Topic Comleting the audit process of fixed assets in financial Statement audits performed by pnt international auditing Company limited môn Kinh tế vi mô 1 | Học viện Tài chính

MINISTRY OF FINANCE ACADEMY OF FINANCE NGUYỄN TÙNG DƯƠNG CQ60/22.04CLC GRADUATION THESIS TOPIC
COMLETING THE AUDIT PROCESS OF FIXED ASSETS IN FINANCIAL
STATEMENT AUDITS PERFORMED BY PNT INTERNATIONAL AUDITING COMPANY LIMITED Mentor : PhD. Mai Ngoc Anh PhD. Dinh Thi Thu Ha Student Performed : Nguyen Tung Duong Class : CQ60/22.04CLC Sudent code : 22CL73403010367 1. PREABLE 2. LIST OF TABLE 3. LIST OF DIAGRAMS
4. CHAPTER 1: BASIC THEORIES OF AUDITTING FIXED ASSET ITEMS
IN THE FINANCIAL STATEMENT AUDITS CONDUCTED BY EXTERNAL AUDIT 4.1.
GENERAL OVERVIEW OF FIXES ASSETS SECTION 4.1.1. Concept of fixed assets
To conduct production and business activities, businesses need to have all the
input factors of the production process including: Labor materials, labor objects and
labor power. Fixed assets are major part of labor materials, playing an important role
in an enterprise’s business operations. However, not all labor materials at the unit are
fixed assets, but fixed assets only include major labor materials that satisfy the
regulations in term of value and useful life according to the current financial management regime.
Fixed assets have the characteristic of participating in many production and
business cycles. When participating in the production and business process, fixed
assets are gradually depreciated and their value is partially transferred into production
and business cost. Tangible fixed assets depreciation is the reduction in value and
usefulness due to the usage in production or natural, whereas intangible fixed assets
depreciation is the reduction in value of the assets due to usage, technological
advancement, or other factors accruing during the course of operations.
Concept of Fixed Assets: Fixed assets are assets that have significant value that
participate in multiple business cycles of an enterprise, have a useful life of more than
one year, and are certain to general future economic benefits.
According to Article 2, Circular 45/2013/TT – BTC issued on April 25, 2013 of
the Ministry of Finance, Fixed assets include: Tangible fixed assets (VAS 03),
Intangible fixed assets (VAS 04), Leases (VAS 06) 4.1.1.1. Tangible fixed assets
According to Clause 1, Article 2, Circular 45/2013/TT – BTC: Tangible fixed
assets are labor materials that have physical form which are processed by enterprises
for use in production and business activities in conformity with the recognition criteria.
According to Clause 1, Article 3, Circular 45/2013/TT – BCT: Labor materials are
tangible assets with an independent structure or a system consisting of many separate
components that are linked together to perform one or several certain functions. If any
component is missing, the whole system cannot operate. Assets that simultaneously
meet all three following criteria are recognized as fixed assets:
- It is definitely obtained the future economic benefits from the use of the assets;
- The asset has a useful life more than 1 year;
- The historical cost has been determined reliably and be worth VND 30 million or more.
According to VAS No. 03 – Tangible fixed assets, the standard for recording assets
as tangible fixed assets must simultaneously satisfy all four following criteria:
- Future economic benefits will surely be obtained;
- Their historical cost has been determined in a reliably way;
- Their useful life is estimated at more than 1 year;
- They meet all value criteria according to current regulations. 4.1.1.2. Intangible fixed assets
According to Clause 2, Article 2, Circular 45/2013/TT – BTC: Intangible fixed
assets which have no physical form but the value can be determined and used by
enterprises in their production, business, service provision in conformity with the recognition criteria.
According to Clause 2, Article 3, Circular 45/2013/TT – BTC, all actual expenses
that the enterprise has spent must simultaneously satisfy three standards as tangible
fixed assets but not forming tangible fixed assets are considered intangible fixed assets. 4.1.1.3. Leases
According to VAS No. 06 – Lease : A lease means an agreement between the
lessor and the lessee whereby the lessor transfers the right to use an asset to the lessee
for a certain period of time in return for a lease payment made in a lump sum or installments.
4.1.2. Characteristics of fixed assets affect the audit financial statements
Fixed assets are a significant item in financial statements and affect substantially
to audit work because of inherent characteristics. First, fixed assets usually have high
value and account for a high proportion of total assets; therefore, any mistake can lead
to material misstatement. Although fixed assets transactions occur infrequently, each
transaction is often complex and relate to several departments, increasing the risk of
errors in determining historical cost, ownership, recognition… Fixed assets also have a
long useful life, affecting many accountings period through depreciation. Therefore,
auditors must carry out the reasonableness and consistency of depreciation methods.
The acquisition and management of fixed assets require sufficient document and
strict procedures. During use, assets may incur repair, maintenance or upgrade costs
and misclassification between capital expenditures operating expenses can also affect
information related to fixed assets on financial reports. Moreover, issues related to
ownership rights such as leases and collateral assets require proper presentation and
disclosure in financial statements. These errors in cost calculation often lead to
materials misstatements in financial statements.
Fixed assets audit is the inspection and control of issues related to the actual status
of assets as well as the increase or decrease during the period of the unit. With the
advancement of science and technology, fixed assets not only detect errors in
operations related to fixed assets but also contributes to improving the efficiency of fixed asset management.
4.1.3. The internal control over fixed assets
Internal control of fixed assets refers to the policies, procedures and practices
implemented within an organization to safeguard and manage its fixed assets
effectively. The purpose of internal control is to ensure the proper acquisition, using,
recording and disposal of fixed assets while minimizing the risk of theft, loss mismanagement or fraud.
5. OVERVIEW OF AUDITING FIXED ASSETS IN AUDITING FINANCIAL STATEMENT 6.