The audit objective is the most important basis for auditors to design and implement procedures to obtain sufficient and appropriate evidence regarding the fairness of the financial statements. Law on Independent Auditing No. 67/2011/QH12Auditing is not just about checking figures, but also about assessing compliance with accounting standards. This process helps to build confidence among investors, banks, and government regulatory agencies.
Defining the right audit objectives helps businesses identify material misstatement risks, prevent fraud, and optimize internal control systems. In today's digital economy, these objectives are also closely linked to assessing the transparency and accountability of the audited entity. Let's explore this in detail with MAN – Master Accountant Network below.
The objectives of auditing and its core role in the economy.
The audit objective is understood as the goal that the auditor needs to achieve after completing the process of examining and comparing accounting documents and records. This serves as a guiding principle for all professional actions, from planning to issuing the final audit report.
The necessity of audit objectives for businesses.
In management, the objective of auditing is to help leaders gain a clear understanding of the actual financial picture. Beyond simply determining "right or wrong," modern auditing aims to provide advice and improve processes. This helps businesses operate more smoothly and transparently.
Below is a table summarizing the role of audit objectives for the relevant stakeholders:
| Object | The role of defining audit objectives |
| Owner/Shareholder | Ensure that investment capital is used for its intended purpose and that reported profits are truthful. |
| Tax Authority | Determining the correct tax base helps to prevent tax evasion or discrepancies in tax obligations. |
| Bank/Creditor | Assess the borrower's ability to repay and the level of risk when granting credit. |
| Board of Directors | Identify gaps in internal controls to improve operational efficiency. |
Legal basis governing audit objectives in Vietnam
These objectives must not be set arbitrarily but must strictly adhere to the Vietnamese Auditing Standards (VSA) system. In particular, VSA 200 stipulates the overall objectives of auditors and the professional code of ethics.
According to Circular 214/2012/TT-BTCThe overall objective of an audit is to provide an opinion on whether the financial statements are prepared in all material respects. The report must conform to the framework for the preparation and presentation of financial statements. This affirms the highest legal responsibility of the auditing team.
The system of 7 specific audit objectives (Assertions)
To achieve the overall objective, auditors must break it down into specific objectives for each group of transactions and account balances. These are often referred to as "Assertionary Data".
Existence and Occurrence
The objective of this audit is to confirm that assets and liabilities exist at the time of reporting and that transactions actually occurred. This prevents the fabrication of fictitious assets or revenues to artificially inflate the entity's financial statements.
Completeness
In contrast to existence, the objective of an audit regarding completeness ensures that no transactions are omitted from the books. For example, liabilities or salary expenses must be fully recorded to avoid distorting the end-of-period business results.
Rights and Obligations
Auditors need to verify that assets are legally owned by the business (rights) and that debts are actually liabilities (obligations). This is typically verified through economic contracts and property ownership certificates.
Valuation and Allocation
The objective of an audit regarding valuation requires that items be recorded at appropriate values. For example, inventory must be valued at the lower of its cost and net realizable value in accordance with Accounting Standard No. 02.
Mechanical accuracy
This audit aims to ensure that the calculations in documents and accounting records are accurate. Accumulation, exchange rate multiplication, or depreciation allocation must be performed according to mathematical rules, with no errors in data entry.
On schedule (Cut-off)
Auditors determine that transactions are recorded in the correct accounting period in which they occur. This audit objective is particularly important at year-end to avoid incorrect transfers of revenue or expenses between accounting periods.
Presentation and Disclosure
Ultimately, the audit objective is to ensure that financial information is clearly classified and described. This information must be fully presented in the notes to the financial statements, making it easy for users to understand the nature of the presented data.
Risk-based audit targeting method
Defining audit objectives varies for all businesses. Depending on the specific industry, auditors will prioritize different objectives and key areas to optimize resources.
Step 1: Analyze potential risks
Auditors assess the actual business environment. For example, a real estate business would have a high risk regarding “Evaluation and Allocation” of unfinished projects. Meanwhile, a retail business would prioritize the “Integrity” of cash revenue.
Step 2: Evaluate the internal control system (ICS)
If the internal control system is strong, auditors can reduce the number of detailed tests. Conversely, if the ICS is weak, the audit objective will focus more on examining material documents to minimize the risk of overlooking errors or fraud.
| Business size | The focus of audit objectives | approach |
| Small and medium-sized enterprises (SMEs) | Mechanical precision, Rights and obligations. | Check the details of the original documents. |
| Listed Corporation/Company | Integrity, Presentation, and Publication. | Inspect the system and analyze trends. |
| FDI enterprises | On time, assess (exchange rate difference). | Compare links and International Financial Reporting Standards (IFRS). |
The audit process is carried out according to the defined objectives.
This process goes through three main phases, each revolving around demonstrating the stated audit objectives.
Phase 1: Planning and Risk Assessment
At this stage, auditors determine materiality. An error is considered material if it has the potential to change the decisions of users of the report. Setting targets helps allocate resources to the areas with the highest risk.
Phase 2: Performing audit procedures
Auditors use techniques such as physical inventory checks to achieve the objective of verifying existence. Additionally, confirmation letters are sent to verify rights and obligations regarding liabilities. Finally, recalculations are performed to ensure the accuracy of provisions.
Phase 3: Synthesizing results and forming opinions
Based on the evidence gathered and compared against the initial objective, the auditor will issue an appropriate opinion. This could be an unqualified opinion, a qualified opinion, an adverse opinion, or a disclaimer of opinion on the report.
Important considerations regarding audit objectives for corporate accounting.
Accountants in a company need to understand how auditors approach audit objectives in order to collaborate effectively.
Prepare legal documents and supporting evidence.
All figures in reports must have verifiable "evidence." To meet the objective of ownership rights, accountants need to keep complete records of invoices, contracts, and related legal documents. A systematic organization will facilitate a quick audit process.
Periodic data reconciliation
Regularly performing accounts receivable reconciliation and inventory checks helps businesses improve the completeness of their data. This helps achieve audit objectives faster and minimizes unwanted adjusting entries once auditors begin their work.
Update the latest circulars.
Tax and accounting legal systems are constantly changing. For example, regulations on related-party transactions under Decree 132/2020/ND-CP require detailed disclosure. Timely updates help businesses ensure compliance with current regulations regarding presentation and disclosure.
Conclude
Audit objectives are a crucial component in ensuring the transparency and sustainability of corporate finances. Understanding and correctly implementing these objectives helps businesses pass audits and build a solid reputation in the market. For accountants, adherence to supporting data is a prerequisite for performing their work professionally and appropriately.
If a business needs an independent consulting firm to verify the most accurate audit objectives, MAN – Master Accountant Network We are always ready to support you. We provide in-depth auditing services to help you identify risks and improve the quality of your financial management. Contact us today to receive support from our team of experienced professionals!
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Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.
Answering questions about audit objectives.
Why is the objective of auditing integrity the most difficult to verify?
Because auditors have to search for what isn't on the books. This is much more difficult than checking the existence of what has already been recorded.
Do the audit objectives change from year to year?
Yes. Depending on the business situation and emerging risks, auditors will adjust their focus to concentrate on the riskiest areas. This ensures the effectiveness of each specific audit.
Which audit objectives are typically violated by financial fraud?
These typically involve violations of existence (false revenue recording) or integrity (concealing debt) and valuation (inflating asset values). These practices seriously distort the financial nature of the entity.
