FOREIGN TRADE UNIVERSITY

FACULTY OF ACCOUNTING AND AUDITING

---------***--------

MID-TERM INTERNSHIP REPORT

Major: Accounting - Auditing with ACCA Orientation

Audit procedure on sales and account receivable

from customers conducted
by Nexia STT Limited Liability Company

Student name : Nguyen Lam Phuong

Student code : 1618820062
Class : English 3
Intake : 55
Supervisor : Tran Tu Uyen, Phd

Hanoi, August 2019

COMMENTS ABOUT MID-TERM INTERNSHIP REPORT
 INTERNSHIP SUMMARY

Time Week description

Week 1 - Study about NEXIA’s background and
(July 2 – July 8) workplace regulations;
- Get familiar with professional working
environment;
- Learn to use photocopy machine,scan machine;
- Study about NEXIA’s customer category.
Week 2 - Expose to overall sample audit program of
(July 9 – July 15) NEXIA;
- Prepare and arrange documents to senior;
- Learn about internal control system of NEXIA;
- Learn about how to collect information of
customers.
Week 3 - Expose to Financial Statements in practice of
(July 16 – July 22) some companies;
- Study about audit of sales and receivables
conducted by NEXIA;
- Check the customer records with senior.
Week 4 - Learn how to calculate ratios related to sales
(July 23 – July 29) sand receivables;
- Expose to some previous working papers about
sales;
- Check the customer transactions with the
senior;
- Translate report from Vietamese to English and
send it to the manager.
Week 5 - Participate in a small party hold by HR
(July 30 – August 4) department for interns;
- Summarize things learned after internship
period;
- Practice auditing expenditure and cash in reality
for small project.

TABLE OF CONTENT
PREFACE........................................................................................................1
CHAPTER 1: NEXIA STT Ltd.Co...............................................................2
1. Overview about Nexia STT Ltd.Co................................................................2
1.1. Historical development of Nexia STT Ltd.Co..........................................2
1.2. Types of services provided by Nexia STT Ltd.Co....................................3
1.4. Auditing department structure in Hanoi Branch.......................................5
1.5. Assessment of business’s performance.....................................................5
2. Elementary theory on audit of sales and accounts receivable.......................6
2.1. Sales..........................................................................................................7
2.2. Accounts receivale....................................................................................8
2.3. Audit objective for sales and account receivables.....................................9
CHAPTER 2: THE PRACTICE OF AUDIT PROCEDURE FOR SALES
AND ACCOUNTS RECEIVABLE IN NEXIA STT Ltd.Co....................12
1. Performing initial audit planning................................................................12
1.1. Understanding the client’s business and industry...................................12
1.2. Understanding internal control of sales and collection cycle..................13
2. Audit planning for auditing sales and accounts receivable from customers
conducted by NEXIA STT..................................................................................17
2.1. General financial statement analysis.......................................................17
2.2. Materiality assessment for sales and receivables....................................18
3. Audit procedure for sales conducted by NEXIA STT..................................18
3.1. General procedure...................................................................................18
3.1.1. Consistency of accounting methods.................................................18
3.1.2. Table of aggregate data...................................................................18
3.2. Test of control.........................................................................................20
3.3. Analytical procedures.............................................................................20
3.4. Test of details of balances.......................................................................21
3.4.1. Analyze revenue for each services...................................................21
3.4.2. Comparison revenue in accounting book to revenue in VAT report 23
3.4.3. Audit sample on revenue recognition...............................................24
3.4.4. Cut-off test.......................................................................................24
 4. Audit program for account receivables from customers.............................24
4.1. General procedures.................................................................................24
4.1.1. Consistency of accounting methods.................................................24
4.1.2. The aggregate data table.................................................................25
4.2. Analytical procedures.............................................................................25
4.3. Test of detailed balances.........................................................................26
4.3.1. Sending confirmation.......................................................................26
4.3.2. Reviewing the provision for bad/doubtful debts...............................26
4.3.3. Examining the transaction and account balances that using foreign
currencies......................................................................................................26
4.3.4. Reviewing account receivable ledger and examining extraordinary
items 26
CHAPTER 3: SOLUTION TO IMPROVE AUDIT PROCEDURE FOR
SALES AND ACCOUNTS RECEIVABLE BY NEXIA STT...................27
1. Comments on audit procedure for sales and accounts receivable from
customers inducted by NEXIA STT....................................................................27
1.1. Positives in the audit procedure for sales and accounts receivable from
customers conducted by NEXIA STT...............................................................27
1.2. Limitations in the audit procedure for sales and accounts receivable from
customers conducted by NEXIA STT...............................................................28
2. Some solution for improving audit procedure for sales and accounts
receivable conducted by NEXIA STT.................................................................29
2.1. Analytical procedures.............................................................................29
2.2. Performance materiality..........................................................................29
2.3. Existence of accounts receivable............................................................30
2.4. Sales cut-off test.....................................................................................31
2.5. Test of control.........................................................................................31
2.6. Comfirmation letter.................................................................................31
CONCLUSION..............................................................................................32
REFERENCES..............................................................................................33
 TABLE FIGURES

Figure 1: Chart of organization................................................................................4

Figure 2: Auditing Department Structure.................................................................5
Figure 3: Profit or loss statement of the company (2016 – 2018).............................6
Figure 4: Reconcile between sale in 2017 and in 2018..........................................19
Figure 5: Matching between sale in 2017 and COGS in 2018................................19
Figure 6: Profit margin durings months of 2018....................................................20
Figure 7: Conponent of sales in 2018.....................................................................21
 PREFACE

A revenue and collections cycle represents the business activities associated with
providing goods, services to customers and collecting their payments. The revenue
cycle processes should emphasize quick turnover of customer payment to ensure a
strong cash flow, but managers should also separate duties to deter any chance of
internal fraud and theft in revenue cycle.

The sales and accounts receivable from customers begins at the initial purchase and
continues through billing and payment receipt for every transaction. Since this is the
core of revenue bookings, it is needed to be suaccurate at all times. Auditing the
records from sales and collections regularly will ensure to identify any procedural
problems or potential errors right away.

Being aware of the above problems, during the internship, I selected the topic: "The
process of auditing sales revenue and receivables from customers" by the process of
auditing sales revenue and debt Customer collection performed by Nexia STT
company "as a report of their graduation internship

Due to limited practical experience, the report could not avoid errors, so I would
like to receive comments and suggestions from teachers and accountants, auditors
of Nexia STT Ltd.Co so this report really makes sense in theory and practice.

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 CHAPTER 1: NEXIA STT Ltd.Co

1. Overview about Nexia STT Ltd.Co

Nexia STT, originally known as STT Audit and Advisory Partnership established
since 2004, a wide range of specialized, multi-disciplinary professional services that
meet the immediate and long-term business and consulting needs of our clients.

Nexia STT focuses on providing value-added services which aim to create a strong
competitive advantage for our clients in a rapidly changing market place. In this
endeavor, we are greatly assisted by our access to the international business
practices and knowledge database of Nexia International and by our ability to
leverage off the international professional expertise, resourc es and strength of
Nexia’s international network.

Nexia is a leading worldwide network of independent, high quality accounting and

consulting firms, which helps to meet the business and financial needs of
organizations and individuals with an international outlook. Nexia's robust group of
member firms includes over 32,000 personnel in over 122 countries with 710
offices worldwide.

Nexia STT operates through its offices in Hanoi, Ho Chi Minh City and Hai Phong
and is committed to serving clients throughout Vietnam and all over the region.

1.1. Historical development of Nexia STT Ltd.Co

Nexia STT was formed and known as STT Audit and Advisory Partnership in early
2004 by a group of local/international professional experts. The FIRM's history can
be traced through the names of its principal founding members - whose initials form
the name "STT".

2005 STT was approved to be a correspondent firm then full Vietnam member
firm of RSM International
2009 STT then mergered with Mazars & Guerard and changed its business
name to Mazars STT Vietnam
2012 STT splited from Mazars and joined a new international network named

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 Ecovis International. The firm name was changed to Ecovis STT Vietnam
2014 STT resigned from Ecovis International network and join Nexia
International network. Nexia International is one of TOP9 global
accounting network in providing audit, tax and advisory services. The
FIRM name was changed accordingly to Nexia STT.

1.2. Types of services provided by Nexia STT Ltd.Co

NEXIA STT offers a full range of professional services including audit, accounting,
international and local taxation, business advisory, transfer pricing for a wide range
of clients across the spectrum of industry sectors.

 Audit and Assurance

 International and Local Taxation
 Accounting and Business Process Outsourcing
 Business Advisory
 Transfer Pricing
1.3. Management organization structure and human resources in the company

NEXIA always regards the staff as the most valuable asset of the company. NEXIA
undertakes to create great working conditions for all staff and maximum supports
for their pursuits of higher education and career development.

The structure of NEXIA is as below:

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 HCMC Office Hanoi Office

Nguyen Thi Ngoc Uyen Le Quang Phi Nguyen Thanh Trung Nguyen Viet Nga
Tax and Advisory Partner Tax and Advisory Partner Managing Partner Audit Partner

Administrative Tax & Business Outsourcing Audit Tax & Administrative Outsourcing Audit
Division Division Division Division Business Division Division Division
(accounting -HCM Advisory (accounting Hanoi
service) Division services)

Senior Manager Senior Manager Audit Partner Manager Audit Senior

Audit Senior Senior Manager Manager
Supervisors Supervisors Supervisors
Manager Supervisors Audit Managers
Seniors Seniors Seniors
Audit Managers Seniors Audit Seniors
Assistants Assistants Assistants
Audit Seniors Assistants

Audit Assistant 1 Audit Assistant 1

Audit Assistant 2 Audit Assistant 2

Figure 1: Chart of organization

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 1.4. Auditing department structure in Hanoi Branch

Nguyen Thu Phuong Luong Thi Mai Thanh

(Manager) (Manager)

Nguyen Ngoc Thuy Nguyen Thi Lam

(Senior 2) (Senior 2)

Nguyen Thi Ha
(Senior 1)

Dinh Viet Ta Van Chuong

Hoang Do Mai Anh
(Assistant 2)
(Assistant 2) (Assistant 2)

Figure 2: Auditing Department Structure

1.5. Assessment of business’s performance

ITEMS Codes 2016 2017 2018
1 Gross revenue from 01 34,874,424,972 45,339,061,478 61,539,894,440
goods sold and
providing services
2 Deductions 02 - - 108,614,231
3 Net revenue from 10 34,874,424,972 45,339,061,478 61,430,280,209
goods sold and
providing services
4 Cost of sales 11 23,874,424,972 29,692,199,221 42,239,341,022
5 Gross profit 20 11,032,562,665 15,46,862,257 19,190,939,187
6 Financial income 21 24,128,456 50,410,372 112,324,989
7 Financial expense 22 203,060,694 223,548,549 461,695,828

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 -In which: Interest 23 203,060,694 223,548,549 461,695,828
expense
8 Selling expenses 24 - - -
9 General and 25 9,927,789,805 14,115,043,418 17,075,599,032
administration expenses
10 Operating profit 30 925,840,622 1,358,680,662 1,765,969,316
11 Other income 31 27,322,133 12,200,001 2,644,268
12 Other expenses 32 216,756,093 324,361,393 476,297,088
13 Profit from other 40 (189,433,960) (312,161,392) (473,652,820)
activities
14 Profit before tax 50 736,406,662 1,046,519,270 1,292,316,496
15 Current CIT expenses 51 182,299,696 282,276,132 353,640,584
16 Deferred corporate tax 52 - - -
17 Profit after tax 60 554,106,966 764,243,138 938,675,912

Figure 3: Profit or loss statement of the company (2016 – 2018)

Profit or loss statement of NEXIA STT shows an increase in revenue and profit of
the company each year in the period from 2016 to 2018. Profit after tax of the
company increase 38% in 2017 and 23% in 2018. These rates represent promising
future for the company in a competitive market like auditing. Recently, company
has achieved many awards such as: top 10 Auditing Firms achieving highest
revenue in providing tax advisory services, etc. as an evidence for the growth of the
company. NEXIA STT wins the trust of not only domestic customners but also
many international customers.

2. Elementary theory on audit of sales and accounts receivable

The overall objective in the audit of the sales and accounts receivable from
customers is to evaluate whether the account balances affected by the cycle are
fairly presented in accordance with accounting standards. The nature of the
accounts may vary, depending on the industry and client involved. There are
differences in the nature of a service company, a retail company, and an insurance
company, but the key concepts remain the same (Arens et al, 2012).

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The audit objectives for sales and receivable relate to obtaining sufficient,
appropriate evidence about each significant assertion for the applicable transaction
and balances. The main objectives would apply to most merchandising entities
(Leung et al, 2011).

2.1. Sales

2.1.1. Definition
According to VAS 14, turnover means the total value of economic benefits gained
by an enterprise in an accounting period, which arises from the enterprise’s normal
production and business operations, contributing to increasing the owner’s capital.
Amounts collected on behalf of third parties such as sales taxes, goods and services
taxes and value added taxes are not economic benefits which flow to the entity and
do not result in increases in equity. Therefore, they are excluded from revenue.
Similarly, in an agency relationship, the gross inflows of economic benefits include
amounts collected on behalf of the principal and which do not result in increases in
equity of the entity. The amounts collected on behalf of the principal are not
revenue. Instead, revenue is the amount of commission.

2.1.2 Characteristic
Sales of goods and services is fundamental basis to evaluate size and performance
of the company. Therefore, accounting sales may cause many frauds due to
following reasons:

 In many cases, determining the right time and amount to record requires
judgement.
 Sales link to profit or loss. Thus, the discrepancies in sales lead to profit and
loss being presented dishonestly and unreasonably.
 In many companies, sales used to evaluate the results and performances so it
may be over exaggerated higher than reality.
 Sales also link to VAT input so it may be declared lower than reality.

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2.1.3. Recognition of the transaction
Sale turnover shall be recognized if it simultaneously meets the following five
conditions:

 The enterprise has transferred the majority of risks and benefits associated
with the right to own the products or goods to the buyer.
 The enterprise no longer holds the right to manage the goods as the goods
owner, or the right to control the goods.
 Turnover has been determined with relative certainty.
 The enterprise has gained or will gain economic benefits from the good sale
transaction.
 It is possible to determine the costs related to the goods sale transaction.

Turnover from service provision transactions shall be recognized when the results
of these transactions are determined in a reliable way. Where a service provision
transaction relates to many periods, turnover shall be recognized in each period
according to the results of the work volume finished on the date of making of such
period's accounting balance sheet. The result of a service provision transaction shall
be determined only when it satisfies all the four conditions below:

 Turnover is determined with relative certainty.

 It is possible to obtain economic benefits from the service provision
transaction.
 The work volume finished on the date of making the accounting balance
sheet can be determined.
 The costs incurred from the service provision transaction and the costs of its
completion can be determined.

2.2. Accounts receivale

2.2.1. Definition
Accounts receivable is the balance of money due to a firm for goods or services
delivered or used but not yet paid for by customers. Said another way, account

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receivable are amounts of money owed by customers to another entity for goods or
services delivered or used on credit but not yet paid for by clients.

Accounts receivable refers to the outstanding invoices a company has or the money
clients owe the company. The phrase refers to accounts a business has a right to
receive because it has delivered a product or service. Accounts receivable, or
receivables represent a line of credit extended by a company and normally have
terms that require payments due within a relatively short time period, ranging from
a few days to a fiscal or calendar year.

2.2.2. Characteristics
• Sales and account receivable has strong link with each other because they
both araise from sales cycle. Moreover, setting a provision depends on measurement
of BOD so it is hard to test.

• Accounts receivable is an important aspect of a businesses' fundamental

analysis. Accounts receivables are current assets so they are a measure of a
company's liquidity or ability to cover short-term obligations without additional
cash flows. Fundamental analysts often evaluate accounts receivable in the context
of turnover, which they call accounts receivable turnover ratio, which measures the
number of times a company has collected on its accounts receivable balance during
an accounting period. Further analysis would include days sales outstanding
analysis, which measures the average collection period for a firm's receivables
balance over a specified period.

• Most income of the enterprise links to account receivable which easily cause
frauds.

2.3. Audit objective for sales and account receivables

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Audit Objectives Related to sales
I. Transaction objectives
1. Occurrence Sales recorded in the accounts
represent the goods shipped to receivable resulted from
customers during the period
2. Completeness All goods shipped to
customers during the period
are recorded
3. Accuracy All sale transactions are
accurately recorded
4. Cut-off All invoices have been
recorded in the right period
5. Classification All sales are recorded in the
correct accounts.
II. Balances objectives
1. Existence
Related to account
receivables
Recorded accounts
sales to customers
All accounts receivable
from customers during the
period are recorded
All accounts receivable are
recorded with exact
amounts
All accounts receivable
have been recorded in the
right period
All accounts receivable are
recorded in the correct
accounts.
Accounts receivable
represents amounts owed
by customers at the end of
accounting period

2. Right and Accounts receivable at the

obligations end of accounting period
represents legal claims of
the entity on customers for
payment
3. Completeness All amounts owed by
customers are included in
accounts receivable at the
end of accounting period

4. Valuation Accounts receivable from

customers are identical to
the amount in subsidiary
ledger
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 III. Presentation and disclosure objectives
1. Occurrence Sales transactions and events
disclosed in the financial
statements have occurred and
related to the entity.
2. Completeness All sales transactions that
should have been disclosed
have been disclosed in the
financial statements.
3. Classification & Disclosed sales transactions
Understandability have been classified
appropriately and presented
clearly in a manner that
promotes the
understandability of
information contained in the
financial statements.
4. Accuracy & Sales transactions have been
Valuation disclosed accurately at their
appropriate amounts.
All accounts receivable
balances that should have
been disclosed have been
disclosed in the financial
statements.
Disclosed accounts
receivable balances have
been classified
appropriately and
presented clearly in a
manner that promotes the
understandability of
information contained in
the financial statements.
Accounts receivable
balances have been
disclosed accurately at
their appropriate amounts.

CHAPTER 2: THE PRACTICE OF AUDIT PROCEDURE

FOR SALES AND ACCOUNTS RECEIVABLE IN NEXIA
STT Ltd.Co

1. Performing initial audit planning

1.1. Understanding the client’s business and industry

NEXIA gathers knowledge of the client’s business and industry to identify and
understand which events, transactions and business operations of customers have

11
material impacts on the financial statements, thereby identifying the risks of
material misstatement due to fraud or error.

Below is the information for one company which I choose for illustration:

 Company: ABC System (joint stock company)

Total investment capital and charter capital of the company amounts of the
company as stipulated in the newest Investment Certification are 15 VND
billion and 4.6 VND billion, respectively.
 The company has from 380 to 420 employees.
 Main activities:
 Serving digital information content
 Producing digital information content products
 Prodviding RAM, domain nam registration (exluding online game, valued
added services, basic telecommunication services.

Tax regulations: The company is subjected to 20% CIT rate, 10% VAT input
and 0% VAT output (Comply with the Circular 219/2013/TT-BTC),PIT (Local
and expatriate – compliance with Circular 111/2013/TT-BTC of MOF, other
applicable taxes: No

Accounting standard and policies: The company has no written accounting

standards and policies. The original financial statements, expressed in VND, has
been prepared in accordance with VAS. The financial statements are prepared on
the historical cost basic and on an accrual basic. The accouting policies have been
consistenly applied by the company and are consistent with those used in those used
in the previous year.

Besides observing the ABC business functions, the auditors need to collect some
documents to be filed as evidences in the working paper files such as:

 Investment proposal
 Business registration certificate
 Previous years financial statements

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  Business contracts, labor contracts, etc.
 General ledger

Auditors will conduct test of detail for each item. In order to assist auditors in
planning detailed audit procedures, NEXIA has a template audit program based on
VACPA audit program that includes the most basic procedures commonly used in
audit firm.

1.2. Understanding internal control of sales and collection cycle

The auditors use narrative to describe the specific cycle. When describing the cycle,
the auditors followed the information: the key business transactions of the cycle
from the stage of accounting activities occur, the main control procedures of the
enterprise applied for this cycle, authorization of approval for each department
related to process of the cycle, key documents and reports used for control purposes
in the cycle, consider about the segregation of duties in the cycle. Auditors often
interview managers to collect evidence about control procedures, review the
document as long as observing the operations.

Below is the narrative description about Sales and receivable of ABC System:

Through interviewing, we noted that there were 2 main types of sale:

 Sales from department XYZ:

Documentation
Incharge
Step Flow & Recording Description
person
tools
1 Customer Sale staff Application Customers filled the
acceptance form, Sale application form for using
system software service via internet (in ABC
reference System software) then sale is
contract automatically recorded in
system. Or they can send via
email/submit directly and sale

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 will be recorded after
activation: Sale staff sent to
customers the reference
contract (if they need)
2 Service Customer -Customers who were
delivering individuals paid money by
cash on hand and cash at bank
-Customers who were agents
submitted a deposit (usually
via bank)
-Customers who were old
companies could paid in
advance or paid after activating
services of issues invoices.
Customers Email/call After receiving information of
staff of XYZ customers for using services
(via mail/call/directly)
Staff of XYZ activated the
services
3 Invoicing & Sale staff Hard-coppy -If customer was individual
Revenue service contract (who needs invoices) or
recognition or list of using companies: Sale staff of XYZ
services send contract to customer for
signing and obtain them and
send to the accountants
-If customer was agent. Sale
staffs of XYZ aggreagated and
sent the list of using service to
accountants
-There were also some
individuals who đin’t need
invoice, sale staff collected all
and prepared a general contract
for accountant to issue invoice
Accountant Invoice Accountant based on daily

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 signed contracts or monthly list
using service of agent to issue
e-invoice and record revenue in
sale book. Ànd she signed
initial into the contracts which
were made invoice.
4 Reconcilitio Accountant, Monthly file for Every month sale staff
n between Sale Staff reconciling sale summarize total sale contracts
accountant into a file summarizing(all sale
department contracts were agreed by
and sale customers). Sale staff sent to
department accountant the toatal amount of
Sale XYZ and accountant
rechecked
5 Pament Sale staff ABC has some bank accounts
recognition for receiving money from
customers. So if customers
paid via bank, the money was
transferred directly to bank
accounts
If customers paid by cash on
hand, sale department
submitted to cashier.
Accountant Accountant didn’t record
payment seperately
If customers paid via bank,
accountant recorded the total
received daily amount of cash
at bank
If customers paid by cash on
hand, accountant recorded the
total received amount of 1
month in cash book.

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  Sale from XYZ department was controlled well.
 Sale from project department:
 Sale from domestic customers

ABC has a project department which was responsible for Projects. And sale from
this department was quite important

The project department prepared bids and then went to the biddings to gain the
Project or received orders from customers or finding customers by themselves.

They signed the contract with customers

Then they supplied services

After each completion of the Project, they sent to accountant the acceptance minutes

Base on that minute, accountant recorded revenue in sale books

Clients performed to pay (payment request, bankstatement)

 Sale from foreign customer

ABC System signed general contract with foreign companies including internal sale
from ABC Corporation (in Japan) and external sale.

Foreign compay delegated the software-production to ABC

The content of above deligation was shown in separate contract

Purchase order

Confirm the order

Acceptance minute

Issuing invoice and recorded sale

Request for payment

Payment

 The sale from Project was not controlled well

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 2. Audit planning for auditing sales and accounts receivable from customers
conducted by NEXIA STT

2.1. General financial statement analysis

The auditors compare the amount of each account in the Account Balance
and the Income Statement. To follow up, the auditors review the current period’s
activities the general ledger and related allowances account, make sure that there are
no unusual entries or amounts, if there are, those entries or amount require further
investigation. In addition the auditors also calculate some financial ratios to
examine further about the company financial situation. Below are some differences
related to the sales and accounts receivable that the auditors think they need to pay
attention to:
BALANCE 31/12/2018 31/12/2017 Difference Difference
SHEET Unadited Audited % Value
Short-term trade
receivables 27,661,335,646 21,115,818,156 31% 6,545,517,490
Other short-term
receivables 3,700,119,605 1,609,317,033 130% 2,090,802,572

Revenue 128,320,538,45
176,828,038,993 4 37.8% 48,507,500,539

 Short-term trade receivables with differ is 31%. Short-term trade receivables

increase in the situation that revenue from credit sales is high and the
management have pressure to make a healthy financial statement. The
auditors indicate the risk of recorded revenue and accounts receivables
earlier than it should be. The auditors should perform more tests on testing
the cut-off assertion.
 Other short-term receivables difference is 2,090,802,572 (130%). The
auditors pay more attention to the transactions with related parties because of
the increase of other short-term receivable coming from the increase of those
transaction.
 Revenue from sale of goods and rendering of services increase by 37.8%.
The auditors indicate the risk of record revenue earlier than it should be. The
auditors focus on the sales cut-off test and the client’s revenue recognition’s
policies.
2.2. Materiality assessment for sales and receivables
Risk of Frauds Yes Sales for services provide over
the year was recorded without
IR High allocating sales and unearned
CR Low revenues. That might effect

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 Risk of material mistatement Medium accuracy and cut off sales.

Theoric level of diligences Medium Also, clients want to be

Materiality criteria
Effective level of work
profitable therefore the sale is
might be overstated>> Risk on
Increase overstated sales>>That might
effect accuracy and cut off of
High sales.

3. Audit procedure for sales conducted by NEXIA STT

3.1. General procedure

3.1.1. Consistency of accounting methods

Check accounting policies applied consistently with the previous year and in
accordance with the framework for preparing and presenting the applied financial
statements

3.1.2. Table of aggregate data

Prepare a table of aggregate data to compare with previous years. Reconcile the
figures on the General Data Sheet with Trial Balance, General ledger, the Detailed
book and Working papers of the previous year's audit (if any)

The number of previous years will be taken on the previous audit report in the
income statement, when listed on the table below if the beginning of the period in
the financial statements of the independent unit deviated from the above. Last year's
audit report, the auditor should check and explain the difference. For pre-audit
numbers, it is taken from the business performance report that the unit has prepared
and provided to the auditor.

Based on ABC System’s Income statement for year , the auditor collect detail
figures (Appendix 1)

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Figure 4: Reconcile between sale in 2017 and in 2018

Figure 5: Matching between sale in 2017 and COGS in 2018

Overally, revenue was moving in line with COS but in some month we saw no
trends between Sale and COGs. The reason for it is the revenue of ABC come from
XYZ and project department COS of XYZ were mainly buying domain and renting
server thus it changing in line with COS.

However COS of project department was salary for technical staff and this amount
was fixed. But this contract project department arise with different amount every
month.

But sale in Oct was higher sharply more than COS bacause in these months, ABC
received more producing software contracts from ABC JP, Viettel and Dien may
Viet Uc Company and Sale was highest in this month because in this month ABC
received many POs with big amount from ABC JP and other clients of Project
department.

19
3.2. Test of control
The auditors test the controls have set up for the sales cycle to determine how strong
and reliable they are. If they are strong, the auditor can reduce the amount of
transaction testing he must do. Common internal controls over the sales cycle
include numbered sales invoices, purchase order authorization over a certain limit
and authorization over receivables write-offs.
The auditor selects a random sample of transactions and examines the related
purchase orders, invoices and customer statements. If the control being tested is
numbered sales invoices, for example, the auditor ensures that all numbers in a
section are accounted for and that none are missing. If the control is that all
purchase orders are approved by management, the auditor checks for a manager's
signature on each document. If control errors are found, the auditor increases the
amount of transactional testing that will be conducted in the audit.
The working for this test is in appendix 2.

3.3. Analytical procedures

Comparison of sales revenue and sales of returned goods, the rate items to reduce
revenue on total revenue between this year and the previous year, explain unusual
fluctuations and assess the risks of material errors due to fraud.

Figure 6: Profit margin durings months of 2018

The line chart reveals the profit margin sharply fluctuate through 11 months. It was
influenced by Sale and COS.

In February, profit margin dropped to bottom because the Sales from Project
contracts of the month is lowest while Cos including regular expenses for employee
remain stable.

Likewise, it reached its peak in Oct because of sale from project department and
stable charged expenses

20
3.4. Test of details of balances

3.4.1. Analyze revenue for each services

First of all, the auditors summarize revenue for each service for each month during
2018 (Appendix 3), analyze the increase or decrease.

Figure 7: Conponent of sales in 2018

ABC’s revenue included: Sale from XYZ (Domain service sale and rental fee of
GMO Zcom) and Sale from Project department (Sale from ABC JP and other
customers)

 Sale from XYZ: made up 39% of total revenue (over 69 billion VND during
2018). Details was as following:
 Sale from XYZ department was mainly domain,SSL,VPS, hosting services,
sale (with amount of over 63 billion VND ~ 41% of ABC’s total sale and
appropriate 90% of XYZ’s total sale)
 Sale from XYZ contained 2 types: VAT 10% (from supplying international
domain which was bought from GMO Pte, supplying hosting,SSL and shop,
…) and VAT exempt (suppying VN domain which was mainly bought from
VNNIC)
 Through understanding the sale cycles, we checked contract between ABC
and ABC’s suppliers (GMO Pte, GMO internet, SSL,VNNIC,…) and noted
that:

21
  Contract between ABC and suppliers: GMO Pte, GMO internet, SSL,…
were all normal commmercial contracts. ABC bought domains, SSL, VPS,…
from those suppliers and then resold to ABC’s customers at self-evaluation
prices
 Rental sale from GMO Pte (DC and server) just account for 4% total sale of
XYZ
 Sale from Project department: made up mainly total sale (~107 billion
VND~61% total sale). Sale from Project was mainly producing software
services for:
 Purchase orders from ABC’s branch in Japan – ABC JP (with amount of 55
billion VND made up 31% ABC’s total sale, and 52% Project department’s
total sales)
 Purchase orders from other customers (both in domestic and in Japan) gained
nearly 51 billion VND in 12 months with made up 48% Project department’s
total sales.

The line chart reveals the fluctuation of all sale components.

Sale from XYZ dept increased constantly durong the year from March because of
the promotion program for online registers and prepaid change. The sale in Jan and
Feb drop annually de to the fact that Jan is the lunar year end month and Feb is the

22
first month of lunar new year in Vietnam, XYZ’s customers regularly delay their
online website register till the next months of the new year.

Rental sale from GMO Pte has a constant increase during the year due to the
increase amount of data consumption. The revenue from ABC JP fluctuated in
2018. It depended on orders which ABC JP got fom its customers

Sale from other customers (project department) was instable during the year. It was
higher in Mar, Jul, Oct and Nov based on some big contracts with GMO media,
Toshiba, GMO research, GMO internet, Intec Vietnam,…

3.4.2. Comparison revenue in accounting book to revenue in VAT report

The source documents for the auditors to examine are the tax summit in year 2018,
detailed ledger of revenue (511) and other incomes (711).

If there is any problem, the auditors have to figure out what is reason or in case no
reason relied, the auditors have to mention in the audit opinion.

After examine the ABC’s VAT report, the auditors state that the revenue in the
VAT report: There is a difference in value but the auditors state that it is small, can
ignore (see details working in Appendix 4)

3.4.3. Audit sample on revenue recognition

The objective of this test is to make sure that the revenues are completely, accuracy
recorded. The auditor will pick up the sample from the sales journal and then trace
to the related supporting documents such as: sales contracts, invoices, etc.
In ABC, the auditors need to check the supporting documents for sales for two main
departments:
Sale from XYZ: This sale was assessed as HRM, TOC were perform and can be
relied on, AR achieved low assurance. Thus, for sale from XYZ we randomly
choose 15 samples among population to check for supporting documents.
Sale from Project Department: Existence of this sale was assessed as HRM, TOC
wasn't performed due to weak internal control, AR achieved low assurance. Thus,
for sale from project department, we randomly choose 70% of sample population to
check for suppoting documents.

23
3.4.4. Cut-off test
Objectives of this test is to obtain suficient, appropriate audit evidence to ensure
cut-off of Revenue are not materility mistated.

In ABC, the auditors checked the date contract and acceptance minute of all aboved
sale recording on 31/12/2018 from Project department and checked the date of
contract, invoice of sale from XYZ department on 31/12/2018.

After checking 20 last contracts and invoice for each department, the auditors noted
that all sale were recorded in the right period.

4. Audit program for account receivables from customers

4.1. General procedures

4.1.1. Consistency of accounting methods

Based on VAS 01, part 07, the accounting policies and methods selected by
enterprises must be applied consistently within at least one accounting year. Where
appear changes in the selected accounting policies or methods, the reasons for and
impacts of such changes must be presented in the explanations of financial
statements.
The entity’s policies are examined for accounts receivable are collected from the
chief accountant. After obtaining the information, the auditors compare with the
accounting method in the previous period’s financial statement. In conclusion,
there is no change in accounting method. The results for ABC was as below:
Accounting policies applied 2017 2018
Receivables are presented at the book value of  
accounts receivable from customers.
Provision for bad debts shows the estimated loss of  
accounts receivable which have the possibility of
being uncollected by customer as at the end of
accounting period.
The provision for bad debts is applied with the  
guidance of Circle No 228/2009/TT-BTC
4.1.2. The aggregate data table
Description Unaudited bal Audited bal @ Variance
@ 31/12/2018 31/12/2017 Amt %
Trade 27,661,335,646 21,115,818,156 6,545,517,490 31%
receivables
Advance from 3,185,714,792 713,541,792 2,472,173,000 346%

24
 customer
Provision for (3,165,000,000) (2,165,000,000) (1,000,000,000) 46%
short-term
doubtful debts

4.2. Analytical procedures

In this procedure, the data is guaranteed to match the above procedure. So the
auditors will analyze based on the above data.
Here, the receivable from customers increased by 31% is due to climb of
receivables in 2018 compare to previous year and the receivables turnover for year
2018 was 50 days because the growth of sale and increase in number of customers
The concern here is the huge increase in prepaid customers due to the fact that the
promotion multiple 1.5 times the bulk amount charged to customers XYZ account
and other communication programs to promote sale.. Thus, the auditors is also
cautious in this item.

4.3. Test of detailed balances

4.3.1. Sending confirmation

The auditors have to make sure that all the accounts receivable belongs to the entity.
The best way to test this objective is to obtain the external confirmation, by
obtaining a direct written from a third party.
There are two methods of requesting an external confirmation: Opened and Closed,
the closed confirmation letter is divided into positive and negative form. Positive
form of confirmation requires debtors to respond whether agree or not with the
amount owed in the request. The negative form which requires the debtor to
respond only when the amount in the request in incorrect. According to VSA 505,
the auditor may use open or closed external confirmation requests or a combination
of both forms.
After receiving confirmation letter, the auditors have to summarize all the
information, calculate the proportion of received letter to decide whether apply
alternative test or not. In this case, the auditors received 60% confirmation so the
auditors see that no need for alternative tests.

4.3.2. Reviewing the provision for bad/doubtful debts

In this test, the auditors collect information from the entity policies, update in case
there are any changes.
The working paper for this test is in appendix 5.

25
4.3.3. Examining the transaction and account balances that using foreign
currencies
The auditors will check on the exchange rates the entity use to record, review the
financial gains/losses. ABC resort records revenue using VND, if the customers pay
by foreign currencies, the bank will convert into VND automatically so there will be
no difference in exchange rate.
The working paper for this test is in appendix 5.

4.3.4. Reviewing account receivable ledger and examining extraordinary items

In this test, the auditor will skim the general ledger and find out the counterpart debt
transactions and unusual transactions such as strange content, strange accounts to
carry out the inspection. Review the summary table to identify unusual transactions.
In this procedure, the auditors will have unusual items with the following
characteristics: a large amount araised, long-term debts have no changes, debts that
debtors are not clear.
Normally, the auditors will select the transactions related to the unusual firgures to
check documents. For debt counterpart transactions, find out the contract, the
minutes of agreement, the debt comparison minutes of both parties to check. For
abnormal transactions, the documents will be checked.
The detailed figure for examining advance from customers in ABC is in the
appendix 6. In conclusion, the auditors indicate that there is no unusual transaction
which can not be explained.

CHAPTER 3: SOLUTION TO IMPROVE AUDIT

PROCEDURE FOR SALES AND ACCOUNTS RECEIVABLE
BY NEXIA STT

1. Comments on audit procedure for sales and accounts receivable from

customers inducted by NEXIA STT

1.1. Positives in the audit procedure for sales and accounts receivable from
customers conducted by NEXIA STT
NEXIA processes good procedure of the substantive tests. It helps auditors to obtain
great amount of evidences, and these evidences is highly appropriate than other
evidence obtain from other tests.

26
NEXIA has already established a computer program of CMA audit sampling. This
can save much time for the auditors because they input the source data of audit
sampling, book value, tolerable misstatement and the reliability factors, the program
will automatically do the CMA selection.

NEXIA auditors have thorough knowledgement of legal barriers, technological

demand and specilised aspect to ensure the entities’ audit with effecency and
effectiveness.

The accuracy and assertion is highly conducted by NEXIA for the sales and
accounts receivable from customers. The auditors check the balances in subsidiary
ledger and compare with the balances in the trial balances and genaral ledger.
NEXIA auditors have also send 100% confirmation letter to identify the balance of
accounts receivable. They also use CMA audit sampling to check whether sales
transactions are recored accurately with full supporting document.

The cut-off assertion for sales and accounts receivable from customers is conducted
at the same time by using the sales cut-off test.

1.2. Limitations in the audit procedure for sales and accounts receivable from
customers conducted by NEXIA STT
Beside those above positives, the audit procedures for sales and accounts receivable
from customers conducted by NEXIA also have some limitations as below:

The analysis procedure from NEXIA only compares figure between the current
period figures with the previous period. This test can only explain the differences in
figures between those two periods. The auditors can also compare the figure of the
entity with the industry norm to examine the trend of difference.

NEXIA uses the performance materiality for the whole financial statement as the
performance materiality for each item in the financial statement. Tolerable
misstatement is applied for all items, regardless of their size and the importance of
the items; this will make unreasonable results among items. This is not reasonable
because each item from the financial statement can have different audit risk.

27
There are risks in sending confirmation letter. The objective of this substantive test
is collecting the reliable and appropriate evidences. Before conducting an audit to
an entity, NEXIA requires their clients to send closed confirmation themselves. The
risk here is that there are some customers who do not carefully compare the balance
from their companies with the balances written in the confirmation letter. They only
sign the confirmation letter and then send to the audit firm, it can make the
evidences unreliable. There is another risk that only the customers with the smaller
amounts than the written balances will reply to the audit firm. The customers with
the bigger amounts than the written balances will not reply to the audit firm because
if they confirm the written balances, they could have the smaller balances.

The cut-off tests conducted for sales and account receivable can not be done by the
normal way as examining the transaction from 5 days before the ending date and 5
days after the ending date because of the characteristics of the systems and resorts
companies. In the working papers of cut-off test, the NEXIA auditor do not use the
special test for ABC system but they refer to the template of the company and only
present the result of the cut-off test on the working paper

2. Some solution for improving audit procedure for sales and accounts
receivable conducted by NEXIA STT

2.1. Analytical procedures

Analytical procedures play a very important role in the whole audit process. For
some industries that do not change much about its investment strategy and the
government’s policies changes does not affect much on company’s operations,
auditors can only use the financial analytical procedures to assess preliminary risks.
However, to some specific industries, to evaluate the business performance of a
company, using financial analysis in the financial statements is not sufficient.
Sometimes, this financial information can not adequately and accurately reflect the
business situation of the customers. Even if only base on financial information, it
may lead to mistakes in providing opinions. Therefore, NEXIA should enhance the
use of non-financial information in auditing financial statements.

28
The analysis of NEXIA for the indicators on the financial statement only stops at
the analysis of financial ratios and fluctuations of company during years. The
company should widen the analysis on the industry average for a better analysis.
Nowadays, there is no authorized association to calculate the industry average ratio
in Vietnam. In this case, NEXIA can connect with other audit firms in Vietnam to
collect data from the audited companies and then send to an internal data system
between the audit firms. This way can help the audit firm get a better analysis.

2.2. Performance materiality

NEXIA uses the performance materiality for the whole financial statement as the
performance materiality for each item in financial statement. This would not be
appropriate and conservative for the whole audit process. In fact materiality for each
individual item depends on factors such as the possible risk of materiality
misstatement of the item. For example, for most of manufacturing company, profit
is the main feature that easily relate to risks, so the tolerable misstatement assigned
for profit should be high. Besides, the size, complexity and the importance of the
item plays vital role in allocating materiality for each item.
Firstly, auditors will determine which item does not need to assign tolerable
misstatement or with little tolerable misstatement. Those items are often with little
or no risk of material misstatement (such as owner’s equity), or items with low audit
cost and auditors can verify 100%.
After that, auditors would assign performance materiality for each item on financial
statement. This can be calculated depending on the importance and probability of
the item related to material misstatement:

Importance level of items

High Moderate Low
Probability related High Highest High Moderate
Moderate High Moderate Low
to risk of material
Low Moderate Low Lowest
misstatement

Performance materiality x R
Performance materiality for each item =
Total R

29
Materiality depends on both the importance and risk-related of the items. From the
model we can see that there are five levels: lowest, low, moderate, high and highest,
they will be scored on the 1-5 scale bases respectively. This is coefficient R which
is used to determine performance materiality applied for the item.

2.3. Existence of accounts receivable

With the debit balances of accounts receivable, they related the guests who are
staying in the system or resort at the current time. In order to check the existence of
those balances, the auditors can check the invoices issued in the next period which
relates to the current accounts receivable balances. If the accounts receivable at the
end of the period is existent, the guests will check-out and make payment in the
next period. The auditor can review the invoices to check for date of rental room, do
they represent for the accounts receivable at the end of the period or not.

2.4. Sales cut-off test

The cut-off tests conducted for sales and account receivable can not be done by the
normal way as examining the transaction from 5 days before the ending date
because of the characteristics of the system and resort companies. In the company’
policies of recording revenue, revenue will be recorded on the occurred date. There
is a risk of recording revenue in the wrong period because the accountants can
record revenue when issuing invoices in the next period and not allocate the revenue
from the current period. In this case, the auditors have to check the invoices 10 days
after the ending date and then identify the invoices related to the revenues in the
current period. After that, the auditors check whether the entity allocate the revenue
from the current period and the next period or not.

2.5. Test of control

Most of the audit procedures conducted by NEXIA are highly focus on the
substantive tests. During the audit planning process, although the auditors indicate
that the test of control is low, they tend to conduct more substantive tests. This can
extent the time for an audit, require auditor enlarge their work, which usually
increases the cost of an audit. When the auditor evaluate the internal control system
is working effectively, or the control is low, they can choose to increase the test of
30
control and reduce the substantive test to economize cost of an audit. After
conducting the test of control, the auditor will consider the effectiveness of those
tests of control. Based on the assertions and the effectiveness of test of control, the
auditor will conduct substantive tests. If the control risk is higher than the control
risk determined in the planning period, the auditors tend to conduct additional
substantive test.

2.6. Comfirmation letter

NEXIA should design the procedure of sending and receiving confirmation letters
more reasonably. Because there is risk of sending closed confirmation letter. The
best way is that the auditors require the entity to send opened confirmation letters
to obtain the reasonable evidences. An opened external confirmation request asks
the respondent to reply to the auditor in all cases by filling in the blank for the
amount needed to be confirmed. A response to an open confirmation request is
ordinarily expected to provide reliable audit evidence.

31
 CONCLUSION

Above report is all my opinion about the topic: “The audit process of sales and
accounts receivable conducted by NEXIA STT Ltd.Co”.

During the internship period, I had chance to understand about NEXIA Company as
well as auditing process of fixed assets. In this report, I had tried to use all my
knowledge and opinion about auditing procedures of fixed assets, from which I
could make some recommendations with the hope that the general auditing process
in NEXIA Company will be improved in the future.

Due to the limited time and my ability, my thesis still has some mistakes and needs
corrections. I hope to receive more feedbacks from teachers that will help me to
broaden my knowledge and complete my thesis.

Lastly, I want to say thank you to my instruction teacher, Ms. Tran Tu Uyen, Board
of Directors and assistant auditors in NEXIA Company, who helped me to
complete my thesis.

Thank you so much.

32
 REFERENCES

1. Vietnam Ministry of Finance, 2016, Vietnam Accounting (VAS), Ministry os

Financial Publisher, Hanoi.
2. Vietnam Ministry of Finance, 2016, Vietnam Standard on Auditing (VSA),
Ministry of Financial Publisher, Hanoi.
3. NEXIA STT company policies.
4. NEXIA Methodology and approach (internal documents).
5. Arens , ALVIN A.;Elder, RANDAL J. ; Beasley, M. S. B. (2012). Auditing
and Assurance Services
6. Leung, Coram, Copper, Richardson (2011). Modern Auditing and Assurance
Services

33
Month 2017 2018 Diff (Amount - %) COGS 2018 Gross profit Profit margin
Jan 10,412,629,854 9,544,069,431 (868,560,423) -8% 12,020,511,766 (2,476,442,335) -26%
Feb 10,649,950,478 7,098,139,076 (3,551,811,402) -33% 7,536,015,756 (437,876,680) -6%
Mar 12,092,649,852 16,313,840,683 4,221,190,831 35% 11,077,147,488 5,236,693,195 32%
Apr 11,782,986,635 13,127,555,920 1,344,569,285 11% 11,863,493,382 1,264,062,538 10%
May 8,859,105,890 13,340,390,274 4,481,284,384 51% 11,641,243,821 1,699,146,453 13%
Jun 12,713,320,716 13,973,906,747 1,260,586,031 10% 12,036,119,674 1,937,787,073 14%
Jul 9,396,449,885 16,706,627,604 7,310,177,719 78% 15,009,460,829 1,697,166,775 10%
Aug 9,141,932,410 13,137,432,820 3,995,500,410 44% 11,583,417,123 1,554,015,697 12%
Sep 9,410,251,287 14,476,877,738 5,066,626,451 54% 12,280,203,198 2,196,674,540 15%
Oct 9,975,187,572 19,973,479,691 9,998,292,119 100% 14,938,312,910 5,035,166,781 25%
Nov 9,482,749,116 17,979,648,493 8,496,899,377 90% 14,921,002,565 3,058,645,928 17%
Dec 14,403,324,759 21,156,070,516 6,752,745,757 47% 19,506,744,857 1,649,325,659 8%
Total 128,320,538,454 176,828,038,993 48,507,500,539 38% 154,413,673,369 22,414,365,624 15%

Appendix 1: ABC’s sales 2017 – 2018

Objective: To obtain understanding about design of sale and receivable cycle

Workdone: Sale from XYZ department: Reperform reconcile Sale summary (made by XYZ department)
and sale recorded by accountant as the sale was well controlled by monthly reconcilation between XYZ department
and Accounting department
Sale from Project department: Do not perform TOC because of weak internal control.

Basic of sampling:Sale from XYZ was well controlled as the reconciliation between XYZ department and accountant department was
performed monthly. Thus we choose 3 months out of 11 months to reperform reconciling between total amount
in sale summarised from XYZ department (sale department) and the amount recomcile in general ledger.

Month Total amount from summarizing from XYZ Total amount in GL Diff
Jan 4,283,115,408 4,283,115,408 -
Jun 5,212,023,300 5,212,023,300 -
Sep 5,410,223,062 5,410,223,062 -
Total 14,905,361,770 14,905,361,770 -

Conclusion: The objective is achieved

Update in final audit:

Dec 5,309,530,728 5,309,530,728 -

Total 20,214,892,498 20,214,892,498 -

Appendix 2: Sales – Test of controls

 sale of domain,SSL,hosting… producing software
XYZ Department Sale from Project department
Month Server and Service sale Sale from other Sale from Total sale
DC for GMO Pte from other customers customers (project ABC JP
Jan 480,751,913 (XYZ)
4,283,115,408 department)
1,523,197,572 3,257,004,538 9,544,069,431
Feb 493,418,795 2,416,288,765 1,063,158,326 3,125,273,190 7,098,139,076
Mar 499,211,380 5,240,472,187 4,162,420,471 6,411,736,645 16,313,840,683
Apr 537,336,819 4,954,322,626 1,669,610,605 5,966,285,870 13,127,555,920
May 537,336,819 5,839,258,902 2,239,981,439 4,723,813,114 13,340,390,274
Jun 569,642,180 5,212,023,300 2,598,087,690 5,594,153,577 13,973,906,747
Jul 556,619,083 5,582,528,092 5,839,140,360 4,728,340,069 16,706,627,604
Aug 632,578,164 5,954,950,425 1,682,583,479 4,867,320,752 13,137,432,820
Sep 649,246,751 5,410,223,062 3,828,391,759 4,589,016,166 14,476,877,738
Oct 697,941,365 6,060,606,339 10,675,274,681 2,539,657,306 19,973,479,691
Nov 697,941,365 5,905,911,780 6,493,542,395 4,882,252,953 17,979,648,493
Dec 680,835,670 5,497,830,728 9,971,638,063 5,005,766,055 21,156,070,516
Total 7,032,860,304 62,357,531,614 51,747,026,840 55,690,620,235 176,828,038,993
Percentages 4% 35% 29% 31% 100%
10% 90% 48% 52%
Total sale from Percentages
XYZ department 69,390,391,918 39%
Project department 107,437,647,075 61%
176,828,038,993 100%

Appendix 3: Sales for each sevices in ABC during 2018

 Month VAT exempt VAT 10% VAT 0% Total
1 2,005,199,444 3,716,200,914 3,882,669,073 9,524,978,522
2 1,166,576,635 2,212,503,158 3,719,059,283 7,098,139,076
3 4,902,947,913 4,397,434,125 7,013,458,645 16,313,840,683
4 2,737,101,782 3,949,395,462 6,441,058,676 13,127,555,920
5 3,201,180,107 4,636,920,993 5,502,289,174 13,340,390,274
6 3,527,131,491 4,171,171,000 6,275,604,256 13,973,906,747
7 6,362,804,726 4,969,184,113 5,374,638,765 16,706,627,604
8 3,051,683,180 4,555,783,714 5,529,965,926 13,137,432,820
9 4,289,444,905 5,071,587,181 5,115,845,652 14,476,877,738
10 12,306,561,777 4,484,263,205 3,182,654,709 19,973,479,691
11 8,079,125,668 4,502,329,356 5,398,193,469 19,973,479,691
12 10,438,313,780 5,063,842,637 5,653,914,099 19,973,479,691
Total 62,068,071,408 51,730,615,858 63,089,351,727 177,620,188,457

Type of revenue Tax rate Amount of revenues VAT output amount

Exempt 62068071408
VAT 10% 10% 51,730,615,858 5173061586
VAT 0% 0% 63,089,351,727
176,828,038,993 5173061586

Per GL 176,828,038,993 5173061600

Diff - -14.00
immaterial >> no further workdone

Appendix 4: ABC’s VAT report

 Unaudited bal @ Adjustment Audited bal @ Audited bal @ Variance
Account Description
31/12/2018 # # 31/12/2018 31/12/2017 Amt %
131_DR Trade receivables 27,661,335,646 620,700,000 35,009,010 28,247,026,636 21,115,818,156 6,545,517,490 31%

Finding:
This year, account receivable balance increased by approximately 6,6 bill (equivalent to 31%) compared to last year.
This growth was mainly contributed by the rise of sale with the amount of 48 bill equivalent to 38%) in this period.
AR for trade receivables for turnover ratio:
Revenue OB Acc.Receivable CB Acc.Receivable Turnover Ratio Time

1 2 3
Year ended 31/12/2017 128,320,538,454 12,962,675,727 21,115,818,156 8 48
Period ended 31/12/2018 176,621,048,993 51,115,818,156 27,661,335,646 7 50

The variance of turnover between 2 periods is immaterial

We noted that receivables turnover for year 2018 was 50 days because the growth of sale and increase in number of customers
The payment term for each client was different and was agreed on the date signed contract

2. Breakdown the balance at 31/12/2018

Basic of sampling: AR was assessed high risk. Thus we used scoping method choose samples to cover at least 70% total AR

Des Amount Check subsequent Send confirmation

Công ty TNHH HASEGAMA Việt Nam 810,000,000 x
Tổng công ty Viễn Thông VIETTEL - chi nhánh tập đoàn Viễn Thông
3,185,000,000 x
GMO Internet Inc. 278,921,145 x
GMO Z.COM ABC System Tokyo Branch 14,917,357,390 x
GMO Z.COM PTE.Ltd 3,570,806,674 x
Total checked 22,762,085,209
Total 27,661,335,646
Coverage 82%

3. Search for bad debts

From AR ledger we noted there are 2 AR (Ban Dan an Trung Uong and Sora Seed) in year end 2016 and remain unpaid till the year end of 2018
At the end of this year, these 2 balances were made provision then written off due to their long ages and insuffi cient payment document.

Original amount Written off amount

Year
JPY VND JPY VND
Ban Dan an Trung Uong 80,000,000 80,000,000
Sora Seed Co.Ltd 425,000 84,702,500 425,000 84,702,500
Total 425,000 164,702,500 164,702,500

We interviewed Ms.Huong-Accountant. She revealed that the provision and written off was approved by Mr.Tau - General Director orally
but there was lack of documents in accordance with Circular 228 prepared for these transactions. The documents will be provided after fieldwork.
We follow up and update later.

4. Revaluation foreign exchange rate as at 31/12/2018

Foreign exchange rate (indicate buying rate provided by Mizuho as at 28/12/2018)

206.99 JPY/VND

Customer Original amount Per audit - VND Per client Diff

Công ty CP B7 180,000 37,258,200 37,258,200 -
CSOne Co.,Ltd 462,000 95,629,380 95,629,380 -
GMO Internet Inc 1,347,510 278,921,095 278,921,145 (50)
GMO Research Pte,Ltd 891,791 184,591,819 184,591,819 -
GMO Z.COM PTE.,Ltd 17,251,109 3,570,807,052 3,570,806,674 378
GMO-Z.com ABCSYSTEM Tokyo Branch 72,068,010 14,917,357,390 14,917,357,390 -
Total 19,084,564,936 19,084,564,608 328
immaterial >> pass

5. Reconcile balance between GL and confirmation:

We sent confirmation to all related parties and 3rd with significant account.

Customer Currency Per client Per confirm Diff Note

GMO Internet Inc JPY 278,921,145 278,921,145 -
GMO Z.COM PTE .,Ltd JPY 3,570,806,674
GMO-Z.com ABCSYSTEM Tokyo Branch (Jun JP) JPY 14,917,357,390
Công ty TNHH HASEGAWA VND 810,000,000 810,000,000 -
Tổng Công ty Viễn Thông Viettel - Chi nhánh tập đoànVND
Viễn thông quân đội (VIETTEL
3,185,000,000
TELECOM) 3,185,000,000 -

Findings:
Accountant recorded the interest for deposits in inappropriate accounts, so we raise adjustment as follows:
DR 1388 (Other receivables) 35,009,100
CR 131 (Trade receivables) 35,009,100

Conclusions: The objective was achieved

Appendix 5: Working for receivables

 Unaudited bal Adjustment Audited bal @ Audited bal @ Variance
Account Description
@ 31/12/2018 # # 31/12/2018 31/12/2017 Amt %
131_CR Advance from customers 3,185,714,792 3,185,714,792 713,541,792 2,472,173,000 346%

Finding:
AR:
Comparing with the year 2017, the amount advance from customers increased significantly 24 bill (346% of total amount in 2017) due to in 2018 advance from customer of XYZ department
had a remarkable increase (total amount was more than 4 bil) as the remarkable growth of sale from XYZ.
Plus, the significant increase is also due to the promotion that multiple 1.5 times the bulk amount charged to customers XYZ account and other communication programs to promote sale.

Basic of sampling : Advance from customers was assessed at low risk, we choose 4 customers including 3 companies and an individual to check and send còmirmation

Breakdown the balance as at 31/12/2018;

Description Amount Check subsequent Send confirmation
Khách hàng mua lẻ dịch vụ XYZ 3,185,714,792 N1
Công ty TNHH Giải pháp tin học 63,634,348 not paid x
Công ty TNHH WEBICO 100,000,000 not paid x
Công ty cổ phần Truyền thông và công nghệ Rao Thuê 10,705,276 not paid x
Bùi Tiến Phong 66,658,309 not paid x
Khách lẻ chưa có danh sách 2,944,719,859 N2
Total 6,371,432,584
Total checked 240,997,933
Coverage 4%

N1 This is advance amount for service from XYZ from agent and personal for buy domain.
For buying domain, clients of XYZ have to make an account and pay in advance for the domains as they want to buy
Contract for sale will be made after all domain/services were transferred
N2 We didn't obtain the full list of XYZ customers advanced due to the fact that XYZ department haven't processed
to prepare the final list of advance from customers > > to follow up

Customer Per client Per confirm Diff Note

Công ty TNHH Giải pháp tin học 63,634,348 63,634,348 -
Công ty TNHH WEBICO 100,000,000 100,000,000 -
Công ty Cổ phần Truyen thông và công nghệ Rao Thuê 10,705,276 10,705,276 -
Bùi Tiến Phong 66,658,309
Total 240,997,933

Conclusions: The objective was achieved

Appendix 6: Working for advance from customers