Latest financial statement audit process

AACS introduces some information about auditing financial statements? Objects, objectives, basic principles of financial statement audit; cycles audited financial statements, methods and processes of auditing financial statements 

I. What is a financial statement audit?

1. What is the concept of financial statement audit?

Financial statement audit is the examination and confirmation of the truthfulness and reasonableness of accounting documents, data and financial reports of the accounting unit to serve those who need to use the information. on the entity's financial statements. The measure to evaluate the audit of financial statements is the system of accounting and auditing standards.

Financial statement audits are often performed by auditing firms to serve managers, governments, banks and investors, and for sellers and buyers.

For example:

• For managers: help them clearly see shortcomings and errors to overcome to improve the quality of the unit's financial information,...
• For banks and investors: consider lending capital,...
• For sellers: consider selling on credit,...

2. Subjects of financial statement audit:

The subjects of financial statement audit are financial statements (including: Balance sheet, Business performance report, Cash flow report and Financial statement notes) and statutory exploitation tables.

3. Objectives of financial statement audit:

• General objective: understood as finding audit evidence to give an opinion on the truthfulness and reasonableness of information presented on the Financial Statement.
• General audit objective: is to review and evaluate the overall amount recorded on the cycles, based on the general commitments about the manager's responsibility for the information obtained through the actual survey at the unit. audited (while also considering other general objectives including the objective of reality, completeness, objective of mechanical accuracy, objective of valuation or presentation classification, objective of rights and obligations).

4. Basic principles of financial statement audit:

• Comply with the law;
• Comply with professional ethical principles: Independence, integrity, objectivity, professional capacity and prudence, confidentiality, professional conduct;
• Comply with professional standards;
• KTV must have a professional skeptical attitude.

II. Financial statement audit cycle

1. Financial statement audit includes the following basic cycles:

• Auditing the sales-collection cycle.
• Audit the purchase-payment cycle.
• Audit the Inventory cycle.
• Auditing the salary cycle and payables to employees.
• Auditing the fixed asset and basic construction cycle.

2. The relationship between cycles is shown through the diagram:

Thereby, it can be seen that the inventory cycle is related to all other cycles, only different from a direct or indirect perspective. Especially the close relationship with the Purchase-payment cycle, employee salaries, sales-collection. These are important cycles and clues for both customers and auditing companies. More specifically, in accounting work at businesses, the results of inventory not only affect the indicators on the Balance Sheet but also directly affect the results of production and business activities. For audits, the results of auditing the inventory cycle help auditors combine, compare and check the results of other cycles (purchases, salaries, etc.) thereby saving money. time, cost, improve work efficiency. From the above characteristics, auditors always determine that inventory audit is the focus when conducting audited financial statements.

III – Audit method:

Financial auditing is a typical activity of auditing activities in general, therefore, to perform the function of verifying and expressing opinions, financial auditing also uses documentary auditing methods (auditing balance system, direct comparison, logical comparison) and auditing outside documents (Inventory, experiment, investigation).

Because each type of audit has different specific functions, different audit objects and different audit subject and object relationships, the way to combine the above basic audit methods is also different. In financial auditing, basic auditing methods are deployed in combination or in more detail depending on specific situations throughout the audit process.

In the process of performing audits, people divide audit methods into two types:

1. Basic testing:

An audit procedure designed to detect material misstatements at the assertion level. Basic tests include:

• Check details (transaction groups, account balances and disclosure information);
• Basic analytical procedures.

2. Test of control

An audit procedure designed to evaluate the effectiveness of controls in preventing, or detecting and correcting, material misstatements at the assertion level.

IV. Financial statement audit process

In auditing financial statements, to collect sufficient valuable audit evidence to serve as a basis for the auditor's conclusion about the truthfulness and reasonableness of information on the financial statements while ensuring To ensure the efficiency, economy, and effectiveness of each audit, auditors must build specific procedures for that audit. Typically, each audit process is divided into 3 steps:

• Prepare audit plans, risk assessments and solutions for assessed risks
• Conduct audits
• Summarize, conclude and form audit opinions

1. Make an audit plan, risk assessment and measures to handle assessed risks:

Auditors and auditing firms must prepare an audit plan that describes the expected scope and manner in which the audit work will be conducted. The audit plan must be complete and detailed to serve as a basis for the audit program. In this work step, starting from the audit invitation, the auditor will get to know the customer with the purpose of forming a contract or coming up with a general plan. Auditors need to collect specific information about customers, learn to evaluate the internal control system... Besides, while planning, the audit company must also prepare the means and staff to implement the developed program.

In addition, the Auditor and Auditing Firm must identify and assess the risk of material misstatement due to fraud or error at the financial statement level and assertion level, through knowledge of the entity. audited and the entity's environment, including internal control, thereby providing a basis for designing and implementing measures to address the assessed risks of material misstatement.

Relevant auditing standards:

• Audit contract (CM 210, D 42-LKTDL);
• Identify and assess the risk of material misstatement through understanding the audited entity and its environment (CM 315);
• Materiality in planning and performing audits (CM 320);
• Audit measures for assessment risks (CM 330);
• Audit planning (CM 300);
• Factors to consider when auditing an entity using external services (CM 402).

2. Perform audit:

Auditors will use technical methods adapted to each specific subject to collect audit evidence. The essence of this process is the proactive and active implementation of audit plans and programs to provide authentic opinions on the truthfulness and reasonableness of the information in the financial statements based on complete and valid audit evidence. This is the stage where auditors perform audit procedures formed from various types of tests, namely control procedures, analytical procedures and detailed inspection procedures. Audit procedures are formed in a very diverse manner and are based on the results of evaluating the client's internal control system, from which the decision to use different procedures is made.

Relevant auditing standards:

• Perform audit of major items of financial statements;
• Evaluate errors discovered during the audit (CM 450).

3. Summarize, conclude and form audit opinions:

This is when the auditor makes an audit conclusion. These conclusions are contained in the audit report or minutes. To provide accurate opinions, auditors must conduct specific tasks such as: reviewing unexpected debts, reviewing events that occurred after the end of the period, considering the relevance of procedures in the unit's operations, collect letters of explanation from the Board of Directors... Finally, the auditor summarizes the results, prepares an audit report and is responsible for resolving events that arise after preparation. Audit report. Depending on the results, auditors may issue an unmodified opinion and an unmodified opinion.

Relevant auditing standards:

• Audit report on financial statements (CM 700, 705, 706);
• Comparative information – Corresponding data and comparative financial statements (CM 710);
• Other information in the document includes audited financial statements (CM 720).

Above are some basic generalizations about auditing financial statements. We hope to add some information and knowledge about auditing financial statements to prepare you for your upcoming audit path.