Chapter 1:

1. What is auditing is ? ( object, output, purpose)

- 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 competent, independent person.
- Output: Audit report, which include information audited and audit’s opinion.
- Purpose: To improve the quality of information for decision makers such as managers and
investors.
2. The difference between auditing and accounting:
- Accounting is the recording, classifying and summarizing financial data for the purpose of
providing them for decision making.
- Auditing is the determining and evaluating whether recorded information is proper or not and
giving auditor’s opinion for decision markers.
- In addition to understanding accounting, auditors must (possess expertise) in the accumulation
(có kiến thức chuyên môn)
and (interpretation) of audit evidence.
(hiểu )
3. Why is auditing important?
- The financial information might be inaccurate and made a mistaken business decision, so
auditing of financial information can reduce its risk for decision markers.
-Causes of information risk:
+ Remoteness of information
+ Biases and motives of the provider
+ Voluminous data
+ Complex exchange transaction
- Auditing can reduce information risk by:
+ User verifies information
+ User shares information risk with management
+ Audited financial statements are provided
4. Requirements of an auditor:
- Competent person: who is sufficiently qualified and expert to know and understand the
evidences.
- Independent person: who is not directly to the company or client to keep the confidence of
users.
5. The standards auditor must consider VSA 200 and VAS

Chapter 2:

1. The objective of auditing financial statement:

- To provide financial statement users with an opinion by the auditor on whether the financial
statements are presented fairly, in all material respects, in accordance with the applicable financial
accounting framework. ( phù hợp với khuôn khổ cáo cáo kế toán hiện hành)

2. Responsibility of manager and auditor:

Manager:
- Adopting sound accounting policies.

- Ensuring that systems of internal control are good and adequate and fraud risks are identified and
mitigated. This provides assurance that financial information and other management information are
reliable.

- Making fair representations in the financial statements rests with management rather than with the
auditor.

Auditor:

- Obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, thereby enabling the auditor to express an opinion on
whether the financial statements are presented fairly, in all material respects, in accordance with an
applicable financial reporting framework

- Report on the financial statements, and communicate as required by auditing standard, in accordance
with the auditor’s finding.

3. Elements of professional skepticism

- Questioning mindset- a disposition to inquiry with some sense of doubt.

- Suspension of judgment- withholding judgment until appropriate evidence is obtain.

- Search for knowledge- a desire to investigate beyond the obvious, with a desire to corroborate.

- Interpersonal understanding- recognition that people’s motivations and perceptions can lead them to
provide biased or misleading information.

- Autonomy- the self-direction, moral independence, and conviction to decide for oneself, rather than
accepting the claims of others.

- Self-esteem- the self-confidence to resist persuasion and to challenge assumptions or conclusions

4. What is the cycle approach? What are its benefit?

- A common way to divide an audit is to keep closely related types ( or classes) or transactions and
account balances in the same segment. This is called the cycle approach.

- Various cycles

+ Sales and collection cycle ( sales, AR, cash, discounts, refunds, COGS….)

+ Acquisition and payment cycle ( expense, AP, cash, prepaid expense,…)

+ Payroll and personnel cycle ( wages payable, wages expense,….)

+ Inventory and warehousing cycle ( raw mats, WIP, damaged goods, AP, cash,….)

+ Capital acquisition and repayment cycle ( fixed assets, depreciation, cash, equity, long term
liability…..)
The benefits of cycle approach:

- Make the audit more manageable.

- Aids in assignment of tasks to different audit team members.

- Each segment is audited separately but not on a completely independent basis. After the audit of each
segment is completed, including interrelationships with other segments, the results are combined.

- Saving audit cost and human resoureces.

5. Three level of audit objectives? Assertions?

- Transaction- related audit objective: For any given class transaction, several audit objectives must be
met before the auditor can conclude that the transactions are properly record.

- Balance- related audit objectives: Several audit objectives must be met for each account balance

- Presentation and disclosure- related audit objectives: Relates to the presentation and disclosure of
information in the financial statements

- Assertions: is a statement one believes is true and related to the recognition, measurement,
presentation and disclosure of items included of financial report.

Management make assertions about each account and related note disclosures.

We use a specific set of assertions related to the financial statements to know that wether one number
true or not.

6.Three/four phases of an audit:

Phase I: Plan and Design an Audit Approach.

The main objective of an audit is to accumulate enough evidence to provide an opinion on the financial
statements. Two overriding considerations affect how an auditor approaches the audit:

1. Sufficient appropriate evidence must be accumulated to meet the auditor’s professional

responsibility.
2. The cost of accumulating the evidence should be minimized.

The audit plan should result in an effective audit at a reasonable cost.

Risk assessment procedures include the following:

1. Obtain an understanding of the entity and its environment.

2. Understand internal control and assess control risk.
3. Assess risk of material misstatement.
Phase II: Perform Tests of Controls and Substantive Tests of Transactions :

1. Tests of controls allow the auditor to evaluate the effectiveness of internal controls and
determine whether the controls can be relied upon to reduce planned control risks.
2. Substantive tests of transactions allow the auditor to evaluate the client’s recording of
transactions.

Phase III: Perform Substantive Analytical Procedures and Tests of Details of Balances:

1. Analytical procedures consist of evaluations of plausible relationships among financial and

nonfinancial data.
2. Tests of details of balances are specific procedures intended to test for monetary misstatements
in the financial statements.

Phase IV: Complete the Audit and Issue and Audit Report:

1. After all procedures have been completed, the auditor will reach an overall conclusion as to
whether the financial statements are fairly presented.
2. After the conclusion, the auditor must issue an audit report that will accompany the client’s
financial statements.

Chap 7:

1. Describe audit evidence decisions?

The auditor must make four major decisions regarding what evidence to gather and how much to
accumulate:

1. Which audit procedures to use? ( Phương pháp kiểm toán nào được sử dụng)
-Audit procedures is the detailed instructions that the audit evidence to be obtained and the
auditor may follow them during the audit.
2. What sample size to select for a given procedure? ( Độ lớn mẫu được chọn cho 1 phương pháp )
-The sample size is likely vary from audit to audit, depending on client characteristics and the
required level of assurance from the procedure.
3. Which items to select from the population? ( Những items nào được chọn từ mẫu )
-Some common items such as selecting the items randomly or selecting those transactions that
the audit thinks are in error,….
4. When to perform the procedures? ( Khi nào thực hiện những phương pháp đó )
-An audit of financial statements usually covers a period such as a year. Normally, an audit is not
completed until several weeks or months after the end of the period. Therefore, the timing of
audit procedures can vary from early in the accounting period to long after it has ended and the
timing decision can be affected by when the client needs the audit to be completed.

2. Two requirements of audit evidence?

The two determinants of the persuasiveness of evidence are appropriateness and sufficiency. -
The persuasiveness of the evidence can be evaluated only after considering the combination of
appropriateness and sufficiency.
 -Appropriateness of evidence depends on relevance and reliability of evidence

-Relevance means that the evidence must be related to the audit objective that is being tested.
Relevance can be considered only in terms specific audit objectives, because evidence may be
relevant for one audit objective but not for a different one.
-Reliability means that the degree to which evidence believable or worthy of trust. Reliability
depends on:
+ Independence of provider

+ Effectiveness of client’s internal controls

+ Auditor’s direct knowledge

+ Qualifications of individuals providing the information

+ Degree of objectivity

+ Timeliness

Sufficiency of evidence refers to the quantity of evidence obtained.The sample size that is
considered sufficient is affected by two factors:
 The auditor’s expectation of misstatements
 The effectiveness of the client’s internal controls
In making decisions about audit evidence, both persuasiveness and cost must be considered.

3. 8 type of procedures to obtain evidence?

 Physical examination (PE) is the inspection or count of a tangible asset by the auditor to
ensure that the asset actually exists and evaluates an asset’s condition or quality. It is
most often associated with cash, inventory or verified with securities, note receivable, …
However PE is not sufficient evidence to verify that existing assets are owned by the
client and proper valuation for financial statement purposes
 Confirmation is the receipt of a direct written response from a third party verifying the
accuracy of information that was requested by the auditor. Because confirmations
come from third party so they are highly regarded. However confirmation are relatively
costly to obtain and may cause some inconvenience to those asked to supply them.
Auditors decide whether or not to use confirmations depending on the reliability needs
of situation as well as the alternative evidence available.
 Inspection is the auditor’s examination of the client’s documents and records to prove
the information that is in the financial statements. Documentation is widely used as
evidence in audits because it is readily available at a low cost. Document can be
classified as internal (prepare by the client’s organization) and external (prepare or
handle by someone outside the organization who is party to the transaction). The
auditor’s determination to accept the document as a reliable evidence is whether it is
internal or external. Because external documents have been in the hands of both the
 client and another party. Therefore, external documents are considered more reliable
than internal ones. Documentary evidence in either paper or electronic mail is more
reliable than same evidence obtain orally, and original documents are more reliable
than photocopies. And auditor rarely verify the authenticity of documentations.
-Using documents to support recorded transactions (occurrence) is called vouching.
-Testing from source documents to recorded amounts (completeness objective) is called
tracing.
 Analytical procedures is the evaluation of financial information through analysis of
plausible relationships among financial and nonfinancial data and are required during
planning and completion phases of all audits. Purposes of analytical procedures include:
- Understand the Client’s Industry and Business: Used in planning to gain knowledge
about the client. By conducting analytical procedures in which the current year’s
unaudited information is compared with prior year’s audited information or industry
data, changes are highlighted. These changes can represent important trend or specific
event, all of which will affect audit planning.
- Assess the entity’s ability to continue as a going concern: Analytical procedures are
often a useful indicator for determining whether the client company has financial
problems and can help the auditor assess the likelihood failure.
- Indicate the presence of possible misstatement in Financial Statement: The
significant unexpected differences between the current year’s unaudited financial data
and other data used in comparisons are called unusual fluctuation. The present of an
accounting misstatements is one possible reason for the unusual fluctuation. If unusual
fluctuation is large, the audit must determine the reason and be satisfied that the cause
is a valid economic event and not a statement.
-Provide evidence supporting an account balance: If reliable relationships
exist, substantive analytical procedures can be used to support account balance

 Inquiries of the client is the obtaining of written or oral from the client in response to
questions from auditors. Because it is not from an independent source so it cannot be
regarded as conclusive unless it is corroborated.
 Recalculation is rechecking a sample of calculations made by client
 Re-performance is the auditor’s independent tests of client accounting procedures or
controls that were originally done as part of entity’s accounting and internal control
system.
 Observation is looking at a process or procedure being performed by other.

4. Cost to perform those procedures:

Most expensive:
Physical examination
Confirmation
Moderately costly:
Inspection
Analytical procedures
 Re-performance
Least expensive:
Observation
Inquiries of the client
Recalculation

5. The purpose of analytical procedures:

Analytical procedures may be performed at any of three times during the audit: Planning phase,
Testing phase, Completion phase.

Auditors compare client data with:

 Industry data
 Similar prior-period data
 Client-determined expected results
 Auditor-determined expected results
6. What is audit documentation and why is it important?
- Audit documentation is the record of the audit procedure performed, relevant audit evidence
and conclusions the auditor reached
- Audit documentation is important because it helps the auditor in providing reasonable
assurance that an adequate audit was conducted in accordance with auditing standard. More
specifically, audit provides
 A Basic for Planning the Audit: If the auditor is to plan an audit adequately, the
necessary reference information must be available in the audit files such as the
information of internal control, the audit program,….
 A record of the evidence accumulated and the results of the test: An adequate audit
was conducted in accordance with auditing standards. If the need arises, the auditor
must be able to demonstrate to courts that the audit was well planned and adequately
supervised, the evidence accumulated was appropriate and sufficient, and the audit
report was proper ( To protect auditor)
 Data for determining the proper types of audit report: Audit documentation provides
an important source of information to assist the auditor in deciding whether sufficient
appropriate evidence was accumulated to justify the audit report in a given set of
circumstances or evaluating whether the financial statements are fairly stated.
 A basic for review by supervisors and partners: Audit documentation was used by
supervisors to review the work of assistants. The careful review by supervisor also
provide evidence that the audit was properly supervised