
contents of the vsa
Determining the Need to Use the Work of an Expert
06. During the audit, the auditor and the audit Iirm may need to obtain audit evidence in the Iorm oI
reports, opinions, valuations and statements oI an expert. Examples are:
- Valuations oI certain types oI assets, Ior example, land and buildings, plant and machinery, works oI art,
and precious stones.
- Determination oI the remaining useIul liIe oI machinery and equipment
- Determination oI quantities or physical condition oI assets, Ior example, minerals stored in
stockpiles, underground mineral and petroleum reserves.
- Determination oI amounts using specialized techniques or methods, Ior example, an actuarial
valuation.
- The measurement oI work completed and to be completed on contracts in progress.
- Legal opinions concerning interpretations oI agreements, statutes and regulations.
07. When determining the need to use the work oI an expert, the auditor and the audit Iirm would
consider:
a) the materiality oI the Iinancial statement item being considered;
b) the risk oI misstatement based on the nature and complexity oI the matter being considered; and
c) the quantity and quality oI other audit evidence available.

136
Competence and Objectivity of the Expert
08. When planning to use the work of an expert, the auditor and the audit firm should assess the
professional competence of the expert. This will involve considering the expert`s:
a) proIessional certiIication or licensing by, or membership in, an appropriate proIessional body; and
b) experience and reputation in the Iield in which the auditor is seeking audit evidence.
09. The auditor and the audit firm should assess the objectivity of the expert.
The risk that an expert`s objectivity will be impaired increases when the expert is:
a) employed by the entity or the audit Iirm, or
b) related to the entity in Iinancial terms, such as having an investment, share capital or lending; or
Iamily relations, such as being a parent, spouse, child, sibling, etc oI the management members,
including the chieI accountant).
10. II the auditor is concerned regarding the competence or objectivity oI the expert, the auditor needs to
discuss any reservations with management and consider whether suIIicient appropriate audit evidence
can be obtained concerning the work oI an expert. The auditor and the audit Iirm may need to
undertake additional audit procedures or seek audit evidence Irom another expert.
Scope of the Expert`s Work
11. The auditor and the audit firm should obtain sufficient appropriate audit evidence that the
scope of the expert`s work is adequate for the purposes of the audit. Audit evidence may be
obtained through a review oI the terms oI reIerence which are oIten set out in written instructions
Irom the entity to the expert. Such instructions to the expert may cover matters such as:
- The objectives and scope oI the expert`s work.
- A general outline as to the speciIic matters the auditor expects the expert`s report to cover.
- The intended use by the auditor and the audit Iirm oI the expert`s work, including the possible
communication to third parties oI the expert`s identity and extent oI involvement.
- The extent oI the expert`s access to appropriate records and Iiles.
- ClariIication oI the expert`s relationship with the entity, iI any.
- ConIidentiality oI the entity`s inIormation.
- InIormation regarding the assumptions and methods intended to be used by the expert and their
consistency with those used in prior periods.
In the event that these matters are not clearly set out in written instructions to the expert, the auditor
may need to communicate with the expert directly to obtain audit evidence in this regard.
Assessing the Work of the Expert
12. The auditor and the audit firm should assess the appropriateness of the expert`s work as audit
evidence regarding the financial statement assertion being considered. This will involve assessment
oI whether the substance oI the expert`s Iindings is properly reIlected in the Iinancial statements or
supports the Iinancial statement assertions, and consideration oI:
- Source data used.
- Assumptions and methods used and their consistency with prior periods.
- Results oI the expert`s work in the light oI the auditor`s overall knowledge oI the business and oI
the results oI other audit procedures.
13. When considering whether the expert has used source data which is appropriate in the circumstances,
the auditor and the audit Iirm would consider the Iollowing procedures:
a) making inquiries regarding any procedures undertaken by the expert to establish whether the
source data is suIIicient, relevant and reliable; and
b) reviewing or testing the data used by the expert.
14. The appropriateness and reasonableness oI assumptions and methods used and their application are
the responsibility oI the expert. The auditor and the audit Iirm do not have the same expertise and,
thereIore, cannot always challenge the expert`s assumptions and methods. However, the auditor and

137
the audit Iirm will need to obtain an understanding oI the assumptions and methods used and to
consider whether they are appropriate and reasonable, based on the auditor`s knowledge oI the
business and the results oI other audit procedures.
15. If the results of the expert`s work do not provide sufficient appropriate audit evidence or if the
results are not consistent with other audit evidence, the auditor and the audit firm should
resolve the matter. This may involve discussions with the entity and the expert, applying additional
procedures, including possibly engaging another expert, or modiIying the audit report.
Reference to an Expert in the Auditor`s Report
16. When issuing an unmodified audit report, the auditor should not refer to the work of an expert.
Such a reIerence might be misunderstood to be a qualiIication oI the auditor`s opinion or a division
oI responsibility, neither oI which is intended.
17. II, as a result oI the work oI an expert, the auditor and the audit Iirm decide to issue a modiIied
auditor`s report, in some circumstances it may be appropriate, in explaining the nature oI the
modiIication, to reIer to or describe the work oI the expert (including the identity oI the expert and
the extent oI the expert`s involvement). In these circumstances, the auditor and the audit Iirm would
obtain the permission oI the expert beIore making such a reIerence. II permission is reIused and the
auditor and the audit Iirm believe a reIerence is necessary, the auditor may need to seek legal advice.
Standard No 710 - Comparatives

138
STANDARD 10
COMPARATIVES

GENERAL
guidance on the responsibilities oI the auditor and the audit Iirm regarding comparatives in an audit
oI Iinancial statements.
This VSA does not deal with situations when summarized Iinancial statements are presented with the
audited Iinancial statements.
02. The auditor and the audit firm should determine whether the comparatives comply in all
material respects with Vietnamese Accounting Standards relevant to the preparation and
disclosure of the financial statements being audited.
03. Comparatives in Iinancial statements, Ior example, may present amounts (such as Iinancial position,
results oI operations, cash Ilows) and appropriate disclosures in an explanatory Iorm oI an entity Ior
more than one period, depending on the standard on Iinancial statements presentation. The
Irameworks and methods oI presentation are reIerred to in this VSA as Iollows:
a) Corresponding Figures where amounts and other disclosures Ior the preceding period are
included as part oI the current period Iinancial statements, and are intended to be read in relation
to the amounts and other disclosures relating to the current period (reIerred to as 'current period
Iigures Ior the purpose oI this VSA). These corresponding Iigures are not presented as complete
Iinancial statements capable oI standing alone, but are an integral part oI the current period
Iinancial statements intended to be read only in relationship to the current period Iigures; and
b) Comparative Financial Statements where amounts and other disclosures Ior the preceding period
are included Ior comparison with the Iinancial statements oI the current period, but do not Iorm part
oI the current period Iinancial statements.
(ReIer to Appendix 1 to this VSA Ior brieI Iormats oI comparative Iinancial statements)
04. Comparatives are presented in compliance with the relevant Iinancial reporting Iramework. The
essential audit reporting diIIerences are that:
a) Ior corresponding Iigures, the auditor`s report only reIers to the Iinancial statements oI the current
period; whereas
b) Ior comparative Iinancial statements, the auditor`s report reIers to each period that Iinancial
statements are presented.
CONTENTS OF THE VSA
Corresponding Figures
The Auditor and Audit Firms Responsibilities
05. The auditor should obtain sufficient appropriate audit evidence that the corresponding figures
meet the requirements of the relevant financial reporting framework. The extent oI audit procedures
perIormed on the corresponding Iigures is signiIicantly less than Ior the audit oI the current period Iigures
and is ordinarily limited to ensuring that the corresponding Iigures have been correctly reported and are
appropriately classiIied. This involves the auditor and the audit Iirm assessing whether:
a) accounting policies used Ior the corresponding Iigures are consistent with those oI the current
period (or whether appropriate adjustments and/or disclosures have been made); and
b) corresponding Iigures agree with the amounts and other disclosures presented in the prior period
or whether appropriate adjustments and/or disclosures have been made.

139
06. When the Iinancial statements oI the prior period have been audited by another auditor, the incoming
auditor assesses whether the corresponding Iigures meet the conditions speciIied in paragraph 05 above
and also Iollows the guidance in VSA 510, Initial Engagements - Opening Balances.
07. When the Iinancial statements oI the prior period were not audited, the incoming auditor and audit
Iirm nonetheless assesses whether the corresponding Iigures meet the conditions speciIied in
paragraph 05 above and also Iollows the guidance in VSA 510, Initial Engagements - Opening
Balances.
08. II the auditor becomes aware oI a possible material misstatement in the corresponding Iigures when
perIorming the current period audit, the auditor perIorms such additional procedures as are
appropriate in the circumstances.
Reporting
09. When the comparatives are presented as corresponding figures, the auditor and the audit firm
should issue an audit report in which the comparatives are not specifically identified because
the auditor`s opinion is on the current period financial statements as a whole, including the
corresponding figures.
10. The auditor's report would make specific reference to the corresponding figures only in the
circumstances described in paragraphs 11, 12, 14(b), and 15 through 18.
11. When the auditor`s report on the prior period, as previously issued, included a qualified
opinion, disclaimer of opinion, or adverse opinion and the matter which gave rise to the
modification is:
a) unresolved, and results in a modification of the auditor`s report regarding the current
period figures, the auditor`s report should also be modified regarding the corresponding
figures; or
b) unresolved, but does not result in a modification of the auditor`s report regarding the
current period figures, the auditor`s report should be modified regarding the corresponding
figures.
12. When the auditor`s report on the prior period, as previously issued, included a qualiIied opinion,
disclaimer oI opinion, or adverse opinion and the matter which gave rise to the modiIication is
resolved and properly dealt with in the Iinancial statements, the current report does not ordinarily
reIer to the previous modiIication. However, iI the matter is material to the current period, the auditor
may include an emphasis oI matter paragraph dealing with the situation.
13. In perIorming the audit oI the current period Iinancial statements, the auditor, in certain unusual
circumstances, may become aware oI a material misstatement that aIIects the prior period Iinancial
statements on which an unmodiIied report has been previously issued.
14. In such circumstances, the auditor should consider the guidance in VSA 50, Subsequent
Events, and
a) if the prior period financial statements have been revised and reissued with a new auditor`s
report, the auditor should be satisfied that the corresponding figures agree with the revised
financial statements; or
b) if the prior period financial statements have not been revised and reissued, and the
corresponding figures have not been properly restated and/or appropriate disclosures have
not been made, the auditor should issue a modified report on the current period financial
statements modified with respect to the corresponding figures included therein.
15. If, in the circumstances described in paragraph 13, the prior period financial statements have
not been revised and an auditor`s report has not been reissued, but the corresponding figures
have been properly restated and appropriate disclosures have been made in the current period
financial statements, the auditor may include an emphasis of matter paragraph describing the
circumstances and referencing to the appropriate disclosures. In this regard, the auditor also

140
considers the guidance in VSA 50, Subsequent Events.
Incoming Auditor - Additional Requirements
!rior !eriod Financial Statements Audited by Another Auditor
16. The incoming auditor is permitted to reIer to the predecessor auditor`s report on the corresponding
Iigures in the incoming auditor`s report Ior the current period. When the auditor decides to refer to
another auditor, the incoming auditor`s report should indicate:
a) that the financial statements of the prior period were audited by another auditor;
b) the type of report issued by the predecessor auditor and, if the report was modified, the
reasons therefor; and
c) the date of that report.
!rior !eriod Financial Statements Not Audited
17. When the prior period financial statements are not audited, the incoming auditor should state
in the auditor`s report that the corresponding figures are unaudited. Such a statement does not,
however, relieve the auditor oI the requirement to perIorm appropriate procedures regarding opening
balances oI the current period. Clear disclosure in the Iinancial statements that the corresponding
Iigures are unaudited is encouraged.
18. In situations where the incoming auditor identifies that the corresponding figures are
materially misstated, the auditor should request management to revise the corresponding
figures or, if management refuses to do so, appropriately modify the report.
Comparative Financial Statements
The Auditor and Audit Firms Responsibilities
19. The auditor should obtain sufficient appropriate audit evidence that the comparative financial
statements meet the requirements of the relevant financial reporting framework. This involves
the auditor assessing whether:
a) accounting policies oI the prior period are consistent with those oI the current period or whether
appropriate adjustments and/or disclosures have been made; and
b) prior period Iigures presented agree with the amounts and other disclosures presented in the prior
period or whether appropriate adjustments and disclosures have been made.
20. When the Iinancial statements oI the prior period have been audited by another auditor and audit
Iirm, the incoming auditor assesses whether the comparative Iinancial statements meet the conditions
in paragraph 19 above and also Iollows the guidance in VSA 510, Initial Engagements - Opening
Balances.
21. When the Iinancial statements oI the prior period were not audited, the incoming auditor nonetheless
assesses whether the comparative Iinancial statements meet the conditions speciIied in paragraph 19
above and also Iollows the guidance in VSA 510, Initial Engagements - Opening Balances.
22. II the auditor becomes aware oI a possible material misstatement in the prior year Iigures when
perIorming the current period audit, the auditor perIorms such additional procedures as are
appropriate in the circumstances.
Reporting
23. When the comparatives are presented as comparative financial statements, the auditor should
issue a report in which the comparatives are specifically identified because the auditor`s
opinion is expressed individually on the financial statements of each period presented. Since the
auditor`s report on comparative Iinancial statements applies to the individual Iinancial statements
presented, the auditor and the audit Iirm may express a qualiIied or adverse opinion, disclaim an
opinion, or include an emphasis oI matter paragraph with respect to one or more Iinancial statements

141
Ior one or more periods, while issuing a diIIerent report on the other Iinancial statements.
24. When reporting on the prior period financial statements in connection with the current year`s
audit, if the opinion on such prior period financial statements is different from the opinion
previously expressed, the auditor and the audit firm should disclose the substantive reasons for
the different opinion in an emphasis of matter paragraph. This may arise when the auditor
becomes aware oI circumstances or events that materially aIIect the Iinancial statements oI a prior
period during the course oI the audit oI the current period.
Incoming Auditor - Additional Requirements
!rior !eriod Financial Statements Audited by Another Auditor
25. When the financial statements of the prior period were audited by another auditor,
a) the predecessor auditor may reissue the audit report on the prior period with the incoming
auditor only reporting on the current period; or
b) the incoming auditor`s report should state that the prior period was audited by another
auditor and the incoming auditor`s report should indicate:
(i) that the financial statements of the prior period were audited by another auditor;
(ii) the type of report issued by the predecessor auditor and if the report was modified, the
reasons therefor; and
(iii) the date of that report.
26. In perIorming the audit on the current period Iinancial statements, the incoming auditor, in certain
unusual circumstances, may become aware oI a material misstatement that aIIects the prior period
Iinancial statements on which the predecessor auditor had previously reported without modiIication.
27. In these circumstances, the incoming auditor should discuss the matter with management and,
after having obtained management`s authorization, contact the predecessor auditor and
propose that the prior period financial statements be restated. If the predecessor agrees to
reissue the audit report on the restated financial statements of the prior period, the auditor
should follow the guidance in paragraph 25.
28. II, in the circumstances discussed in paragraph 26, the predecessor does not agree with the proposed
restatement or reIuses to reissue the audit report on the prior period Iinancial statements, the
introductory paragraph oI the auditor`s report may indicate that the predecessor auditor reported on
the Iinancial statements oI the prior period beIore restatement. In addition, iI the incoming auditor is
engaged to audit and applies suIIicient procedures to be satisIied as to the appropriateness oI the
restatement adjustment, the auditor may also include the Iollowing paragraph in the report:
e also audited the adfustments described in Note X that were applied to restate the 20X0
financial statements. In our opinion, such adfustments are appropriate and have been properly
applied.
!rior !eriod Financial Statements Not Audited
29. When the prior period financial statements are not audited, the incoming auditor should state
in the auditor`s report that the comparative financial statements are unaudited. Such a
statement does not, however, relieve the auditor oI the requirement to carry out appropriate
procedures regarding opening balances oI the current period. Clear disclosure in the Iinancial
statements that the comparative Iinancial statements are unaudited is encouraged.
30. In situations where the incoming auditor identifies that the prior year unaudited figures are
materially misstated, the auditor should request management to revise the prior year`s figures
or if management refuses to do so, appropriately modify the report.

142
Appendix 01
Discussion of Financial Reporting Frameworks for Comparatives

1. Comparatives covering one or more preceding periods provide the users oI Iinancial statements with
inIormation necessary to identiIy trends and changes aIIecting an entity over a period oI time.
2. Under Iinancial reporting Irameworks, comparability and consistency are desirable qualities Ior
Iinancial inIormation. Comparability is the quality oI having certain characteristics in common and
comparison is normally a quantitative assessment oI the common characteristics. Consistency is a
quality oI the relationship between two accounting numbers. Consistency (Ior example, consistency in
the use oI accounting principles Irom one period to another, the consistency oI the length oI the
reporting period, etc.) is a prerequisite Ior true comparability.
3. There are two broad Iinancial reporting Irameworks Ior comparatives: the corresponding Iigures and the
comparative Iinancial statements.
4. Under the corresponding Iigures Iramework, the corresponding Iigures Ior the prior period(s) are an
integral part oI the current period Iinancial statements and have to be read in conjunction with the
amounts and other disclosures relating to the current period. The level oI detail presented in the
corresponding amounts and disclosures is dictated primarily by its relevance to the current period Iigures.
5. Under the comparative Iinancial statements Iramework, the comparative Iinancial statements Ior the prior
period(s) are considered separate Iinancial statements. Accordingly, the level oI inIormation included in
those comparative Iinancial statements (including all statement amounts, disclosures, Iootnotes and other
explanatory statements to the extent that they continue to be oI signiIicance) approximates that oI the
Iinancial statements oI the current period.

Appendix 02
EXAM!LE AUDITR'S RE!RTS
(Comparatives)
Example 01: Report for the circumstances described in paragraph 11a
XYZ COMPANY
Address, tel. and fax, email
No.:.......................................

AUDITOR`S REPORT
ON THE FINANCIAL STATEMENTS OF ABC COMPANY
FOR THE YEAR.

1o: The Board of Management and Directors of ABC Company
the related statements oI income and cash Ilows Ior the year then ended together with the appended notes.
These Iinancial statements are the responsibility oI the Company`s management. Our responsibility is to
express an opinion on these Iinancial statements based on our audit.
Basis of Opinion
that we plan and perIorm the audit to obtain reasonable assurance about whether the Iinancial statements
are Iree oI material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the Iinancial statements. An audit also includes assessing the current (or

143
estimates and judgments made by the management as well as evaluating the overall statement
presentation. We believe that our audit provides a reasonable basis Ior our opinion.
As discussed in Note X to the Iinancial statements, no depreciation has been provided in the Iinancial
statements which practice, in our opinion, is not in accordance with Vietnamese Accounting Standards.
This is the result oI a decision taken by management at the start oI the preceding Iinancial year and caused
us to qualiIy our audit opinion on the Iinancial statements relating to that year. Based on the straight-line
method oI depreciation and annual rates oI 5 Ior the building and 20 Ior the equipment, the loss Ior
the year should be increased by VNDXXX in 20X1 and VNDXXY in 20X0, the Iixed assets should be
reduced by accumulated depreciation oI VNDXXX in 20X1 and VNDXXY in 20X0, and the accumulated
loss should be increased by VNDXXX in 20X1 and VNDXXY in 20X0.
Qualified Opinion
In our opinion, except Ior the eIIect on the Iinancial statements oI the matter reIerred to in the preceding
paragraph, the Iinancial statements give a true and Iair view, in all material respects, oI the Iinancial
position oI the Company as oI December 31, 20X1, and oI the results oI its operations and its cash Ilows
Ior the year then ended in accordance with the current Vietnamese Accounting Standards and Regulations
and other relevant legislation.

XYZ CM!ANY
Director Auditor
., day... month... year ...
(*) It may be relevant to specify the name of XYZ Audit Firm.

144
Example 02. Report for the circumstances described in paragraph 11b
XYZ COMPANY
No.:.......................................
AUDITOR`S REPORT
FOR THE YEAR.
express an opinion on these Iinancial statements based on our audit.
Basis of Opinion
Because we were appointed auditors oI the Company during 20X1, we were not able to observe the
counting oI the physical inventories at the beginning oI that (period) or satisIy ourselves concerning those
inventory quantities by alternative means. Since opening inventories enter into the determination oI the
results oI operations, we were unable to determine whether a revision oI the auditor's report on the
Iinancial statements might be necessary Ior the year ended. 20X0.
Qualified Opinion
In our opinion, except Ior the eIIect on the corresponding Iigures Ior 20X0 oI the adjustments, iI any,
which we might have determined to be necessary had we been able to observe beginning inventory
quantities as at ..., the Iinancial statements give a true and Iair view, in all material respects, oI the
Iinancial position oI the Company as oI December 31, 20X1, and oI the results oI its operations and its
cash Ilows Ior the year then ended in accordance with the current Vietnamese accounting standards and
regulations and other relevant legislation.

XYZ CM!ANY
Director Auditor
., day ... month ... year ...

145
Example 03. Report for the circumstances described in paragraph 23
XYZ COMPANY
No.:.......................................
AUDITOR`S REPORT
FOR THE YEAR.
express an opinion on these Iinancial statements based on our audits.
Basis of Opinion
As discussed in Note X to the Iinancial statements, no depreciation has been provided in the Iinancial
statements which practice, in our opinion, is not in accordance with Vietnamese Accounting Standards.
Based on the straight-line method oI depreciation and annual rates oI 5 Ior the building and 20 Ior the
equipment, the loss Ior the year should be increased by XXX in 20X1 and XXX in 20X0, the Iixed assets
should be reduced by accumulated depreciation oI XXX in 20X1 and XXX in 20X0, and the accumulated
loss should be increased by XXX in 20X1 and XXX in 20X0.
Qualified Opinion
paragraph, the Iinancial statements give a true and Iair view, in all material respects, oI the Iinancial
position oI the Company as oI December 31, 20X1 and 20X0, and oI the results oI its operations and its
cash Ilows Ior the years then ended in accordance with the current Vietnamese accounting standards and
regulations and other relevant legislations.

XYZ CM!ANY
Director Auditor

146
Example 04. Example Report for the circumstances described in paragraph 16
XYZ COMPANY
No.:.......................................
AUDITOR`S REPORT
FOR THE YEAR.

1o: Board of Management and Directors of ABC Company
the related statements oI income and cash Ilows Ior the year then ended together with the appended notes
express an opinion on these Iinancial statements based on our audit. The Iinancial statements oI the
Company as oI December 31, 20X0, were audited by another auditor whose report dated March 31, 20X1
expressed an unqualiIied opinion on these Iinancial statements.
Basis of Opinion
Unqualified Opinion
In our opinion, the Iinancial statements give a true and Iair view, in all material respects, oI the Iinancial
position oI the Company as oI December 31, 20X1, and oI the results oI its operations and its cash Ilows
Ior the year then ended in accordance with the current Vietnamese accounting standards and regulations
and other relevant legislation.

XYZ CM!ANY
Director Auditor
., day ... month ... year ...

147
Example 05. Report for the circumstances described in paragraph 25b
XYZ COMPANY
No.:.......................................
AUDITOR`S REPORT
FOR THE YEAR.
express an opinion on these Iinancial statements based on our audit. The Iinancial statements oI the
Company as oI December 31, 20X0, were audited by another auditor whose report dated March 31, 20X1
expressed a qualiIied opinion due to their disagreement as to the adequacy oI the provision Ior doubtIul
receivables.
Basis of Opinion
The receivables reIerred to above are still outstanding at December 31, 20X1 and no provision Ior
potential loss has been made in the Iinancial statements. Accordingly, the provision Ior doubtIul
receivables at December 31, 20X1 and 20X0 should be increased by XXX, the net proIit Ior 20X0
decreased by XXX and the retained earnings at December 31, 20X1 and 20X0 reduced by XXX.
Qualified Opinion
paragraph, the 20X1 Iinancial statements reIerred to above give a true and Iair view, in all material
respects, oI the Iinancial position oI the Company as oI December 31, 20X1, and oI the results oI its
operations and its cash Ilows Ior the year then ended in accordance with the current accounting standards
and regulations and other relevant legislations.
XYZ CM!ANY
Director Auditor
Standard No 720 - Other information in documents containing audited financiaI statements

148
STANDARD 20
OTHER INFORMATION IN DOCUMENTS CONTAININGAUDITED FINANCIAL
STATEMENTS

GENERAL
guidance on the auditor and the audit Iirm`s consideration oI other inIormation, on which the auditor
and the audit Iirm have no obligation to report, in documents containing audited Iinancial statements.
This VSA applies when an annual report is involved, however it may also apply to other documents,
such as those used in securities oIIerings.
02. The auditor should read the other information disclosed together with the audited financial
statements to identify material inconsistencies with the audited financial statements.
The auditor and the audit Iirm should comply with this VSA in the gathering and dealing with audit
evidence.
It is expected that the auditee (client) entity, and organizations and individuals involved in an audit oI
Iinancial statements should possess essential knowledge as to the general principles and procedures
set out in this VSA in working with the auditor and the audit Iirm during an audit oI Iinancial
statements.
04. ther information means Iinancial and non-Iinancial inIormation required by statutes or practices which
can be disclosed with the Iinancial statements oI the entity. Examples oI such inIormation include a
report by management or the board oI directors on operations, important human resources summaries or
data, planned capital expenditures, Iinancial ratios, names oI oIIicers and directors and selected quarterly
data.
05. Annual report means a set oI documents including audited Iinancial statements Ior a given year and the
auditor's report.
06. A material inconsistency exists when other inIormation contradicts inIormation contained in the
audited Iinancial statements. A material inconsistency may raise doubt about the audit conclusions
drawn Irom audit evidence previously obtained and, possibly, about the basis Ior the auditor`s opinion
on the Iinancial statements.
CONTENTS OF THE VSA
07. The auditor has a statutory or contractual obligation to report speciIically on other inIormation
contained in the audited Iinancial statements. However, the auditor and the audit Iirm need to give
consideration to such other inIormation when issuing a report on the Iinancial statements, as the
credibility oI the audited Iinancial statements may be undermined by inconsistencies which may exist
between the audited Iinancial statements and other inIormation.
08. The auditor and the audit Iirm are required to apply speciIic procedures to certain oI the other
inIormation, Ior example, required supplementary data and interim Iinancial inIormation. II such
other inIormation is omitted or contains deIiciencies, the auditor may be required to reIer to the
matter in the auditor`s report.
09. When there is an obligation to report speciIically on other inIormation, the responsibilities oI the
auditor and the audit Iirm are determined by the nature oI the engagement and by local legislation and
proIessional standards. When such responsibilities involve the review oI other inIormation, the auditor

149
will need to Iollow the guidance on review engagements in the appropriate auditing standards.
Access to Other Information
10. In order that the auditor and the audit Iirm can consider other inIormation included in the annual
report, timely access to such inIormation will be required. The auditor thereIore needs to make
appropriate arrangements with the entity to obtain such inIormation prior to the date oI the auditor`s
report. In certain circumstances, all the other inIormation may not be available prior to such date. In
these circumstances, the auditor and the audit Iirm would Iollow the guidance in paragraphs 21 to 24.
Consideration of Other Information
11. The objective and scope oI an audit oI Iinancial statements are Iormulated on the premise that the
auditor`s responsibility is restricted to inIormation identiIied in the auditor`s report. Accordingly, the
auditor and the audit Iirm have no speciIic responsibility to determine that other inIormation is
properly stated.
Material Inconsistencies
12. If, on reading the other information, the auditor identifies a material inconsistency, the auditor
and the audit firm should determine whether the audited financial statements or the other
information needs to be amended.
13. If an amendment is necessary in the audited financial statements and the entity refuses to
make the amendment, the auditor and the audit firm should express a qualified or adverse
opinion.
14. If an amendment is necessary in the other information and the entity refuses to make the
amendment, the auditor and the audit firm should consider including in the auditor`s report an
emphasis of matter paragraph describing the material inconsistency or taking other actions.
The actions taken, such as not issuing the auditor`s report or withdrawing Irom the engagement, will
depend upon the particular circumstances and the nature and signiIicance oI the inconsistency. The
auditor would also consider obtaining legal advice as to Iurther action.
Material Misstatements of Fact
15. While reading the other inIormation Ior the purpose oI identiIying material inconsistencies, the
auditor may become aware oI an apparent material misstatement oI Iact.
16. If the auditor and the audit firm become aware that the other information appears to include a
material misstatement of fact, the auditor should discuss the matter with the entity`s
management. When discussing the matter with the entity`s management, the auditor may not be able
to evaluate the validity oI the other inIormation and management`s responses to the auditor`s
inquiries. The auditor and the audit Iirm would then need to consider whether valid diIIerences oI
judgment or opinion exist.
17. When the auditor still considers that there is an apparent misstatement of fact, the auditor
should request management to consult with a qualified third party, such as the entity`s legal
counsel and should consider the advice received.
18. If the auditor concludes that there is a material misstatement of fact in the other information
which management refuses to correct, the auditor should consider taking further appropriate
action. The actions taken could include such steps as notiIying those persons ultimately responsible
Ior the overall direction oI the entity in writing oI the auditor`s concern regarding the other
inIormation and obtaining legal advice.
Availability of Other Information After the Date of the Auditor`s Report
20. When all the other inIormation is not available to the auditor prior to the date oI the auditor`s report,
the auditor would read the other inIormation at the earliest possible opportunity thereaIter to identiIy
material inconsistencies.
21. II the auditor identiIies a material inconsistency or becomes aware oI an apparent material

150
misstatement oI Iact, the auditor would determine whether the audited Iinancial statements or the
other inIormation need revision.
22. When revision oI the audited Iinancial statements is appropriate, the guidance in VSA 560,
Subsequent Events, would be Iollowed.
23. When revision oI the other inIormation is necessary and the entity agrees to make the revision, the
auditor and the audit Iirm would carry out the procedures necessary under the circumstances. The
procedures may include reviewing the steps taken by management to ensure that individuals in
receipt oI the previously issued Iinancial statements, the auditor`s report thereon and the other
inIormation are inIormed oI the revision.
24. When revision of the other information is necessary but management refuses to make the
revision, the auditor should consider taking further appropriate action. The actions taken could
include such steps as notiIying management oI the entity in writing oI the auditor`s concern regarding
the other inIormation and obtaining legal advice.
Standard No 930 - Engagement to compiIe financiaI information

151
STANDARD 930
ENGAGEMENT TO COMPILE FINANCIAL INFORMATION

GENERAL
guidance on the proIessional responsibilities oI public practice accountants and accounting service
Iirms (hereinaIter jointly reIerred to as the accountant) when an engagement to compile Iinancial
inIormation is undertaken and the Iorm and content oI the report the accountant issues in connection
with such a compilation.
This standard also constitutes a basis Ior the audit Iirm and the auditor to implement engagements to
compile Iinancial inIormation or audit Iinancial statements oI entities using service organizations.
02. The accountant (also the auditor and the audit Iirm) should comply with this VSA in implementing
engagements to compile Iinancial inIormation.
03. This VSA is directed toward the compilation oI Iinancial inIormation and also applies to
engagements to compile non-Iinancial inIormation, provided the accountant has adequate knowledge
oI the subject matter in question. Engagements to provide limited assistance to a client in the
preparation oI Iinancial statements (Ior example, on the selection oI an appropriate accounting
policy) do not constitute an engagement to compile Iinancial inIormation.
In this VSA, the following terms have the meaning attributed below:
04. Engagements to compile financial information means engagements including the preparation oI part
or the whole set oI Iinancial statements, combined Iinancial statements or the collection,
classiIication and summarization oI other Iinancial inIormation.
CONTENTS OF THE VAS
Objective of a Compilation Engagement
05. The objective of a compilation engagement is for the accountant to use accounting expertise, as
opposed to auditing expertise, to collect, classify and summarize financial information. This
ordinarily entails reducing detailed data to a manageable and understandable Iorm without a
requirement to test the assertions underlying that inIormation. The procedures employed are not
designed and do not enable the accountant to express any assurance on the Iinancial inIormation.
General Principles of a Compilation Engagement
06. The accountant should comply with the code of ethics for professional accountants in
conducting engagements to compile financial information as follows:
a) independence;
b) integrity;
c) objectivity;
d) proIessional competence and due care;
e) conIidentiality;
I) proIessional behavior; and
g) technical standards.
Where the accountant is not independent, a statement to that eIIect would be made in the accountant`s
report.
07. The accountant engaged in compiling financial information should issue a report on the
completed compilation engagement (Appendix 02).
Defining the Terms of the Engagement

152
08. The accountant should ensure that there is a clear understanding between the client and the
accountant regarding the terms of the engagement. Matters to be considered include the:
O Nature oI the engagement including the Iact that neither an audit nor a review will be carried out
and that accordingly no assurance will be expressed.
O Fact that the engagement cannot be relied upon to disclose errors or Iraud.
O Nature oI the inIormation to be supplied by the client.
O Fact that management is responsible Ior the accuracy and completeness oI the inIormation
supplied to the accountant Ior the completeness and accuracy oI the compiled Iinancial
inIormation.
O Basis oI accounting on which the Iinancial inIormation is to be compiled and the Iact that it, and
any known departures thereIrom, will be disclosed.
O Intended use and distribution oI the inIormation, once compiled.
O Form oI report to be rendered and responsibilities oI the accountant whose name is associated
therewith.
09. An engagement to compile Iinancial inIormation is in accordance with VSA 210, Terms oI Audit
Engagements, with major requirement stated at Appendix 01.
Planning
10. The accountant should plan the work so that an effective engagement will be performed. The
planning procedures are in accordance with VSA 300, Audit Planning.
Documentation
11. The accountant should document matters which are important in providing evidence that the
engagement was carried out in accordance with this VSA and the terms of the engagement.
Documentation procedures are in accordance with VSA 230, Documentation.
Procedures
12. The accountant should obtain a general knowledge of the business and operations of the entity
and should be familiar with the accounting principles and practices of the industry in which the
entity operates and with the form and content of the financial information that is appropriate
in the circumstances.
13. To compile Iinancial inIormation, the accountant requires a general understanding oI the nature oI the
entity`s business transactions, the Iorm oI its accounting records and the accounting basis on which
the Iinancial inIormation is to be presented. The accountant ordinarily obtains knowledge oI these
matters through experience with the entity or inquiry oI the entity`s personnel.
14. Other than as noted in this VSA, the accountant is not ordinarily required to:
a) make any inquiries oI management to assess the reliability and completeness oI the inIormation
provided;
b) assess internal controls;
c) veriIy any matters; or
d) veriIy any explanations.
15. If the accountant becomes aware that information supplied by management is incorrect,
incomplete, or otherwise unsatisfactory, the accountant should consider performing the
procedures set out in paragraph 14 and request management to provide additional
information. If management refuses to provide additional information, the accountant should
withdraw from the engagement, informing the entity of the reasons for the withdrawal.
16. The accountant should read the compiled information and consider whether it appears to be
appropriate in form and free from obvious material misstatements. In this sense, misstatements
include:
a) Mistakes in the application oI the identiIied Iinancial reporting Iramework.

153
b) Nondisclosure oI the Iinancial reporting Iramework and any known departures thereIrom.
c) Nondisclosure oI any other signiIicant matters oI which the accountant has become aware.
The accounting standards applied and other information on such application should be
disclosed in the footnotes to the financial information, though their effects need not be
quantified.
17. If the accountant becomes aware of material misstatements, the accountant should try to agree
appropriate amendments with the entity. If such amendments are not made and the financial
information is considered to be misleading, the accountant should withdraw from the
engagement.
Responsibility of Management
18. The accountant should obtain an acknowledgment from management of its responsibility for
the appropriate presentation of the financial information and of its approval of the financial
information. Such acknowledgment may be provided by representations Irom management which
cover the accuracy and completeness oI the underlying accounting data and the complete disclosure
oI all material and relevant inIormation to the accountant.
Reporting on a Compilation Engagement
19. Reports on compilation engagements should contain the following:
a) Accounting service firm's name and address;
b) report number;
c) report title;
d) addressee;
e) a statement that the engagement was performed in accordance with VSA 930, Engagements
to Compile Financial Information;
I) when relevant, a statement that the accountant is not independent of the entity;
g) identification of the financial information noting that it is based on information provided by
management;
h) a statement that management is responsible for the financial information compiled by the
accountant;
i) a statement that neither an audit nor a review has been carried out and that accordingly no
assurance is expressed on the financial information;
j) a paragraph, when considered necessary, drawing attention to the disclosure of material
departures from the identified financial reporting framework;
k) date of the report;
l) signature, full name, professional license no. of the accountant; and signature, full name,
professional license no. of Director (or entity representative) and seal of the accounting
service firm.
Appendix 2 to this VSA contains examples oI compilation reports.
20. The financial information compiled by the accountant should contain a reference such as
'Unaudited, 'Compiled without Audit or Review or 'Refer to Compilation Report on each
page of the financial information or on the front of the complete set of financial statements.

154
Appendix 01
Examples of Contract for Compilation Engagement
(For guidance and reference)
ACCOUNTING SERVICE FIRM . SOCIALIST REPUBLIC OF VIETNAM
Address, tel and fax........ Independence - Freedom - Happiness
No.:................. -------------------------------------------------
., day. month. year.

CONTRACT FOR COMPILATION ENGAGEMENT

Pursuant to Economic Contract Ordinance and Decree No. dated. oI the Government speciIying
the detailed implementation oI the Economic Contract Ordinance;
Pursuant to Accounting Law dated June 17, 2003 and Decree No. 129/2004/ND-CP dated May 31,
2004 oI the Government speciIying details and providing guidance on the implementation oI Accounting
Law Ior business activities; and,
Pursuant to VSA 930, Engagements to Compile Financial InIormation,
This memorandum oI contract is made by and between
Party A: Company. (hereinaIter reIerred to as Party A)
Represented by : ..................
Position : ..................
Tel. : ..................
Fax : ..................
Address : ..................
Account No. : ...... At Bank oI ........
Party B: Accounting service firm. (hereinaIter reIerred to as Party B)
Represented by : ..................
Position : ..................
Tel. : ..................
Fax : ..................
Address : ..................
Account No. : ...... At Bank oI........
Upon agreement, the parties hereto hereby sign this contract with the terms and conditions speciIied
as Iollows:
Article 1: Description of Services
Party B shall provide Party A with the compilation service as Iollows:
...........................
Article 2: Governing Laws and Standards
The compilation service shall be conducted in accordance with VSA 930, Engagements to Compile
Financial InIormation, and related Vietnamese Accounting Standards.

155
Article 3: Responsibilities of the Parties
3.1. Party A shall:
- supply Party B inIormation Ior the preparation oI Iinancial statements and have responsibity Ior
the accuracy and completeness oI the inIormation supplied and data combined by Party B in
respect oI a third party. Such inIormation shall be Iormed in accordance with the current
accounting standards and regulations;
- open appropriate accounting books, maintain internal control procedures, and select and apply
suitable accounting policies;
- delegate responsibility personnel to work with and supply Party B accounting data and other
inIormation to enable Party B to prepare Iinancial statements.
- .
3.2. Party B shall:
- prepare the balance sheet as at December 31, 200X, the related statements oI income and cash
Ilows Ior the year then ended and the appended notes. These Iinancial statements are compiled in
accordance with the accounting standards and regulations and VSA 930, Engagements to Compile
Financial InIormation.
- not perIorm audit procedures or limited examination oI these Iinancial statements, and hence shall
not provide assurance on the Iinancial statements.
- inIorm Party A oI the Iinding oI errors, Irauds or breaches oI provisions oI law,
- state in the Iinancial statements prepared by Party B, or disclose in the compilation report all
departures Irom, and breaches oI, the accounting standards and regulations.
- .
Article 4: Reporting
Upon completion oI the engagement to compile Iinancial inIormation, Party B shall deliver to Party
A:
- a compilation report; and
- the Iinancial statements prepared by Party B.
Article 5: Fee and Payment Method
- The total Iee is:.................................................................................................. (In
words:.........................................................................................................................)
- Payment oI the Iee shall be made. (as agreed).
Article : Commitments and Due Dates
Both parties commit to implement all articles as set Iorth herein. During the implementation, either
party should be kept promptly inIormed oI any problems that might obstruct the successIul completion oI
the engagement to discuss possible solutions. InIormation shall be directed to the other party in writing at
the above address.
The engagement shall be completed within . days beginning the date oI this contract.
Article : Effectiveness, Language and Duration of Contract
This contract is made in. copies in Vietnamese and. copies in. (English), oI which the
Vietnamese version shall be binding in case oI misinterpretation and shall come into Iull Iorce upon the
second signature and seal. Either party shall retain. copies in Vietnamese and. copies in. (English).
This contract shall remain in eIIect until certiIication oI completion or cancellation oI contract as may
be agreed by both parties.

156

PARTY B
ACCOUNTING SERVICE FIRM .
PARTY A
COMPANY .
Director Director
(Signature, full name and seal) (Signature, full name and seal)
Accountant Practice Certificate Ao. (or CPA
Certificate Ao. )

Appendix 02
Examples of Compilation Reports
Example 01. A report on an Engagement to Compile Financial Statements
XYZ ACCOUNTING SERVICE FIRM
Address, tel and fax, email
No.:......................................

COMPILATION REPORT

To. The Boards oI Management and Directors oI .
(Company name)

On the basis oI inIormation you provide, we (*) have compiled the balance sheet as at December 31,
200X, the related statements oI income and cash Ilow and the notes to the Iinancial statements (set out on
pages Irom. to.) Ior the year then ended. The Iinancial statements are compiled in accordance with
VSA 930, Engagements to Compile Financial InIormation.
Management is responsible Ior the preparation and disclosure oI these Iinancial statements. Our
responsibility is to assist the management in IulIilling its responsibilities. We have not audited or
reviewed these Iinancial statements and accordingly expressed no assurance thereon.

XYZ ACCOUNTING SERVICE FIRM ...., day... month... year ...
Director Accountant
Accountant Practice Certificate Ao. (or CPA
Certificate Ao. )
Accountant Practice Certificate Ao. (or
CPA Certificate Ao. )
(*). It may be relevant to specify the name of XYZ Accounting Service Firm

157
Example 02. A report on an Engagement to Compile Financial Statements with an Additional
!aragraph that Draws Attention to a Departure from the Identified Financial Reporting Framework
XYZ ACCOUNTING SERVICES COMPANY
No.:.......................................

COMPILATION REPORT

To. The Boards oI Management and Director oI . (Company name)
On the basis oI inIormation you provide, we (*) have compiled the balance sheet as at December 31,
200X, the related statements oI income and cash Ilow and the notes to the Iinancial statements (set out on
pages Irom. to.) Ior the year then ended. The Iinancial statements are compiled in accordance with
VSA 930, Engagements to Compile Financial InIormation.
Management is responsible Ior the preparation and disclosure oI these Iinancial statements. Our
responsibility is to assist the management in IulIilling its responsibilities. We have not audited or
reviewed these Iinancial statements and accordingly expressed no assurance thereon.
We draw attention to Note X to the Iinancial statements because management has elected not to
capitalize the leases on Iixed assets, which is a departure Irom the current accounting standards and
regulations underlying the preparation oI the Iinancial statements.

XYZ ACCOUNTING SERVICE Co. ...., day ... month ... year ...
Director Accountant
Accountant Practice certificate Ao. (or cPA
certificate Ao.)
Accountant Practice Certificate Ao. (or cPA
certificate Ao.)
(*). it may be relevant to specify the name of xy: accounting service company

Standard No 1000 - Audit of finaI accounts of investment

158
STANDARD 1000
AUDIT OF FINAL ACCOUNTS OF INVESTMENT

GENERAL
Iundamental principles and provide guidance on procedures to be Iollowed by the audit Iirm and the
auditor in an audit oI Iinal accounts oI investment.
02. The auditor and the audit firm should adhere to the objectives and principles of auditing final
accounts of investment, conduct the audit in the established processes and orders and provide
an opinion on the integrity and reasonability of the final accounts of investment in accordance
with prevailing statutory regulations, auditing standards and fundamental principles and
procedures prescribed in this VSA.
03. This VAS applies to audits oI Iinal accounts oI investment, which are reports on the investment costs
oI civil works and capital construction, development planning and other civil projects which have
been completed.
- The auditor and audit Iirm should comply with the provisions oI this VSA in auditing Iinal
accounts oI investment.
- It is expected that the auditee (client) entity and users oI the auditor's report should possess
essential knowledge oI the Iundamental objectives and principles set out in this VSA in joining
the auditor and the audit Iirm in the audit and dealing with the relations involving the audited
inIormation.
04. Final accounts of investment reIers to the system oI Iinancial reports prepared in accordance with
prevailing accounting standards and systems, Iinancial regulations and relevant provisions oI law Ior
Iair reIlection oI economic, Iinancial inIormation and other essential data oI the investment process
oI construction works and projects.
05. Employer entity means the equity owner or the person charged with direct management and use oI
investment Iunds in accordance with the provisions oI law.
06. Authori:ed approver of final accounts means the legal representative oI a state or governmental agency
or a business enterprise who is authorized to veriIy and approve Iinal accounts oI investment according
to prevailing regulations on construction management.
07. Final accounts dossiers means all documents, papers and schedules necessarily prepared and gathered
by Employer entity in relation to a completed civil work or project in accordance with prevailing
regulations on investment costs settlement.
08. Settled investment costs reIers to the total valid outlays incurred during the construction process to
bring the work into intended use. Valid outlays are costs realized Iollowing approved design
estimates, technical norms, unit prices, Iinancial-accounting regulations, construction contracts and
relevant statutory requirements. Settled investment costs are normally less than, or equal to, the total
budget originally approved or subsequently revised Ior a particular civil work or project.
09. Technicians means individuals with qualiIied proIessional competency and skills on construction
economy and technology, who are invited to undertake, or join the audit team in, the technical
veriIication oI a completed civil work or project.
CONTENTS OF THE VSA

159
Objectives of an Audit of Final Accounts of Investment
10. The objective of an audit of final accounts of investment is to enable the auditor and audit firm to
express an opinion as to whether the final accounts of investment have been prepared in
accordance with established accounting standards and systems and current regulations on
investment costs settlement; comply with the provisions of law and relevant regulations on
construction management; and present fairly, in all material respects, the conditions and results
of construction investments.
11. The opinion expressed by the auditor and audit Iirm would enhance the credibility oI the Iinal
accounts oI investment and create a basis Ior the authorized approver oI Iinal accounts to veriIy and
approve the construction investment costs.
Fundamental Principles Underlying an Audit of Final Accounts of Investment
12. The principles underlying governing an audit oI Iinal accounts oI investment are:
- Compliance with provisions oI law;
- Compliance with the code oI ethics Ior practicing auditors; and
- Application oI existing auditing standards and adherence to the provisions oI this VSA.
13. The auditor should show constant respects Ior and abide by the provisions oI law in auditing Iinal
accounts oI investment.
14. The auditor should comply with the Code oI ethics Ior practicing auditors, which contains the
underlying principles that Iollow:
a) Independence;
b) Integrity;
c) Objectivity;
d) ProIessional competence and due care;
e) ConIidentiality;
I) ProIessional behaviour; and
g) Technical standards.
15. In auditing Iinal accounts oI investment, the auditor should apply the related Vietnamese standards
on auditing, namely, Audit Engagements, Documentation, Planning, Knowledge oI the Business,
Audit Evidence, Audit Sampling and Other Selected Testing Procedures, Using the Work oI an
Experts, The Auditor's Reports on Financial Statements and other relevant standards.
Responsibility for Final Accounts of Investment and Final Accounts Dossiers
16. The Director (or the leader) of the auditee entity (either Employer entity or Project
management) is responsible to prepare and present final accounts of investment in accordance
with accounting standards and systems, current regulations on investment costs settlement and
relevant provisions of law.
17. The Director (or the leader) oI the auditee entity is responsible to make available to and provide the
auditor with Iinal accounts dossiers prepared in accordance with relevant regulations and other
related documents, including minutes (iI any) oI previous examinations and investigations and take
liability Ior the Iairness, accurateness and timeliness oI the dossiers and documents supplied to the
auditor.
In the case of an entity failing to fully prepare the final accounts dossiers, an auditor can be
engaged to provide advisory services of compliling final accounts dossiers as a separate contract
unless otherwise the work is constructed with funds from the State budget. The auditor and audit
firm which assist an entity in compiling such final accounts dossiers are not permitted to provide
the entity with an audit of final accounts of investment.

160
18. The duty of the auditor and audit firm is to audit final accounts of investment and final
accounts dossiers and express an opinion on the audited final accounts of investment.
19. The audit oI Iinal accounts oI investment will not release the Director (or the leader) oI the auditee
entity Irom their responsibility Ior the Iinal accounts oI investment.
Contract signing
20. It is required that a written contract be signed Ior a Iinal accounts oI investment audit between the
audit Iirm and Employer entity beIore the perIormance oI the audit. For a project subject to audit, an
audit contract may be reached beIore the date oI its completion. The audit contract should be clear
with a description oI works and duties oI the involved parties, the Iorms oI auditor's reports, the
service Iees and payment modes. In signing and implementing an audit contract, the auditor and audit
Iirm should adhere to VSA 210, Audit Engagements.
(Refer to Appendix 01 for example of audit contract)
Procedures and Approaches oI a Final Accounts oI Investment Audit
21. In auditing final accounts of investment, the auditor and audit firm ordinarily follow the three-
phase process that follows:
1) Planning phase
2) Testing phase
3) Conclusion phase
Phase 1. Planning
22. An audit plan should be prepared for an audit of final accounts of investment of projects of A
and B Groups according to prevailing regulations and should be communicated to the auditee
entity for co-ordination. Planning should be adequately prepared, taking into accounts all material
aspects oI an audit; detection oI risks, errors and inherent considerations to ensure the audit is
completed as scheduled. The audit plan enables the auditor to assign work to assistants and
technicians and coordinate with related personnel oI the auditee entity.
For an audit of the final accounts of investment of a project of Group C, the audit firm
should prepare an audit plan as suggested in paragraphs 21 - 29 herein to keep the audit work in
line with the project's size and nature.
23. The scope oI an audit plan will vary depending on the size, complexity oI the audit and the auditor's
knowledge and experience oI the project under audit.
24. In planning an audit, the auditor should obtain an understanding oI the project Ior an ascertain as to
transactions, events and matters material to the Iinal accounts oI investment and measure their ability
to perIorm the audit as originally planned.
25. The plan Ior an audit oI Iinal accounts oI investment has two components:
O Overall audit plan;
O Audit program.
The preparation oI such an audit plan should be in accordance with VSA 300, Planning. Below is
some major guidance:
Overall audit plan
26. The overall audit plan describes the scope and conduct of an audit. The overall audit plan will
need to be suIIiciently detailed to guide the development oI the audit program. The Iorm and content
oI an audit plan will vary depending on the size oI the project and the complexity oI the audit.
27. Matters to be considered by the auditor in developing the overall audit plan include:

161
nowledge of the !rofect and the Entity under Audit
O The auditor's general understanding oI construction management and changes in the construction
management policies in the project implementing phase which cause signiIicant impacts on the
project.
O The auditor's understanding oI the project's major Ieatures, which include such inIormation as
project characteristics; inception and completion dates; total investment budgets and resources;
number oI construction works and contractors involved; bid selection methods; major revisions
and supplementations required during the investment process; and the manner in which the
project is managed, etc.
O The condition oI Iinal accounts dossiers, e.g. whether they are already completed or being
prepared, iI so, identiIy the rate oI completion.
O Managerial competency oI Employer entity (project management).
O The accounting policies adopted by the entity and changes in those policies.
O The eIIect oI new accounting pronouncements.
O The auditor`s cumulative knowledge oI the accounting and internal control systems and the
relative emphasis expected to be placed on tests oI control and substantive procedures.
To understand a project's condition and its accounting and internal control systems, the auditor would
apply VSA 310, Knowledge of the Business.
Risk and Materiality
O The expected assessments oI inherent and control risks and the identiIication oI signiIicant audit
areas.
O The setting oI materiality levels Ior audit purposes.
O The possibility oI material misstatement, including the experience oI past periods.
O Methods adopted Ior each segment oI the audit work.
To assess risks and determine materiality levels, the auditor and the audit Iirm would apply VSA 400,
Risk Assessments and Internal Control; and VSA 320, Audit Materiality.
Coordination, Direction, Supervision and Review
O The involvement oI technicians and specialists oI other Iields.
O StaIIing requirements.
O Timing schedule.
O The co-ordination and involvement oI clients in the audit.
ther Matters
O Conditions requiring special attention, such as the existence oI related parties.
O The terms oI the engagement and any statutory responsibilities.
O The nature and timing oI reports or other communication with the entity that are expected under
the engagement.
(Refer to Appendix 02 for example of overall audit plan)
Audit planning
28. An audit program sets out the nature, timing and extent of planned audit procedures required
to implement the overall audit plan.

162
29. In preparing the audit program, the auditor would consider the speciIic assessments oI inherent and
control risks and the required level oI assurance to be provided by substantive procedures. The
auditor would also consider:
O The timing oI tests oI controls and substantive procedures; and
O The coordination or any assistance expected Irom the client, the availability oI assistance and the
involvement oI other auditors and technicians.
An audit firm's audit program, prepared by the auditor and the audit firm, may differ from
those of other audit firms and be applied differently to each audit. The program should meet the
audit objectives, be carried out in accordance with the audit plan and attain the desired
effectiveness for the audit.
(Refer to Appendix 03 for example of audit program)
Changes to the overall audit plan and audit program
30. The overall audit plan and the audit program should be revised as necessary during the course oI the
audit. Planning is continuous throughout the engagement because oI changes in conditions or
unexpected results oI audit procedures. The reasons Ior signiIicant changes would be recorded.
Phase 2. Testing
Supply of final accounts dossiers
31. BeIore the start oI an audit, the auditor would require the auditee entity to supply the whole set oI
Iinal accounts dossiers. Upon receipt oI the Iinal accounts dossiers, the auditor and the entity should
prepare a documents transIer-receipt minute Ior documentation. A set oI Iinal accounts dossiers is, as
statutorily prescribed, composed oI such documents and working papers as
O Request Ior approval oI Iinal accounts;
O Final accounts oI investment;
O Legal documents on construction works, projects under audit;
O Construction contracts, contract liquidations with organizations, individuals involved in the project
implementation;
O Minutes on test-transIer by phases and hand-over oI work Ior the project as a whole;
O A-B Iinalized accounts, hand-over minutes oI completed works Ior a project packages; and
O Such other related documents as designs, estimates, addenda, bid dossiers, as-built documents,
logbooks...
32. As with sizeable projects (A, B Groups), beIore investigating documents, dossiers, Iinal data and
records, the auditor may use such procedures as observation, measurement, photographing or enquiry
oI user entities... As a consequence oI these site activities, the auditor would take minutes or make
reports as audit evidence Ior working papers in the documentation.
Work Contents of an Audit of Final Accounts of Investment
33. In the testing phase, the auditor would carry out the audit work according to the requirements,
guidelines and instructions by the Ministry oI Finance on the process oI veriIying Iinal accounts oI
investment. The examination will Iocus on:
Legal Documents of Construction !rofect under Audit
O Review and check the list oI written decisions and resolutions on project investment and legal
documents realized during the construction process to relevant statutory regulations.
O Review the validity oI project related documents with regards to the making, approval,
authorization and type oI the documents.
O Examine the legality and observance oI bid regulations and service contracts entered into with
consultants, constructors, suppliers and installers.

163
Upon examination oI a project's legal documents, the auditor would comment on its compliance with
the provisions oI law on construction investment.
Investment Funds
O Review and check the structure and the amount oI Iunds realized or settled through the years by
sources to the approved budget.
O VeriIy the appropriate use oI Iunds against the Iunds structure authorized in investment decisions.
O Examine whether the movement oI the project's investment Iunds is in line with established
regulation and authorization.
Upon investigating a construction project's sources oI Iund, the auditor would render an opinion on
the allocation, settlement, lending and use oI these Iunding sources.
Investment Costs
O VeriIy whether Iinalized construction and installation costs are in agreement with the approved
estimates, testing minutes, as-built drawings, variation reports; assess the compliance with statutory
regulations on the application oI price indexes, costs norms, inIlation rates, surcharges (Ior
appointed contractors), the application oI tender prices (Ior tender contractors) and the observance
oI rules on constructors selection (appointed or tender); and examine whether the types oI used
materials are those named in respective construction designs, estimates, and bid documents.
O VeriIy whether equipment costs are in agreement with the quantities and amounts speciIied in
supply contracts, purchase invoices, payment vouchers, and actual deliveries; determine whether
such incidental costs as transportation, custody, insurance, maintenance, etc are relevant to service
contracts, invoices, vouchers and in accordance with related regulations; and whether established
regulations on suppliers selection (appointed or tender) are complied with.
O VeriIy whether other costs are in agreement with the approved estimates, and in accordance with
statutorily set indexes, norms and standards; and whether established regulations on suppliers
selection (appointed or tender) are complied with.
Investment Items Disqualified as !art of Constructed Assets
O IdentiIy the portion oI investment costs which is disqualiIied as part oI the constructed assets as
declined by Employer entity under current statutory regulations in terms oI substances, causes,
and basis Ior the disqualiIication oI these costs and the authorization oI their exclusion Irom the
constructed assets.
O Review the costs oI damage caused on account oI unIoreseeable circumstances which are subject
to exclusion Irom the costs oI constructed assets in terms oI substances and amounts as measured
and quantiIied by insurance companies Ior write-oII against the investment costs (where the assets
are underwritten).
O Investigate the amount oI damage given up as resolved by competent authorities Ior exclusion
Irom the cost oI constructed assets in terms oI substances and amounts against the relevant
resolution; and the authorization by competent agencies Ior exclusion oI the amount Irom the
constructed assets.
Costs of Constructed Assets
O Check the listings and costs oI constructed assets, including Iixed and current items which are
handed over to user or custodian entities, to hand-over minutes.
O Review the allocation oI other costs to respective assets.
O VeriIy investment costs Irom which Iixed assets and current assets are constituted.
O Investigate the conversion oI the constructed assets costs in reIerence to the price ruling on the
hand-over date as advised by the Ministry oI Transport in the case oI a project requiring an
investment Iunds conversion.
Receivables, !ayables and Materials Left ver

164
O VeriIy payments made to respective contractors by items oI work and cost to date, thereby to
determine a listing oI accounts due to and Irom respective contractors.
O Test balances oI cash and bank and receipts to be handed over to the State budget.
O QuantiIy and value leIt over materials and equipment.
O QuantiIy and value items in use Ior management purposes.
Evidence
34. In conducting an audit, the auditor and the audit Iirm should obtain suIIicient appropriate audit
evidence to be able to draw reasonable conclusions on which to base the audit opinion on Iinal
accounts oI investment. The gathering and processing oI evidence by the auditor and the audit Iirm
should be in accordance with VSA500, Evidence; VSA530, Audit Sampling and Other
Alternative Procedures; and VSA250, Consideration of Laws and Regulations in an Audit of
Financial Statements. (ReIer to paragraphs 35, 36 and 37 Ior major guidance)
35. Audit evidence means all written data, documentation, inIormation and recorded images and voices
which are obtained by the auditor Irom various sources, both internal and external, by means oI
control tests and substantive procedures. The procedures applied by the auditor to collect audit
evidence include investigation, observation, inquiry, conIirmation, re-computation and analytical
procedures. Where disagreement exists between evidences collected Irom various sources, the auditor
should take into account applying Iurther alternative audit procedures to settle such disagreement and
arrive at Iinal conclusions. II Iailing to gather suIIicient appropriate audit evidence about an
assertion, the auditor and audit Iirm would express a modiIied opinion
36. In gathering audit evidence, the auditor uses proIessional judgments to measure audit risk and design
audit procedures to reduce audit risk to an acceptable level. When designing audit procedures, the
auditor should determine appropriate means oI selecting items Irom the population Ior testing. The
means available to the auditor are:
1) Selecting all items (1" examination): This will be applied when the project is risky with
indications oI disputes, litigations or breaches oI established regulations or has substandard works
or when the client requires.
2) Selecting specific items: This will be applied to projects which are less risky, Iollow established
procedures and policies or have a number oI similar work items, etc. The auditor would only
select items oI signiIicant values or with doubtIul risk or apply random selection.
3) Statistical and non-statistical audit sampling: This will be applied to items with less probable
error or with similar or repetitious nature. This method proves to be cost-eIIective but susceptible
to audit risk.
37. The auditee entity is assumed to strictly comply with laws and regulations on construction investment.
The auditor should work with proIessional due-care in detecting acts oI non-compliance with laws and
regulations which would cause misstatements material to the Iinal accounts oI investment.
The auditor should discuss any noncompliance with laws and regulations with the auditee entity and
relevant competent authorities; should gather adequate appropriate evidence to support the degree oI
eIIect, material or immaterial, on the Iinal accounts oI investment. Upon detection oI a material eIIect
on the Iinal accounts oI investment which has not been revised or adjusted Iollowing the auditor's
suggestion, the auditor and the audit Iirm would express a qualiIied opinion or an adverse opinion.
38. During the conduct oI an audit, the auditor and audit Iirm use technicians other than employed by the
audit Iirm, such as specialists in Iavor oI the work part relevant to their proIessional competence. In
this case the auditor and audit Iirm should adhere to VSA20, Using the Work of an Expert and
VSA220, Quality Control for Audit Work. (ReIer to paragraphs 39 and 40 Ior major guidance):
39. The quality oI an audit depends on the qualiIication oI auditors involves, the assignment oI work and
the outcome oI such assignment:

165
a) The auditor, assistants and technicians should comply with the ethical standards, adhere to the
principles oI independence, integrity and objectivity; possess appropriate proIessional competence,
prudence and conIidentiality, have good proIessional behavior and comply with auditing standards.
b) The auditor should be tasked with works relevant to their proIessional competence, provided with
adequate guidance and supervised on each step oI work within a given audit process.
c) During the course oI audit, any work beyond the auditor's capacity should be reIerred to
specialists Ior advice. The auditor would reIuse to accept a client request should it be against the
provision oI law or ethical standards.
40. As with a project or work which have been investigated or inspected by state agencies or involved
with litigation or dispute, the auditor should have particular attention to the conclusion oI such
investigations or inspections or the settlement oI the litigation/dispute and take into account the
requests and petitions by Employer entity (Project management) Ior appropriate evidence Ior an audit
opinion.
Obtaining representations from the auditor of the auditee entity
41. The auditor and audit Iirm should obtain evidence that the Director (or the leader) oI the auditee
entity acknowledges their responsibility for the fair presentation of the final accounts of
investment in accordance with prevailing accounting standards and systems and responsibility
for the adequate provision of final accounts dossiers in accordance with the provisions of law
and management representations on the final accounts of investment. The auditor can obtain
such evidence Irom relevant minutes oI meetings with client entities or by obtaining a written
representation Irom management or a signed copy oI the management report. In this case, the auditor
and audit Iirm should adhere to VSA 580, Management Representations. (ReIer to paragraphs 42,
43, 44 and 45 Ior major guidance)
42. Written representations requested Irom management may be limited to matters that are considered
either individually or collectively material to the Iinancial statements. Regarding certain items it may be
necessary Ior the auditor and audit Iirm to inIorm management oI the auditor`s understanding oI
materiality.
43. The auditor should keep in the documentation representations by the Director or a representative oI
the auditee entity in the Iorm oI summary oI oral discussions or written representations Ior audit
evidence.
44. II management reIuses to provide a representation that the auditor considers necessary, this
constitutes a scope limitation and the auditor should express a qualiIied opinion or a disclaimer oI
opinion. In such circumstances, the auditor would evaluate any reliance placed on other
representations made by management during the course oI the audit and consider the degree oI its
eIIects on the Iinal accounts oI investment.
Phase 3. Conclusion
45. In concluding an audit, the auditor should implement the procedures that Iollow:
O Overall analyses and review oI the audit results.
O Preparation oI the auditor's report.
O Handling oI works subsequent to issuance oI the auditor's report.
Overall analyses and review of the audit results
46. Analytical procedures should be applied during the process oI planning an audit, examining the Iinal
accounts oI investment, gathering evidence and particularly oI overally analyzing, reviewing the
audit results beIore the Iormation oI an audit opinion. The application oI analytical procedures
throughout an audit should adhere to VSA520, Analytical Procedures. (ReIer to paragraphs 47, 48,
and 49 Ior major guidance).

166
47. Overall review and analysis oI the audit results will assist the auditor in asserting the conclusions
achieved as a result oI the examination oI the Iinal accounts oI investment to express an opinion on
the integrity and reasonableness oI the Iinal accounts oI investment. The overall review and
analytical procedures are also aimed to issues which require Iurther investigations.
48. When overall reviews and analytical procedures identiIy signiIicant Iluctuations or inconsistent
relationships, the auditor should Iurther investigate and obtain adequate audit evidence about the
audit conclusions.
49. The auditor and audit firm should review and assess conclusions reached as a consequence of
collected evidence and use these conclusions to base their opinion on the final accounts of
investment.
In expressing an opinion, the auditor and audit Iirm will measure the relevance oI the Iinal accounts
oI investment to the prevailing accounting standards and systems, the integrity and reasonableness oI
the Iinal accounts oI investment as well as the entity's compliance with the investment procedures
and processes under the provisions oI laws in implementing the project.
Reporting
50. The auditor's report on the Iinal accounts oI investment includes the basic elements oI a Iinancial
statement auditor's report prepared in accordance with VSA00, The Auditor's report on Financial
Statements, in the Iollowing layout:
a) Name and address oI the audit Iirm
b) ReIerence number oI report
c) Title oI report
d) Addressee oI report
e) Opening paragraph identiIying:
O The objects oI an audit oI Iinal accounts oI investment; and
O The responsibility oI the Director (or leader) oI the auditee entity and that oI the auditor and
the audit Iirm.
I) Scope and basis paragraph stating:
O The auditing standards based on which to conduct the audit; and
O Works and procedures perIormed by the auditor in the audit;
g) Opinion oI the auditor and audit Iirm on the Iinal accounts oI investment audited
h) Place and date oI the auditor's report
i) The auditor's signature, auditor practice certiIicate number and audit Iirm's seal
51. Further, the auditor's report on the Iinal accounts oI investment covers the Iollowing particular
contents:
O Legal basis and Iinal accounts dossiers
O Audit results reached in relation to the reported amounts oI the Iinal accounts oI investment, as
opposed to the corresponding audited Iigures
O The auditor's recommendations to Employer entity and those parties concerned with the Iinal
accounts oI investment
52. The audit basis and Iinal accounts dossiers will constitute documents collected by and Iurnished to
the auditor to perIorm the audit using appropriate audit approaches and draw conclusions Ior an
opinion on the Iinal accounts oI investment. The audit results and the auditor's opinion are dependent
on the legal basis and Iinal accounts dossiers so collected and Iurnished and thereIore the auditor
should identiIy the legal basis and the Iinal accounts dossiers in the Scope and Basis paragraph in the
auditor's report.

167
The legal basis and final accounts dossiers include.
O Prevailing statutory regulations on management oI construction investment;
O Relevant legal documents oI the project; and
O Final accounts dossiers prepared in accordance with the provisions oI law.
53. The results of an audit of final accounts of investment will provide a basis for the authorized
approver of final accounts to verify the investment funds. The auditor will identify the
investment accounts as a result of their audit work in respect of the following:
O Compliance with the investment procedures and processes in the course oI a construction project;
O Investment Iunds;
O Construction investment costs;
O Items excluded Irom the costs oI constructed assets;
O Costs oI the assets handed over to user entities; and
O Outstanding receivables and payables and leIt over materials, equipment.
54. The auditor should identiIy the Iigures produced by the entity prior to the audit commencement (Iinal
accounts), Iigures adjusted subsequent to the auditor's suggestions (audit results) provided in the
auditor's report to premise their expression oI opinions and provision oI recommendations.
55. Where diIIerences exist between the Iinal accounts oI investment and the audit results, the auditor
should then draw up an attachment, which breaks down the diIIerences and provides an account
thereIor.
56. Where an amount advised by the auditor Ior adjustment is declined by the entity or accepted by the
entity without subsequent adjustment being made to the Iinal accounts oI investment, the auditor
should also draw such an attachment or should rather disclose the Iact in the auditor's report.
57. In expressing an opinion in the auditor's report on the Iinal accounts oI investment, the auditor and
audit Iirm should adhere to VSA 00, The Auditor's report on Financial Statements. (ReIer to
paragraphs 58 through 66 Ior major guidance).
58. Depending on the examination processes and results, the auditor and the audit firm can give
one of the following types of opinions on the final accounts of investment:
O Unqualified opinion
O Qualified opinion
O Disclaimer of opinion
O Adverse opinion
Unqualified opinion
59. An unqualified opinion should be expressed when the auditor and the audit firm concludes that
the final accounts of investment give a true and fair view, in all material respects, of the
finalization of investment funds by the project under audit in accordance with the prevailing
accounting standards and systems and relevant statutory regulations.
60. An unqualiIied opinion is also expressed in the cases where the Iinal accounts oI investment contain
misstatements as detected by the auditor, which have, upon their recommendations, been adjusted by
the entity and that the adjusted accounts are accepted by the auditor. The wording Ior this paragraph
should be In our opinion, the final accounts of investment, upon the adfustment made thereon at the
auditors recommendation, with the total invested fund of JND., give a true and fair view, in all
material respects, of the finali:ation of investment funds at the reporting date, in accordance with
prevailing accounting standards and systems and relevant statutory regulations.

168
61. The unqualiIied opinion does not necessarily mean that the Iinal accounts oI investment are completely
accurate but that they may contain certain misstatements, which, in the auditor's judgments, are not
material. (Refer to Appendix 04)
Qualified opinion
62. A qualified opinion is expressed in the auditor's report when the auditor and the audit firm
determine that the final accounts of investment only give a true and fair view of the finalization
of investment funds by the entity should it be affected by the "subject to" (or "except for")
factors discussed in the auditor's report. This also means that iI such Iactors raised therein had
material impacts on the Iinal accounts oI investment, these accounts would Iail to give a true and Iair
view in all material respects.
"Subject to" Iactors shows matters that are material but not as certain as the issues resolved by an
authorized approver oI Iinal accounts oI investment in connection with the investment costs oI a
construction item or work oI the project.
63. The "subject to" Iactors are normally associated with events predicted to be occurring in the Iuture,
which are beyond the auditor and the entity's controls, or matters remaining unidentiIied in prevailing
statutory regulations the resolution oI which rests with the jurisdiction oI the person who resolves the
matter. The expression oI an opinion with "subject to" Iactor support the discharge oI the auditor's
responsibility in connection with the audit while still drawing the attention oI users oI the audited
Iinal accounts oI investment Ior Iollow-up oI any likely events or causing the authorized approver oI
the Iinal accounts to Iormally resolve the issue.
Illustration oI an auditor's report with "subject to" Iactors:
In our opinion, in all material respects, the final accounts of investment upon the adfustment made
thereon at the auditors recommendation, with the total invested fund of JND. give a true and fair
view, in all material respects, of the finali:ation of investment funds at the reporting date, in
accordance with prevailing accounting standards and systems and relevant statutory regulations,
subfect to.
O The costs of ork Item A3 for which an addendum is pending approval in the amount of
XY1JND as accepted by competent authorities,
O The intended costs for verifying the final accounts in the amount of XJ2JND as will be
approved by competent authorities when actually incurred, and
O The test-run costs in the amount of XY3JND as approved by competent authorities.
64. A qualiIied opinion should be expressed when the auditor concludes that an unqualiIied opinion
cannot be expressed but that the eIIect oI any disagreement with management, or limitation on scope
is not so material and pervasive as to require an adverse opinion or a disclaimer oI opinion. A
qualiIied opinion should be expressed as being except Ior` the eIIects oI the matter to which the
qualiIication relates as In our opinion, except for the effects (if any) of the matters referred to above,
the final accounts of investment give a true and fair view, in all material respects,...
Disclaimer of opinion
65. A disclaimer of opinion should be expressed when the possible effect of a limitation on scope is
so material and pervasive that the auditor is not furnished with sufficient final accounts
dossiers in regards of such a large amount of items that the auditor is unable to express an
opinion on the final accounts of investment, using a paragraph that reads Because of the
significance of the matters discussed in the preceding paragraph, we do not express an opinion on
the final accounts of investment.`
An adverse opinion
66. An adverse opinion should be expressed when the effect of a disagreement is so material and
pervasive to such a large amount of items that the auditor and the audit firm concludes that a
qualification of the report is not adequate to disclose the misleading or incomplete nature of the

169
final accounts of investment, using the paragraph that reads In our opinion, due to the material
effects of the matters referred to above, the final accounts of investment do not give a true and fair
view, in all material respect,. .
Whenever the auditor expresses an opinion that is other than unqualiIied, which are qualiIied, disclaimer
oI or adverse opinions, a clear description oI all the substantive reasons should be included in the
report and, unless impracticable, a quantiIication oI the possible eIIect(s) on the Iinal accounts oI
investment. Ordinarily, this information would be set out in a separate paragraph preceding the
opinion paragraph.
1reatment of events subsequent to the auditor's report date
67. Where errors are detected in connection with the audit results or an event is Iound as having material
eIIects on the expressed audit opinion subsequent to the date oI the auditor's report on the Iinal accounts
oI investment, the auditor and audit Iirm can take the actions that Iollow:
a) Where the auditee entity accepts to revise the Iinal accounts oI investment, the auditor would re-
issue the auditor's report in regards oI the adjusted Iinal accounts oI construction and keep the
addressees oI the change oI opinion.
b) Where the entity would otherwise reIuse to do so, the auditor would take all necessary measures
to keep those who have received or will receive the audited Iinal accounts oI investment and the
auditee entity promptly inIormed oI the Iact.
Documentation
68. The auditor should obtain and record in the audit file all documentation and information
which are important in providing evidence to support the audit opinion and evidence that the
audit was carried out in accordance with VSAs. The audit documentation should be sufficiently
complete and detailed to provide other auditors or examiners/reviewers with an overall
understanding of the audit.
The auditor should prepare and maintain documentation on an audit oI Iinal accounts oI investment
in accordance with VSA230, Documentation. (ReIer to paragraphs 69 through 77 Ior major
guidance)
69. The auditor should obtain and record in the audit Iile all documents and inIormation in relation to:
a) The audit planning;
b) The audit perIormance: nature, timing and extent oI conducted audit procedures;
c) The results oI procedures conducted;
d) The conclusions drawn Irom the audit evidence obtained.
Audit documentation would include the auditor's reasoning on all significant matters which require
the exercise of professional judgment, together with the auditor's conclusion thereon. In areas
involving difficult questions of principle or judgment, documentation will record the relevant
facts that were known by the auditor at the time the conclusions were reached. Audit
documentation also records the results from tests and reviews of the quality of an audit by
authorized persons as regulated by the audit firm.
70. Audit documentation is designed and organized in the format established by the audit firm.
The auditor may utilize schedules, analyses, working papers and other documents prepared by
the entity provided the auditor needs to be satisfied that those materials have been properly
prepared. As required under the circumstances, the auditor should retain with the audit
documentation the client's documents that the auditor finds necessary and essential for their
opinion on the final accounts of investment.
71. Audit documentation should be prepared and arranged by respective clients and engagements
according to the requirements and conditions of the auditor and the audit firm. The use of
standardized working papers (checklists, specimen letters, standard working papers etc) may

170
improve the efficiency with which such documentation is prepared and reviewed. They
facilitate the delegation of work and control over quality.
72. Audit documentation should be prepared and arranged into:
O Permanent audit file; and
O Current audit file
74. Permanent audit files ordinarily include:
O Name and number oI the documentation, date oI preparation and Iiling.
O General inIormation on the project and the auditee entity:
- Extracts or copies oI important legal documents, agreements and minutes: project documents,
investment decisions, design ratiIications, budget estimations; tender plan resolutions; minutes
oI relevant management members meetings;
- Tax documents: written rules and policies applicable to the project as approved by competent
authorities and documents on perIormance oI annual tax obligations;
- Personnel and organization records: establishment decisions; names, addresses, Iunctions and
operation scope and organizational structure oI the auditee entity; regulations on personnel and
utilization oI payrolls;
- Internal rules on management oI construction investment: processes oI work veriIication and
settlement; and
- Other related documents.
O Audit contracts, contract appendixes (iI any), contract liquidations.
O InIormation on preparers, veriIiers and reviewers oI audit documentation:
- Names oI the auditor and assistants involved in the audit perIormance and documents
preparation;
- Names oI the reviewer and date oI review; and
- Name oI the approver and date oI approval.
O Audit planning:
- Evidence oI the audit strategy and planning process, including the audit program and any
changes thereto;
- Evidence about changes in the accounting and internal control systems oI the auditee entity;
and
- Evidence and conclusions oI inherence and control risk assessments and any revisions thereoI;
O The Iinal accounts oI investment prepared by the auditee entity prior to the audit.
O A summary oI the audit results and draIt and Iinal audit reports.
O Representations letters by the Director (or leader) oI the auditee entity.
O Written conIirmations by the auditee entity and a third party.
O Other documents.
74. Current audit files ordinarilly include:
O The audit program and related procedures perIormed and the results thereoI.
O Documents and records pertaining to construction works and items, blue prints. individual
estimates, tender invitations, test minutes, as-built drawings, work accounts.
O Computations by technicians.
O Working minutes in details.

171
O Other documents.
75. The auditor and the audit Iirm should keep the audit documentation conIidential and saIeguarded. Audit
documentation should be retained over a period oI 10 years or longer to meet the need oI the audit practice
and in accordance with the statutory regulations on the maintenance and Iiling oI accounting documents
and guidelines established by the accountancy bodies and audit Iirm. Audit documentation should be
arranged and Iiled in a proper and orderly Iashion to Iacilitate the accessibility and reIerence and gathered
at the Iirm's achieve oIIice. Where an audit Iirm has branches or oIIices in the localities, audit
documentation should be kept at the oIIice where the auditor's report is signed and stamped.
76. Audit documentation is the property oI the auditor and audit Iirm. The client and third parties are
entitled to access to and use oI portion or extracts oI the documentation upon the consents oI the
Director oI the audit Iirm or otherwise under statutory or proIessional requirements. In no case is
audit documentation a substitute Ior the client's accounting records or Iinal accounts oI investment.
77. As with an audit oI the Iinal accounts oI investment oI a C-group project, the audit Iirm should
adhere to the guidelines provided Ior in paragraphs 68 through 76 oI this standard to make the
documentation taking into account the size oI the project under audit.
78. Appendices:
Appendix 01 - Audit contract
Appendix 02 - Overall audit plan
Appendix 03 - Audit program
Appendix 04 - Auditor's report (unqualiIied opinion).
Appendix 01
EXAMPLE OF AUDIT CONTRACT
(For guidance and reference)
-------------------------------------

AUDIT FIRM ... SOCIALIST REPUBLIC OF VIETNAM
Address, tel. and fax, email. Independence - Freedom - Happiness
No. /HDKT -------------------------------------------------
., day . month . year .

AUDIT CONTRACT
(Audit of Final Accounts of Investment)
Project .................................................
of ......................................................

O Pursuant to the Economic Contract Ordinance and Decree No... dated. oI the Government
speciIying the implementation oI the Economic Contract Ordinance;
O Pursuant to Decree No. 105/2004/ND-CP dated 30 March 2004 oI the Government on
independent audit;
O Pursuant to Decree No. dated. oI the Government providing Ior investment and construction
management;
O In conIormity with VSA 210, Term oI Audit Engagement; and VSA 1000, Audit oI Final
Accounts oI Investment.
Party A: Company (Project Management)...(hereinaIter reIerred to as Party A)
Represented by:.............................
Position:.......................
Tel.:...........................
Fax:...........................

172
Address:.......................
Account No.:.... At Bank oI ...................
Party B: Audit Firm......... (HereinaIter reIerred to as Party B)
Represented by:....................
Position:.......................
Tel.:...........................
Fax:...........................
Address:.......................
Account No.:...... At Bank oI ..............
The parties hereby agree upon the Iollowing terms and conditions:
Article 1: Description of Services
Party B shall provide Party A with an audit oI the Iinal accounts oI investment oI Project. oI...
Article 2: Governing Laws and Standards
The engagement is conducted in accordance with Vietnamese Accounting Standards and Vietnamese
Standards on Auditing and in conIormity with legal documents issued by the State Ior use in the Iield oI
capital construction, taking into account Party A`s circumstances and written agreements reached during
the implementation. The audit results shall be objective, practical and conIidential.
Those standards require that Party B plan and perIorm the audit to obtain reasonable assurance that
the Iinal accounts oI investment are Iree oI material misstatement. An audit includes examination, on a
test basis, oI evidence relevant to the amounts and disclosures in the Iinal accounts oI investment.
Due to the inherent limitations associated to an audit and the accounting and internal control systems,
there might be risks that are beyond the capacity oI the auditor and the audit Iirm in the detection oI
material misstatement.
Article 3: Responsibilities of the Parties
3.1. Party A shall:
O retain and manage accounting vouchers and books, estimation documents, blue prints, Iinal
accounts and other dossiers and documents on the project as statutorily required;
O supply Party B, in a timely manner, suIIicient inIormation and documents relating to the audit in
accordance with the prevailing regulations, including project investment decisions, technical
designs, budget estimations, as-built drawings, veriIication minutes, logbooks, A-B Iinalizations,
Iinal accounts oI investment and other dossiers and records relating to the project and assume
accountability Ior documents delivered to Party B,
O delegate responsible personnel to work with Party B to explain and measure work contents as may
be required by Party B;
O Iormally sign and stamp the Iinal accounts oI investment prior to producing them to Party B. The
true and Iair presentation oI the Iinancial statements and presentation oI related inIormation is the
responsibility oI Party A. This responsibility requires that the accounting and internal control
systems should be appropriate, the selection and application oI accounting policies adequate and
the saIeguarding oI assets proper;
O require Irom time to time a written conIirmation Irom Party A on the reliability oI documents and
inIormation provided;
O delegate responsible personnel to work with and give Party B access to all accounting books and
records, documents and other inIormation required Ior the audit;
O Iacilitate Party B's observation and survey at site as may be required by Party B; and
O make Iull payment oI the audit Iee to Party B on a contractual basis.

173
3.2. Party B shall:
O ensure to Iollow the prevailing standards on auditing (as speciIied in Article 2);
O develop and inIorm Party A oI the work contents and audit plan; implement the work according to
plan and with respect to the principles oI independence, objectiveness and conIidentiality;
O keep regular communication and discussion with Party A Ior settlement oI queries in the audit and
meet the time table and work quality mutually agreed; and
O deliver the auditor's report to Party A as scheduled and assume responsibility Ior the integrity,
objectivity, and validity oI the inIormation and data disclosed in the auditor's report;
Article 4: Reporting
Upon completion oI the audit, Party B shall deliver to Party A:
O An auditor's report; and
O A management letter (iI applicable) which discusses the Iindings and recommendations
concerning the weaknesses noted aiming to Iurther improving the accounting and internal control
systems.
The auditor's report and management letter (iI any) shall be prepared in. copies. Party A shall
retain.. copies and Audit Firm. copies.
Article 5: Fee and Payment Method
O The total Iee is:................... (In words:.........)
O Payment oI the Iee shall be made. (As agreed).
The Iee shall be paid either in cash or by transIer and billed in Vietnam dong (VND).
Article : Commitments and Due Dates
Both parties commit to implement all articles as set Iorth herein. During the implementation, either
party should be kept promptly inIormed oI any problems that might obstruct the successIul completion oI
this contract to discuss possible solutions. InIormation shall be directed to the other party in writing at the
above address.
The audit shall be due Ior completion within. days beginning...
Article : Effectiveness, Language and Duration of Contract
This contract shall be made in. copies and shall come into Iorce upon the second signature and
stamp. Either party shall retain. copies in Vietnamese.
This contract shall remain in eIIect until certiIication oI completion or cancellation oI contract as may
be agreed by both parties.

Party B Party A
AUDIT FIRM .............................................
Director Director
(Full name, signature and seal) (Full name, signature and seal)
Appendix 02
EXAMPLE OF OVERALL AUDIT PLAN
-------------------------------------

AUDIT FIRM
OVERALL AUDIT PLAN

Client entity: Prepared by Date
Project: Approved by Date

174
1. Information about the client and the project:
Client name:.......................................................................................................................
Head oIIice: ......................................................................................................................
Phone no: ...................... Fax no:......................Email:......................................................
Tax code: ..........................................................................................................................
Operation license (Investment license, business registration certificate)........................
Project name: ...................................................................................................................
Total investment: Construction: ..................................................................................
Equipment: .....................................................................................
Others: ............................................................................................
Investment Iund: State budget: ....................................................................................
Loan: Local: ....................................................................................
Overseas: ..............................................................................
Others: .............................................................................................
Project size: ......................................................................................................................
Location:......................................................................................................................
Commencement date: .................................... Completion date:......................................
Major civil works and items:

No Works and items
Approved
estimates
Final
accounts
Contract type
Package
contract
Adjusted
contract
Appointed
contract
Work item A
Work item B
.......
Project management:............................................................................
Contractors:.......................................................................................................................
Constructors:......................................................................................................................
Suppliers: ..........................................................................................................................
Consultants: ......................................................................................................................
Major change and adjustment during the project implementation:
...........................................................................................................................................
Special events aIIecting the project operation:...................................................
Transaction bank/Financing agency: ..................................................
Client key personnel involved:

Full name Position Degree Notes

Summary on client internal controls:..................................................

175
Managerial capacity:........................................................................
2. Understanding of accounting and internal control systems:
Based on the review oI the client's Iinal accounts oI investment and understanding oI its business to
consider the level oI eIIects on the preparation oI Iinal accounts oI investment in terms oI:
the accounting policies adopted by the entity and changes in those policies:.................
the eIIect oI new accounting and auditing policies: ...............
the accounting staII: ...................................................
Technical and management personnel:................................
Reporting requirement:...............................................................
Assessing the control environment, accounting system, and internal controls as reliable and
effective:
High Medium Low
3. Risk assessment and materiality measurement:
Risk assessment:
Inherent risk:
High Medium Low
Control risk:
High Medium Low
Assessment oI internal controls operations:
Materiality measurement:
Key indicators Ior measuring materiality levels include:
- Total investment
- Total estimates
- Construction costs
- Equipment costs
- Other costs
Reason Ior choice oI materiality level: .........................................
Assessment oI materiality levels Ior each audit objective..........
The possibility of material misstatement from the auditor experience for the project; and the
identification of complex accounting transactions, costs and civil works/items.
- Account audit approach:
Sample test..................................................................................
Key item test...............................................................................
100 examination .....................................................................
4. Co-coordinated direction, supervision and review
The involvement oI legal and other experts
Timing schedule:.....................................................................
StaIIing requirement: ....................................................................
In-charge director (deputy director)...........................................


176
In-charge manager ....................................................................
Audit team head .........................................................................
Audit assistant 1 ........................................................................
Audit assistant 2 ........................................................................
5. Other matters
- Conditions requiring special attention:.....................................
- The terms oI the engagement and any statutory responsibilities:..........................
- The nature and timing oI reports or other communication with the
entity:...................................................................................
6. Overall audit plan summary:
No. SigniIicant
items
Inherent
risk
Control
risk
Mat'lity
level
Audit
approach
Audit
procedures
ReI.
1
2
3
4 .......
- General classiIication oI Client:
Very important Important Not important
- Other: .....................
Appendix 03
EXAMPLE OF AUDIT PROGRAM
------------------------------------------------------------------------------
AUDIT FIRM:
CONSTRUCTION COSTS AUDIT PROGRAM

Client entity: Prepared by Date
Project Approved by Date
Determination oI detailed risk
Detailed risks are identiIied in this audit program are as Iollows:

No. Detailed
risk
Audit
approach
Audit
procedures
Work perIormer Assessment/
ReIerence

(These risks are also identified during audit planning)
SUBSTANTIVE PROCEDURES
This program is subject to revision or supplementation iI it is in the audit team's opinion that the
procedures incorporated into the program are not inclusive oI all relevant inherent considerations or are
inadequate with the lack oI instructive inIormation about materiality concerning this type oI costs in the
circumstances Ior each audit.


177

GENERAL AUDIT PROCEDURES
1. GENERAL EXAMINATION OF CONSTRUCTION COSTS
2. DETAILED EXAMINATION OF CONSTRUCTION COSTS
3. .............

Specific audit procedures Performer Reference
1 GENERAL EXAMIN. OF CONSTRUCTION COSTS
A. Collect construction costs summaries by years
1. Check addition
2. Reconcile addition to ledgers and Iinal accounts
B. PerIorm analysis procedures on construction costs
1. Check movement oI construction costs to approved
estimates by items.

2. Assess examination results
2 DETAILED EXAMIN. OF CONSTRUCTION COSTS
A. Upon analysis oI construction costs, examine and check
evidence that Iollows:

1. Costs sheets
2. Bank vouchers on settlement and allocation
3. Summary oI payments to constructors
4. Assessment oI examination results and conIirmation that
construction costs are all accounted Ior.

B. Examine construction costs oI civil works to ensure that:
1. Finalized works agrees with costs incurred and are as
statutorily regulated.

2. Adopted prices are as statutorily and internally mandated.
3. Adopted norms are as statutorily and internally mandated.
4. Adopted rates oI inIlation, surcharge, materials
compensation are as statutorily and internally prescribed.

5. Assess test results


178

Appendix 04
EXAMPLE OF UNQUALIFIED REPORT
-------------------------------------------------
XYZ AUDIT FIRM
(Address, tel. and fax, email...)
Ao...
AUDITOR'S REPORT
Re. Final Accounts of Investment
Project...........................................
of ABC Project Management

1o: ABC Project Management
We have audited the Iinal accounts oI investment oI Project. prepared on. by ABC Project
Management set out on pages. to.
1. Respective Responsibilities of the Project Management and Auditors
These Iinal accounts oI investment are the responsibility oI the Project management. Our
responsibility is to express an opinion on these Iinal accounts based on our audit.
2. Audit Scope and Basis
LEGAL BASIS
(Indicate the legal documents issued by the State governing the investment and construction
management)
FINAL ACCOUNTS DOSSIERS
(Indicate the documents making up the final accounts dossiers supplied to auditors)
BASIS OF OPINION
We conducted our audit in accordance with Vietnamese Standards on Auditing. Those standards
require that we plan and perIorm the audit to obtain reasonable assurance that the Iinal accounts oI
investment are Iree oI material misstatement.
On the basis oI the documents you supplied, we reviewed the Iinal accounts oI investment oI
Project. oI ABC Project management in accordance with (Circular No. 45/2003/TT-BTC dated May 15,
2003 of the Ministry of Finance), including the Iollowing items oI work:
- Review oI project legal documents;
- Investigation oI investment Iunds;
- VeriIication oI construction costs;
- VeriIication oI equipment costs;
- VeriIication oI other costs
- Determination oI costs excluded Irom constructed assets;
- Test oI assets handed over Ior use; and
- Test oI outstanding debtors and creditors, materials and equipment leIt over.
To perIorm the Ioregoing items oI work, we reviewed accounting documents and records relating to
the project, veriIied the Iinal costs oI bid packages, and determined other costs. Our work also included
reconciling the amount oI work completed with approved designs and estimates, variation Iorecasts,
veriIication minute, as-built drawings and checking adopted norms, local indexes and approved price oI
construction and other testing procedures as we considered necessary in the circumstances.
3. Audit results

179
Background of the project: Disclose a profect overview
Final accounts dossiers: (hether documents are sufficient or insufficient? hether auditors were
engaged in compiling the final accounts dossiers?)
Legality of the project investment process:
Lists and contents of legal documents.
(State whether or not lists and contents of legal documents with regards to profect investment are in
accordance with current statutory regulations).
Jalidity and implementation of the economic contract.
(State whether or not implementing the construction contract is in accordance with the current
statutory regulations).
Funds for construction investment:
Resources
Unit. JND
Items
APPROVED
INVESTMENT
Actual
Per final
accounts
Audit
results
Difference (`)
1 2 3 4 5 4 - 3
- State budget
- Loan Iund
- Others
Total
Causes oI diIIerences (iI any)
Investment Costs
Unit. JND

No. Items
APPROVED
ESTIMATES
Actual
Per final
accounts
Audit
results
Difference (`)
1 2 3 4 5 6 5 - 4
Construction costs
Equipment costs
Other costs
Contingencies
Total
Investment Costs !roposed to be Excluded from Constructed Assets
Unit. JND
No.
Items
Per final
accounts
Audit
Results
Difference (`) Note
1 2 3 4 5 4 - 3 6
1 Cost ......
2 Cost......
Total
Cost of Constructed Assets
Unit. JND
No.
Items
Per final
accounts
Audit
results
Difference
(`)
Note

180
1 2 3 4 5 4 - 3 6
1 Fixed assets
2 Current assets
Total
Debtors and Creditors
Unit. JND
No.
Creditor and debtor
Per final
accounts
Audit
results
Difference
(`)
Note
1 2 3 4 5 4 - 3 6
I Debtor
II Creditor
Costs of Materials and Equipment Left ver.
Unit. JND
No. Items Per final
accounts
Audit
results
Difference
(`)
Note
1 2 3 4 5 4 - 3 6
I Materials
II Equipment
(*) For noted differences, there should be an appendix for causes.
4. Disclosure of reasons: This is required if the opinion (paragraph 5) is either a qualified,
adverse, or disclaimer of opinion (as guided in paragraphs 2, 5 and herein).
5. Opinion:
On the basis oI the documents and inIormation you supplied, in our opinion, the accompanying Iinal
accounts oI investment with the total amount oI. give a true and Iair view, in all material respects, oI the
settled investment costs at the accounts date and in accordance with the current accounting standards and
systems and relevant statutory regulations.
. Recommendations:
..........................................
............................................

..., day. month. year...
XYZ AUDIT FIRM
Auditor Director
(Full name and signature) (Full name, signature and seal)
CPA Certificate Ao... CPA Certificate Ao...

Standard No 260 - Communications of audit matters with those charged with governance

181
STANDARD 20
COMMUNICATIONS OF AUDIT MATTERS WITH THOSE CHARGED WITH
GOVERNANCE
(Issued in pursuance of the Minister of Finance
Decision No. 101/2005/QD-BTC dated 29 December 2005)

GENERAL
guidance on communication oI audit matters arising Irom the audit oI Iinancial statements between
the auditor and the audit Iirm and those charged with governance oI an entity.
02. The auditor and the audit firm should communicate audit matters of governance interest
arising from the audit of financial statements with those charged with governance of an entity.
03. This VAS applies to communications oI audit matters between the auditor and the audit Iirm and
those charged with governance.
This VAS does not speciIy how the auditor communicates with those outside the audited entity.
statements and rendering related services.
and the audit Iirm and dealing with the relations maintained during the audit.
In this JSA, the following terms have the meaning attributed below.
02. Management reIers to persons entrusted with the supervision, control and direction oI an entity and
the decison making Ior its operation and development, consisting oI members oI the Board oI
Management, Board oI Directors and Control Committee and those charged with managing business
areas.
03. Governance is the term used to describe the role oI persons entrusted with managing, supervising and
controling a particular area oI business or directing and executing a legal entity.
Those charged with governance ordinarily are accountable for ensuring that the entity achieves
its objectives, supervising the operations and reporting to interested parties.
06. Audit matters of governance interest are those that arise Irom the audit oI Iinancial statements and, in
the opinion oI the auditor and the audit Iirm, are both important and relevant to those charged with
governance in overseeing the Iinancial reporting and disclosure process.
The auditor is not required to identiIy and report to management oI the entity all matters oI
governance interest.
CONTENTS OF THE VSA
0. The auditor and the audit firm should determine the relevant persons who are charged with
governance and with whom significant matters, including audit matters of governance interest,
are communicated.
08. The auditor should determine the structure and principles oI governance oI each entity, such as the
overseeing Iunction (Control Committee) and executing Iunction oI the Board oI Directors and the
Board oI Management.
09. The auditor should identiIy the persons who are charged with governance and whom the auditor
communicates audit matters oI governance interest.
10. When the entity`s governance structure is not well deIined, or those charged with governance are not
clearly identiIied, the auditor comes to an agreement with the entity about with whom audit matters oI
governance interest are to be communicated.
11. To avoid misunderstandings, an audit engagement letter may explain that the auditor will
communicate only those matters oI governance interest that come to attention as a result oI the

182
perIormance oI an audit and that the auditor is not required to design audit procedures Ior the speciIic
purpose oI identiIying matters oI governance interest.
The engagement letter may also:
- IdentiIy the relevant persons with whom such communications will be made; and
- IdentiIy any speciIic audit matters oI governance interest to be communicated.
12. The eIIectiveness oI communications is enhanced by developing a constructive working relationship
between the auditor and those charged with governance. This relationship is developed while
maintaining an attitude oI proIessional independence and objectivity.
Audit Matters of Governance Interest to be Communicated
13. The auditor should consider significant matters, including audit matters of governance interest
that arise from the audit of the financial statements and communicate them with those charged
with governance. Ordinarily such matters include the following:
a) The general approach and overall scope oI the audit, including any expected limitations thereon,
or any additional requirements;
b) The selection oI, or changes in, signiIicant accounting policies and practices that have, or could
have, a material eIIect on the entity`s Iinancial statements;
c) The potential eIIect on the Iinancial statements oI any material risks and exposures, such as
pending litigation, that are required to be disclosed in the Iinancial statements;
d) Audit adjustments, whether or not recorded by the entity that have, or could have, a material
eIIect on the entity`s Iinancial statements;
e) Material uncertainties related to events and conditions that may cast signiIicant doubt on the
entity`s ability to continue as a going concern;
I) Disagreements with management about matters that, individually or in aggregate, could be
signiIicant to the entity`s Iinancial statements or the auditor`s report;
g) Expected modiIications to the auditor`s report;
h) Other matters warranting attention by those charged with governance, such as material
weaknesses in internal control, questions regarding management integrity, and Iraud involving
management; and
i) Any other matters agreed upon in the terms oI the audit engagement.
14. As part oI the auditor`s communications, those charged with governance are inIormed oI the
Iollowing signiIcant matters:
a) The auditor`s communications oI the audit results; and
b) The Iact that an audit oI Iinancial statements is not designed to identiIy all matters that may be
relevant to those charged with governance. Accordingly, the auditor and the audit Iirm do not
ordinarily identiIy all such matters.
Timing of Communications
15. The auditor should communicate significant matters, including audit matters of governance
interest, on a timely basis. This enables those charged with governance to take appropriate and
prompt action.
16. In order to achieve timely communications, the auditor discusses with those charged with governance
the basis and timing oI such communications. In certain cases, because oI the nature oI the matter, the
auditor may communicate that matter sooner than previously agreed.
Forms of Communications
17. The auditor`s communications with those charged with governance may be made orally or in writing.
The auditor and the audit Iirm`s decision whether to communicate orally or in writing is aIIected by
Iactors such as the Iollowing:
a) The size, operating structure, legal structure, and communications processes oI the entity being
audited;

183
b) The nature, sensitivity and signiIicance oI the audit matters oI governance interest to be
communicated;
c) The arrangements made with respect to periodic meetings or reporting oI audit matters oI
governance interest; and
d) The amount oI on-going contact and dialogue the auditor has with those charged with governance.
18. When audit matters oI governance interest are communicated orally, the auditor documents in the
working papers the matters communicated and any responses to those matters. This documentation
may take the Iorm oI a copy oI the minutes oI the auditor`s discussion with those charged with
governance. In certain circumstances, depending on the nature, sensitivity, and signiIicance oI the
matter, it may be advisable Ior the auditor and the audit Iirm to conIirm in writing with those charged
with governance any oral communications on audit matters oI governance interest.
19. Ordinarily, the auditor initially discusses audit matters oI governance interest with management,
except where those matters relate to questions oI management competence or integrity. These initial
discussions with management enable the auditor to gather Iurther inIormation Irom the audit. II
management agrees to communicate a matter oI governance interest with those charged with
governance, the auditor may not need to repeat the communications, provided that the auditor is
satisIied that such communications have eIIectively and appropriately been made.
When the auditor is satisIied with inIormation obtained aIter communicating with management oI the
entity, the auditor is not required to discuss the inIormation with any others oI those charged with
governance.
Other Matters
20. II the auditor considers that a modiIication oI the auditor`s report on the Iinancial statements is
required, as described in VSA 700 The Auditor`s Report on Financial Statements communications
between the auditor and those charged with governance cannot be regarded as a substitute.
21. The auditor and the audit Iirm consider whether audit matters oI governance interest previously
communicated may have an eIIect on the current year`s Iinancial statements. The auditor considers
whether the point continues to be a matter oI governance interest and whether to communicate the
matter again with those charged with governance.
Confidentiality
22. When legal documents provide regulations on conIidentiality that restrict communication oI audit
matters oI governance interest arising Irom the audit oI Iinancial statements, the auditor and the audit
Iirm reIer to such regulations beIore communicating with those charged with governance. In some
circumstances, the potential conIlicts with the auditor`s ethical and legal obligations, the auditor may
wish to consult with legal counsel.
Laws and Regulations
23. When the requirements oI legal documents impose obligations on the auditor and the audit Iirm to
make communications on governance related matters that are not covered by this VSA, the auditor
and the audit Iirm should comply with these requirements.

Standard No 330 - The auditor's procedures in response to assessed risks

184
STANDARD 330
THE AUDITOR`S PROCEDURES IN RESPONSE TO ASSESSED RISKS

GENERAL
guidance on determining overall responses and designing and perIorming Iurther audit procedures to
respond to the assessed risks oI material misstatement at the Iinancial statement and assertion levels in
a Iinancial statement audit.
02. The auditor and the audit firm should obtain an understanding of the entity and its
environment, including its internal control, sufficient to identify and assess the risks of material
misstatement of the financial statements whether due to fraud or error, and sufficient to design
and perform further audit procedures.
03. This VAS applies to audits oI Iinancial statements and also applies to audits oI other Iinancial
inIormation, and related services rendered by the audit Iirm.
statements.
and the audit Iirm and dealing with relations relevant to audited inIormation.
04. The following is an overview of the requirements of this standard.
verall responses. This section requires the auditor and the audit Iirm to determine overall responses
to address risks oI material misstatement at the Iinancial statement level and provides guidance on the
nature oI those responses.
Audit procedures responsive to risks of material misstatement at the assertion level. This section
requires the auditor to design and perIorm Iurther audit procedures, including tests oI the operating
eIIectiveness oI controls, when relevant or required, and substantive procedures, whose nature,
timing, and extent are responsive to the assessed risks oI material misstatement at the assertion level.
In addition, this section includes matters the auditor and the audit Iirm consider in determining the
nature, timing, and extent oI such audit procedures.
Evaluating the sufficiency and appropriateness of audit evidence obtained. This section requires the
auditor to evaluate whether the risk assessment remains appropriate and to conclude whether
suIIicient appropriate audit evidence has been obtained.
Documentation. This section requires that the contents and documents in the audit documentation
contain inIormation relevant to assessed risk.
05. In order to reduce audit risk to an acceptably low level, the auditor and the audit firm should
determine overall responses to assessed risks at the financial statement level, and should design
and perform further audit procedures to respond to assessed risks at the assertion level. The
overall responses and the nature, timing, and extent oI the Iurther audit procedures are matters Ior the
proIessional judgment oI the auditor. In addition to the requirements oI this VSA, the auditor and the
audit Iirm also comply with the requirements and guidance in VSA 240 Fraud and Error in responding
to assessed risks oI material misstatement due to Iraud.
CONTENTS OF THE VSA
Overall Responses
06. The auditor should determine overall responses to address the risks of material misstatement at
the financial statement level. Such responses may include emphasizing to the audit team the need to
maintain proIessional skepticism in gathering and evaluating audit evidence, assigning more
experienced staII or those with special skills or using experts, providing more supervision, or
incorporating additional elements oI unpredictability in the selection oI Iurther audit procedures to be

185
perIormed. Additionally, the auditor and the audit Iirm may make general changes to the nature,
timing, or extent oI audit procedures as an overall response, Ior example, perIorming substantive
procedures at period end instead oI at an interim date.
07. The assessment oI the risks oI material misstatement at the Iinancial statement level is aIIected by the
auditor`s understanding oI the control environment. An eIIective control environment may allow the
auditor to have more conIidence in internal control and the reliability oI audit evidence generated
internally within the entity and thus, Ior example, allow the auditor to conduct some audit procedures
at an interim date rather than at period end. II there are weaknesses in the control environment, the
auditor ordinarily conducts more audit procedures as oI the period end rather than at an interim date,
seeks more extensive audit evidence Irom substantive procedures, modiIies the nature oI audit
procedures to obtain more persuasive audit evidence, or increases the number oI locations to be
included in the audit scope.
08. Such considerations, thereIore, have a signiIicant bearing on the auditor`s general approach, Ior
example, an emphasis on substantive procedures (substantive approach), or an approach that uses tests
oI controls as well as substantive procedures (combined approach).
Audit Procedures Responsive to Risks of Material Misstatement at the Assertion Level
09. The auditor and the audit firm should design and perform further audit procedures whose
nature, timing, and extent are responsive to the assessed risks of material misstatement at the
assertion level. The purpose is to provide a clear linkage between the nature, timing, and extent oI the
auditor`s Iurther audit procedures and the risk assessment. In designing Iurther audit procedures, the
auditor and the audit Iirm consider such matters as the Iollowing:
a) The signiIicance oI the risk;
b) The likelihood that a material misstatement will occur;
c) The characteristics oI the class oI transactions, account balance, or disclosure involved;
d) The nature oI the speciIic controls used by the entity and in particular whether they are manual or
automated; and
e) Whether the auditor expects to obtain audit evidence to determine iI the entity`s controls are
eIIective in preventing, or detecting and correcting, material misstatements.
10. The auditor`s assessment oI the identiIied risks at the assertion level provides a basis Ior considering
the appropriate audit approach Ior designing and perIorming Iurther audit procedures. In some cases,
the auditor may determine that only by perIorming tests oI controls may the auditor achieve an
eIIective response to the assessed risk oI material misstatement Ior a particular assertion. In other
cases, the auditor may determine that perIorming only substantive procedures is appropriate Ior
speciIic assertions and, thereIore, the auditor excludes the eIIect oI controls Irom the relevant risk
assessment. This may be because the auditor`s risk assessment procedures have not identiIied any
eIIective controls relevant to the assertion, or because testing the operating eIIectiveness oI controls
would be ineIIicient. However, the auditor needs to be satisIied that perIorming only substantive
procedures Ior the relevant assertion would be eIIective in reducing the risk oI material misstatement
to an acceptably low level. OIten the auditor may determine that a combined approach using both tests
oI the operating eIIectiveness oI controls and substantive procedures is an eIIective approach.
Irrespective oI the approach selected, the auditor designs and perIorms substantive procedures Ior
each material class oI transactions, account balance, and disclosure as required by paragraph 51.
11. In the case oI very small entities, there may not be many control activities that could be identiIied by
the auditor. For this reason, the auditor`s Iurther audit procedures are likely to be primarily
substantive procedures. In such cases, in addition to the matters reIerred to in paragraph 10 above, the
auditor and the audit Iirm consider whether in the absence oI controls it is possible to obtain suIIicient
appropriate audit evidence.
Considering the Nature, Timing, and Extent of Further Audit Procedures
Aature

186
12. The nature oI Iurther audit procedures reIers to their purpose (tests oI controls or substantive
procedures) and their type, that is, inspection, observation, inquiry, conIirmation, recalculation,
reperIormance, or analytical procedures. Certain audit procedures may be more appropriate Ior some
assertions than others. For example, in relation to revenue, tests oI controls may be most responsive to
the assessed risk oI misstatement oI the completeness assertion, whereas substantive procedures may
be most responsive to the assessed risk oI misstatement oI the occurrence assertion.
13. The auditor`s selection oI audit procedures is based on the assessment oI risk. The higher the auditor`s
assessment oI risk, the more reliable and relevant is the audit evidence sought by the auditor Irom
substantive procedures. This may aIIect both the types oI audit procedures to be perIormed and their
combination. For example, the auditor may conIirm the completeness oI the terms oI a contract with a
third party, in addition to inspecting the document.
14. In determining the audit procedures to be perIormed, the auditor considers the reasons Ior the
assessment oI the risk oI material misstatement at the assertion level Ior each class oI transactions,
account balance, and disclosure. This includes considering both the particular characteristics oI each
class oI transactions, account balance, or disclosure (i.e., the inherent risks) and whether the auditor`s
risk assessment takes account oI the entity`s controls (i.e., the control risk). For example, iI the auditor
considers that there is a lower risk that a material misstatement may occur because oI the particular
characteristics oI a class oI transactions without consideration oI the related controls, the auditor may
determine that substantive analytical procedures alone may provide suIIicient appropriate audit
evidence. On the other hand, iI the auditor expects that there is a lower risk that a material
misstatement may arise because an entity has eIIective controls and the auditor intends to design
substantive procedures based on the eIIective operation oI those controls, then the auditor perIorms
tests oI controls to obtain audit evidence about their operating eIIectiveness. This may be the case, Ior
example, Ior a class oI transactions oI reasonably uniIorm, non-complex characteristics that are
routinely processed and controlled by the entity`s inIormation system.
15. The auditor is required to obtain audit evidence about the accuracy and completeness oI inIormation
produced by the entity`s inIormation system when that inIormation is used in perIorming audit
procedures. For example, iI the auditor uses non-Iinancial inIormation or budget data produced by the
entity`s inIormation system in perIorming audit procedures, such as substantive analytical procedures
or tests oI controls, the auditor obtains audit evidence about the accuracy and completeness oI such
inIormation to comply with VSA 500 Audit Evidence.
Timing
16. Timing reIers to when audit procedures are perIormed or the period or date to which the audit
evidence applies.
17. The auditor may perIorm tests oI controls or substantive procedures at an interim date or at period
end. The higher the risk oI material misstatement, the more likely it is that the auditor may decide it is
more eIIective to perIorm substantive procedures nearer to, or at, the period end rather than at an
earlier date, or to perIorm audit procedures unannounced or at unpredictable times (Ior example,
perIorming audit procedures at selected locations on an unannounced basis). On the other hand,
perIorming audit procedures beIore the period end may assist the auditor in identiIying signiIicant
matters at an early stage oI the audit, and consequently resolving them with the assistance oI
management or developing an eIIective audit approach to address such matters. II the auditor
perIorms tests oI controls or substantive procedures prior to period end, the auditor considers the
additional evidence required Ior the remaining period (see paragraphs 39-40 and 58-63).
18. In considering when to perIorm audit procedures, the auditor also considers such matters as the
Iollowing:
a) The control environment;
b) When relevant inIormation is available (Ior example, procedures to be observed may occur only at
certain times);
c) The nature oI the risk (Ior example, iI there is a risk oI inIlated revenues to meet earnings
expectations by subsequent creation oI Ialse sales agreements, the auditor may wish to examine
contracts available on the date oI the period end); and

187
d) The period or date to which the audit evidence relates.
19. Certain audit procedures can be perIormed only at or aIter period end, Ior example, agreeing the
Iinancial statements to the accounting records and examining adjustments made during the course oI
preparing the Iinancial statements. II there is a risk that the entity may have entered into improper
sales contracts or transactions may not have been Iinalized at period end, the auditor perIorms
procedures to respond to that speciIic risk. For example, when transactions are individually material
or an error in cutoII may lead to a material misstatement, the auditor ordinarily inspects transactions
near the period end.
Extent
20. Extent includes the quantity oI a speciIic audit procedure to be perIormed, Ior example, a sample size
or the number oI observations oI a control activity.
The extent oI an audit procedure is determined by the judgment oI the auditor aIter considering the
materiality, the assessed risk, and the degree oI assurance the auditor plans to obtain. In particular, the
auditor ordinarily increases the extent oI audit procedures as the risk oI material misstatement
increases. However, increasing the extent oI an audit procedure is eIIective only iI the audit procedure
itselI is relevant to the speciIic risk; thereIore, the nature oI the audit procedure is the most important
consideration.
21. The use oI computer-assisted audit techniques (CAATs) may enable more extensive testing oI
electronic transactions and account Iiles. Such techniques can be used to select sample transactions
Irom key electronic Iiles, to sort transactions with speciIic characteristics, or to test an entire
population instead oI a sample.
22. Valid conclusions may ordinarily be drawn using sampling approaches. However, iI the quantity oI
selections made Irom a population is too small, the sampling approach selected is not appropriate to
achieve the speciIic audit objective, or iI exceptions are not appropriately Iollowed up, there will be
an unacceptable risk that the auditor`s conclusion based on a sample may be diIIerent Irom the
conclusion reached iI the entire population was subjected to the same audit procedure. VSA 530 Audit
Sampling and Other Selective Testing Procedures contains guidance on the use oI sampling.
23. This VSA regards the use oI diIIerent audit procedures in combination as an aspect oI the nature oI
testing as discussed above. However, the auditor considers whether the extent oI testing is appropriate
when perIorming diIIerent audit procedures in combination.
Tests of Controls
24. The auditor is required to perIorm tests oI controls when the auditor`s risk assessment includes an
expectation oI the operating eIIectiveness oI controls or when substantive procedures alone do not
provide suIIicient appropriate audit evidence at the assertion level.
25. The auditor`s assessment of risks of material misstatement at the assertion level includes an
expectation that controls are operating effectively, the auditor and the audit firm should
perform tests of controls to obtain sufficient appropriate audit evidence that the controls were
operating effectively at relevant times during the period under audit. Paragraphs 41-46 below
discuss the use oI audit evidence about the operating eIIectiveness oI controls obtained in prior audits.
26. Auditor`s assessment oI risk oI material misstatement at the assertion level may include an
expectation oI the operating eIIectiveness oI controls, in which case the auditor perIorms tests oI
controls to obtain audit evidence as to their operating eIIectiveness. Tests oI the operating
eIIectiveness oI controls are perIormed only on those controls that the auditor has determined are
suitably designed to prevent, or detect and correct, a material misstatement in an assertion.
27. When the auditor has determined that it is not possible or practicable to reduce the risks of
material misstatement at the assertion level to an acceptably low level with audit evidence
obtained only from substantive procedures, the auditor should perform tests of relevant
controls to obtain audit evidence about their operating effectiveness. For example, the auditor
may Iind it impossible to design eIIective substantive procedures that by themselves provide suIIicient
appropriate audit evidence at the assertion level when an entity conducts its business using IT and no
documentation oI transactions is produced or maintained, other than through the IT system.

188
28. Testing the operating eIIectiveness oI controls is diIIerent Irom obtaining audit evidence that controls
have been implemented. When obtaining audit evidence oI implementation by perIorming risk
assessment procedures, the auditor determines that the relevant controls exist and that the entity is
using them. When perIorming tests oI the operating eIIectiveness oI controls, the auditor obtains audit
evidence that controls operate eIIectively during the period. This includes obtaining audit evidence
about how controls were applied at relevant times during the period under audit, the consistency with
which they were applied, and by whom or by what means they were applied. II substantially diIIerent
controls were used at diIIerent times during the period under audit, the auditor considers each
separately. The auditor may determine that testing the operating eIIectiveness oI controls at the same
time as evaluating their design and obtaining audit evidence oI their implementation is eIIicient.
29. Although some risk assessment procedures that the auditor perIorms to evaluate the design oI controls
and to determine that they have been implemented may not have been speciIically designed as tests oI
controls, they may nevertheless provide audit evidence about the operating eIIectiveness oI the
controls and, consequently, serve as tests oI controls. For example, the auditor may have made
inquiries about management`s use oI budgets, observed management`s comparison oI monthly
budgeted and actual expenses, and inspected reports pertaining to the investigation oI variances
between budgeted and actual amounts. These audit procedures provide knowledge about the design oI
the entity`s budgeting policies and whether they have been implemented, and may also provide audit
evidence about the eIIectiveness oI the operation oI budgeting policies in preventing or detecting
material misstatements in the classiIication oI expenses. In such circumstances, the auditor considers
whether the audit evidence provided by those audit procedures is suIIicient.
Nature of Tests of Controls
30. The auditor selects audit procedures to obtain assurance about the operating eIIectiveness oI controls.
As the planned level oI assurance increases, the auditor seeks more reliable audit evidence. In
circumstances when the auditor adopts an approach consisting primarily oI tests oI controls, in
particular related to those risks where it is not possible or practicable to obtain suIIicient appropriate
audit evidence only Irom substantive procedures, the auditor ordinarily perIorms tests oI controls to
obtain a higher level oI assurance about their operating eIIectiveness.
31. The auditor should perform other audit procedures in combination with inquiry to test the
operating effectiveness of controls. Although diIIerent Irom obtaining an understanding oI the
design and implementation oI controls, tests oI the operating eIIectiveness oI controls ordinarily
include the same types oI audit procedures used to evaluate the design and implementation oI
controls, and may also include reperIormance oI the application oI the control by the auditor. Since
inquiry alone is not suIIicient, the auditor uses a combination oI audit procedures to obtain suIIicient
appropriate audit evidence regarding the operating eIIectiveness oI controls. Those controls subject to
testing by perIorming inquiry combined with inspection or reperIormance ordinarily provide more
assurance than those controls Ior which the audit evidence consists solely oI inquiry and observation.
For example, an auditor may inquire about and observe the entity`s procedures Ior opening the mail
and processing cash receipts to test the operating eIIectiveness oI controls over cash receipts. Because
an observation is pertinent only at the point in time at which it is made, the auditor ordinarily
supplements the observation with inquiries oI entity personnel, and may also inspect documentation
about the operation oI such controls at other times during the audit period in order to obtain suIIicient
32. The nature oI the particular control inIluences the type oI audit procedure required to obtain audit
evidence about whether the control was operating eIIectively at relevant times during the period under
audit. For some controls, operating eIIectiveness is evidenced by documentation. In such
circumstances, the auditor may decide to inspect the documentation to obtain audit evidence about
operating eIIectiveness. For other controls, however, documentation oI control eIIectiveness may not
be available or relevant. For example, documentation oI operation may not exist Ior some Iactors in
the control environment, such as assignment oI authority and responsibility, or Ior some types oI
control activities, such as control activities perIormed by a computer. In such circumstances, audit
evidence about operating eIIectiveness may be obtained through inquiry in combination with other
audit procedures such as observation or the use oI CAATs.

189
33. In designing tests oI controls, the auditor considers the need to obtain audit evidence supporting the
eIIective operation oI controls directly related to the assertions as well as other indirect controls on
which these controls depend. For example, the auditor may identiIy a user review oI an exception
report oI notes receivable over a customer`s authorized credit limit as a direct control related to an
assertion. In such cases, the auditor considers the eIIectiveness oI the user review oI the report and
also the controls related to the accuracy oI the inIormation in the report.
34. In the case oI an automated application control, because oI the inherent consistency oI IT processing,
audit evidence about the implementation oI the control at the time oI assessment, when considered in
combination with audit evidence obtained regarding the operating eIIectiveness oI the entity`s general
controls may provide substantial audit evidence about its operating eIIectiveness during the relevant
period.
35. When responding to the risk assessment, the auditor may design a test oI controls to be perIormed
concurrently with a test oI details on the same transaction. The objective oI tests oI controls is to
evaluate whether a control operated eIIectively. The objective oI tests oI details is to detect material
misstatements at the assertion level. Although these objectives are diIIerent, both may be
accomplished concurrently through perIormance oI a test oI controls and a test oI details on the same
transaction, also known as a dual-purpose test. For example, the auditor may examine an invoice to
determine whether it has been approved and to provide substantive audit evidence oI a transaction.
The auditor careIully considers the design and evaluation oI such tests to accomplish both objectives.
36. The absence oI misstatements detected by a substantive procedure does not provide audit evidence
that controls related to the assertion being tested are eIIective. However, misstatements that the
auditor detects by perIorming substantive procedures are considered by the auditor when assessing the
operating eIIectiveness oI related controls. A material misstatement detected by the auditor`s
procedures that was not identiIied by the entity ordinarily is indicative oI the existence oI a material
weakness in internal control, which is communicated to management and those charged with
governance.
Timing of Tests of Controls
37. The timing oI tests oI controls depends on the auditor`s objective and determines the period oI
reliance on those controls. II the auditor tests controls at a particular time, the auditor only obtains
audit evidence that the controls operated eIIectively at that time. However, iI the auditor tests controls
throughout a period, the auditor obtains audit evidence oI the eIIectiveness oI the operation oI the
controls during that period.
38. Audit evidence pertaining only to a point in time may be suIIicient Ior the auditor`s purpose, Ior
example, when testing controls over the entity`s physical inventory counting at the period end. II, on
the other hand, the auditor requires audit evidence oI the eIIectiveness oI a control over a period, audit
evidence pertaining only to a point in time may be insuIIicient and the auditor supplements those tests
with other tests oI controls that are capable oI providing audit evidence that the control operated
eIIectively at relevant times during the period under audit. Such other tests may consist oI tests oI the
entity`s monitoring oI controls.
39. When the auditor obtains audit evidence about the operating effectiveness of controls during an
interim period, the auditor should determine what additional audit evidence should be obtained
for the remaining period. In making that determination, the auditor considers the signiIicance oI the
assessed risks oI material misstatement at the assertion level, the speciIic controls that were tested
during the interim period, the degree to which audit evidence about the operating eIIectiveness oI
those controls was obtained, the length oI the remaining period, the extent to which the auditor
intends to reduce Iurther substantive procedures based on the reliance oI controls, and the control
environment. The auditor obtains audit evidence about the nature and extent oI any signiIicant
changes in internal control, including changes in the inIormation system, processes, and personnel
that occur subsequent to the interim period.
40. Additional audit evidence may be obtained, Ior example, by extending the testing oI the operating
eIIectiveness oI controls over the remaining period or testing the entity`s monitoring oI controls.

190
41. If the auditor plans to use audit evidence about the operating effectiveness of controls obtained
in prior audits, the auditor should obtain audit evidence about whether changes in those specific
controls have occurred subsequent to the prior audit. The auditor should obtain audit evidence
about whether such changes have occurred by performing inquiry in combination with
observation or inspection to confirm the understanding of those specific controls. VSA 500 Audit
Evidence states that the auditor perIorms audit procedures to establish the continuing relevance oI
audit evidence obtained in prior periods when the auditor plans to use the audit evidence in the current
period. For example, in perIorming the prior audit, the auditor may have determined that an
automated control was Iunctioning as intended. The auditor obtains audit evidence to determine
whether changes to the automated control have been made that aIIect its continued eIIective
Iunctioning, Ior example, through inquiries oI management and the inspection oI logs to indicate what
controls have been changed. Consideration oI audit evidence about these changes may support either
increasing or decreasing the expected audit evidence to be obtained in the current period about the
operating eIIectiveness oI the controls.
42. If the auditor plans to rely on controls that have changed since they were last tested, the auditor
should test the operating effectiveness of such controls in the current audit. Changes may aIIect
the relevance oI the audit evidence obtained in prior periods such that there may no longer be a basis
Ior continued reliance. For example, changes in a system that enable an entity to receive a new report
Irom the system probably do not aIIect the relevance oI prior period audit evidence; however, a
change that causes data to be accumulated or calculated diIIerently does aIIect it.
43. If the auditor plans to rely on controls that have not changed since they were last tested, the
auditor should test the operating effectiveness of such controls at least once in every third audit.
As indicated in paragraphs 42 and 46, the auditor may not rely on audit evidence about the operating
eIIectiveness oI controls obtained in prior audits Ior controls that have changed since they were last
tested or controls that mitigate a signiIicant risk. The auditor`s decision on whether to rely on audit
evidence obtained in prior audits Ior other controls is a matter oI proIessional judgment. In addition,
the length oI time period between retesting such controls is also a matter oI proIessional judgment, but
cannot exceed two years.
44. In considering whether it is appropriate to use audit evidence about the operating eIIectiveness oI
controls obtained in prior audits, and, iI so, the length oI the time period that may elapse beIore
retesting a control, the auditor considers the Iollowing:
a) The eIIectiveness oI other elements oI internal control, including the control environment, the
entity`s monitoring oI controls, and the entity`s risk assessment process.
b) The risks arising Irom the characteristics oI the control, including whether controls are manual or
automated.
c) The eIIectiveness oI general IT-controls.
d) The eIIectiveness oI the control and its application by the entity, including the nature and extent
oI deviations in the application oI the control Irom tests oI operating eIIectiveness in prior audits.
e) The risk oI material misstatement and the extent oI reliance on the control. The higher the risk oI
material misstatement, or the greater the reliance on controls, the shorter the time period elapsed,
iI any, is likely to be. Factors that ordinarily decrease the period Ior retesting a control, or result in
not relying on audit evidence obtained in prior audits at all, include the Iollowing:
- A weak control environment;
- Weak monitoring oI controls;
- A signiIicant manual element to the relevant controls;
- Personnel changes that signiIicantly aIIect the application oI the control;
- Changing circumstances that indicate the need Ior changes in the control; and
- Weak general IT-controls.
45. When there are a number of controls for which the auditor determines that it is appropriate to
use audit evidence obtained in prior audits, the auditor should test the operating effectiveness of

191
some controls each audit. The purpose oI this requirement is to avoid the possibility that the auditor
might apply the approach oI paragraph 43 to all controls on which the auditor proposes to rely, but
test all those controls in a single audit period with no testing oI controls in the subsequent two audit
periods. In addition to providing audit evidence about the operating eIIectiveness oI the controls being
tested in the current audit, perIorming such tests provides collateral evidence about the continuing
eIIectiveness oI the control environment and thereIore contributes to the decision about whether it is
appropriate to rely on audit evidence obtained in prior audits. ThereIore, when the auditor determines
in accordance with paragraphs 41-44 that it is appropriate to use audit evidence obtained in prior
audits Ior a number oI controls, the auditor plans to test a suIIicient portion oI the controls in that
population in each audit period, and at a minimum, each control is tested at least every third audit.
46. When the auditor has determined that an assessed risk of material misstatement at the assertion
level is a significant risk and the auditor plans to rely on the operating effectiveness of controls
intended to mitigate that significant risk, the auditor should obtain the audit evidence about the
operating effectiveness of those controls from tests of controls performed in the current period.
The greater the risk oI material misstatement, the more audit evidence the auditor obtains that relevant
controls are operating eIIectively. Accordingly, although the auditor oIten considers inIormation
obtained in prior audits in designing tests oI controls to mitigate a signiIicant risk, the auditor does not
rely on audit evidence obtained in a prior audit about the operating eIIectiveness oI controls over such
risks, but instead obtains the audit evidence about the operating eIIectiveness oI controls over such
risks in the current period.
Extent oI Tests oI Controls
1. The auditor designs tests oI controls to obtain suIIicient appropriate audit evidence that the controls
operated eIIectively throughout the period oI reliance. Matters the auditor may consider in
determining the extent oI the auditor`s tests oI controls include the Iollowing:
a) The Irequency oI the perIormance oI the control by the entity during the period;
b) The length oI time during the audit period that the auditor is relying on the operating eIIectiveness
oI the control;
c) The relevance and reliability oI the audit evidence to be obtained in supporting that the control
prevents, or detects and corrects, material misstatements at the assertion level;
d) The extent to which audit evidence is obtained Irom tests oI other controls related to the assertion;
e) The extent to which the auditor plans to rely on the operating eIIectiveness oI the control in the
assessment oI risk (and thereby reduce substantive procedures based on the reliance oI such
control); and
I) The expected deviation Irom the control.
2. The more the auditor relies on the operating eIIectiveness oI controls in the assessment oI risk, the
greater is the extent oI the auditor`s tests oI controls. In addition, as the rate oI expected deviation
Irom a control increases, the auditor increases the extent oI testing oI the control. However, the
auditor considers whether the rate oI expected deviation indicates that the control will not be
suIIicient to reduce the risk oI material misstatement at the assertion level to that assessed by the
auditor. II the rate oI expected deviation is expected to be too high, the auditor may determine that
tests oI controls Ior a particular assertion may not be eIIective.
ii. Because oI the inherent consistency oI IT processing, the auditor may not need to increase the extent
oI testing oI an automated control. An automated control should Iunction consistently unless the
program is changed. Once the auditor determines that an automated control is Iunctioning as intended
(which could be done at the time the control is initially implemented or at some other date), the
auditor considers perIorming tests to determine that the control continues to Iunction eIIectively. Such
tests might include determining that changes to the program are not made without being subject to the
appropriate program change controls.

192
Substantive Procedures
50. Substantive procedures are perIormed in order to detect material misstatements at the assertion level,
and include tests oI details oI classes oI transactions, account balances, and disclosures and
substantive analytical procedures. The auditor plans and perIorms substantive procedures to be
responsive to the related assessment oI the risk oI material misstatement.
51. Irrespective of the assessed risk of material misstatement, the auditor should design and
perform substantive procedures for each material class of transactions, account balance, and
disclosure. This requirement reIlects the Iact that the auditor`s assessment oI risk is judgmental and
may not be suIIiciently precise to identiIy all risks oI material misstatement. Further, there are
inherent limitations to internal control including management override. Accordingly, while the auditor
may determine that the risk oI material misstatement may be reduced to an acceptably low level by
perIorming only tests oI controls Ior a particular assertion related to a class oI transactions, account
balance or disclosure (see paragraph 10), the auditor always perIorms substantive procedures Ior each
material class oI transactions, account balance, and disclosure.
52. The auditor`s substantive procedures should include the following audit procedures related to
the financial statement closing process:
a) Agreeing the financial statements to the underlying accounting records; and
b) Examining material journal entries and other adjustments made during the course of
preparing the financial statements.
The nature and extent oI the auditor`s examination oI journal entries and other adjustments depends
on the nature and complexity oI the entity`s Iinancial reporting process and the associated risks oI
material misstatement.
53. When the auditor has determined that an assessed risk of material misstatement at the assertion
level is a significant risk, the auditor should perform substantive procedures that are
specifically responsive to that risk. For example, iI the auditor identiIies that management is under
pressure to meet earnings expectations, there may be a risk that management is inIlating sales by
improperly recognizing revenue related to sales agreements with terms that preclude revenue
recognition or by invoicing sales beIore shipment. In these circumstances, the auditor may, Ior
example, design external conIirmations not only to conIirm outstanding amounts, but also to conIirm
the details oI the sales agreements, including date, any rights oI return and delivery terms. In addition,
the auditor may Iind it eIIective to supplement such external conIirmations with inquiries oI non-
Iinancial personnel in the entity regarding any changes in sales agreements and delivery terms.
54. When the approach to signiIicant risks consists only oI substantive procedures, the audit procedures
appropriate to address such signiIicant risks consist oI tests oI details oI transactions or balances, or a
combination oI tests oI details and substantive analytical procedures. The auditor considers the
guidance in paragraphs 55-64 in designing the nature, timing, and extent oI substantive procedures Ior
signiIicant risks. In order to obtain suIIicient appropriate audit evidence, the substantive procedures
related to signiIicant risks are most oIten designed to obtain audit evidence with high reliability.
Nature oI Substantive Procedures
55. Substantive analytical procedures are generally more applicable to large volumes oI transactions that
tend to be predictable over time. Tests oI details are ordinarily more appropriate to obtain audit
evidence regarding certain assertions about account balances, including existence and valuation. In
some situations, the auditor may determine that perIorming only substantive analytical procedures
may be suIIicient to reduce the risk oI material misstatement to an acceptably low level. For example,
the auditor may determine that perIorming only substantive analytical procedures is responsive to the
assessed risk oI material misstatement Ior a class oI transactions where the auditor`s assessment oI
risk is supported by obtaining audit evidence Irom perIormance oI tests oI the operating eIIectiveness
oI controls. In other situations, the auditor may determine that only tests oI details are appropriate, or
that a combination oI substantive analytical procedures and tests oI details are most responsive to the
assessed risks.

193
56. The auditor designs tests oI details responsive to the assessed risk with the objective oI obtaining
suIIicient appropriate audit evidence to achieve the planned level oI assurance at the assertion level. In
designing substantive procedures related to the existence or occurrence assertion, the auditor selects
Irom items contained in a Iinancial statement amount and obtains the relevant audit evidence. On the
other hand, in designing audit procedures related to the completeness assertion, the auditor selects
Irom audit evidence indicating that an item should be included in the relevant Iinancial statement
amount and investigates whether that item is so included. For example, the auditor might inspect
subsequent cash disbursements to determine whether any purchases had been omitted Irom accounts
payable.
57. In designing substantive analytical procedures, the auditor considers such matters as the Iollowing:
a) The suitability oI using substantive analytical procedures given the assertions;
b) The reliability oI the data, whether internal or external, Irom which the expectation oI recorded
amounts or ratios is developed;
c) Whether the expectation is suIIiciently precise to identiIy a material misstatement at the desired
level oI assurance; and
d) The amount oI any diIIerence in recorded amounts Irom expected values that is acceptable.
The auditor considers testing the controls, iI any, over the entity`s preparation oI inIormation used by
the auditor in applying analytical procedures. When such controls are eIIective, the auditor has greater
conIidence in the reliability oI the inIormation and, thereIore, in the results oI analytical procedures.
Alternatively, the auditor may consider whether the inIormation was subjected to audit testing in the
current or prior period. In determining the audit procedures to apply to the inIormation upon which
the expectation Ior substantive analytical procedures is based, the auditor considers the guidance in
VSA 500 Audit Evidence.
Timing oI Substantive Procedures
58. When substantive procedures are performed at an interim date, the auditor should perform
further substantive procedures or substantive procedures combined with tests of controls to
cover the remaining period that provide a reasonable basis for extending the audit conclusions
from the interim date to the period end.
59. In some circumstances, substantive procedures may be perIormed at an interim date. This increases
the risk that misstatements that may exist at the period end are not detected by the auditor. This risk
increases as the remaining period is lengthened. In considering whether to perIorm substantive
procedures at an interim date, the auditor considers such Iactors as the Iollowing:
a) The control environment and other relevant controls;
b) The availability oI inIormation at a later date that is necessary Ior the auditor`s procedures;
c) The objective oI the substantive procedure;
d) The assessed risk oI material misstatement;
e) The nature oI the class oI transactions or account balance and related assertions; and
I) The ability oI the auditor to perIorm appropriate substantive procedures or substantive procedures
combined with tests oI controls to cover the remaining period in order to reduce the risk that
misstatements that exist at period end are not detected.
60. Although the auditor is not required to obtain audit evidence about the operating eIIectiveness oI
controls in order to have a reasonable basis Ior extending audit conclusions Irom an interim date to the
period end, the auditor considers whether perIorming only substantive procedures to cover the
remaining period is suIIicient. II the auditor concludes that substantive procedures alone would not be
suIIicient, tests oI the operating eIIectiveness oI relevant controls are perIormed or the substantive
procedures are perIormed as oI the period end.
61. In circumstances where the auditor has identiIied risks oI material misstatement due to Iraud, the
auditor`s response to address those risks may include changing the timing oI audit procedures. For
example, the auditor might conclude that substantive procedures need to be perIormed at or near the

194
end oI the reporting period to address an identiIied risk oI material misstatement due to Iraud (see
VSA 240 Fraud and Error).
62. Ordinarily, the auditor compares and reconciles inIormation concerning the balance at the period end
with the comparable inIormation at the interim date to identiIy amounts that appear unusual,
investigates any such amounts, and perIorms substantive analytical procedures or tests oI details to
test the intervening period. When the auditor plans to perIorm substantive analytical procedures with
respect to the intervening period, the auditor considers whether the period end balances oI the
particular classes oI transactions or account balances are reasonably predictable with respect to
amount, relative signiIicance, and composition. The auditor considers whether the entity`s procedures
Ior analyzing and adjusting such classes oI transactions or account balances at interim dates and Ior
establishing proper accounting cutoIIs are appropriate. In addition, the auditor considers whether the
inIormation system relevant to Iinancial reporting will provide inIormation concerning the balances at
the period end and the transactions in the remaining period that is suIIicient to permit investigation oI:
signiIicant unusual transactions or entries (including those at or near period end); other causes oI
signiIicant Iluctuations, or expected Iluctuations that did not occur; and changes in the composition oI
the classes oI transactions or account balances. The substantive procedures related to the remaining
period depend on whether the auditor has perIormed tests oI controls.
63. II misstatements are detected in classes oI transactions or account balances at an interim date, the
auditor ordinarily modiIies the related assessment oI risk and the planned nature, timing, or extent oI
the substantive procedures covering the remaining period that relate to such classes oI transactions or
account balances, or extends or repeats such audit procedures at the period end.
64. The use oI audit evidence Irom the perIormance oI substantive procedures in a prior audit is not
suIIicient to address a risk oI material misstatement in the current period. In most cases, audit
evidence Irom the perIormance oI substantive procedures in a prior audit provides little or no audit
evidence Ior the current period. In order Ior audit evidence obtained in a prior audit to be used in the
current period as substantive audit evidence, the audit evidence and the related subject matter must
not Iundamentally change. An example oI audit evidence obtained Irom the perIormance oI
substantive procedures in a prior period that may be relevant in the current year is a legal opinion
related to the structure oI a securitization to which no changes have occurred during the current
period. As required by VSA 500 Audit evidence, iI the auditor plans to use audit evidence obtained
Irom the perIormance oI substantive procedures in a prior audit, the auditor perIorms audit procedures
during the current period to establish the continuing relevance oI the audit evidence.
Extent of the Performance of Substantive Procedures
65. The greater the risk oI material misstatement, the greater the extent oI substantive procedures. Because
the risk oI material misstatement takes account oI internal control, the extent oI substantive procedures
may be increased as a result oI unsatisIactory results Irom tests oI the operating eIIectiveness oI
controls. However, increasing the extent oI an audit procedure is appropriate only iI the audit procedure
itselI is relevant to the speciIic risk.
66. In designing tests oI details, the extent oI testing is ordinarily thought oI in terms oI the sample size,
which is aIIected by the risk oI material misstatement. However, the auditor also considers other
matters, including whether it is more eIIective to use other selective means oI testing, such as
selecting large or unusual items Irom a population as opposed to perIorming representative sampling
or stratiIying the population into homogeneous subpopulations Ior sampling. VSA 530 Audit
Sampling and Other Selective Testing Procedures contains guidance on the use oI sampling and other
means oI selecting items Ior testing. In designing substantive analytical procedures, the auditor
considers the amount oI diIIerence Irom the expectation that can be accepted without Iurther
investigation. This consideration is inIluenced primarily by materiality and the consistency with the
desired level oI assurance. Determination oI this amount involves considering the possibility that a
combination oI misstatements in the speciIic account balance, class oI transactions, or disclosure
could aggregate to an unacceptable amount. In designing substantive analytical procedures, the
auditor increases the desired level oI assurance as the risk oI material misstatement increases.
Adequacy of Presentation and Disclosure

195
67. The auditor should perform audit procedures to evaluate whether the overall presentation of
the financial statements, including the related disclosures, are in accordance with the applicable
financial reporting framework. The auditor considers whether the individual Iinancial statements
are presented in a manner that reIlects the appropriate classiIication and description oI Iinancial
inIormation. The presentation oI Iinancial statements in conIormity with the applicable Iinancial
reporting Iramework also includes adequate disclosure oI material matters. These matters relate to the
Iorm, arrangement, and content oI the Iinancial statements and their appended notes, including, Ior
example, the terminology used, the amount oI detail given, the classiIication oI items in the
statements, and the bases oI amounts set Iorth.
The auditor considers whether management should have disclosed a particular matter in light oI the
circumstances and Iacts oI which the auditor is aware at the time. In perIorming the evaluation oI the
overall presentation oI the Iinancial statements, including the related disclosures, the auditor considers
the assessed risk oI material misstatement at the assertion level in accordance with VSA 500 Audit
Evidence Ior a description oI the assertions related to presentation and disclosure.
Evaluating the Sufficiency and Appropriateness of Audit Evidence Obtained
68. Based on the audit procedures perIormed and the audit evidence obtained, the auditor should evaluate
whether the assessments oI the risks oI material misstatement at the assertion level remain
appropriate.
69. As the auditor perIorms planned audit procedures, the audit evidence obtained may cause the auditor
to modiIy the nature, timing, or extent oI other planned audit procedures. InIormation may come to
the auditor`s attention that diIIers signiIicantly Irom the inIormation on which the risk assessment was
based. For example, the extent oI misstatements that the auditor detects by perIorming substantive
procedures may alter the auditor`s judgment about the risk assessments and may indicate a material
weakness in internal control. In addition, analytical procedures perIormed at the overall review stage
oI the audit may indicate a previously unrecognized risk oI material misstatement. In such
circumstances, the auditor may need to reevaluate the planned audit procedures, based on the revised
consideration oI assessed risks Ior all or some oI the classes oI transactions, account balances, or
disclosures and related assertions.
70. The concept oI eIIectiveness oI the operation oI controls recognizes that some deviations in the way
controls are applied by the entity may occur. Deviations Irom prescribed controls may be caused by
such Iactors as changes in key personnel, signiIicant seasonal Iluctuations in volume oI transactions
and human error. When such deviations are detected during the perIormance oI tests oI controls, the
auditor makes speciIic inquiries to understand these matters and their potential consequences, Ior
example, by inquiring about the timing oI personnel changes in key internal control Iunctions. The
auditor determines whether the tests oI controls perIormed provide an appropriate basis Ior reliance
on the controls, whether additional tests oI controls are necessary, or whether the potential risks oI
misstatement need to be addressed using substantive procedures.
71. The auditor cannot assume that an instance oI Iraud or error is an isolated occurrence, and thereIore
considers how the detection oI a misstatement aIIects the assessed risks oI material misstatement.
BeIore the conclusion oI the audit, the auditor evaluates whether audit risk has been reduced to an
acceptably low level and whether the nature, timing, and extent oI the audit procedures may need to
be reconsidered. For example, the auditor reconsiders the Iollowing:
A) THE NATURE, TIMING, AND EXTENT OF SUBSTANTIVE PROCEDURES; AND
B) THE AUDIT EVIDENCE OF THE OPERATING EFFECTIVENESS OF RELEVANT
CONTROLS, INCLUDING THE ENTITY`S RISK ASSESSMENT PROCESS.
72. The auditor should conclude whether sufficient appropriate audit evidence has been obtained to
reduce to an acceptably low level the risk of material misstatement in the financial statements.
In developing an opinion, the auditor considers all relevant audit evidence, regardless oI whether it
appears to corroborate or to contradict the assertions in the Iinancial statements.
73. The suIIiciency and appropriateness oI audit evidence to support the auditor`s conclusions throughout
the audit are a matter oI proIessional judgment. The auditor`s judgment as to what constitutes

196
suIIicient appropriate audit evidence is inIluenced by such Iactors as the Iollowing:
a) SigniIicance oI the potential misstatement in the assertion and the likelihood oI its having a
material eIIect, individually or aggregated with other potential misstatements, on the Iinancial
statements;
b) EIIectiveness oI management`s responses and controls to address the risks;
c) Experience gained during previous audits with respect to similar potential misstatements;
d) Results oI audit procedures perIormed, including whether such audit procedures identiIied
speciIic instances oI Iraud or error;
e) Source and reliability oI the available inIormation;
g) Persuasiveness oI the audit evidence; and
h) Understanding oI the entity and its environment, including its internal control.
74. If the auditor has not obtained sufficient appropriate audit evidence as to a material financial
statement assertion, the auditor should attempt to obtain further audit evidence. If the auditor
is unable to obtain sufficient appropriate audit evidence, the auditor should express a qualified
opinion or a disclaimer of opinion to comply with VSA 00 The Auditor`s Report on Financial
Statements.
Documentation
75. The auditor should document the overall responses to address the assessed risks of material
misstatement at the financial statement level and the nature, timing, and extent of the further
audit procedures, the linkage of those procedures with the assessed risks at the assertion level,
and the results of the audit procedures. In addition, if the auditor plans to use audit evidence
about the operating effectiveness of controls obtained in prior audits, the auditor should
document the conclusions reached with regard to relying on such controls that were tested in a
prior audit. The manner in which these matters are documented is based on the auditor`s
professional judgment. VSA 230 Documentation establishes standards and provides guidance
regarding documentation in the context of the audit of financial statements.

Standard No 505 - ExternaI confirmations

197
STANDARD 505
EXTERNAL CONFIRMATIONS
(Issued in pursuance of the Minister of Finance
Decision No. 101/2005/QD-BTC dated 29 December 2005)
GENERAL
guidance on the auditor`s use oI external conIirmation as a means oI obtaining audit evidence oI the
auditor and the audit Iirm.
03. The auditor and the audit firm should determine whether the use of external confirmations is
necessary to obtain sufficient appropriate audit evidence at the assertion. In making this
determination, the auditor should consider the assessed risk of material misstatement, inherent
and control risks and how the audit evidence from other planned audit procedures will reduce
the risk of material misstatement at the asserion level to an acceptably low level.
03.04. The auditor and the audit Iirm should comply with this VSA in obtaining external conIirmations.
04.05. It is expected that the audited (client) entity, related entities and persons should possess essential
and the audit Iirm and dealing with the relations maintained during obtaining external conIirmation.
05.06. VSA 500 Audit Evidence states that the reliability oI audit evidence is inIluenced by its source
and by its nature, and is dependent on the individual circumstances under which it is obtained. Under
this VSA, audit evidence is more reliable when it is obtained Irom independent sources outside the
entity; and audit evidence is more reliable when it exists in image or documentary Iorm than in oral
Iorm. Accordingly, audit evidence in the Iorm oI original written Irom outside is more reliable as
people outside the entity are not directly related to the entity being audited. The auditor should
determine whether to consider audit evidence individually or cumulatively Irom other audit
procedures which were implemented or will be implemented to assist in reducing the risk oI material
misstatement Ior the related assertions to an acceptably low level.
06.07. External conIirmation is the process oI obtaining and evaluating audit evidence through a
representation oI inIormation or an existing condition directly Irom a third party in response to a
request Ior inIormation about a particular item aIIecting management`s assertions disclosed in the
Iinancial statements oI the entity being audited. In deciding to what extent to use external
conIirmations the auditor and the audit Iirm consider the characteristics oI the environment in which
the entity being audited operates and the collectability oI such inIormation.
07.08. External conIirmations are Irequently used in relation to account balances and their components,
but need not be restricted to these items. For example, the auditor and the audit Iirm may request
external conIirmation oI the terms oI agreements or transactions an entity has with third parties. Other
examples oI situations where external conIirmations may be used include the Iollowing:
a) Bank balances and other inIormation Irom bankers;
b) Accounts receivable balances;
c) Stocks held by third parties at bonded warehouses Ior processing or on consignment;
d) Property title deeds held by lawyers or Iinanciers Ior saIe custody or as security;
e) Investments purchased Irom stockbrokers but not delivered at the balance sheet date;
I) Loans Irom lenders; and
g) Accounts payable balances.
08.09. The reliability oI the audit evidence obtained by external conIirmations depends, among other
Iactors, upon the auditor applying appropriate audit procedures in designing the external conIirmation
request, perIorming the external conIirmation procedures, and evaluating the results oI the external
conIirmation procedures. Factors aIIecting the reliability oI conIirmations include the control the
auditor exercises over conIirmation requests and responses, the characteristics oI the respondents, and
any restrictions included in the response or imposed by management.

198
COA1EA1S OF 1HE JSA
Relationship of External Confirmation Procedures to the Auditor`s Assessments of the Inherent
Risk and Control Risk
09.10. VSA 400 Risk Assessments and Internal Control speciIies audit risk and its components,
including inherent risk, control risk and detection risk. This VSA also prescribles that the auditor`s
control risk assessment, together with the inherent risk assessment is to inIluence the nature, timing
and extent oI substantive procedures to be perIormed to reduce detection risk, thereIore audit risk, to
an acceptably low level.
10. VSA 400 Risk Assessments and Internal Control also speciIies the nature and extent oI audit evidence
obtained Irom carrying out substantive procedures that depend on auditor`s assessments oI control and
inherent risk. The assessed levels oI inherent and control risk cannot be suIIiciently low to eliminate
the need Ior the auditor to perIorm any substantive procedures. These substantive procedures may
include external conIirmation procedures Ior the assertion oI the Iinancial statements.
11. VSA 400 Risk Assessments and Internal Control requires that the higher the assessment oI inherent
and control risk, the more audit evidence the auditor should obtain Irom the perIormance oI
substantive procedures. ThereIore, when the assessed levels oI inherent and control risk increase, the
auditor should perIorm substantive procedures to Iurther collect appropriate audit evidence
concerning an assertion oI the Iinancial statements. In the circumstances, using external conIirmation
procedures brings eIIect on adequately provision oI appropriate audit evidence.
12. The lower the assessment oI inherent and control risk, the less assurance the auditor should obtain
Irom the perIormance oI substantive procedures in order to express an opinion on an assertion oI the
13. Complex or unusual transactions can result in a higher level oI inherent and control risk than that oI
normal ones. Where the entity being audited has unusual or complex transactions and the assessed
level oI its inherent and control risk is high, the auditor should check external conIirmations kept by
the entity concerning contents relevant to these transactions with related parties.
Assertions Addressed by External Confirmations
14. VSA 500 Audit evidence requires that assertions oI the Iinancial statements should satisIy the creteria,
including: existence, rights and obligations, occurrence, completeness, valuation, accuracy, and
disclosure. While external conIirmations may provide audit evidence regarding these assertions, the
ability oI an external conIirmation to provide audit evidence relevant to a particular assertion varies.
15. External conIirmation oI an account receivable provides reliable and relevant audit evidence regarding
the existence oI the account as at a certain date. ConIirmation also provides audit evidence regarding
the operation oI cut-oII procedures. However, such conIirmation does not ordinarily provide all the
necessary audit evidence relating to the valuation assertion, since it is not practicable to ask the debtor
to conIirm detailed inIormation relating to its ability to pay the account.
16. Similarly, in the case oI goods held on consignment, external conIirmation is likely to provide reliable
and relevant audit evidence to support the existence and the rights and obligations assertions, but
might not provide audit evidence that supports the valuation assertion.
17. The relevance oI external conIirmations to auditing a particular assertion is also aIIected by the
objective oI the auditor in selecting inIormation Ior conIirmation. For example, when auditing the
completeness assertion Ior accounts payable, the auditor and the audit Iirm need to obtain audit
evidence that there is no material unrecorded liability. Accordingly, sending conIirmation requests to
an entity`s principal suppliers asking them to provide copies oI their statements oI account directly to
the auditor, even iI the records show no amount currently owing to them, will usually be more
eIIective in detecting unrecorded liabilities than selecting accounts Ior conIirmation based on the
larger amounts recorded in the accounts payable subsidiary ledger.
18. When obtaining audit evidence Ior assertions not adequately addressed by conIirmations, the auditor
considers other audit procedures to complement conIirmation procedures or to be used instead oI
conIirmation procedures.

199
DESIGN OF THE EXTERNAL CONFIRMATION REQUEST
19. The auditor and the audit firm should tailor external confirmation requests to the specific audit
objective. When designing the request, the auditor considers the assertions being addressed and the
Iactors that are likely to aIIect the reliability oI the conIirmations. Factors such as the Iorm oI the
external conIirmation request, prior experience on the audit or similar engagements, the nature oI the
inIormation being conIirmed, and the intended respondent, aIIect the design oI the requests because
these Iactors have a direct eIIect on the reliability oI the audit evidence obtained through external
conIirmation procedures.
20. Also, in designing the request, the auditor and the audit Iirm consider the type oI inIormation
respondents will be able to conIirm readily since this may aIIect the response rate and the nature oI
the audit evidence obtained. For example, certain respondents` inIormation systems may Iacilitate the
external conIirmation oI single transactions rather than oI entire account balances. In addition,
respondents may not always be able to conIirm certain types oI inIormation, such as the overall
accounts receivable balance, but may be able to conIirm individual invoice amounts within the total
balance.
21. ConIirmation requests ordinarily include management`s authorization to the respondent to disclose the
inIormation to the auditor. Respondents may be more willing to respond to a conIirmation request
containing management`s authorization, and in some cases may be unable to respond unless the
request contains management`s authorization.
USE OF POSITIVE AND NEGATIVE CONFIRMATIONS
22. The auditor may use open or closed external conIirmation requests or a combination oI both.
23. An open (positive) external conIirmation request asks the respondent to reply to the auditor in all
cases either by indicating the respondent`s agreement with the given inIormation, or by asking the
respondent to Iill in inIormation. A response to an open conIirmation request is ordinarily expected to
provide reliable audit evidence. There is a risk, however, that a respondent may reply to the
conIirmation request without veriIying that the inIormation is correct. The auditor is not ordinarily
able to detect whether this has occurred. The auditor may reduce this risk, however, by using open
conIirmation requests that do not state the amount (or other inIormation) on the conIirmation request,
but ask the respondent to Iill in the amount or Iurnish other inIormation. On the other hand, use oI this
type oI open conIirmation request may result in lower response rates because additional eIIort is
required oI the respondents.
24. A closed (negative) external conIirmation request asks the respondent to reply only in the event oI
disagreement with the inIormation provided in the request. However, when no response has been
received to a closed conIirmation request, the auditor remains aware that there will be no explicit
audit evidence that intended third parties have received the conIirmation requests and veriIied that the
inIormation contained therein is correct. Accordingly, the use oI closed (negative) conIirmation
requests ordinarily provides less reliable audit evidence than the use oI open (positive) conIirmation
requests, and the auditor considers perIorming other substantive procedures to supplement the use oI
negative conIirmations.
25. Closed (negative) conIirmation requests may be used to reduce the risk oI material misstatement to an
acceptable level when:
a) The assessed risk oI material misstatement is lower;
b) A large number oI small balances is involved;
c) A substantial number oI errors is not expected; and
d) The auditor has no reason to believe that respondents will disregard these requests.
26. A combination oI positive and negative external conIirmations may be used. For example, where the
total accounts receivable balance comprises a small number oI large balances and a large number oI
small balances, the auditor may decide that it is appropriate to conIirm all or a sample oI the
large balances with positive conIirmation requests and a sample oI the small balances using negative
conIirmation requests.

200
Management Requests
27. When the auditor seeks to conIirm certain balances or other inIormation, and management requests
the auditor not to do so, the auditor and the audit Iirm should consider whether there are valid grounds
Ior such a request and obtain audit evidence to support the validity oI management`s requests. II the
auditor agrees to management`s request not to seek external conIirmation regarding a particular
matter, the auditor and the audit Iirm should apply alternative audit procedures to obtain suIIicient
appropriate audit evidence regarding that matter.
28. If the auditor and the audit firm do not accept the validity of management`s request and is
prevented from carrying out the confirmations, there has been a limitation on the scope of the
auditor`s work and the auditor and the audit firm should consider the possible impact on the
auditor`s report.
29. When considering the reasons provided by management, the auditor and the audiI Iirm apply an
attitude oI proIessional skepticism and consider whether the request has any implications regarding
management`s integrity. The auditor considers whether management`s request may indicate the
possible existence oI Iraud or error. II the auditor believes that Iraud or error exists, the auditor applies
the guidance in VSA 240 Fraud and Error. The auditor also considers whether the alternative audit
procedures will provide suIIicient appropriate audit evidence regarding that matter.
Characteristics of Respondents
30. The reliability oI audit evidence provided by a conIirmation is aIIected by the respondent`s
competence, independence, authority to respond, knowledge oI the matter being conIirmed, and
objectivity. For this reason, the auditor and the audit Iirm attempt to ensure, where practicable, that
the conIirmation request is directed to an appropriate individual. For example, when conIirming that a
covenant related to an entity`s long-term debt has been waived, the auditor directs the request to an
oIIicial oI the creditor who has knowledge about the waiver and has the authority to provide the
inIormation.
31. The auditor and the audit Iirm also assess whether certain parties may not provide an objective or unbiased
response to a conIirmation request. InIormation about the respondent`s competence, knowledge,
motivation, ability or willingness to respond may come to the auditor`s attention. The auditor considers the
eIIect oI such inIormation on designing the conIirmation request and evaluating the results, including
determining whether additional audit procedures are necessary. The auditor also considers whether there is
suIIicient basis Ior concluding that the conIirmation request is being sent to a respondent Irom whom the
auditor can expect a response that will provide suIIicient appropriate audit evidence. For example, the
auditor may encounter signiIicant unusual year-end transactions that have a material eIIect on the Iinancial
statements, the transactions being with a third party that is economically dependent upon the entity. In such
circumstances, the auditor and the audit Iirm consider whether the third party may be motivated to provide
an inaccurate response.
The External Confirmation Process
32. When performing confirmation procedures, the auditor and the audit firm should maintain
control over the process of selecting those to whom a request will be sent, the preparation and
sending of confirmation requests, and the responses to those requests. Control is maintained over
communications between the intended recipients and the auditor to minimize the possibility that the
results oI the conIirmation process will be biased because oI the interception and alteration oI
conIirmation requests or responses. The auditor ensures that it is the auditor who sends out the
conIirmation requests, that the requests are properly addressed, and that it is requested that all replies
are sent directly to the auditor. The auditor considers whether replies have come Irom the purported
senders.
No Response to a Positive Confirmation Request
2. The auditor and the audit firm should perform alternative audit procedures where no response
is received to a positive external confirmation request. The alternative audit procedures should
be such as to provide audit evidence about the assertions that the confirmation request was
intended to provide.

201
27. Where no response is received, the auditor and the audit Iirm ordinarily contact the recipient oI the
request to elicit a response. Where the auditor and the audit Iirm are unable to obtain a response, the
auditor uses alternative audit procedures. The nature oI alternative audit procedures varies according
to the account and assertion in question. In the examination oI accounts receivable, alternative audit
procedures may include examination oI subsequent cash receipts, examination oI shipping
documentation or other client documentation to provide audit evidence Ior the existence assertion, and
examination oI sales near the period-end to provide audit evidence Ior the cutoII assertion. In the
examination oI accounts payable, alternative audit procedures may include examination oI subsequent
cash disbursements or correspondence Irom third parties to provide audit evidence oI the existence
assertion, and examination oI other records, such as goods received notes, to provide audit evidence
oI the completeness assertion.
Reliability of Responses Received
28. The auditor and the audit Iirm consider whether there is any indication that external conIirmations
received may not be reliable. The auditor considers the response`s authenticity and perIorms audit
procedures to dispel any concern. The auditor may choose to veriIy the source and contents oI a
response in a telephone call to the purported sender. In addition, the auditor requests the purported
sender to mail the original conIirmation directly to the auditor. With ever-increasing use oI
technology, the auditor considers validating the source oI replies received in electronic Iormat (Ior
example, Iax or electronic mail). Oral conIirmations are documented in the work papers. II the
inIormation in the oral conIirmations is signiIicant, the auditor requests the parties involved to submit
written conIirmation oI the speciIic inIormation directly to the auditor.
Causes and Frequency of Exceptions
29. When the auditor and the audit firm form a conclusion that the confirmation process and
alternative audit procedures have not provided sufficient appropriate audit evidence regarding
an assertion, the auditor should perform additional audit procedures to obtain sufficient
In Iorming the conclusion, the auditor considers the:
a) Reliability oI the conIirmations and alternative audit procedures;
b) Nature of any exceptions, including the implications, both quantitative and qualitative of
those exceptions; and
c) Audit evidence provided by other audit procedures.
Based on this evaluation, the auditor determines whether additional audit procedures are needed to
obtain suIIicient appropriate audit evidence.
30. The auditor also considers the causes and Irequency oI exceptions reported by respondents. An
exception may indicate a misstatement in the entity`s records, in which case, the auditor determines
the reasons Ior the misstatement and assesses whether it has a material eIIect on the Iinancial
statements. II an exception indicates a misstatement, the auditor reconsiders the nature, timing and
extent oI audit procedures necessary to provide the audit evidence required.
Evaluating the Results of the Confirmation Process
31. The auditor should evaluate whether the results of the external confirmation process together
with the results from any other audit procedures performed, provide sufficient appropriate
audit evidence regarding the assertion being audited. In conducting this evaluation the auditor and
the audit Iirm consider the guidance provided by VSA 530 Audit Sampling and Other Means oI
Testing.
External Confirmations Prior to the Year-End
32. When the auditor uses confirmation as at a date prior to the year-end to obtain audit evidence
to support an assertion, the auditor obtains sufficient appropriate audit evidence that
transactions relevant to the assertion in the intervening period have not been materially
misstated. In fact, when inherent and control risks are low and medium, the auditor may decide
to confirm balances at a date other than the period end, for example, when the audit is to be
completed within a short time after the balance sheet date. As with all types of pre-year-end

202
work, the auditor considers the need to obtain further audit evidence relating to the remainder
of the period
Standard No 545- Auditing fair vaIues measurements and discIosures
203
STANDARD 545
AUDITING FAIR VALUES MEASUREMENTS AND DISCLOSURES

GENERAL
guidance on auditing Iair value measurements and disclosures contained in Iinancial statements. This
VSA assists the auditor and the audit Iirm with addressing audit considerations relating to the
measurement, presentation and disclosure oI material assets, liabilities and speciIic components oI
equity presented or disclosed at Iair value in Iinancial statements. Fair value measurements oI assets,
liabilities and components oI equity may arise Irom both the initial recording oI transactions and later
changes in value. Changes in Iair value measurements that occur over time may be treated in diIIerent
ways under the regulations oI the applicable accounting systems and standards.
02. The auditor and the audit firm should obtain sufficient appropriate audit evidence that fair
value measurements and disclosures are in accordance with the regulations of the applicable
accounting systems and standards.
03. This VAS applies to audits oI Iinancial statements and also applies to audits oI other Iinancial
inIormation, and related services rendered by the audit Iirm.
statements and rendering related services.
knowledge as to the objective and general principles set out in this VSA in IulIilling its responsibility
and in working with the auditor and the audit Iirm to deal with relations mainttained during the audit.
04. Management is responsible Ior making the Iair value measurements and disclosures included in the
Iinancial statements. As part oI IulIilling its responsibility, management needs to establish an
accounting and Iinancial reporting process Ior determining the Iair value measurements and
disclosures, select appropriate valuation methods, identiIy and adequately support any signiIicant
assumptions used, prepare the valuation and ensure that the presentation and disclosure oI the Iair
value measurements are in accordance with the accounting system and standards which the entity
applies.
05. Many measurements based on estimates, including Iair value measurements, are inherently imprecise.
In the case oI Iair value measurements, particularly those that do not involve contractual cash Ilows or
Ior which market inIormation is not available when making the estimate, Iair value estimates oIten
involve uncertainty in both the amount and timing oI Iuture cash Ilows. Fair value measurements also
may be based on assumptions about Iuture conditions, transactions or events whose outcome is
uncertain and will thereIore be subject to change over time. The auditor`s consideration oI such
assumptions is based on inIormation available to the auditor at the time oI the audit and the auditor is
not responsible Ior predicting Iuture conditions, transactions or events which, had they been known at
the time oI the audit, may have had a signiIicant eIIect on management`s actions or management`s
assumptions underlying the Iair value measurements and disclosures. Assumptions used in Iair value
measurements are similar in nature to those required when developing other accounting estimates.
VSA 540 Audit oI Accounting Estimates provides guidance on auditing accounting estimates. This
VSA also addresses considerations similar to those in VSA 540 and provides Ior others in the speciIic
context oI Iair value measurements and disclosures in accordance with an applicable accounting
system and standards.
06. DiIIerent accounting systems and standards require or permit a variety oI Iair value measurements and
disclosures in Iinancial statements. They also vary in the level oI guidance that they provide on the
basis Ior measuring assets and liabilities or the related disclosures. Some accounting systems and
standards give prescriptive guidance, others give general guidance, and some give no guidance at all.
In addition, certain industry-speciIic measurement and disclosure practices Ior Iair values also exist.
While this VSA provides guidance on auditing Iair value measurements and disclosures, it does not
address speciIic types oI assets or liabilities, transactions, or industry-speciIic practices.
204
07. In VAS Frameworks, underlying the concept oI Iair value measurements is a presumption that the
entity is a going concern in a Ioreseeable Iuture, that is, it has no intention or obligation to liquidate,
curtail materially the scale oI its operations, or undertake a transaction on adverse terms. ThereIore, in
this case, Iair value would not be the amount that an entity would receive or pay in a Iorced
transaction, involuntary liquidation, or distress sale. An entity, however, may need to take its current
economic or operating situation into account in determining the Iair values oI its assets and liabilities
iI prescribed or permitted to do so by applicable accounting systems or standards and such accounting
Iramework may or may not speciIy how that is done. For example, management`s plan to dispose oI
an asset on an accelerated basis to meet speciIic business objectives may be relevant to the
determination oI the Iair value oI that asset.
08. The measurement oI Iair value may be relatively simple Ior certain assets or liabilities, Ior example,
assets that are bought and sold in active and open markets that provide readily available and reliable
inIormation on the prices at which actual exchanges occur. The measurement oI Iair value Ior other
assets or liabilities may be more complex. A speciIic asset may not have an active market or may
possess characteristics that make it necessary Ior management to estimate its Iair value (Ior example,
an investment property or a derivative Iinancial instrument). The estimation oI Iair value may be
achieved through the use oI a valuation model (Ior example, discounting oI Iuture cash Ilows) or
through the assistance oI an expert, such as an independent valuer.
09. The uncertainty associated with an item, or the lack oI objective data may make it incapable oI
reasonable estimation, in which case, the auditor considers whether the auditor`s report needs
modiIication to comply with VSA 700 The Auditor`s Report on Financial Statements.
CONTENTS OF THE VSA
Understanding the Entity`s Process for Determining Fair Value Measurements and Disclosures and
Relevant Control Activities, and Assessing Risk
10. The auditor and the audit firm should obtain an understanding of the entity`s process for
determining fair value measurements and disclosures and of the relevant control activities to
identify and assess assertion-level risk to design and perform further audit procedures.
11. Management is responsible Ior establishing an accounting and Iinancial reporting process Ior
determining Iair value measurements. In some cases, the measurement oI Iair value and thereIore the
process set up by management to determine Iair value may be simple and reliable. For example,
management may be able to reIer to published price quotations to determine Iair value Ior marketable
securities held by the entity. Some Iair value measurements, however, are inherently more complex
than others and involve uncertainty about the occurrence oI Iuture events or their outcome, and
thereIore assumptions that may involve the use oI judgment need to be made as part oI the
measurement process. The auditor`s understanding oI the measurement process, including its
complexity, helps identiIy and assess the risks oI material misstatement in order to determine the
nature, timing and extent oI the audit procedures.
12. When obtaining an understanding oI the entity's process Ior determining Iair value measurements and
disclosures, the auditor considers, Ior example:
a) The relevant control activities over the process used to determine Iair value measurements,
including, Ior example, controls over data and the segregation oI duties between those committing
the entity to the underlying transactions and those responsible Ior undertaking the valuations;
b) The expertise and experience oI those persons determining the Iair value measurements;
c) The role that inIormation technology has in the process;
d) The types oI accounts or transactions requiring Iair value measurements or disclosures (Ior
example, whether the accounts arise Irom the recording oI routine and recurring transactions or
whether they arise Irom non-routine or unusual transactions);
e) The extent to which the entity uses service organizations to provide Iair value measurements or
the data that supports the measurement. When an entity uses a service organization, the auditor
205
complies with the requirements oI VSA 402 Audit Considerations Relating to Entities Using
Service Organizations,
I) The extent to which the entity uses the work oI experts in determining Iair value measurements
and disclosures (see paragraphs 2932 oI this VSA);
g) The signiIicant management assumptions used by management in determining Iair value;
h) The documentation supporting management`s assumptions;
i) The methods used to develop and apply management assumptions and controls to monitor
changes in those assumptions;
j) The integrity oI change controls and security procedures Ior valuation models and relevant
inIormation systems, including approval processes; and
k) The controls over the consistency, timeliness and reliability oI the data used in valuation models.
13. VSA 400 requires the auditor to obtain an understanding oI the components oI the accounting and
internal control systems to plan the audit. It is required in particular by this VSA the auditor and the
audit Iirm obtain a suIIicient understanding oI the entity`s Iair value measurements and disclosures in
order to design the nature, timing and extent oI the Iurther audit procedures.
14. After obtaining an understanding of the entity`s process for determining fair value
measurements and disclosures, the auditor and the audit firm should identify and assess the
significant assertion-level risks related to the fair value measurements and disclosures in the
financial statements to determine the nature, timing and extent of the further audit procedures.
15. The degree to which a Iair value measurement is susceptible to misstatement is an inherent risk.
Consequently, the nature, timing and extent oI the Iurther audit procedures will depend upon the
susceptibility to misstatement oI a Iair value measurement and whether the process Ior determining
Iair value measurements is relatively simple or complex. Where the auditor has determined that the
risk oI material misstatement related to a Iair value measurement or disclosure is a signiIicant risk, the
auditor Iollows the requirements oI VSA 400 Risk Assessments and Internal Control.
16. VSA 400 discusses the inherent limitations oI internal controls. As Iair value determinations oIten
involve subjective judgments by management, this may aIIect the nature oI control activities that are
capable oI being implemented. The susceptibility to misstatement oI Iair value measurements also
may increase as the accounting and Iinancial reporting requirements Ior Iair value measurements
become more complex. The auditor considers the inherent limitations oI controls in such
circumstances in assessing the risk oI material misstatement.
Evaluating the Appropriateness of Fair Value Measurements and Disclosures
17. The auditor and the audit Iirm should evaluate whether the Iair value measurements and disclosures in
the Iinancial statements are in accordance with the accounting system and standards which the entity
applies.
18. The auditor`s understanding oI the requirements oI the applicable accounting system and standards
and knowledge oI the business and industry, together with the results oI other audit procedures, are
used to assess whether the accounting Ior assets or liabilities requiring Iair value measurements is
appropriate, and whether the disclosures about the Iair value measurements and signiIicant
uncertainties related thereto are appropriate under the accounting system and standards.
19. The evaluation oI the appropriateness oI the entity`s Iair value measurements under the applicable
accounting system and standards and the evaluation oI audit evidence depends, in part, on the
auditor`s knowledge oI the nature oI the business. This is particularly true where the asset or liability
or the valuation method is highly complex. For example, derivative Iinancial instruments may be
highly complex, with a risk that diIIering interpretations oI how to determine Iair values will result in
diIIerent conclusions. The measurement oI the Iair value oI some items, Ior example 'in-process
research and development or intangible assets acquired in a business combination, may involve
special considerations that are aIIected by the nature oI the entity and its operations iI such
considerations are appropriate under the accounting system and standards which the entity applies.
Also, the auditor`s knowledge oI the business, together with the results oI other audit procedures, may
206
help identiIy assets Ior which management needs to recognize impairment by using a Iair value
measurement pursuant to the accounting system and standards.
20. Where the method Ior measuring Iair value is speciIied by the applicable accounting system and
standards, Ior example, the requirement that the Iair value oI a marketable security be measured using
quoted market prices as opposed to using a valuation model, the auditor considers whether the
measurement oI Iair value is consistent with that method.
21. Some accounting standards presume that Iair value can be measured reliably Ior assets or liabilities as
a prerequisite to either requiring or permitting Iair value measurements or disclosures. In some cases,
this presumption may be overcome when an asset or liability does not have a quoted market price in
an active market and Ior which other methods oI reasonably estimating Iair value are clearly
inappropriate or unworkable. When management has determined that it has overcome the presumption
that Iair value can be reliably determined, the auditor obtains suIIicient appropriate audit evidence to
support such determination, and whether the item is properly accounted Ior under the applicable
accounting system and standards.
22. The auditor should obtain audit evidence about management`s intent to carry out specific courses of
action, and consider its ability to do so, where relevant to the fair value measurements and
disclosures under the applicable accounting system and standards.
23. In some accounting systems and standards, management`s intentions with respect to an asset or
liability are criteria Ior determining measurement, presentation, and disclosure requirements, and how
changes in Iair values are reported within Iinancial statements. In such accounting Irameworks,
management`s intent is important in determining the appropriateness oI the entity`s use oI Iair value.
Management oIten documents plans and intentions relevant to speciIic assets or liabilities and the
applicable accounting system and standards may require it to do so. While the extent oI audit evidence
to be obtained about management`s intent is a matter oI proIessional judgment, the auditor`s
procedures ordinarily include inquiries oI management, with appropriate corroboration oI responses,
Ior example, by:
a) Considering management`s past history oI carrying out its stated intentions with respect to assets
or liabilities;
b) Reviewing written plans and other documentation, including, where applicable, budgets, minutes,
etc;
c) Considering management`s stated reasons Ior choosing a particular course oI action;
d) Considering management`s ability to carry out a particular course oI action given the entity`s
economic circumstances, including the implications oI its contractual commitments. The auditor
also considers management`s ability to pursue a speciIic course oI action iI ability is relevant to
the use, or exemption Irom the use, oI Iair value measurement under the applicable accounting
system and standards.
24. Where alternative methods for measuring fair value are available under the accounting system
and standards which the entity applies, or where the method of measurement is not prescribed,
the auditor and the audit firm should evaluate whether the method of measurement is
appropriate in the circumstances under the applicable accounting system and standards.
25. The auditor should evaluate whether the method oI measurement oI Iair value is appropriate in the
circumstances require the use oI proIessional judgment. When management selects one particular
valuation method Irom alternative methods available under the accounting system and standards
which the entity applies, the auditor obtains an understanding oI management`s rationale Ior its
selection by discussing with management its reasons Ior selecting the valuation method. The auditor
considers whether:
a) Management has suIIiciently evaluated and appropriately applied the criteria, iI any, provided in
the applicable accounting system and standards to support the selected method;
b) The valuation method is appropriate in the circumstances given the nature oI the asset or liability
being valued and the accounting system and standards which the entity applies, and
207
c) The valuation method is appropriate in relation to the business, industry and environment in
which the entity operates.
26. Management may have determined that diIIerent valuation methods result in a range oI signiIicantly
diIIerent Iair value measurements. In such cases, the auditor evaluates how the entity has investigated
the reasons Ior these diIIerences in establishing its Iair value measurements.
27. The auditor and the audit firm should evaluate whether the entity`s method for its fair value
measurements is applied consistently.
28. Once management has selected a speciIic valuation method, the auditor evaluates whether the entity
has consistently applied that basis in its Iair value measurement, and iI so, whether the consistency is
appropriate considering possible changes in the environment or circumstances aIIecting the entity, or
changes in the requirements oI the accounting system and standards which the entity applies. II
management has changed the valuation method, the auditor considers whether management can
adequately demonstrate that the valuation method to which it has changed provides a more
appropriate basis oI measurement, or whether the change is supported by a change in the requirements
oI the applicable accounting system and standards or a change in circumstances. For example, the
introduction oI an active market Ior a particular class oI asset or liability may indicate that the use oI
discounted cash Ilows to estimate the Iair value oI such asset or liability is no longer appropriate.
Using the Work of an Expert
29. The auditor and the audit firm should determine the need to use the work of an expert. The
auditor may have the necessary skill and knowledge to plan and perIorm audit procedures related to
Iair values or may decide to use the work oI an expert. In making such a determination, the auditor
considers the matters discussed in VSA 620 Using the Work oI an Expert.
30. II the use oI such an expert is planned, the auditor obtains suIIicient appropriate audit evidence that
such work is adequate Ior the purposes oI the audit, and complies with the requirements oI VSA 620.
31. When planning to use the work oI an expert, the auditor considers whether the expert`s understanding
oI the deIinition oI Iair value and the method that the expert will use to determine Iair value are
consistent with that oI management and the requirements oI the applicable accounting system and
standards. For example, the method used by an expert Ior estimating the Iair value oI real estate or a
complex derivative, or the actuarial methodologies developed Ior making Iair value estimates oI
insurance obligations, reinsurance receivables and similar items, may not be consistent with the
measurement principles oI the applicable accounting system and standards. Accordingly, the auditor
considers such matters, oIten by discussing, providing or reviewing instructions given to the expert or
when reading the report oI the expert.
32. In accordance with VSA 620, the auditor and the audit Iirm assesses the appropriateness oI the
expert`s work as audit evidence. While the reasonableness oI assumptions and the appropriateness oI
the methods used and their application are the responsibility oI the expert, the auditor obtains an
understanding oI the signiIicant assumptions and methods used, and considers whether they are
appropriate, complete and reasonable, based on the auditor`s knowledge oI the business and the
results oI other audit procedures. The auditor oIten considers these matters by discussing them with
the expert. Paragraphs 39 through 49 discuss the auditor`s evaluation oI signiIicant assumptions used
by management, including assumptions relied upon by management based on the work oI an expert.
Audit Procedures Responsive to the Risk of Material Misstatement of the Entity`s Fair Value
Measurements and Disclosures
33. The auditor and the audit firm should design and perform further audit procedures in response
to assessed risks of material misstatement of assertions relating to the entity`s fair value
measurements and disclosures.
34. Because oI the wide range oI possible Iair value measurements, Irom relatively simple to complex, the
auditor`s procedures can vary signiIicantly in nature, timing and extent. For example, substantive
procedures relating to the Iair value measurements may involve (a) testing management`s signiIicant
assumptions, the valuation model, and the underlying data (see paragraphs 3949), (b) developing
independent Iair value estimates to corroborate the appropriateness oI the Iair value measurement (see
208
paragraph 52), or (c) considering the eIIect oI subsequent events on the Iair value measurement and
disclosures (see paragraphs 5355).
35. The existence oI published price quotations in an active market ordinarily is the best audit evidence oI
Iair value. Some Iair value measurements, however, are inherently more complex than others. This
complexity arises either because oI the nature oI the item being measured at Iair value or because oI
the valuation method required by the applicable accounting system and standards or selected by
management. For example, in the absence oI quoted prices in an active market, some accounting
standards permit an estimate oI Iair value based on an alternative basis such as a discounted cash Ilow
analysis or a comparative transaction model. Complex Iair value measurements normally are
characterized by greater uncertainty regarding the reliability oI the measurement process. This greater
uncertainty may be a result oI:
- Length oI the Iorecast period;
- The number oI signiIicant and complex assumptions associated with the process;
- A higher degree oI subjectivity associated with the assumptions and Iactors used in the process;
- A higher degree oI uncertainty associated with the Iuture occurrence or outcome oI events
underlying the assumptions used; and
- Lack oI objective data when highly subjective Iactors are used.
36. The auditor`s understanding oI the measurement process, including its complexity, helps guide the
auditor`s determination oI the nature, timing and extent oI audit procedures to be perIormed. The
Iollowing are examples oI considerations in the development oI audit procedures:
a) Using a price quotation to obtain audit evidence about valuation may require an understanding oI
the circumstances in which the quotation was developed. For example, where quoted securities
are held Ior investment purposes, valuation at the listed market price may require adjustment
under the accounting system and standards which the entity applies iI the holding is signiIicantly
large in size or is subject to restrictions in marketability.
b) When using audit evidence provided by a third party, the auditor considers its reliability. For
example, when inIormation is obtained through the use oI external conIirmations, the auditor
considers the respondent`s competence, independence, authority to respond, knowledge oI the
matter being conIirmed, and objectivity in order to be satisIied with the reliability oI the evidence.
c) Audit evidence supporting Iair value measurements, Ior example, a valuation by an independent
valuer, may be obtained at a date that does not coincide with the date at which the entity is required
to measure and report that inIormation in its Iinancial statements. In such cases, the auditor obtains
audit evidence that management has taken into account the eIIect oI events, transactions and
changes in circumstances occurring between the date oI Iair value measurement and the reporting
date.
d) Collateral oIten is assigned Ior certain types oI investments in debt instruments that either are
required to be measured at Iair value or are evaluated Ior possible impairment. II the collateral is
an important Iactor in measuring the Iair value oI the investment or evaluating its carrying
amount, the auditor obtains suIIicient appropriate audit evidence regarding the existence, value,
rights and access to or transIerability oI such collateral, including consideration whether all
appropriate liens have been Iiled, and considers whether appropriate disclosures about the
collateral have been made under the accounting system and standards which the entity applies.
e) In some situations, additional audit procedures, such as the inspection oI an asset by the auditor,
may be necessary to obtain suIIicient appropriate audit evidence about the appropriateness oI a
Iair value measurement. For example, inspection oI an investment property may be necessary to
obtain inIormation about the current physical condition oI the asset relevant to its Iair value, or
inspection oI a security may reveal a restriction on its marketability that may aIIect its value.
Testing Management`s Significant Assumptions, the Valuation Model, and the Underlying Data
37. The auditor and the audit Iirm`s understanding oI the reliability oI the process used by management to
determine Iair value is an important element in support oI the resulting amounts and thereIore aIIects the
209
nature, timing, and extent oI Iurther audit procedures. A reliable process Ior determining Iair value is
one that results in reasonably consistent measurement and, where relevant, presentation and disclosure
oI Iair value when used in similar circumstances. When obtaining audit evidence about the entity`s Iair
value measurements and disclosures, the auditor and the audit Iirm evaluate whether:
a. The assumptions used by management are reasonable;
b. The Iair value measurement was determined using an appropriate model, iI applicable; and
c. Management used relevant inIormation that was reasonably available at the time.
38. Estimation techniques and assumptions and the auditor`s consideration and comparison oI Iair value
measurements determined in prior periods, iI any, to results obtained in the current period may
provide audit evidence oI the reliability oI management`s processes. However, the auditor and the
audit Iirm also consider whether such variances result Irom changes in economic circumstances.
39. Where the auditor and the audit firm determine there is a significant risk related to fair values,
or where otherwise applicable, the auditor should evaluate whether the significant assumptions
used by management in measuring fair values, taken individually and as a whole, provide a
reasonable basis for the fair value measurements and disclosures in the entity`s financial
statements.
40. It is necessary Ior management to make assumptions, including assumptions relied upon by
management based upon the work oI an expert, to develop Iair value measurements. Assumptions are
integral components oI more complex valuation methods, Ior example valuation methods that employ
a combination oI estimates oI expected Iuture cash Ilows together with estimates oI the values oI
assets or liabilities in the Iuture, discounted to the present. The auditor and the audit Iirm pay
particular attention to the signiIicant assumptions underlying a valuation method and evaluate whether
such assumptions are reasonable. To provide a reasonable basis Ior the Iair value measurements and
disclosures, assumptions need to be relevant, reliable, neutral, understandable and complete.
41. SpeciIic assumptions will vary with the characteristics oI the asset or liability being valued and the
valuation method used (Ior example, replacement cost, direct comparison or income-based approach).
For example, where discounted cash Ilows (an income-based approach) are used as the valuation
method, there will be assumptions about the level oI cash Ilows, the period oI time used in the
analysis, and the discount rate.
42. Assumptions ordinarily are supported by diIIering types oI audit evidence Irom internal and external
sources that provide objective support Ior the assumptions used. The auditor and the audit Iirm assess
the source and reliability oI audit evidence supporting management`s assumptions, including
consideration oI the assumptions in light oI historical inIormation and an evaluation oI whether they
are based on plans that are within the entity`s capacity.
43. Audit procedures dealing with management`s assumptions are perIormed in the context oI the audit oI
the entity`s Iinancial statements. The objective oI the audit procedures is thereIore not intended to
obtain suIIicient appropriate audit evidence to provide an opinion on the assumptions themselves.
Rather, the auditor and the audit Iirm perIorm audit procedures to consider whether the assumptions
provide a reasonable basis in measuring Iair values in the context oI an audit oI the Iinancial
statements taken as a whole.
44. IdentiIying those assumptions that appear to be signiIicant to the Iair value measurement requires the
exercise oI judgment by management. The auditor and the audit Iirm Iocus attention on signiIicant
assumptions. Generally, signiIicant assumptions cover matters that materially aIIect the Iair value
measurement and may include those that are:
a. Sensitive to variation or uncertainty in amount or nature. For example, assumptions about short-
term interest rates may be less susceptible to signiIicant variation compared to assumptions about
long-term interest rates; and
b. Susceptible to misapplication or bias.
45. The auditor and the audit Iirm consider the sensitivity oI the valuation to changes in signiIicant
assumptions, including market conditions that may aIIect the value. Where applicable, the auditor and
the audit Iirm encourage management to use such techniques as sensitivity analysis to help identiIy
210
particularly sensitive assumptions. In the absence oI such management analysis, the auditor considers
whether to employ such techniques. The auditor and the audit Iirm also consider whether the
uncertainty associated with a Iair value measurement, or the lack oI objective data may make it
incapable oI reasonable estimation under the accounting system and standards the entity applies.
46. The consideration oI whether the assumptions provide a reasonable basis Ior the Iair value
measurements relates to the whole set oI assumptions as well as to each assumption individually.
Assumptions are Irequently interdependent, and thereIore, need to be internally consistent. A particular
assumption that may appear reasonable when taken in isolation may not be reasonable when used in
conjunction with other assumptions. The auditor and the audit Iirm consider whether management has
identiIied the signiIicant assumptions and Iactors inIluencing the measurement oI Iair value.
47. The assumptions on which the Iair value measurements are based (Ior example, the discount rate used
in calculating the present value oI Iuture cash Ilows) ordinarily will reIlect what management expects
will be the outcome oI speciIic objectives and strategies. To be reasonable, such assumptions,
individually and taken as a whole, also need to be realistic and consistent with:
a. The general economic environment and the entity`s economic circumstances;
b. The plans oI the entity;
c. Assumptions made in prior periods, iI appropriate;
d. Past experience oI, or previous conditions experienced by, the entity to the extent currently
applicable;
e. Other matters relating to the Iinancial statements, Ior example, assumptions used by management
in accounting estimates Ior Iinancial statement accounts other than those relating to Iair value
measurements and disclosures; and
I. II applicable, the risk associated with cash Ilows, including the potential variability oI the cash
Ilows and the related eIIect on the discounted rate.
Where assumptions are reIlective oI management`s intent and ability to carry out speciIic courses oI
action, the auditor and the audit Iirm consider whether they are consistent with the entity`s plans and
past experience (see paragraphs 22 and 23).
48. II management relies on historical Iinancial inIormation in the development oI assumptions, the auditor
and the audit Iirm considers the completeness and appropriateness oI such inIormation. However,
historical inIormation might not be representative oI Iuture conditions or events, Ior example, iI
management intends to engage in new activities or circumstances change.
49. For items valued by the entity using a valuation model, the auditor and the audit Iirm are not expected
to substitute their judgment Ior that oI the entity`s management. Rather, the auditor and the audit Iirm
review the model, and evaluate whether the model is appropriate and the assumptions used are
reasonable. For example, it may be inappropriate to use a discounted cash Ilow method in valuing an
equity investment in a start-up enterprise iI there are no current revenues on which to base the Iorecast
oI Iuture earnings or cash Ilows.
50. The auditor and the audit firm should perform audit procedures on the data used to develop the
fair value measurements and disclosures and evaluate whether the fair value measurements
have been properly determined from such data and management`s assumptions.
51. The auditor and the audit Iirm evaluate whether the data on which the Iair value measurements are
based, including the data used in the work oI an expert, are accurate, complete and relevant; and
whether the Iair value measurements have been properly determined using such data and
management`s assumptions. Examples may include audit procedures such as veriIying the source oI
the data, mathematical recalculation and reviewing oI inIormation Ior internal consistency, including
whether such inIormation is consistent with management`s intent to carry out speciIic courses oI
action discussed in paragraphs 22 and 23.
Developing Independent Fair Value Estimates for Corroborative Purposes
52. The auditor and the audit Iirm may make an independent estimate oI Iair value (Ior example, by using
an auditor-developed model) to corroborate the entity`s Iair value measurement. When developing an
211
independent estimate using management`s assumptions, the auditor and the audit Iirm evaluate those
assumptions as discussed in paragraphs 39-49. Instead oI using management`s assumptions the
auditor and the audit Iirm may develop separate assumptions to make a comparison with
management`s Iair value measurements. In that situation, the auditor and the audit Iirm nevertheless
understand management`s assumptions. The auditor and the audit Iirm use that understanding to
determine that the auditor`s model considers the signiIicant variables and to evaluate any signiIicant
diIIerence Irom management`s estimate. The auditor and the audit Iirm also perIorm audit procedures
on the data used to develop the Iair value measurements and disclosures as discussed in paragraphs 50
and 51. The auditor and the audit Iirm consider the guidance contained in VSA 520 Analytical
Procedures when perIorming these procedures during an audit.
Subsequent Events
53. The auditor and the audit Iirm should consider the eIIect oI subsequent events on the Iair value
measurements and disclosures in the Iinancial statements.
54. Transactions and events that occur aIter period-end but prior to completion oI the audit, may provide
appropriate audit evidence regarding the Iair value measurements made by management. For example,
a sale oI investment property shortly aIter the period-end may provide audit evidence relating to the
Iair value measurement.
55. In the period aIter a Iinancial statement period-end, however, circumstances may change Irom those
existing at the period-end. Fair value inIormation aIter the period -end may reIlect events occurring
aIter the period-end and not the circumstances existing at the balance sheet date. For example, the
prices oI actively traded marketable securities that change aIter the period-end ordinarily do not
constitute appropriate audit evidence oI the values oI the securities that existed at the period-end. The
auditor complies with VSA 560 Subsequent Events when evaluating audit evidence relating to such
events.
Disclosures about Fair Values
56. The auditor and the audit Iirm should evaluate whether the disclosures about Iair values made by the
entity are in accordance with the applicable accounting system and standards.
57. Disclosure oI Iair value inIormation is an important aspect oI Iinancial statements in many accounting
standards. OIten, Iair value disclosure is required because oI the relevance to users in the evaluation oI
an entity`s perIormance and Iinancial position. In addition to the Iair value inIormation required by
the applicable accounting system and standards, some entities disclose voluntary additional Iair value
inIormation in the notes to the Iinancial statements.
58. When auditing Iair value measurements and related disclosures included in the notes to the Iinancial
statements, whether required by the applicable accounting system and standards or disclosed
voluntarily, the auditor and the audit Iirm ordinarily perIorm essentially the same types oI audit
procedures as those employed in auditing a Iair value measurement recognized in the Iinancial
statements. The auditor and the audit Iirm obtain suIIicient appropriate audit evidence that the
valuation principles are appropriate under the accounting system and standards which the entity
applies, are being consistently applied, and the method oI estimation and signiIicant assumptions used
are properly disclosed in accordance with the applicable accounting system and standards. The auditor
and the audit Iirm also consider whether voluntary inIormation may be inappropriate in the context oI
the Iinancial statements. For example, management may disclose a current sales value Ior an asset
without mentioning that signiIicant restrictions under contractual arrangements preclude the sale in
the immediate Iuture.
59. The auditor and the audit Iirm evaluate whether the entity has made appropriate disclosures about Iair
value inIormation as called Ior by its accounting system. II an item contains a high degree oI
measurement uncertainty, the auditor assesses whet--her the disclosures are suIIicient to inIorm users
oI such uncertainty. For example, the auditor might evaluate whether disclosures about a range oI
amounts, and the assumptions used in determining the range, within which the Iair value is reasonably
believed to lie is appropriate under the accounting system and standards which the entity applies,
when management considers a single amount presentation not appropriate. Where applicable, the
212
auditor and the audit Iirm also consider whether the entity has complied with the accounting and
disclosure requirements relating to changes in the valuation method used to determine Iair value
measurements.
60. When disclosure oI Iair value inIormation under the applicable accounting system and standards is
omitted because it is not practicable to determine Iair value with suIIicient reliability, the auditor
evaluates the adequacy oI disclosures required in these circumstances. II the entity has not
appropriately disclosed Iair value inIormation required by the applicable accounting system and
standards, the auditor evaluates whether the Iinancial statements are materially misstated by the
departure Irom the applicable accounting system and standards.
Evaluating the Results of Audit Procedures
61. In making a Iinal assessment oI whether the Iair value measurements and disclosures in the Iinancial
statements are in accordance with the accounting system and standards which the entity applies, the
auditor and the audit Iirm should evaluate the suIIiciency and appropriateness oI the audit evidence
obtained as well as the consistency oI that evidence with other audit evidence obtained and evaluated
during the audit.
62. When assessing whether the Iair value measurements and disclosures in the Iinancial statements are in
accordance with the applicable accounting system and standards, the auditor and the audit Iirm
evaluate the consistency oI the inIormation and audit evidence obtained during the audit oI Iair value
measurements with other audit evidence obtained during the audit, in the context oI the Iinancial
statements taken as a whole. For example, the auditor and the audit Iirm consider whether there is or
should be a relationship or correlation between the interest rates used to discount estimated Iuture
cash Ilows in determining the Iair value oI an investment property and interest rates on borrowings
currently being incurred by the entity to acquire investment property.
Management Representations
3. The auditor and the audit firm should obtain written representations from management
regarding the reasonableness of significant assumptions, including whether they appropriately
reflect management`s intent and ability to carry out specific courses of action on behalf of the
entity where relevant to the fair value measurements or disclosures.
64. VSA 580 Management Representations discusses the use oI management representations as audit
evidence. Depending on the nature, materiality and complexity oI Iair values, management
representations about Iair value measurements and disclosures contained in the Iinancial statements
also may include representations about the Iollowing:
a) The appropriateness oI the measurement methods, including related assumptions, used by
management in determining Iair values within the applicable Iramework, and the consistency in
application oI the methods;
b) The basis used by management to overcome the presumption relating to the use oI Iair value set
Iorth under the accounting system and standards which the entity applies;
c) The completeness and appropriateness oI disclosures related to Iair values under the accounting
system and standards which the entity applies; and
d) Whether subsequent events require adjustment to the Iair value measurements and disclosures
included in the Iinancial statements.
Communication with Those Charged with Governance
65. The auditor and the audit Iirm should communicate audit matters oI governance interest with
those charged with governance. Because oI the uncertainties oIten involved with some Iair
value measurements, the potential eIIect on the Iinancial statements oI any signiIicant risks
may be oI governance interest. For example, the auditor and the audit Iirm consider
communicating the nature oI signiIicant assumptions used in Iair value measurements, the
degree oI subjectivity involved in the development oI the assumptions, and the relative
materiality oI the items being measured at Iair value to the Iinancial statements as a whole.

CM Kiem Toan Viet Nam - Eng

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

CM Kiem Toan Viet Nam - Eng

Uploaded by

Copyright:

Available Formats

Vietnam Standards on Auditing

You might also like