standard 200 - S&S AUDIT I.pdf · Standard 210 – Terms of Audit Engagements 3. Standard 230 –...

1. Standard 200 – Objective and General Principles Governing an Audit of Financial

Statements

2. Standard 210 – Terms of Audit Engagements

3. Standard 230 – Documentation

4. Standard 700 – The audit Report on Financial Statements

standard 200

Objective and General Principles Governing an Audit of Financial Statements

(issued in pursuance of the Minister of Finance Decision No. 120/1999/QD-BTC dated 27

September 1999)

General

01. The purpose of this Vietnamese Standard on Auditing (VAS) is to establish standards and

provide guidance on the objective and general principles governing an audit of financial

statements.

02. The objective of an audit of financial statements, as aimed at by the auditor and the

audit firm, is to express an opinion as to the fairness of the financial statement on the

basis of the general principal statements on the basis of the general principles governing

an a audit of financial statements.

03. This VSA applies to an audit of financial statements and also applies to an audit of other

financial information and related servives rendered by the audit firm.

The auditor and the audit firm should conduct an audit and related services in accordance with

this VSA.

It is expected that the client entity and users of the audit report should possess essential

knowledge as to the objective and general principles set out in this VSA in working with the

audit firm and the auditor during the audit and in dealing with the relations with assertions and

information audited.

In this VSA, the following terms have the meaning attributed below:

04. Financial statement mean the type of reports prepared in accordance with the prevailing (or

accepted) accounting standards and system to mirror the economic and financial information

of an entity.

05. Materiality refers to the degree of importance of information (an accounting data) in the

financial statements.

Information is material if omission or misstatement thereof could influence the economic

decision of users taken on the basis of the financial statements. Materiality depends on the

importance of such omission or misstatement judged in the particular circumstances.

Materiality should be considered in term of both qualitative and quantative characteristics.

06. Assurance refers to the auditor’s satisfaction as to the reliability of an assertion or an evidence

gathered or of information disclosed by the entity to the user.

To provide such assurance, the auditor assesses the evidence colleted as a result of procedures

conducted and expresses a conclusion. The degree of satisfaction achieved and, therefore, the

level of assurance which may be provided is determined by the procedures performed and

their results.

07. Reasonable assurance: In an audit engagement, the auditor provides a high, but not absolute,

level of assurance, expressed positively in the audit report as reasonable assurance, that the

audited financial statements are free of material misstatement.

08. The term “true” in “give a true and fair view…” refers to the notation where the financial

information and accounting documents reflect the content, nature and value of the transaction

as it is.

09. The term “fair” in “give a true and fair view…” refers to the notation where the financial

information and accounting documents reflect the place, time and events in such an impartial,

noteworthy and appropriate manner that they are accepted by a majority of people.

10. Validity refers to the notation where the financial information and accounting and accounting

documents reflect compliance with prevailing (or accepted) legislation, standards and system.

CONTENTS OF THE VSA

Objective of an Audit of Financial Statements

11. The objective of an audit of financial statement is to enable the auditor and the audit firm

to express an opinion whether the financial statements ate prepared, in all material

respects, in accordance with the prevailing (or accepted) accounting standards and

systems, where they comply with the applicable laws and whether they give a true and

fair view.

An audit is also aimed to assist the audited entity in ascertaining outstanding matters and

weaknesses that need settling down to promote the reliability of the information presented by

the entity.

12. Although the auditor’s opinion enhances the credibility of the financial statements, the user

cannot assume that the opinion is an assurance as to the future viability of the entity or to the

efficiency or effectiveness with which management has directed the affairs of the entity.

General Principles Governing an Audit of Financial Statements

13. The general principles governing an audit financial statements are:

- Adherence to the statutory mandate;

- Compliance with the ethical requirements;

- Compliance with the standards on auditing; and

- Professional behavior of scepticim.

14. During the course of public practice, the auditor should show respects for, and adhere to,

the statutory mandates.

15. Ethical principles governing the auditor’s professional responsibilities are:

a) Independence;

b) Integrity;

c) Objectivity;

d) Professional competence and due care;

e) Confidentiality;

f) Professional behavior; and

g) Technical standards.

16. Independence: Independence is a fundamental principle of the auditor in public practice.

During the audit, it is required that the auditor be or appear to be free of any interest which

might be regarded, whatever its actual effects, as being incompatible with integrity,

objectivity and independence.

The auditor should not offer to provide audit services to any entity in which he/ she maintains

economic relationships or holds financial interest, such as shares in, loan to, or borrowings

from, a client, or acts as a voting shareholder, or has signed contracts for processing work,

services, or as a sales agent etc.

The auditor should not provide audit service to any entity to which he has family relationships

( as a parent, spouse, child brother or sister), with any of those of management (such as

member of the Board of Management, Board of Directors, head or deputy of a division or

equal positions) of the entity being audited.

The auditor should not provide accounting services (such as record/ bookkeeping and financial

reporting to his/her audit client.

During the audit, if his/her independence is impaired, the auditor should find a way out of the

situation. In case of a failure to do so, the auditor should refer to such limitations in the audit

report.

17. Integrity: The auditor is required to possess honesty and straight-forwardness and be direct in

his opinion.

18. Objectivity: The audit is required to be fair and truthful and avoid prejudice and bias.

19. Professional competence and due care: The auditor should conduct audit service with all

necessary professional competence, with due care and with utmost diligence. The auditor id

expected to maintain, update and upgrade his/ her knowledge on professional practice, statutory

requirements and technology advancements to meet the growing demand of the profession.

20. Confidentiality: The auditor is obliged to respect the confidentiality of information obtained in

the course of audit, not to make any disclosures to other persons unless otherwise authorized by

appropriate persons or required by law or there is a professional obligation or right to do so

21. Professional behaviour: The auditor should seek to improve and protect the professional

credibility and by no means should he/ she commit any conducts that might impair the

professional credibility.

22. Compliance with technical standards: The auditor should carry out his/ her audit work in

conformity with the technical and professional standards set out in the Vietnamese Standards

on Auditing (or International Standards on Auditing accepted in Vietnam) and the relevant

legal requirements.

23. The auditor should adhere to Vietnamese Standard on Auditing or International Standards on

Auditing or International Standards on Auditing accepted in Vietnam. Such standards establish

general principles and essential procedures and provide related guidance concerning an audit

of financial statements.

24. The auditor should plan and perform the audit with an attitude of professional skepticism

recognizing that circumstances may exist which cause the financial statements to be materially

misstated. For example, the auditor would ordinarily expect to find evidence to support

management representations and not assume they are necessarily correct.

25. The term “scope of an audit” refers to the audit procedures deemed necessary in the

circumstances to achieve the objective of the audit. The procedures required to conduct an

audit in accordance with VSA, (or International Standards on Auditing accepted in Vietnam)

should be determined with regard to the requirements of VSAs and relevant professional

bodies, legislation, regulations an d term of the audit engagement.

Reasonable Assurance

26. An audit in accordance with VSAs (or International Standards on Auditing accepted in

Vietnam) is designed to provide reasonable assurance that material misstatement (if any) in the

financial statements has been detected and discussed in the audit report. The financial

statement are assumed to be free of material misstatement. Reasonable assurance is a concept

relating to the accumulation of the audit evidence necessary for the auditor and the audit firm

to conclude that there are no material misstatement in the financial statements taken as a

whole. Reasonable assurance relates to the whole audit process.

27. However, there are inherent limitations in an audit that affect the auditor’s ability to detect

material misstatements. There limitations result from factors, such as:

- The use of sampling and testing;

- The inherent limitations of any accounting and internal control system (for example, the

possibility of collusion, counterfeit documentation etc.); and,

- The fact that most audit evidence is persuasive rather than conclusive.

28. Also, work undertaken by the auditor to form an opinion is permeated by his/her own

judgement, in particular regarding:

a) The gathering of audit evidence; an d

b) The drawing of conclusions based on the audit evidence gathered (for example, assessing

the reasonableness of estimated, such as depreciation, provision etc.).

Responsibility for the Financial Statements

29. The Director (or the leader) of the entity being audited is responsible for preparing and

presenting the financial statements in a true and fair manner in accordance with the prevailing

(or accepted) accounting standards and systems and relevant regulations.

The auditor and the audit firm are responsible for the examination and for forming and

expressing and opinion on the financial statements.

The audit of the financial statements does not relieve the Director (or the leader) of the entity

being audited of their responsibility for the financial statements.

standard 210

Terms of Audit Engagements


September 1999)

General

01. The purpose of this Vietnamese Standard on Auditing (VSA) is to establish standards and

fundamental principles on agreements between the audit firm and the client concerning:

a) The terms and conditions of the audit contract; and

b) Respective responsibility of the audit firm and the client for a request to implement or change

the terms of an audit contract.

This VSA also provides guidance on the application of fundamental principles and the content

of the audit contract.

Governed by the Ordinance on Economic Contracts, this VSA would underlie the signing and

implementation of the audit contract.

This VSA also provides guidance on the application of fundamental principles and the content

of the audit contract.

Governed by the Ordinance on Economic Contracts, this VSA would underlie the signing and

implementation of the audit contract.

02. The audit firm and the client should agree on the terms of engagement. The agreed terms

would need to be recorded in an audit contract or other suitable form of contract.

03. This VSA applies to the preparation and implementation of an audit contract relating to the

financial statement and to other financial information and related services rendered by the

audit firm.

It is necessary that separate contracts should be reached on related engagements, such as tax,

finance, accounting advisory services etc.

The auditor, the audit firm and the client should agree on and implement the audit contract in

accordance with this VSA.


04. Audit contract refers to a written engagement between the contracting parties (the audit firm

and the client) on the terms and conditions of the audit, In the contract, the audit objective,

scope, respective parties’ right and obligations, form of the audit report, timing of the work

and those on remuneration and solutions for contract disputes are determined.

The audit contract should be prepared and signed prior to commencement of the engagement

to help protect the interest of the audit firm and the client.

CONTENTS OF THE VSA

05. With respect to signing the contract for an audit or related service engagement or committing

to other terms on lieu of a contract, the audit firm and the client should comply with the

statutory requirements on economic contracts.

06. The form and content of an audit contract should contain all general covenants of an economic

contract as currently required and may vary for each client. Whichever the case may be, an

audit contract would normally include reference to:

- The reference number and date of engagement;

- The contracting parties’ names, addresses and account numbers and banks;

- The service contents;

- Technological quality requirements;

- Acceptance condition on the results of engagement;

- Actions to be taken to ensure smooth implementation of engagement;

- Responsibility of the parties and liability for engagement breaches;

- Audit fee and billing arrangement;

- Effectiveness and duration of contracts;

- Language(s) of contract;

- Numbers of copies of contract and filing offices;

- Names, titles, signatures of the parties’ representatives an stamps of the audit firm and the

entity; and,

- Other arrangements.

Apart from the above general covenants, a contract would contain the following:

- The objective, nature and scope of an audit or related services;

- The responsibility of the Director (or the leader) of the entity being audited for the preparation

and presentation of financial statements;

- The audit scope that is to conform with the legal requirements and the prevailing regulations

and policies;

- The form of any report or other communication on the results of the engagement;

- The fact that because of the nature of testing and other relevant limitations of an audit,

together with the inherent limitations of any accounting and internal control system, there is an

avoidable risk that even some material misstatement may remain undiscovered; and

- The client’s responsibility for giving the audit firm access to records, documentation and other

information in connection with the audit.

07. The audit firm may also wish to include in the contract:

- Terms regarding the audit planning;

- Expectation of receiving from the client written confirmation concerning representations made

in connection with the audit;

- Description of any other letters or report or reports that the audit firm is expected to issue to

the client, such as management letters, presentation letters, a third party’s confirmation; and,

- Basis on which fees are computed and currencies for payment and exchange rates (if

appropriate).

08. Where appropriate, the contracting parties may agree to include in the contract the following

points:

- Arrangements concerning the involvement of other auditors and experts in certain aspects of

the audit;

- Arrangements concerning the involvement of internal auditors and other client staff;

- Arrangements to be made with the predecessor auditors, if any, in the case of an initial audit;

- Contract disputes and conflicts and conditions of settlement;

- Any restriction in the audit firm’s financial liability when such possibility exists; and

- A reference to any further agreements between the auditor and the client.

09. The audit contract should be co-signed by the Director (or the leader or any person eligibly

authorized by law) of the audit firm and the client and stamped as statutorily required.

In case of a join audit carried out by two (2) or more audit firms, the audit contract should

incorporate information in relation to all parties thereto, and accordingly bear their appropriate

signatures and stamps.

The language(s) used in the audit contract should be either Vietnamese alone or Vietnamese

and a foreign language as mutually agreed upon by the contracting parties.

At least a copy of the audit contract in original should be retained with each of the contracting

parties together with any appendices thereto (if any)

10. Upon completion of the audit work specified in the audit contract, the contracting parties should

implement procedures necessary to finalise the contract and prepare “Minute on audit completion” as is

currently required, which includes the following:

- Number and date of the minute;

- Names of those representing the contracting parties;

- Nature and quality of the service completed and results accepted;

- Progress of fee payment; and

- Names, position and signatures of the representatives and stamps of respective parties.

Copies of the minute on audit completion shall be distributed to the contracting parties, each apiece.

Audit of Components

11. When the audit firm acting as auditor of a parent entity ( a corporation, company…) also audits

its component (a subsidiary/affiliate company, branch…), the factors that influence the decision

as to whether to reach a separate audit contract with the component include:

- Who appoints the auditor of the component;

- Whether a separate audit report is to be issued on the component;

- Statutory requirements,

- The extent of any work performed by other auditor;

- Degree of ownership of the parent; and

- Degree of independence of the component’s management.

12. In case of an audit contract signed between the parent company and an audit firm in Vietnam,

no audit contract between the latter and the component as client is required. The audit firm

and the component are obliged to conform with the audit contract signed between the parent

company and the audit firm.

For a component wishing to agree on audit objective, scope, work timing and fee level and

thus requesting the audit firm to issued a separate report or so, the audit firm and the

component can reach a separate audit contract or agree to an annex to the contract initially

signed with the parent company.

Recurring Audits

13. The audit firm and the client may sign a contract on recurring audits. In case of

recurring audits, on an annual basis, the audit firm and the client should consider

whether circumstances require the audit contract to be revised and accordingly, a

written agreement should be made with respect to the current year audit. This document

is then deemed as annex to the audit contract initially signed.

14. However, the following factors may make it appropriate to sign a new audit contract for the

current year audit:

- Any revised objective and scope as requested by the client;

- A necessity for important terms of engagement to be changed;

- Recent changes in the client’s management or proportion of contribution;

- Significant changes in the nature or size of the client’s business; and

- Statutory requirements.

Acceptance of a Change of Engagement

15. If requested, before the completion of the engagement, to change the terms of contract

for the current year audit to one which provides a lower level of assurance, the audit

form should consider the appropriateness of doing so.

16. A request from the client to change the engagement may result from a misunderstanding as to

the nature of an audit or related service originally requested or a restriction on the scope of the

engagement. The audit firm would consider carefully the reason, particularly the implication

of a restriction on the scope of the engagement.

17. A change in circumstances that affects the entity’s requirement or a misunderstanding

concerning the nature of service originally requested would normally be considered a

reasonable basis for requesting a change in the engagement. In contrast, a change would not

be considered reasonable if it appeared that the change relates to information that is incorrect,

incomplete or otherwise unsatisfactory.

18. Before agreeing to change the audit engagement to a related service, the audit firm would

consider, in addition to the above matters, any legal or contractual implications of the change.

19. If the audit firm concludes that there is reasonable justification to change the engagement and

if the audit work performed complies with VSAs applicable to the changed engagement, the

report issued would be appropriate for the revised terms of engagement. In order to avoid

confusing the reader, the report would not include reference to:

a) the original engagement; or

b) any procedures that may have been performed in the original engagement, except where the

changed engagement requires compliance with particular terms initially engaged.

20. Where the terms of engagement are changed, the audit firm and the client should agree

on the new terms in writing.

21. The audit firm should not agree to a change of engagement where there is no reasonable

justification for doing so. An example might be an audit engagement when the auditor is

unable to obtain sufficient appropriate audit evidence regarding receivables and the client

asks for the engagement to be changed to avoid a qualified audit opinion or a disclaimer of

opinion.

22. If the audit firm is unable to agree to a change of the engagement and is not permitted to

continue the original engagement, the audit firm should withdraw and consider whether

there is any obligation, either contractual or otherwise to report to other parties, such as

the representative signing the contract, the Board of Management or shareholders, the

circumstance necessitating the withdrawal.

23. In case where one or the contracting parties request that engagement be cancelled, an

agreement should be mutually reached toward a solution thereon under the current legal

requirement. Copies of the cancellation agreement should be distributed to the contracting

parties, each apiece, for records.

24. For simpler procedures, no contract would be required on irregular service that are completed

within a short period of time, however, an written commitment (for example an engagement

letter ) should be conclude between the contracting parties concerning the services.

25. In case where the audit firm and the client use a document in lieu of an audit contract, it is

required that such document contain the basic terms and conditions of a contract.

26. Example of an Audit Contract (Appendix 01)

27. Example of an Audit Contract for a joint audit by two or more audit firms (Appendix 02)

28. Example of an Engagement Letter used in place of an Audit Contract (Appendix 03)

APPENDIX 01

Example of an Audit Contract

AUDIT FIRM A SOCIALIST REPULIC OF VIETNAM

Address, phone and fax number Independence – Freedom - Happiness

No ………………………./HDKT Date …………………………………………….

AUDIT CONTRACT

(Audit of the Financial Statements of ABC Company for the Year Ended ………………….)

- Pursuant to ….. (Economic Contract Ordinance and Decree No…..dated…………of the Government

specifying the implementation of such Economic Contract Ordinance);

- Pursuant to ……….(Decree 07/CP dated 29 January 1994 issuing the Regulations on Independent

Audits on the National Economy); and

- In conformity with the VSA 210 on Terms of Audit Engagements

The con tract made and entered into by and between:

Party A: Company……………………………

(hereinafter referred to as Party A)

Represented by:

Position:

Tel.:

Fax:

Address:

Account No. : At Bank of:

Party B: Company……………………………

(hereinafter referred to as Party B)

Represented by:

Position:

Tel.:

Fax:

Address:

Account No. : At Bank of:

The parties hereby agree as follows:

Article 1: Description of Services

Party B shall provide Party A with an audit of the financial statements of ……for the year ended

………..(or) ………..

Article 2: Governing Laws and Standards

The audit services shall be conducted in conformity with ………(Regulations on Independent Audit)

and in accordance with Vietnamese Standards on Auditing (or International Standards on Auditing

accepted in Vietnam). Those Standards require that the entity being audited plans and performs

the audit to obtain reasonable assurance that the financial statements are free of material

misstatement. An audit includes examining, on test basis evidence supporting the amounts and

disclosures I the financial statements. An audit also includes assessing the accounting policies

applied and significant estimates and judgements made by management, as well as evaluating the

overall financial statements.

Due to the inherent limitations associated to an audit and the accounting and internal control

systems, there might be risks that are beyond the capacity of the auditor and the audit firm in the

detection of material misstatement.

Article 3: Responsibilities of the Parties

3.1 Party A shall:

-retain and manage all related accounting book and records, documents, financial statements and

other documents relating to Party A in a safe and confidential manner as statutorily required;

- provide Party B, in a timely manner, with sufficient information and documents relating to the

audit, including accounting books and records, documents, financial statements and other

information;

- formally sign and stamp the financial statements prior to presenting to Party B. The preparation

of the financial statements and presentation of related information is the responsibility of Party A.

This responsibility requires that the accounting and internal control systems should be appropriate;

So as the accounting policies selected and applied and the safeguarding of the entity’s assets;

- Party B may required a written confirmation from Party A on the reliability of the documents and

information provided;

- delegate responsible personnel to work with Party B and give Party B access to all accounting

books and records, documents, and other information;

………………………………..

3.2 Party B shall:

- ensure to follow the prevailing standards on auditing (as specified in Article 2)

- develop and inform Party A of the work contents and audit plan; implement the work as planned

and in accordance with the principles of independence, objectiveness and confidentiality; and

- delegate competent and experienced auditors and experts to perform the audit (or delegate

auditor as initially agreed).

Article 4: Reporting

Upon completion of the audit, Party B shall deliver to Party A:

- An audit report;

- A management letter (if applicable) which discusses the finding and recommendations

concerning the weaknesses note aiming to further improving the accounting and internal

control systems.

- The audit report and management letter (if any) shall be prepared in ……. copies in Vietnamese

and …….. copies in …. (English), of which the Vietnamese version shall be binding in case of

misinterpretation. The company shall retain ………. copies in Vietnamese and … … copies in

………(English) and the Audit Firm ……. copies in Vietnamese and ………….. copies in ……. English).

Article 5: Fee and Payment Method

- The total fee is …………………………………………………………. (In words ………………………………………………..)

- Payment of the shall be made …………( as agreed)

The fee will be payable either in cash or by transfer in denomination of Vietnam dong (VND) or a

foreign currency at the rate of exchange ruling on ……………………….

Where Party A wishes to acquire Party B’s services on tax, finance, accounting …………., the service

contents and remuneration should be subject to another agreement subsequent to this agreement ( if not

arranged in Article 1 and 5 herein).

Article 6: Commitments and Due Dates

Both parties commit to implement all articles as set forth herein. During the implementation, either

party should be kept promptly informed of any problems that might obstruct the successful completion

of this contract to discuss possible solutions. Information shall be directed to the other party in writing at

the above address.

The audit shall be completed within ……….. days beginning the date of this contract.

Article 7: Effectiveness, Language and Duration of Contract.

This contract is made in ……. copies in Vietnamese and …………. copies in …………….. (English), of which the

Vietnamese version shall be binding in case of misinterpretation and shall come into force upon the

second signature and stamp. Either party shall retain …………….. copies in Vietnamese and ………….. copies in

……..(English),

This contract shall remain in effect until certification of completion or cancellation of contract as may

be agreed by both parties.

FOR AND ON BEHALF OF PARTY B FOR AND ON BEHALF OF PARTY A

AUDIT FIRM COMPANY

(Signed and stamped) (Signed and stamped)

(Full name) (Full name)

Director Director

APPENDIX 02

Example of an Audit Contract

(Applied to a joint audit by two (2) or more audit firms)

AUDIT FIRM AUDIT FIRM B

Address, phone and fax number Address, phone and fax number

SOCIALIST REPUBLIC OF VIETNAM

Independence- Freedom-Happiness

No. ………………../HDKT Date ……………………………………………….

AUDIT CONTRACT

(Ref. Audit of the Financial Statements of ABC Company for the Year Ended ……………………………)

- Pursuant to ……….. (Economic Contract Ordinance and Decree No ……………. dated ………… of the

Government specifying the implementation of such Economic Contract Ordinance);

- Pursuant to …………….( Decree 07/CP dated 29 January 1994 issuing the Regulation on

Independent Auditing in the National Economy);

- In conformity with the VSA 210 on terms of Audit Engagements, and

- Upon the request of ABC Company for an audit of the company’s financial statements for the

year ended ………. to be carried out jointly by Audit Firm A and Audit Firm B

The contract made and entered into by and between:

Party A: Company……………………………………………………….

(hereinafter referred to as Party A)

Represented by:

Position:

Tel.:

Fax:

Address:

Account No.: At Bank of ……………

Party B: (hereinafter referred jointly to as Party B) 1.

1. Audit Firm A

Represented by:

Position:

Tel.:

Fax:

Address:


2. 1. Audit Firm B

Represented by:

Position:

Tel.:

Fax:

Address:


The parties hereby agree as follows:

Article 1: Description of Services

Party B shall provide Party A with an audit of the financial statements of ……… for the year ended

………… (or ….)

Article 2: Governing Laws and Standards (same as Appendix 01)

(Appendix 01 apart, it is required that the parties unanimously provide herein as to which of the

audit firms (Firm A or B) shall maintain contacts with Party A and deal with legal requirements).

Article 3: Responsibilities of the Parties (same as Appendix 01)

Article 4: Reporting

Upon completion of the audit, Party B shall deliver:

- An audit report;

- A management letter (if applicable) which discusses the findings and recommendations

concerning the weaknesses noted aiming to further improving the accounting and internal

control systems.

The audit report and management letter (if applicable) shall be prepared in ……….. copies in Vietnamese

and ………….. copies in ………….. (English), of which the Vietnamese version shall be binding in case of

misinterpretation. The company shall retain ………. copies in Vietnamese and ………… copies in ………..

(English) and the Audit Firm …….. copies in Vietnamese and ……… copies in ……. (English).

………………………….

Article 5: Fee and Payment Method

- The total fee is …………………..(In words …………………………….)

(The audit remuneration can be billed in the name of Party A as a whole or for respective audit

firms separately)

- Payment of the fee shall be made ……. (as agreed)

The fee will be payable either in cash or by transfer in denomination of Vietnam dong (VND) or a

foreign currency at the rate of exchange ruling on …………..

Where Party A wishes to acquire Party B’s services on tax, finance, accounting …………., the service

contents and remuneration should be subject to another agreement subsequent to this agreement

(if not arranged in Article 1 and 5 herein).

Article 6: Commitments and Due Dates (same as Appendi01)

Article 7: Effectiveness, language and Duration of Contract (same as Appendix 01)

FOR AND ON BEHALF OF PARTY B FOR AND ON BEHALF OF PARTY A

AUDIT FIRM A ABC COMPANY

(Signed and stamped) (Signed and stamped)

(Full name) (Full name)

Director Director

AUDIT FIRM B

(Signed and stamped)

Full name

Director

APPENDIX 03

Example of an Engagement Letter

AUDIT FIRM A

Address, phone and fax number

Date ……………………………

To: ABC company

No. 12, P. Street, Hanoi, Vietnam

For the attention of Mr/Ms ……

Company Director

Ref. Provision of professional service (auditing, accounting ………….) for ABC Company

Dear Sir/Madam,

We would like to extend to you our greetings and thanks for your concern in our professional

service during the past year (s)

We are please to write to you about our audit of the financial statements of ABC Company for the

year ended ….

THE WORK TO PEFORM

Audit of financial statements

- We will conduct our audit of the financial statements of your company for the year ended ………

in accordance with Vietnamese Standards on Auditing accepted in Vietnam) and relevant

regulations of Vietnam.

- ABC Company is responsible for the keeping of all related accounting books and records and

documents, for the preparing and signing of the financial statements and for providing us with

adequate documents as per our request on a timely manner.

- We are responsible for the examination and for expressing an opinion on the financial

statements and making an audit plan and performing the work to give reasonable assurance

that the financial statements are free of material misstatement. We shall also assess the

company’s compliance with the accounting standards and system registered.

- Because of the inherent limitations of an audit and of any accounting and intenal control

system, there is an unavoidable risk that even some material misstatements may remain

undiscovered by the auditor and the audit firm.

- Upon completion of the audit we shall deliver our report on the financial statements and a

separate management letter (if applicable) in Vietnamese and English to discuss any material

weakness in the accounting and internal control systems which come to our attention.

- We assume our responsibility under the statutory requirements on external auditing of

financial statements.

- Our work will be completed within ………………. days counting from the date this letter is signed

by you.

(It is advisable to name the types of other services to be provided, commitment of responsibility of

the Director of ABC Company and that of the audit firm).

PROPOSED FEE

We estimate the fee for respective services taking into account the complexity of service, level of

efforts and the profit brought. In addition, out-of-pocket expenses will be re-imbursable at cost

based on related supporting documents.

We propose the fee for our audit in respect of the year ended …… in the amount of VND …………. (in

words …………………….) and out –of-pocket expenses not exceeding VND ………….

We are available to meet any queries from you.

Please sign and return the attached copy of this letter to indicate that it is in accordance with your

acceptance of this engagement letter.

We look forward to your confirmation with sincere thanks.

Yours faithfully,

(signed and stamped)

Director

I acknowledge acceptance of the above terms of engagement on behalf ABC Company

(Signed and stamped)

…………………………………….

Director

(Full name)

Date……………………………………….

Standard 230

DOCUMENTATION

(Issued in pursuance of the Ministry of Finance Decision No. 120/1999.QD-BTC dated 27 September

1999)

GENERAL

01. The purpose of this Vietnamese Standard on Auditing (VSA) is to established standards

and provides guidance regarding preparation, obtaining, classification, utilization and

filling of documentation of an audit of financial statements.

02. The auditor should obtain and record in the audit file all documents and information

which are important in providing evidence to support the audit opinion and evidence

that the audit was carried out in accordance with VSAs (or International Standards

on Auditing accepted in Vietnam)

03. Documentation is used to:

- record the audit evidence resulting from the audit work performed and support the

audit’s opinion;

- assist in the planning and performance of the audit;

- assist in the supervision, review and evaluation of the audit work; and

- assist in the addressing post audit events.

04. This VSA applies to the documentation of an audit of financial statements and also applies

to that of an audit of other financial information and related services renders by the audit

firm.

The auditor and the audit firm should conduct an audit and related services in accordance

with this VSA in the preparation, obtaining, classification, utilization and filling of

documentation of an audit of financial statement.

On the basis of this VSA, the audit firm should establish specific regulations on the

content, preparation and filling of documentation.


05. “Documentation” means the material (working papers) prepared, or obtained and retained,

classified and used by the auditor. Working papers may be in the form of data stored on

paper, film, electronic media or other media as statutorily required.

Permanent audit files include documents and materials containing general information on

audit client, serving one or more audits concerning a number of fiscal years of the clients.

Current audit files include documents and materials containing specific information on an

audit client, serving the audit of a single fiscal year.

CONTENTS OF THE VSA

Form and Content of Working Papers

06. During the course of an audit, the auditor should prepare working papers which are

sufficiently complete and details to provide an overall understanding of the audit to

other auditors or reviewers.

07. The auditor should record in the working papers and keep in the audit file information

and documents in relation to:

a. the audit planning;

b. the audit performance: nature, timing and extent of the audit procedures

conducted;

c. the results of the procedures conducted; and

d. the conclusions drawn from the audit evidence obtained.

Working papers would include the auditor’s reasoning on all significant matters which

require the exercise of professional judgement, together with the auditor’s conclusion

thereon. In areas involving difficult questions of principle or judgement, working papers

will record the relevant facts that were know by the auditor at the time the conclusions

were reached. Working papers also record the results from tests and reviews of the quality

of an audit by authorized persons as regulated by the audit firm.

08. It is neither necessary nor practical to document every matter the auditor considers with

respect to the audit. The extent and content of working papers is a matter of professional

judgement by the auditor. The working paper would adequately enable their auditor to

form an opinion an ensure to provide another auditor, who has no previous experience

with the audit, and the reviewer with an understanding of the work performed and the

basis on which his/her opinion is shapped. That other auditor may only be able to obtain an

understanding of detailed aspects of the audit by discussing them with the auditors who

prepared the working papers.

09. The form and content of working papers are affected by key factors, such as:

+ Objective and content of the engagement;

+ Form of the auditor’s report.

+ Nature and complexity of the business.

+ Nature and condition of the entity’s accounting and internal control systems;

+ Audit methodology and technology used in the course of the audit;

+ Needs in the particular circumstances for direction, supervision and review of work

performed by assistance, and

+ Requirements of a joint audit performed by two (2) or more audit firms:

10. Working papers are designed and organized in the formats regulated by the audit

firm. The auditor may utilize schedules, analyses and other documentation prepared by the

entity provided he/she needs to be satisfied that those materials have been properly prepared.

11. Working papers should be prepared and arrange on respective clients and engagements

according to the conditions and requirements of the auditor and the audit firm. The use of

standadised working papers (checklists, specimen letters, standard organization of working

papers etc.) may improve the efficiency with which such working papers are prepared and

reviewed. They facilitate the delegation of work and control over quality.

12. Working papers should be prepared and arranged into:

* Permanent audit files; and

* Current audit files.

13. Permanent audit files ordinarily include:

+ Name and number of the documentation, date of preparation and filing;

+ General information on the client:

- Extracts or copies of important legal documents, agreements and minutes:

establishment decision, company charter, establishment permit (investment licence,

joint venture contract), business registration, announcements, meeting minutes of the

Board of Management and Board of Directors…(names, addresses, functions and

scopes of operations, organizational structure);

- Information as to the business and legislative environments within which the entity

operates and the development process of the entity.

+ Tax documents: those on the tax regime applicable to the industry in which the client

operates as permitted by the tax authority and those on the client’s performance of their annual

tax obligations;

+ Personnel documents: agreements on employment, regulations on personnel; rules

on management and utilization of salary fund;

+ Accounting documents:

- Written approval of the current accounting system;

- Accounting principles applicable: such methods on valuation of inventory; making of

provision…

+ Contracts or agreements signed with a third party with long-term validity (for 2 fiscal

years or longer): audit contracts; lease contracts, insurance contract, loans contracts…

+ Other documents

The permanent audit files are updated with new information of continuing importance on an

annual basis upon any changes relating to the aforesaid documents.

14. Current audit files ordinary include:

+ Information on the preparer and reviewer of working papers.

* Name of auditor and assistant(s) performing the audit and preparing the working

papers;

* Name of reviewer and date of review;

* Name of person who approves the documentation and the date of approval;

+ Legal documents on finance, accounting, taxation issued by the Government and

relevant agencies in connection with the current year;

+ Copies of the financial statements, audit report, management letter and associated

reports (both draft and final copies);

+ Audit contracts, engagement letters, contract annexes and minutes on contract

completion;

+ Evidence of the audit strategy and planning process including audit programme and

any changes thereto;

+ Evidence of changes to accounting and internal control systems of the client.

+ Evidence of inherent and control risk assessment and any revision thereof.

+ Evidence of the audit’s consideration of the work of internal auditing and conclusion

reached.

+ Notes on subsequent events;

+ A record of nature, timing and extent of audit procedures performed and the results

of such procedures;

+ Analyses of transactions and balances;

+ Analyses of significant ratios and trends concerning the client’s operation;

+ Evidence that the work performed by assistants was supervised and reviewed by the

auditor and authorized personnel;

+ Details of procedures applied regarding components whose financial statements are

audited by another auditor;

+ Copies of communications with other auditor experts and other third parties.

+ Copies of letters or notes concerning audit matters communicated to, or discussed

with, the entity, including the terms of engagement;

+ Letters of representation received from the Director (or the leader) of the entity

being audited;

+ Confirmations from a client of the entity or a third party;

+ Conclusions reached by the auditor concerning significant aspects of the audit,

including how exceptions and unusual matters, if any, disclosed by the auditor’s procedures

were resolved and treated; and

+ Related document.

15. In the case of a joint audit performed by two (2) or more audit firms, the working papers are

prepared by both sides with respect to the assignments devided between them. In making the

documentation complete for the reviewing, reporting, and filing purpose, before the end of the

engagement, either side should be furnished with copies of the working papers prepared by the

other in respect of portion of work assumed thereby.

Confidentiality, Safe Custody, Retention and Ownership of Working Papers

16. The auditor and the audit firm should maintain the confidentiality and safe custody of the

working papers.

Working papers should be retained for a period sufficient to meet the needs of practice

and in accordance with legal requirements of records retention and those established by

the profession and each audit firm.

Working papers should be arranged and filed in proper and orderly fashion to facilitate the

accessibility and reference and gathered at the firm’s archive. In the case of an audit firm with

branches, the working papers should be kept at the office where the audit report is signed and

stamped.

17. Working papers are the property and the ownership of the audit firm. The client and the third

party are entitled to access to, and use of, portions or extracts of the working paper upon the

consent of the Director (or the leader) of the audit firm or otherwise under statutory or

professional requirement.

Although portions or all of the working papers may be made available to the client at the

discretion of the audit firm under the circumstances, in no case are they a substitute for the

client’s accounting records and financial statements.

standard 700

The Audit Report on Financial Statements


September 1999)

General

01. The purpose of this Vietnamese Standard on Auditing (VSA) is to establish standards and

provide guidance on the form and content of the audit report issued as a result on an audit

performed by the auditor and the audit form of the financial statements of an entity.

02. The auditor and the audit firm should review and assess the conclusions drawn from the

audit evidence obtained and use such conclusions as the basis for the expression of and

opinion on the financial statements.

This review and assessment involves considering whether the financial statements have been

prepared in accordance with the prevailing (or accepted accounting standards and system. It is

also necessary to consider whether the financial statements comply with statutory

requirements.

03. The audit report should contain a clear written expression of opinion of the auditor and

the audit firm on the financial statements taken as a whole.

04. This VSA applies to the preparation of an audit report on the financial statements and can also

apply to that an audit report on other financial information an don related services rendered by

the firm.

05. The auditor and the audit firm should conduct an audit and prepare the audit report to

announce the audit results in accordance with this VSA.

It is expected that the entity being audited ( the client ) and users of the audit reports possess

essential knowledge of the principles and procedures regulating the preparation of the audit

report set out on this VSA so that the audit results are used properly.


06. Audit report: a written document prepared and issued by the auditor and the audit firm to

express their independent opinion on the financial statements of an entity being audited.

07. The term “Give a true and fair view….” means that the auditor’s opinion expressed n the audit

report would give reasonable assurance that the financial statements audited give a true and

fair view but not absolute assurance that the financial statements audited are free of material

misstatement. The auditor is only concerned with the material factors in the financial

statements.

CONTENTS OF THE VSA

08. The audit report includes the following basic elements, ordinarily in the following layout:

a) Name and address of the audit firm;

b) Number of the audit report;

c) Title of the audit report;

d) Addressee of the audit report;

e) Opening or introductory paragraph:

- identification of the financial statements audited;

- a statement of the responsibility of the Director (or the leader) of the entity and the

responsibility of the auditor and the audit firm;

f) Scope and basis paragraph

- a reference to the auditing standards followed to conduct the audit;

- a description of the work and procedures conducted by the auditor.

g) Opinion paragraph containing an expression of opinion by the auditor and the audit firm on the

financial statements;

h) Place and date of the report;

i) Signatures and stamps.

A measure of uniformity in the form and content of the audit report is desirable because it

helps to promote the reader’s understanding and to identify unusual circumstances when

they occur.

09. Name and address of the audit firm:

The audit report should bear the name, address, logo, telephone and fax number and any other

contact identifications of the audit firm or branches of the audit firm issuing the audit report.

In the case of a joint audit carried out by two (2) or more audit firms, the audit report so issued

should bear all the above information of the audit firms cosigning the audit report.

10. Number of the audit report:

The audit report should be identified with a reference number designed with respect to

issuance thereof, which would be given on an annual basis (this is the official numbering

systematically kept in line with the documentation system of the audit firm and/or the firm’s

branches).

11. Title

The audit report should have a specific and appropriate title to distinguish the audit report from

reports that are issued by others. It may be appropriate to use the term “ Auditor’s Report”, or

“Auditors’ Report on the Financial Statements”, or “Auditors’ Report on the Financial Statements

of Company… for the year ended…”

12. Addressee

The auditor’s report should be appropriately addressed as set forth in the audit contract. The

report is ordinarily addressed either to the Board of Management, Director or shareholders of the

entity whose financial statements are being audited. Example is “To the Board of Management

and the General Director of Company…”

The audit report should accompany the financial statements that have been audited.

Opening or Introductory Paragraph

13. The audit report should identify the financial statement of the entity that have been

audited, including the date of and period covered by the financial statements.

14. The report should include a statement that the financial statements are the responsibility

of the entity’s Director (or leader) and a statement that the responsibility of the auditor

is to express an opinion on the financial statements based on the audit.

15. Financial statements are the representations of economic and financial information of the

entity. The preparation of such statements requires the Director (or the leader) of the entity or

adhere to the prevailing (or accepted) accounting standards and system to make significant

accounting estimates and judgments, as well as to determine the appropriate accounting

principles and method s used in preparation of the financial statements. In contrast, the auditor

and audit firm’s responsibility is to audit these financial statements in order to express an

opinion theron.

16. An illustration of an opening (introductory) paragraph is:

“We (*) have audited the accompanying balance sheet of ABC Company as at 31 December X, and

the related statement of income and statement of cash flows for the year then ended together with the

appended notes set out on page… to page…

The financial statements are the responsibility of the Company’s Director (or leader). Our

responsibility is to express an opinion on these financial statements based on our audit.”

(*) In case of a joint audit carried out by two (2) or more audit firms, the opening (introductory)

paragraph should clearly state: “We, Audit Firm A and Audit Firm B, have jointly audited…”

Scope and Basis Paragraph

17. The audit report should describe the scope and basis of the audit by stating that the audit

was conducted in accordance with VSAs or International Standards or Auditing as

appropriate.

“Scope” refers to the auditor’s ability to perform audit procedures deemed necessary in the

circumstances. The reader needs this as an assurance that the audit has been carried out in the

report.

18. The report should include a statement by the audit was planned and performed to obtain

reasonable assurance that the financial statements are free of material misstatement.

19. The audit report should describe the audit as incliding:

a) examining, on a test basis, evidence to support the financial statement amounts and

disclosures;

b) assessing the compliance with prevailing (or accepted) accounting standards and system

and the accounting principles and standards used in the preparation of the financial

statements;

c) assessing the significant estimates made by the Director (or the leader) of the entity

being audited in the preparation of the financial statements; and

d) evaluating the overall financial statement presentation.

20. The report should include a statement by the auditor that the audit provides a reasonable

basis for the opinion.

21. An illustration of these matters in a scope and basis paragraph is:

“We conducted our audit in accordance with Vietnamese Standards on Auditing accepted in Vietnam).

Those Standards require that we plan and perform the audit to obtain reasonable assurance that the

financial statements are free of material misstatement. An audit includes examining, on a test basis,

evidence supporting the amounts and disclosures in the financial statements. An audit also includes

assessing the accounting standards and systems applied (or accepted), accounting principles and

approaches used and significant estimates and judgments made by management, as well as

evaluating the overall financial statement presentation. We believe that our audit provides a

reasonable basis for our opinion”

Opinion paragraph

22. The audit report should clearly state the auditor and the audit firm’s opinion as to

whether the financial statements give a true and fair view in accordance with prevailing

(or accepted ) accounting standards and system and whether the financial statements

comply with relevant statutory requirements.

23. In assessing the compliance with the accounting standards and systems used in the preparation

of the financial statements, it is necessary to take into consideration the compliance with the

accounting standards, or other accounting standards and systems accepted by competent

authority) by a paragraph, for example:

“The financial statements have been drawn up in accordance with Vietnamese Accounting

Standards and systems (or International Accounting Standards, or other accounting standards and

systems approved by the Ministry of Finance in Letter No……dated…..) and comply with relevant

statutory requirements”

24. In addition to an opinion on the true and fair view (or fair presentation, in all material

respects,) and on the compliance with the accounting standards and system as discussed in

Para. 07 and 23 herein, the audit report should include an opinion as to whether the financial

statements comply with other requirements specified by the relevant statutes or law.

25. An illustration of these matters in an opinion paragraph is:

“ In our opinion, the financial statements give a true and fair view of the financial position of ABC

Company as at 31 December X, and of the year then ended in accordance with the Vietnamese

Accounting Standards and system and comply with relevant statutory requirement.”

26. In any situation where it is not evident which country’s accounting standards have been

used, the country, where the client operates, should be stated in the audit report.

When reporting on financial statements that are distributed extensively outside Vietnam, it is

recommended that the auditor refers to Vietnamese Accounting Standards and principles

used, such as:

……” In accordance with Vietnamese Accounting Standards and principles…”

or “ In accordance with applicable accounting standards and principles accepted in Vietnam…”

This designation will help the user to better understand which accounting principles were used in

preparing the financial statements. When reporting on financial statements that are p repared

specifically for use in another country (For example, where the statements have been translated

into a language and in a currency other than that of the original financial statements), the auditor

will consider the need to refer to the international accounting standards or other accounting

standards used to prepared the financial statements and make appropriate disclosures in the notes

to the financial statements.

Date of Report and Auditor’s Address

27. The auditor should date the report as at the completion date of the audit. This informs the

reader that the auditor has considered the effect on the financial statements and an the report

of events and transactions of which the auditor became aware and that occurred up to that date.

The report should name a specific location, which is ordinarily the city or province where the

audit firm or the audit firm’s branch maintains the office, which issues the report.

28. The audit report should never be dated before the financial statements under audit are

signed by the Director (or the leader) of the entity. In case where adjustments are made to

the financial statements, which accordingly requires re-preparing during the audit, the date on

which the audit report is signed may be that of the financial statements.

Auditor’s Signature

29. The report should be signed in the personal name of the registered auditor, who is in charge of

the audit and concurrently signed by the Director (or his authorize person) of the audit firm (or

the firm’s branch) that assumes responsibility for the audit.

Separately placed under the respective signatures should be the full name and registry

number of the professional license of the persons above discussed. The stamp of the audit

firm or the firm’s branch issuing the audit report is given adjoining the signature of the firm’s

Director or his authorized person. Stamps are also given between on the edge of pages of the

audit report and the audited financial statements.

To bring it into line with the international practice, the Director (or his authorized person) may

sign the audit report in the name of the audit firm in place of his/her name; however,

he/she is required to state therein his/ her name and the registry number of his/her own

professional license and make sure the report would then bear the firm’s stamp.

30. Where the audit is conducted jointly by two (2) or more audit firms, the audit report should bear

the signature of the Directors (or their authorized persons) of the respective firms in the manner

defined in Para. 29. No longer is the auditor in charge of the audit on the part of each firm

required to sign such an audit report.

(see Appendix 06)

31. “Authorized person”, who is eligible to sign the audit report, is either a deputy director of the audit

firm, the director of the firm’s branch or his/her deputy, all required to possess audit professional

licenses in Vietnam and a letter of authorization from that firm’s Director for doing so.

32. The language used in the audit report is either Vietnamese alone or Vietnamese and a foreign

language as agreed upon in the audit contract.

Audit Report on Consolidated Financial Statements

33. An audit report should be issued in respect of the audit of the financial statements of a client entity,

namely companies and businesses with full legal status, depending on the agreement in the audit

contract.

When reporting on the combined financial statements of a corporate, a separate audit report is

made on each of its dependent subsidiary, depending on the agreement in the audit contract. If

these subsidiaries are under the direct control of the entity it is appropriate to either issue an

report to, or conclude an audit minute. Such a minute would however contain all basic contents

designed for an audit report.

(see Appendix 07)

The audit report on the consolidated financial statements of a corporate should be prepared on

the basis of the results of individual subsidiary audits and from the examination of the

consolidated financial statements

Types of Opinion on the Financial Statements Audited

34. An audit report is considered to be modified in the following situations

Depending on the examination results, the auditor can give one of the following types of

opinion:

- Unqualified opinion;

- Qualified opinion;

- Disclaimer of opinion, and

- Adverse opinion

Unqualified opinion

35. An unqualified opinion should be expressed when the auditor and the audit firm conclude

that the financial statements give a true and fair view of the financial position of the entity

under the audit in accordance with the prevailing (or accepted) accounting standards and

systems. An unqualified opinion also indicates implicitly that any changes in accounting principles

or in the method of their application, and the effects thereof, have been properly determined and

disclosed in the financial statement, such as:

“In our opinion, the accompanying financial statements give a true and fair view of the financial

position of ABC Company as at 31 December X, and of the results of its operations and its cash flows

for the year then ended in accordance with the Vietnamese accounting standards and system and

comply with relevant statutory requirements”

36. The unqualified opinion is also expressed in the case that the audited financial statements

contain misstatements as detected by the auditor, which upon his/her recommendations, have been

revised by the entity and that the revised financial statements are accepted by the auditor.

Example of a paragraph therefor is: “In our opinion, the accompanying financial statements, upon

the revision made thereon at the auditor’s recommendations, give a true and fair view of…”

37. An unqualified opinion is applicable even in the circumstance where a paragraph is added to

highlight a matter that neither causes any material impacts on the financial statements nor affects

the auditor’s opinion. The paragraph would preferably be included after the opinion paragraph and

would enhance the reader’s assessment of the effect of the matter on the financial statements. For

example:

“In our opinion, the accompanying financial statements give a true and fir view of the financial

position of ABS Company as at 31 December X, and of the results of its operations its cash flow

for the year then ended in accordance with the Vietnamese Accounting Standards and systems

and comply with relevant statutory requirements

Without qualify our opinion we draw your attention to Note X to the financial statements. Three

month before the year-ended the company set for use a constructed asset worth of VND XX,

which has not so far been realize as fixed assets and for which neither depreciation nor

provision was made. This should be specifically discussed in Notes to the Financial

Statements…”

38. The unqualified opinion does not mean that the financial statements are completely accurate,

but means that they may have certain misstatements, which, in the auditor’s judgements, are not

material.

(see Appendix 01)

Qualified Opinion

39. A qualified opinion is expressed in the audit report when the audit and the audit firm

determine that the financial statements only give a true and fair view of the financial position of

the entity without being affected by the “subject to” factors discussed in the audit report. This

also means that if such factors raised therein had material impacts on the financial statements, these

statements would fail to give a true and fair view in all material respects.

“Subject to” factors shows matters that are material but not as certain as a going-concern, or the case of

revenue unlikely to be r realized that affects the results of the entity’s operations.

40. The “subject to” factors are normally associated with events predicted to be occurring the future,

which are beyond the auditor and audit firm’s controls. The expression of an opinion with “subject to”

factors supports the discharge of the auditor’s responsibility in connection with the audit and draws the

reader’s attention to such likely events.

Example of a paragraph expressing “subject to” opinion follows:

“In our opinion, subject to the effect of

- the sales o f VND XX which has been accepted; and

- the spending item of VND XY approved by the Board of Management,

the accompanying financial statements give a true and fair view of the financial position of ABC Company

as at 31 December X, and of the results of its operations and its cash flows for the year then ended in

accordance with the Vietnamese Accounting Standards and system and comply with relevant statutory

requirements.

(see Appendix 02)

41. A qualified opinion should be expressed when the auditor concludes that an unqualified opinion

cannot be expressed but the effect of any disagreement with management, or limitation on scope

is not so material and pervasive as to require adverse opinion or a disclaimer of opinion. A

qualified opinion should be expressed as being “except for” the effects of the matter to which the

qualification relates as: “In our opinion, except for the effects on the financial statements of the matters

referred to above, the accompanying financial statements give a true and fair view of …”

(see Appendix 03)

Disclaimer of opinion

42. A disclaimer of opinion should be expressed when the possible effect of a limitation on scope is

so material and pervasive that the auditor has not been able to obtain sufficient appropriate audit

evidence and accordingly is unable to express an opinion on the financial statements as “ In our

opinion, for the reasons above discussed, we are unable to form an opinion on the financial statements…”

(see Appendix 04)

Adverse opinion

43. An adverse opinion should be expressed when the effect of a disagreement is so material and

pervasive to the financial statements that the auditor concludes that a qualification of the report

is not adequate to disclose the misleading or incomplete nature of the financial statements as “In

our opinion, due t the material effects on the financial statements of the matters above referred to, the

accompanying financial statements do not give a true and fair view of…”

(see Appendix 05)

Whenever the auditor expresses an opinion that is other than unqualified, which are qualified,

disclaimer of or adverse opinion, a clear description of all the substantive reasons should be

inclided in the report and, unless impracticable, a quantification of the possible effect (s) on the

financial statements. Ordinarily, this information would be set out in a separate paragraph preceding

the opinion or disclaimer of opinion and may include a reference to a more extensive discussion, if any,

in a note to the financial statements.

44. Circumstances that may result in other than an unqualified opinion

The auditor would ordinarily not express an unqualified opinion in cases where the financial statement

are likely to be significantly affected by one of the following circumstances:

a) A limitation on the scope of the auditor’s work; and

b) There is a disagreement with management regarding the selection of the accounting

standards and systems, the method of their application or the inappropriateness of

disclosures and information in the financial statements or in the notes thereto.

Such circumstances could lead to a qualified, disclaimer of or adverse opinion.

Limitation on the scope

45. A limitation on the scope of the auditor’s work may sometimes be imposed by the entity (for

example when the terms of the engagement specify that the auditor will not carry out an audit

procedure that the auditor, believes is necessary). However, when the limitation in the term of a

proposed engagement is such that the auditor believes the need to express a disclaimer of opinion

exists, the auditor would normally not accept such a limited engagement as an audit engagement,

unless required by statue. Also, a statutory auditor would not except such an audit engagemenr when

the limitation infringes on the auditor’s statutory duty.

46. A scope limitation may be imposed by circumstances (for example, when the timing of the

auditor’s appointment is such that the auditor is unable to observe the counting of physical inventories).

It may also arise when, in the opinion of the auditor, the entity’s accounting records are inadequate or

then the auditor is unable to carry out an audit procedure believed to be desirable. In these

circumstances, the auditor would attempt to carry out reasonable alternative procedures to obtain

sufficient appropriate audit evidence to support an unqualified opinion.

47. When there is a limitation on the scope of the auditor’s work that requires expression of a

qualified opinion or a disclaimer of opinion, the audit report should describe the limitation and

indicate possible adjustments to the financial statements that might have been determined to be

necessary had the limitation not existed.

48. Illustrations of these matters are set out below:

“…We did not observe the counting of the physical inventories as at 31 December 19X1, since that date

was prior to the time we were initially engaged as auditors for the company. Owing to the nature of the

company’s records, we were unable to satisfy ourselves as to inventory quantity by other audit

procedures.

In out opinion, except for the effects (if any) on the financial statements of the matters referred to

above, the accompanying financial statements give a true and fair view of …”

Or:

“Due to the limitation imposed by the management, we were unable to examine the total revenue and

failed to obtain adequate confirmations of accounts receivable from the debtors; and in view of the

materiality of these effects. Therefore we are unable to form an opinion on the financial statements”.

Disagreement with management

In case that the auditor disagrees with management about matters such as the selection of the

accounting standards and systems, the method of their application or the inappropriateness of

disclosures and information in the financial statements or in the notes thereto.

If such disagreements are material to the financial statements, the auditor should express a

qualified opinion or an adverse opinion.

50. Illustrations of disagreement with management

“…As discussed in Note X to the financial statements, no depreciation has been provided in the financial

statements whereas the related items of assets had actually been in use for over six months, for which the

depreciation that should have been charged is VND XXX. Accordingly the operating expenses were

understated and the net-book value of these fixed assets was overstated by an amount approximating VND

XXX, thus resulting in a falsified profit of the same amount.

In our opinion, except for the effects (if any) on the financial statements of the matter referred to above,

the accompanying financial statements give a true and fair view of …”

Or:

“On 25 March X, the company released a loan of VND XXX, which had not been confirmed by 31

December the same year. This should have been specified in the Notes to the Financial Statements…

In our opinion, except for the effects (if any) of the absence of a note as referred to above, the

accompanying financial statements give a true and fair view of…”

Or:

“The value of fixed assets of VND XXX and a loan due to Company B of VND disclosed in the balance

sheet are neither recorded in the books of account nor supported by any accounting documents…

In out opinion, owing to the material effects on the financial statements of the matters referred to above,

the accompanying financial statements do not give a true and fair view of…”

51. Appendices to the audit report

In circumstance where further information about the audit results reported is required, the auditor may

present appendices to accompany the audit report, such as an explanation of “except for” factors, a

table of computation in detail, recommendations…

52. Management letter

To assist the entity to restructure the financial and accounting management and recommend

improvements of the internal accounting and internal control systems, the auditor and the audit firm

may, where appropriate, circulate a management letter.

The management letter discusses matters noticed in detail in terms of observations, implications,

recommendations and management’s response associated therewith. The management letter may

discuss one or more than one weaknesses depending on his/her judgement.

Although the management letter represents part of the audit engagement, its attachment to the audit

report is not always required.

53. Appendices:

Appendix 01: Example of an unqualified audit report;

Appendix 02: Example of an unqualified audit report with “subject to” opinion;

Appendix 03: Example of an unqualified audit report with “except for” opinion;

Appendix 04: Example of an unqualified audit report with a disclaimer of opinion;

Appendix 05: Example of an unqualified audit report with an adverse opinion;

Appendix 06: Example of an unqualified audit report for a joint audit by two or more audit firms;

Appendix 07: Example of an unqualified audit minute

APPENDIX 01

Example of an unqualified audit report

AUDIT FIRM XYZ

Appropriate address, phone and fax number

No: …………………………….

AUDITORS’ REPORT ON FINANCIAL STATEMENTS OF ABC COMPANY FOR THE YEAR

ENDED…

To: The Board of Management and Board of Directors ABC Company

We have audited the accompany balance sheet of ABC Company as at 31 December X, and the related

statement of income and statement of cash flows for the year ended 31 December X prepared on …

together with the appended notes as set out on page … to …

These financial statements are the responsibilities of the company’s management. Our responsibility is to

express an independent opinion on these financial statements based on our audit.

Basis of opinion

We conducted our audit in accordance with Vietnamese Standards on Auditing. Those standards require

that we plan and perform the audit to obtain reasonable assurance that the financial statements are free

of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts

and disclosures in the financial statements. An audit also includes assessing the accounting principle used

and significant estimates made by management, as well as evaluating the overall financial statement

representation. We believe that our audit provides a reasonable basis for our opinion.

Opinion

In our opinion, the accompanying financial statements give a true and fair view of the financial position

of ABC Company as at 31 December X, and of the results of its operations and its cash flow for the year

then ended in accordance with the Vietnamese Accounting Standards and system and comply with relevant

statutory requirements.

Hanoi, dated…………………………………………,

AUDIT FIRM XYZ

Director Auditor

(Signature and stamp) (Signature)

Full name Full name

Profession al license number Professional license number

APPENDIX 02

Example of an unqualified audit report with “subject to” opinion

AUDIT FIRM XYZ


No:………………………………………….

AUDITORS’ REPORT

ON FINANCIAL STATEMENTS OF ABC COMPANY FOR THE YEAR ENDED…


We have audited…. (As App. 01)

Basis of opinion

(As App. 01)

Opinion

“In our opinion, subject to the effects of

- the sales of VND XX which has been accepted; and

- the spending item of VND XY approved by the Board of Management,




requirements.

Ha noi, dated……………………………………………………….

AUDIT RIRM XYZ

Director Auditor


Full name Full name

Professional license number Professional license number

APPENDIX 03

Example of a qualified audit report with “except for” opinion

AUDIT FIRM XYZ


No:……………………………………

AUDITORS’ REPORT

ON FINANCIAL STATEMENTS OF ABC COMPANY FOR THE YEAR

ENDED…….


We have audited……………

(As App. 01)

Basis of opinion

We conducted…………….

(As App. 01)

Opinion

We did not observe the counting of the physical inventories as of 31 December X, since that date was

prior to the time we were initially engaged as auditors for the company.

Owing to the nature of the company’s records, we were unable to satisfy ourselves as to inventory

quantity by other audit procedures.

In out opinion, except for the effects (if any) on the financial statements of the matters referred to above,




requirements.

Hanoi dated………………………………………………………..

AUDIT RIRM XYZ

Director Auditor


Full name Full name


APPENDIX 04

Example of an audit report with a disclaimer of opinion

AUDIT FIRM XYZ


No: ………………………………………

AUDITORS’ REPORT

ON FINANCIAL STATEMENTS OF ABC COMPANY FOR THE YEAR ENDED……….

To: The Board of Management and Board of Directs

ABC Company

We have audited…..

(As App. 01)

Basis of opinion

(As App. 01)

Opinion

Due to the limitation imposed by the management, we were unable to examine the total revenue and failed

to obtain adequate confirmations of accounts receivable from debtors; and in view of the materiality of

these effects, we are do not express an opinion on the financial statements.

Ha noi, dated……………………………………………………

AUDIT RIRM XYZ

Director Auditor


Full name Full name


APPENDIX 05

Example of an audit report with a disclaimer of opinion

AUDIT FIRM XYZ


No: ………………………………………

AUDITORS’ REPORT

ON FINANCIAL STATEMENTS OF ABC COMPANY FOR THE YEAR ENDED……….

To: The Board of Management and Board of Directs

ABC Company

We have audited…..

(As App. 01)

Basis of opinion

(As App. 01)

Opinion

The cost of fixed asset of VND XXX and a loan due to Company B of VND disclosed in the balance

sheet are neither recorded din the books of account nor supported by any accounting documents………..

In our opinion, because of the material effects on the financial statements of the matters referred to above,

the accompany financial statements do not give a true and fair view of the financial position of ABC

Company as at 31 December X, or of the results of its operations and its cash flows for the year then

ended in accordance with the Vietnamese Accounting Standards and system and do not comply with

relevant statutory requirements.

Ha noi, dated……………………………………………………

AUDIT RIRM XYZ

Director Auditor


Full name Full name


APPENDIX 06

Example of an audit report for a joint audit by two or more audit firms

AUDIT FIRM A AUDIT FIRMS B

Appropriate address, Appropriate address,

phone and fax number phone and fax number

No:……………………………………………

AUDITORS’ REPORT

ON FINANCIAL STATEMENTS OF ABC COMPANY FOR THE YEAR ENDED…….


We, (Audit Firm A and Audit Firm B), have audited the accompanying balance sheet of ABC Company as

at 31 December X, and the related statement of income and statement of cash flows for the year ended 31

December X prepared on ………..together with the appended notes as set out on page ………to……….

These financial statements are the responsibilities of the company’s management. Our responsibility is to

express an independent opinion on these financial statements based on our audit.

Basis of opinion

(As App. 01)

Opinion

(As App. 01,02, 03, 04 and 05)

Ha noi, dated……………………………………………………

AUDIT RIRM XYZ

Director Auditor


Full name Full name


Appendix 07

Example of an audit minute

AUDIT FIRM XYZ


No: ……………………………

AUDIT MINUTE

To implement the audit plan arranged with Corporation X, the audit team assigned by Audit Firm XYZ

have audited the accompanying balance sheet of ABC Company, a subsidiary of Corporation X, as at 31

December X and the related statement of income and statement of cash flows for the year ended 31

December X prepared on ………… together with the appended notes as set out on page…. to ……

This minute is taken on the …….. day of ………… at the office of ABC Company by and between:

1. Representative of ABC Company:

Mr./Ms:

Position:

2. Representative of ABC Company:

Mr./Ms:

Position:

The parties hereby agree upon the matters associated with the audit results in respect of ABC

Company for the year ended 31 December X, as follows:

The audit team conducted the audit in accordance with Vietnamese Standards on Auditing and

according examined accounting documents, books of accounts and financial statements and

attended counting of physical inventories from (date) to (date). Below are the results of the audit

exercise:

I. Organization, functions and responsibilities of ABC Company:

- ABC Company was established in pursuance of Decision No…. dated ……..

- Business functions and activities ………………

II. Accounting system in use:

- ABC Company maintains its accounting practice in accordance with the Vietnamese Accounting

Standards (or ………)

- Accounting form applied is the General Journal (or …….)

(state the significant accounting policies followed by ABC Company)

III. Accounting data:

1. Balance Sheet as at 31 December X

2. Summary of revenues and income for Year X

3. Summary of expenses for Year X

4. Other disclosures

(note down adjusted figures mutually agreed upon and those disagreed concerning the

financial statements before the audit and those adjusted at the auditor’s recommendations – if

any)

IV. Outstanding matters in relation to the accounting and internal control systems of

ABC Company

(discuss each of the matters so outstanding that the financial statements are likely to be affected,

auditor recommendations and the comments and response of the Director (or an appropriate

representative of the company).

Auditor’s conclusion:

In the auditor’s opinion, the financial statements of ABC Company ……….. (give the opinion in

details)

Comments by ABC Company Management (if any)

(in case of a mutual agreements with the auditor’s conclusion, such statement should be

introduced: “this auditor minute has been agree upon by both parties”)

This minutes is made in two (2) copies, one of which shall be kept by ABC Company and the

other by Audit Firm XYZ.

…………………………………., dated ………………………………

FOR ABC COMPANY FOR AUDIT FIRM XYZ

Director Auditor

(Signature and stamp) (Signature and name)

Full name Full name

Date post:	07-Mar-2020
Category:	Documents
Upload:	others
View:	5 times
Download:	0 times

standard 200 - S&S AUDIT I.pdf · Standard 210 – Terms of Audit Engagements 3. Standard 230 –...

Documents