The content of financial statement audits acts as a crucial "filter" to verify the accuracy and reasonableness of economic information in an increasingly complex financial market. Law on Independent Auditing No. 67/2011/QH12Therefore, reviewing and providing opinions on financial statements is not only a legal obligation for foreign-invested enterprises (FDI) or public companies, but also an effective risk management tool.
The reliability of revenue, asset, and capital figures is confirmed through a rigorous auditing process. This is especially important when stakeholders such as banks, investors, and tax authorities need an objective view of the entity's true financial health. Let's explore the details of auditing below.
The concept and importance of financial statement audit content.
Content audit of financial statements Auditing is understood as the process by which independent auditors gather and evaluate evidence regarding financial information presented in financial statements. The purpose is to confirm the conformity of this information with accounting standards (VAS/IFRS) and current government regulations.
In Vietnam, regulations regarding the content of financial statement audits are standardized through the system of 47 Vietnamese Auditing Standards (VSA). Auditing helps to promptly detect material errors and fraud, while also enhancing transparency and helping businesses optimize their operations. evaluating the internal control system and comply with tax obligations to the budget.
Legal basis for regulations regarding the content of financial statement audits.
To properly conduct financial statement audits, accountants and auditors need to have a thorough understanding of the following legal documents:
- Independent Auditing Law 2011: Regulations on the principles and conditions for practicing auditing.
- Circular 200/2014/TT-BTC: Guidelines for business accounting procedures.
- Decree 41/2018/ND-CP: Regulations on administrative penalties for violations in the field of accounting and independent auditing.
The penalty for failing to submit audit reports on time or failing to conduct mandatory audits can be up to VND 50,000,000, depending on the severity of the violation.
Common types of audit opinions today
Based on the content of the financial statement audit performed, the auditing firm will issue a report with the following types of opinions:
- Full acceptance opinion: The financial statements reflect a true and fair view in all material respects.
- Exceptional opinions: There may be errors or limitations in the audit scope, but these do not have a widespread impact on the entire financial statements.
- Opposing opinion: The errors were material and had a widespread impact, rendering the financial statements unreliable.
- Refusing to comment: The auditors were unable to gather sufficient evidence due to severe scope limitations.
Key aspects in the content of financial statement audits.
To ensure the quality of an audit, auditing firms must focus on four key aspects. Each aspect represents a different level of financial information security.
The accuracy and reasonableness of the data.
Audit content financial reports First and foremost, auditors focus on verifying the authenticity of the economic transactions that have occurred. Auditors examine whether the figures on the balance sheet or income statement accurately reflect the actual situation.
Reasonableness is assessed based on the logical correlation between indicators. For example, the proportionality between revenue and cost of goods sold, or the appropriateness between accounts receivable balances and the volume of goods supplied during the period.
Compliance with accounting standards (VAS and IFRS)
In the audit of financial statements, checking compliance with Vietnamese Accounting Standards (VAS) is mandatory. This applies to businesses that apply them. International Financial Reporting Standards (IFRS)Auditors need to assess the transferability and presentation of information in accordance with international practices.
Misapplication of standards, such as recognizing revenue that does not meet the eligibility criteria or making improper provisions, will lead to qualified opinions in the audit report, negatively impacting the company's reputation.
Comply with the State's financial regulations and laws.
The audit of financial statements also includes reviewing compliance with tax regulations (VAT, corporate income tax, personal income tax), salary systems, and welfare funds. Auditors will compare accounting records with tax returns to ensure the business does not violate financial laws.
Evaluating the internal control system (ICS)
An integral part of the financial statement audit is the assessment of the effectiveness of the internal control system. If the internal control system is weak, the risk of errors will be high, forcing auditors to expand the scope of detailed examination of original documents.
The entities responsible for conducting the financial statement audit.
The primary focus of the audit process is the complete set of financial statements. Below is a comparison table of the key components that auditors will concentrate on reviewing:
| Financial statement components | Audit focus | Confirmation objective |
| Balance sheet | Fixed assets, Inventory, Liabilities | Reality and ownership |
| Business performance report | Revenue, Cost of Goods Sold, Administrative Expenses | Accurate timing and classification |
| Cash flow statement | Operating cash flow, investing cash flow, financing cash flow | Accuracy of cash flows |
| Notes to the Financial Statements | Accounting policies, Events after the closing date | Completeness of disclosed information |
Auditing financial statements, particularly the balance sheet, typically takes the most time due to the need for physical inventory checks and sending confirmation letters to third parties.
Detailed procedures for conducting financial statement audits.
The auditing process is typically divided into three main phases to ensure the logical consistency and completeness of the evidence gathered.
Audit planning phase
During this phase, auditors learn about the client's business operations, business processes, and specific risks. Determining materiality is crucial for focusing resources on accounts with the highest potential for errors.
Detailed inspection phase
This is the core stage of the financial statement audit process. The tasks include:
- Control test: Check whether the expenditure approval and inventory procedures are being carried out in accordance with regulations.
- Basic testing: Verify the details of documents and invoices, and send confirmation letters to the bank and suppliers.
- Check cross-sectional area: Ensure that revenue and expenses are recorded in the correct accounting period (avoid carrying over revenue to the next year or shifting expenses to the previous year).
The stage of synthesizing and concluding opinions.
After completing the evidence gathering, the auditor will summarize the errors and recommend that the business make corrections. Based on the results, they will issue one of the types of audit opinions according to VSA Standards 700 or 705.
Common mistakes made when conducting financial statement audits.
In practice, audits of financial statements often uncover the following typical types of errors:
Errors in inventory and assets
Many businesses do not conduct periodic inventory checks or make provisions for inventory devaluation. This leads to inflated asset values on financial statements compared to their actual recoverable value.
Errors in recording revenue and expenses.
Recognizing revenue before transferring the risks and benefits associated with the goods is a common error. Additionally, expenses without valid supporting documents that are still included in tax-deductible expenses are frequently scrutinized by auditors.
Conclude
The content of financial statement audits goes beyond simply complying with the law; it's a core value in establishing a company's reputation in the marketplace. A transparent audit report is a passport to accessing preferential loan sources and attracting strategic partners. Understanding and correctly implementing financial statement audits gives management greater peace of mind regarding internal operations.
Understanding the difficulties businesses face in preparing documentation and dealing with audits, MAN – Master Accountant Network provides solutions. financial statement auditing services Professionalism. With a team of experienced experts, we are committed to supporting your business in reviewing data, optimizing accounting processes, and ensuring that all financial statement audits meet the highest quality standards. Let MAN help you transform dry numbers into solid trust for investors.
Service contact information at MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
- Mobile/Zalo: 0903 963 163 – 0903 428 622
- Email: man@man.net.vn
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.
Frequently Asked Questions about the Content of Financial Statement Audits
Which businesses are required to have their annual financial statements audited?
According to regulations, foreign-invested enterprises (FDI), credit institutions, public and listed companies, and state-owned enterprises are required to have their annual financial statements audited.
How is auditing financial statements different from tax settlement?
The content of financial statement audits focuses on the accuracy and fairness according to accounting standards. Meanwhile, tax settlement focuses on correctly calculating the amount of tax payable according to tax laws. These two activities have different objectives but support each other.
What is the deadline for submitting the audit report?
For state-owned enterprises, the deadline is 90 days from the end of the fiscal year. For other entities, the deadline usually follows the regulations for submitting financial statements to state management agencies.
