University of Economics

KIỂM TO Faculty of Accounting

ÁN

AUD2001 – PRINCIPLES OF AUDTING

Semester 1 – Year 2020-2021

Lecturer: MPA. Nguyen Thanh Huyen
Email: huyen.ntt@due.edu.vn

1
 TRƯỜNG ĐẠI HỌC KINH TẾ
KHOA KẾ TOÁN

T O Á N
KIỂ M
CHAPTER 1

INTRODUCTION TO AUDITING

2
 LEARNING OBJECTIVES
KIỂM TO
ÁN

After study this chapter, you should be able to:

 Brief history of auditing;
 Describe auditing;
 Distinguish between auditing and accounting;
 Differentiate the three main types of audits;
 Identify the primary types of auditors;
 Describe the requirements for becoming a CPA
 Understanding the role of international auditing standards
and Vietnamese standards on auditing

3
 CONTENTS
KIỂM TO
ÁN

 History of auditing;
 Nature of auditing;
 Types of audits;
 Types of auditors;
 Introduction of professional & auditing
organizations;
 Auditing Standards.

4
 BRIEF HISTORY OF THE AUDIT FUNCTION
KIỂM TO
ÁN

 Audits have been performed at least since the thirteenth

century.
 Audits until the early 1900s focused on the company’s
solvency and the detection of fraud and error.
 Audits from early 1900s to 1940s: added objectives of
verification of financial report accuracy and attestation to
financial report credibility.
 Since the 1940s: the overall objective of auditing has been
the expression of an opinion as to whether the financial report
is materially misstated.

5
 OPENING STORY ABOUT AUDITING
KIỂM TO
ÁN

Auditors have a great responsibility.

What is auditing?

What is a responsibility of auditors?

6
 KIỂM TO
DEFINITION OF AUDITING
ÁN

Auditing is the accumulation and evaluation of evidence about

information to determine and report on the degree of
correspondence between the information and established
criteria. Auditing should be done by a competent, independent
person.

Arens et. al (2017), Auditing and Assurance Services

7
 KIỂM TO
DEFINITION OF AUDITING
ÁN

The definition includes several key words and phrases. For

ease of understanding, we will discuss the terms in a different
order than they occur in the description:

Information and Established Criteria

Accumulating and Evaluating Evidence

Competent, Independent Person

Audit Report

8
 KIỂM TO
DEFINITION OF AUDITING
ÁN
An example of elements of an financial statement audit
Information

Financial
statements
Competent, Accumulating prepared by
client
Independent and Evaluating
Evidence Reporting
Person
Check transactions
and balances that Determines Whether FSs
CPA are fairly stated
might contain material correspondence
firms
errors or other
misstatements

Established Criteria

Accounting
standards
9
 KIỂM TO
DEFINITION OF AUDITING
ÁN

Relationship among Auditor, Client, and External Users

Distinct between auditing and accounting?

10
 DISTINCTION BETWEEN AUDITING & ACCOUNTING
KIỂM TO
ÁN

ACCOUNTING AUDITING
Make study and evaluation of
Analyze Events and
Client's system of Internal
transactions
control

Measure and Record Obtain and evaluation

transaction data evidence concerning the FS

Determine fairness of
Classify and summarize
Statements in conformity with
recorded data
GAAP

Prepare Financial Prepare Audit report on

statement per GAAP findings

Deliver Audit report to client

Distribute FS and auditor’s
report to shareholders in
annual report 11
 KIỂM TO
TYPES OF AUDITS
ÁN

CPAs perform three primary types of audits:

1.Operational audit
2.Compliance audit
3.Financial statement audit

12
 KIỂM TO
TYPES OF AUDITS
ÁN

Operational audit:
Evaluates the efficiency and effectiveness of any part of an
organization’s operating procedures and methods.
At the completion of an operational audit, management
normally expects recommendations for improving operations.
The reviews are not limited to accounting. They can include
the evaluation of organizational structure, computer operations,
production methods, marketing, and any other area in which
the auditor is qualified.
Establishing criteria for evaluating the information in an
operational audit is extremely subjective.
13
 KIỂM TO
TYPES OF AUDITS
ÁN

Compliance audit:
Determine whether the auditee is following specific
procedures, rules, or regulations set by some higher authority.
Many private and not-for-profit organizations have prescribed
policies, contractual agreements, and legal requirements that
may require compliance auditing.
Results of compliance audits are typically reported to
management, rather than outside users, because management
is the primary group concerned with the extent of compliance
with prescribed procedures and regulations.

14
 KIỂM TO
TYPES OF AUDITS
ÁN

Financial statement audit:

Determine whether the financial statements (the information
being verified) are stated in accordance with specified criteria.
Auditors gather evidence to determine whether the statements
contain material errors or other misstatements.

15
 KIỂM TO
TYPES OF AUDITS
ÁN

Type of Nature of Measurement Reporting Primary use

audit focus Criteria format of audit report

Operational Management Efficiency and Recomm- Department

audit goals and effectiveness endations Head and
resource indicators management
usage
Compliance Policies and Specific Yes/ No Management
audit procedures conditions Authority
Financial Entity’s Accounting True and Shareholders
statement financial standards fair Creditors
audit statements Regulatory
agencies and
General Public
16
KIỂM TO
TYPES OF AUDITS
ÁN

17
 KIỂM TO
TYPES OF AUDITORS
ÁN

Several types of auditors are in practice today:

1.Certified public accounting firms (External auditors)

2.Government accountability office auditors

3.Internal auditors

18
 KIỂM TO
TYPES OF AUDITORS
ÁN

Certified public accounting firms (CPA firms):

CPA firms are responsible for auditing the published historical
financial statements of all publicly traded companies, most
other reasonably large companies, and many smaller
companies and noncommercial organizations.
It is common to use the terms auditor and CPA firm
synonymously, even though several different types of auditors
exist. Auditors who express audit opinions on financial
statements must be licensed as CPAs.
CPA firms are often called external auditors or independent
auditors to distinguish them from internal auditors.
19
 KIỂM TO
TYPES OF AUDITORS
ÁN

Government accountability office auditors:

Is a agency in the legislative branch of the federal
government.
Its responsibility is to perform the audit function for Congress,
including auditing the financial information prepared by
various federal government agencies, evaluating the
operational efficiency and effectiveness of various federal
programs, and determining whether the auditee is following
regulations.

20
 KIỂM TO
TYPES OF AUDITORS
ÁN
Internal auditors
Internal auditors are employed by all types of organizations to
audit for management.
Internal auditors’ responsibilities vary considerably, depending
on the employer.
To maintain independence from other business functions, the
internal audit group typically reports directly to the president,
another high executive officer, or the audit committee of the
board of directors. However, internal auditors cannot be
entirely independent of the entity as long as an employer–
employee relationship exists.
=> Users from outside the entity are unlikely to want to rely on
information verified solely by internal auditors because of their
lack of independence. 21
KIỂM TO
CERTIFIED PUBLIC ACCOUNTANT
ÁN

22
 Introduction of professional & auditing
KIỂM TO
ÁN
organizations

 The International Auditing & Assurance

Standard Board (IAASB)
 American Institute of Certified Public
Accountants (AICPA)
 Vietnam Association of Certified Public
Accountants (VACPA)

23
 KIỂM TO
AUDITING STANDARDS
ÁN
For certified public accounting firms
The International Auditing and Assurance Standards Board (IAASB)
is an independent standard-setting body that serves the public
interest by setting high-quality international standards for auditing,
assurance, and other related areas, and by facilitating their adoption
and implementation. In doing so, the IAASB enhances the quality
and consistency of practice throughout the world and strengthens
public confidence in the global auditing and assurance profession.
The IAASB’s medium-term strategy addresses the following three
main themes in the public interest:
- Supporting global financial stability;
- Enhancing the role, relevance and quality of assurance and related
services in an evolving world; and
- Facilitating adoption and implementation
24 of the standards.
 KIỂM TO
AUDITING STANDARDS
ÁN

For government accountability office auditors

The International Organisation of Supreme Audit Institutions
(INTOSAI), which is an autonomous, independent and non-political
organisation, operates as an umbrella organisation for the external
government audit community.
INTOSAI has provided an institutionalised framework for supreme
audit institutions to promote development and transfer of knowledge,
improve government auditing worldwide and enhance professional
capacities, standing and influence of member SAIs in their
respective countries.

25
 KIỂM TO
AUDITING STANDARDS
ÁN

For internal auditors

The Institute of Internal Auditors (IIA) is the internal audit
profession's global voice, recognized authority, acknowledged
leader, chief advocate, and principal educator. Generally, members
work in internal auditing, risk management, governance, internal
control, information technology audit, education, and security.
The mission of The Institute of Internal Auditors is to provide
dynamic leadership for the global profession of internal auditing.
Internal auditing is an independent, objective assurance and
consulting activity designed to add value and improve an
organization’s operations. It helps an organization accomplish its
objectives by bringing a systematic, disciplined approach to evaluate
and improve the effectiveness of risk management, control, and
governance processes. 26
 INTERNATIONAL STANDARDS ON AUDITING
KIỂM TO
ÁN

Auditing standards are general guidelines to aid auditors in fulfilling

their professional responsibilities in the audit of historical financial
statements.
They include consideration of professional qualities such as
competence and independence, reporting requirements, and
evidence.

27
 INTERNATIONAL STANDARDS ON AUDITING
KIỂM TO
ÁN International Standards on Auditing (ISAs) are
issued by the International Auditing and Assurance Standards Board
(IAASB) of the International Federation of Accountants (IFAC).
-IFAC is the worldwide organization for the accountancy profession,
with 159 member organizations in 124 countries, representing more
than 2.5 million accountants throughout the world.
-The IAASB works to improve the uniformity of auditing practices
and related services throughout the world by issuing
pronouncements on a variety of audit and attest functions and by
promoting their acceptance worldwide.
ISAs do not override a country’s regulations governing the audit of
financial or other information, as each country’s own regulations
generally govern audit practices.
Most countries, including Vietnam, base their auditing standards on
ISAs, modified as appropriate for each country’s regulatory
28
environment and statutory requirements.
 GENERALLY ACCEPTED AUDITING STANDARDS
KIỂM TO
ÁN

10 generally accepted auditing standards (GAAS), which were

developed by the AICPA, fall into three categories:
• General standards
• Standards of field work
• Reporting standards
These standards are not sufficiently specific to provide any
meaningful guide to practitioners, but they do represent a framework
upon which the AICPA can provide interpretations.

29
 GENERALLY ACCEPTED AUDITING STANDARDS
KIỂM TO
ÁN

30
 GENERALLY ACCEPTED AUDITING STANDARDS
KIỂM TO
ÁN

General standards: The general standards stress the important

personal qualities that the auditor should possess.
- Adequate Technical Training and Proficiency: have formal
education in auditing and accounting, adequate practical experience
for the work being performed, and continuing professional education.
- Independence in Mental Attitude: CPA firms are required to
follow several practices to increase the likelihood of independence of
all personnel.
- Due Professional Care: Due care includes consideration of the
completeness of the audit documentation, the sufficiency of the audit
evidence, and the appropriateness of the audit report.

31
 GENERALLY ACCEPTED AUDITING STANDARDS
KIỂM TO
ÁN

Standards of field work: concern evidence accumulation and other

activities during the actual conduct of the audit.
- Adequate Planning and Supervision: the audit is sufficiently
planned to ensure an adequate audit and proper supervision of
assistants.
- Understand the Entity and its Environment, Including Internal
Control: To adequately perform an audit, the auditor must have an
understanding of the client’s business and industry.
- Sufficient Appropriate Evidence: Decisions about how much and
what types of evidence to accumulate for a given set of
circumstances require professional judgment.

32
 GENERALLY ACCEPTED AUDITING STANDARDS
KIỂM TO
ÁN

Standards of Reporting: require the auditor to prepare a report on

the financial statements taken as a whole, including informative
disclosures.
- Must state in the auditor’s report whether the financial statements
are presented in accordance with generally accepted accounting
principles (GAAP).
- Must identify in the auditor’s report those circumstances in which
such principles have not been consistently observed in the current
period in relation to the preceding period.
- Must so state in the auditor’s report when determining that
informative disclosures are not reasonably adequate.
- Must either express an opinion regarding the financial statements,
taken as a whole, or state that an opinion cannot be expressed, in
the auditor’s report. 33
 VIETNAMESE STANDARDS ON AUDITING
KIỂM TO
ÁN

The purpose of this Vietnamese Standard on Auditing (VSA) is to

establish standards and fundamental principles and provide
guidance on procedures to be followed by the audit firm and the
auditor in an audit of final accounts of investment.

1999: 04 auditing standards including VSA 200, 210, 230 and 700
were established.
Up to 12/2005, 37 VSAs were established by the Ministry of
Finance.
6/12/2012, the Ministry of Finance established 37 new VSAs,
replacing most of current VSAs, excluding VSA 910, VSA 920, VSA
930 and VSA 1000
8/5/2015, 4 new VSAs were established and the new VSA 1000
replaced the current one. Up to now,34there are 41 VSAs in total.