NATIONAL ECONOMICS UNIVERSITY
EXCELLENT EDUCATION PROGRAM

AUDIT PROJECT
AUDITING PROCESS FOR THE REVERNUE CYCLE OF DELOITTE AT PHU NHUAN JEWELRY (PNJ)
JOINT STOCK COMPANY

Members: Tran Ngoc Mai
Nguyen Van Tuan
Nguyen Hai Phuc
Nguyen Trung Hieu
Ngo Ngoc Linh
Trinh Viet Dung
Hanoi 15/11/2017

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CONTENTS
LIST OF TABLES
PREFACE............................................................................................................................................4
PART I : CHARACTERISTICS OF AUDITING REVENUE CYCLE OF DELOITTE.......................................6
1.1. INTRODUCTION.........................................................................................................................6
1.1.1. Overall about Deloitte...........................................................................................................6
1.1.2. Overall about Phu Nhuan Jewelry Joint Stock Company.......................................................6
1.2. CHACRACTERISTICS OF REVENUES CYCLE.................................................................................7
1.2.1. Definition...............................................................................................................................7
1.2.2. Classification of revenue.......................................................................................................7
1.2.3. Conditions for recording revenue.........................................................................................8
1.3. CHARACTERISTICS OF AUDITING REVENUE CYLE AT DELOITTE.................................................9
1.3.1. Audit Objectives....................................................................................................................9

1.3.2. Audit process for revenue cyle............................................................................................13
PART II : APPLYING AUDIT PROCESS TO AUDITING REVENUE CYLE AT PNJ..................................21
2.1. PLANNING THE AUDIT.............................................................................................................21
2.1.1. Overall plan.........................................................................................................................21
2.1.2. Performing detail plan.........................................................................................................28
2.2. PERFORMING THE AUDIT........................................................................................................28
2.2.1. Test of controls....................................................................................................................29
2.2.2. Analytical procedures..........................................................................................................30
2.2.3. Substantive test of transactions..........................................................................................31
2.2.4. Complete the audit..............................................................................................................40
PART III : RECOMMENDATION........................................................................................................48
CONCLUSION...................................................................................................................................50
REFERENCES....................................................................................................................................51

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LIST OF TABLES
Table 1.1. Combined risk assessment

14

Table 1.2. Control testing

16

Table 2.1 Bảng phân tích Sff bộ Báo cáo kết quả kinh doanh của Công ty ABC

24


Table 2.2: Bảng hướng dẫn ước lượng tính trọng yếu của Deloitte Việt Nam

25

Table 2.3: Bảng tính mức trọng yếu với Công ty điện tử ABC.

26

Table 2.4: Bảng câu hỏi đánh giá ban đầu về tính hiêụ lực của hệ thống
INTERNAL CONTROL đối với khoản mục doanh thu của Công ty điện tử ABC

28

Table 2.5: Bảng phân tích doanh thu 2016

29

Table 2.6: analysis of changes in price and volume

30

Table 2.7: Substantive tests of transactions

31

Table 2.8: Bảng kiếm tra hàng hỏng bị trả lại

33

Table 2.9: Bảng đối chiếu doanh thu


34

Table 2.10: Bảng kiểm tra việc ghi nhận đúng kỳ

37

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PREFACE
Today, with the trend of integration and development, enterprises that want to survive and
develop must undergo fierce competition. Every business needs to build trust for interested
parties by providing accurate and reliable financial information. This is one of the important
factors decisive to the success of enterprises in the market, the auditing latitude birth is an
urgent requirement for businesses. Auditing serves the needs of those who want to understand
the credible financial information. Although late and relatively new industry compared with
many other industries, but with a staff of qualified, trained, experienced and quite
knowledgeable about auditing in Vietnam, the audit industry of our country is growing stronger
and integrating strongly with international auditing in recent years.
Deloitte Vietnam Auditing Company is one of the best in the trend of integration and
development of Vietnam auditing. Deloitte Vietnam is the result of the merger of Vaco Audit
Company, the oldest Vietnamese auditing firm into a joint venture of one of the four major audit
firms in the world. In the process of auditing the financial statements, revenue is a very
important part and Deloitte paid much attention to the fact that revenue in the business is the
most frequent and contributes to the survival and development of the Company. In addition, the
revenue department also contains risks that may cause fraud and error, it has a close relationship
with other parts of the business. The main reason for the volume of revenue collected in the
financial statement auditing was the selection of the subject: "Auditing process for the revenue
cycle of Deloitte at Phu Nhuan Jewelry (PNJ) Joint stock company "as a research topic

In our article, we divided into three parts:
PART I: CHARACTERISTICS OF AUDITING REVENUE CYCLE OF DELOITTE
PART II: APPLYING AUDIT PROCESS TO AUDITING REVENUE CYCLE AT PNJ
PART III: RECOMMENDATION
Despite our best effort and effort, due to limited knowledge and experience, our subject matter
is inevitably lacking. We look forward to receiving your comments so that you can further
improve this project.
Thank you sincerely!

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PART I: CHARACTERISTICS OF AUDITING
REVENUE CYCLE OF DELOITTE
1.1. INTRODUCTION
1.1.1. Overall about Deloitte
Deloitte has more than 263,900 professionals at member firms delivering services in audit &
assurance, tax, consulting, financial advisory, risk advisory, and related services in more than 150
countries and territories. Revenues for fiscal year 2017 were US$38.8 billion.
Deloitte Vietnam is the first auditing company in the independent auditing market in Vietnam.
The establishment and development of Deloitte Vietnam is closely linked to the formation and
development of independent auditing. Deloitte Vietnam has the advantage of being strongly
supported by the parent company as well as other Deloitte members in Southeast Asia in terms
of human resources, experience as well as advanced modern audit procedures. . This has made a
significant contribution to the success of Deloitte Vietnam in the market and captures the
confidence of businesses and people of interest.
1.1.2. Overall about Phu Nhuan Jewelry Joint Stock Company
 Main business sectors:
 Producing and trading jewelry of gold, silver, precious stones, fashion accessories,
souvenirs. Trading watches and buying gold bars

 Diamond, precious stones and precious metal inspection services
 Trading in real estate
 Vision
As the leading jewelry and fashion retailer in Asia, it holds the number one position in the middle
and high end segments in Vietnam.
 Mission
PNJ brings pride to customers with exquisite jewelry products, superior quality. We affirm our
leadership position in creativity, sophistication and reliability in jewelry and fashion.
 Core values
Integrity - Responsibility - Quality - Innovation – Mounting
1.2. CHARACTERISTICS OF REVENUES CYCLE
1.2.1. Definition
Revenue is a very important item in financial statement because it is the basis for users to review
about the business situation and the scale of the enterprise. Therefore, anyone who interested in

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in the efficiency of the enterprise should read this item in financial statement. Particularly for
accountants, AUDITORS, revenues also have to be considered in terms of receiving revenues,
revenues classification, the time revenues are recorded and evaluation of this item on
accounting documents, reports, etc… In addition, revenue is related to other item and cycle such
as: Selling procedure, account receivable, cash, capital, inventory, therefore AUDITORS of
Deloitte at PNJ JSC focus on this item and consider it as one of the most important item in
financial statement.
According to International accounting standard 18 : “Revenue is the gross inflow of economic
benefits during the period arising in the course of the ordinary activities of an entity when those
inflows result in increases in equity, other than increases relating to contributions from equity
participants.” Every company with different business activities will have different characteristics
of revenues item. Revenue includes only the total value of profits that enterprises have obtained

or will obtain. The amount that’s collected from the third party is not profit; it does not increase
the equity of the company so it will not be considered as revenue. Capital contributions of the
shareholders will increase owner equity but will not increase the profits of the enterprise
therefore it is not revenue
1.2.2. Classification of revenue
 Sales revenue and revenue from providing services: revenue that’s earned from the sales
of products , providing services is the main and regularly revenue from company’s
business activities
 Financial revenue: revenues from financial activities of the company such as : loans,
purchase and sale of foreign currency, selling copyright and other financial investment
activities such as buying securities, investments in subsidiaries, …. There’re corresponding
financial revenues such as interest from loans or deposits, discounts, dividends, exchange
rate differences ...
 Other revenue: revenues from the unusual activity such as revenues from liquidation of
fixed assets, revenue after partner broke the contract: donation, inheritance or aid.
Note:
 Revenue from sales and service providers is not only just revenue from sales and service
providers but also deductible loss and net sales: including deductions revenues include
trade discounts, discount selling price, goods were returned
 Sales revenues and sale from providing services are the value of goods and services sold
or provided during accounting period. For company is liable for VAT (Value Added Tax) ,
under the deduction method, this revenue does not include VAT
 Commercial discounts is the amount that company discount for customers who buy large
quantities at once or after many times

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 Discount selling price is a deduction for the buyer who bought inferior quality goods,
incorrect specifications or backward tastes

 Value of returned goods sold is the value of sales volume that already bought by
customers but customers refused to pay and return to company.
 Net revenue is sales revenue and sales from providing service without deduction such as
trade discount, rebate, value of returned goods sold, SCT (Special Consumption Tax) or
Export Tax on the turnover (if there is any). Particularly for company is liable for VAT
follow the direct method, output VAT is calculated on the sales revenue but it will be
included in deductions to eliminate from revenue later to get net revenue
1.2.3. Conditions for recording revenue
With each business type, characteristics of business activities are different, because each type of
revenue has different characteristics about products, ownership as well as the method of
calculating and specific guidelines. However, the recording revenues still follow one general
principle which is increasing profit and increasing owner equity.
There are 5 conditions to apply for sales revenue:
 Company has transferred substantially all risks and rewards associated with ownership of
the goods to the buyer
 Company no longer holds jurisdiction of goods as cargo owners or control over the goods
 Revenue is determined relatively sure
 Company has obtained or will obtain profit from sales transaction
 Identify all costs that related to sales transactions
There are 4 conditions to apply for revenue from providing services:





Revenue is determined relatively sure
Company has ability to collect profit from the transaction that provide service
Determine the percentage of work completed at the date of the Balance Sheet
Identify all costs related to the transaction and the costs to complete the transaction to
provide that service


1.3. CHARACTERISTICS OF AUDITING REVENUE CYCLE AT DELOITTE
1.3.1. Audit Objectives
1.3.1.1. Transaction-related audit objectives
The auditorS’s transaction-related audit objectives follow and are closely related to
management’s assertions about classes of transactions. There is a difference between general
transaction-related audit objectives and specific transaction-related audit objectives for each
class of transactions. The six general transaction-related audit objectives discussed here are

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applicable to every class of transactions and are stated in broad terms. Specific transactionrelated audit objectives are also applied to each class of transactions but are stated in terms
tailored to a specific class of transactions, such as sales transactions. Once the auditorS
establishes general transaction-related audit objectives, they can be used to develop specific
transaction-related audit objectives for each class of transactions being audited.
 General Transaction-related Audit Objectives :
Occurrence—Recorded Transactions Exist This objective deals with whether recorded
transactions have actually occurred. Inclusion of a sale in the sales journal when no sale occurred
violates the occurrence objective. This objective is the auditorS’s counterpart to the
management assertion of occurrence for classes of transactions.
Completeness—Existing Transactions Are Recorded This objective deals with whether all
transactions that should be included in the journals have actually been included. Failure to
include a sale in the sales journal and general ledger when a sale occurred violates the
completeness objective. This objective is the counterpart to the management assertion of
completeness for classes of transactions. The occurrence and completeness objectives
emphasize opposite audit concerns. Occurrence deals with potential overstatement;
completeness with unrecorded transactions (understatement).
Accuracy—Recorded Transactions Are Stated at the Correct Amounts This objective addresses
the accuracy of information for accounting transactions and is one part of the accuracy assertion

for classes of transactions. For sales transactions, this objective is violated if the quantity of
goods shipped was different from the quantity billed, the wrong selling price was used for billing,
extension or adding errors occurred in billing, or the wrong amount was included in the sales
journal. It is important to distinguish between accuracy and occurrence or completeness.
Posting and Summarization—Recorded Transactions Are Properly Included in the Master Files
and Are Correctly Summarized This objective deals with the accuracy of the transfer of
information from recorded transactions in journals to subsidiary records and the general ledger.
It is part of the accuracy assertion for classes of transactions.
Classification—Transactions Included in the Client’s Journals Are Properly Classified This
objective addresses whether transactions are included in the appropriate accounts, and is the
auditorS’s counterpart to management’s classification assertion for classes of transactions.
Timing—Transactions Are Recorded on the Correct Dates The timing objective for transactions
is the auditorS’s counterpart to management’s cutoff assertion. A timing error occurs if a
transaction is not recorded on the day it took place.
 Specific transaction-related audit objectives :

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After the general transaction-related audit objectives are determined, specific trans- actionrelated audit objectives for each material class of transactions can be developed. Such classes of
transactions typically include sales, cash receipts, acquisitions of goods and services, payroll, and
so on. At least one specific transaction-related audit objective should be included for each
general transaction-related audit objective unless the auditorS believes that the general
transaction-related audit objective is not relevant or is unimportant in the circumstances.
1.3.1.2. Balanced-related audit objectives
Balance-related audit objectives are similar to the transaction-related audit objectives just
discussed. They also follow from management assertions and they provide a frame- work to help
the auditorS accumulate sufficient appropriate evidence related to account balances. There are
also both general and specific balance-related audit objectives.
 General Balance-Related Audit Objectives

Existence—Amounts Included Exist This objective deals with whether the amounts included in
the financial statements should actually be included. This objective is the auditorS’s counterpart
to the management assertion of existence for account balances.
Completeness—Existing Amounts Are Included This objective deals with whether all amounts
that should be included have actually been included. Failure to include an account receivable
from a customer in the accounts receivable trial balance when a receivable exists violates the
completeness objective. This objective is the counterpart to the management assertion of
completeness for account balances. The existence and completeness objectives emphasize
opposite audit concerns. Existence deals with potential overstatement; completeness deals with
unrecorded amounts (understatement).
Accuracy—Amounts Included Are Stated at the Correct Amounts The accuracy objective refers
to amounts being included at the correct amount. Accuracy is one part of the valuation and
allocation assertion for account balances.
Classification—Amounts Included in the Client’s Listing are Properly Classified Classification
involves determining whether items included on a client’s listing are included in the correct
general ledger accounts. Classification is also part of the valuation and allocation assertion. The
classification balance-related audit objective is closely related to the presentation and disclosurerelated audit objectives, but relates to how balances are classified in general ledger accounts so
they can be appropriately presented and disclosed in the financial statements.
Cutoff—Transactions Near the Balance Sheet Date Are Recorded in the Proper Period In testing
for cutoff of account balances, the auditorS’s objective is to determine whether transactions are
recorded and included in account balances in the proper period. An account balance is likely to
be misstated by those transactions recorded near the end of the accounting period. For an

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annual audit this is as of the balance sheet date. Cutoff tests can be thought of as a part of
verifying either the balance sheet accounts or the related transactions, but for convenience,
AUDITORS usually perform them as a part of auditing balance sheet accounts. For this reason, we
also include cutoff as a balance-related audit objective related to the valuation and allocation

assertion for account balances. The timing objective for transactions deals with the proper
timing of recording transactions throughout the year, whereas the cutoff objective for balancerelated audit objectives relates only to transactions near year-end.
Detail Tie-In—Details in the Account Balance Agree with Related Master File Amounts, Foot to
the Total in the Account Balance, and Agree with the Total in the General Ledger Account
balances on financial statements are supported by details in master files and schedules prepared
by clients. The detail tie-in objective is concerned that the details on lists are accurately
prepared, correctly added, and agree with the general ledger.
Realizable Value—Assets Are Included at the Amounts Estimated to Be Realized This objective
concerns whether an account balance has been reduced for declines from historical cost to net
realizable value or when accounting standards require fair market value accounting treatment.
Rights and Obligations In addition to existing, most assets must be owned before it is acceptable
to include them in the financial statements. Similarly, liabilities must belong to the entity. Rights
are always associated with assets and obligations with liabilities. This objective is the auditorS’s
counterpart to the management assertion of rights and obligations for account balances.
 Specific Balance-Related Audit Objectives
The same as for transaction related-audit objectives, after the general balance-related audit
objectives are determined, specific balance-related audit objectives for each account balance on
the financial statements can be developed. At least one specific balance-related audit objective
should be included for each general balance-related audit objective unless the auditorS believes
that the general balance-related audit objective is not relevant or is unimportant for the account
balance being considered. There may be more than one specific balance-related audit objective
for a general balance-related audit objective.
1.3.2. Audit process for revenue cycle
1.3.2.1. Strategic planning design and risk assessment



Identify the main types of transactions

The auditorS determines the types of transactions or processes that affect the important

accounts and related documents identified above.



Understand the business transactions that have arisen and processed, identifying
potential misstatements and the corresponding control procedures of the customer.

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The auditorS considers the process of economic transactions to be handled from the time it
arises, through the process of circulating the documents, until they are accounted in the
accounting books and financial reports. In business, there are three types of transactions:
regular, extraordinary and accounting estimates. Misstatements should be identified for
appropriate audit procedures, and the auditorS considers the client has control procedures. Is it
appropriate to prevent and detect these offenses, so that the audit takes place more centrally.


Walk through

This is a procedure to confirm the Company's understanding of the business transactions, and
potential misstatements could occur. This procedure is accomplished by selecting several
transactions, following it from start to finish, through interviewing techniques, observation,
document checking to record or use flowchart to depict the cycle of business operations.
In the case of using a service that has not met the requirements, it is possible to select additional
operations for the first and last review.



Verify control procedures


Because audits are performed based on the customer's internal control system, it is necessary to
select the customer's control procedures for verification. This option can be a sampling of a
number of operations or a whole selection, depending on the characteristics of each audit.



Understanding and evaluating customer information systems

In terms of the application of information technology, control procedures for each type of
business are divided into three categories: manual procedures; IT-Dependent Manual Control
with the support of machinery, for example, using accounting software to reconcile with
customers ...; Application Controls, such as card swiping machines, control the working time of
employees ... Control procedures are used to prevent and detect possible violations. Control
procedures for general information technology applications, ITGCs are procedures that are
applicable to all types of businesses, such as information security procedures by using
encryption, managing employee access to corporate databases by ID and password. Therefore,
only authorized persons can access and change information ... These procedures can be
automatic or semi-automatic, increasingly support the control of customer. Therefore, AUDITORS
must have depth understanding.



Combined risk assessment

Based on the assessment of inherent risk and control risk, the auditorS determines the
combination risk, high, moderate, low or minimal

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Table 1.1. Combined risk assessment
Control risk (CR)
Minimal

Moderate

Effective control procedures

Maximum
Ineffective control
procedures

Inherent risk
(IR)

Low
High

Minimal
Low

Low
Moderate

Moderate
High

If the combined risk is assessed to be at the highest level, high potential of misstatements could
occur so the auditorS need to carry out more tests . Conversely, when the combined risk rating is

low, moderate and minimal, the likelihood of a lower error is lower, the auditorS will minimize
tests.
• Design of tests of control
In this step, there are four questions to be answered by the group or auditorS team: Do we
perform tests of control, sample size, timing and items to select.
Deloitte can rely on client’s internal control or use substantive tesing.
The internal control system of the customer is designed for four purposes: to ensure the
truthfulness of information, protect property, ensure compliance with the provisions of law,
ensure efficiency and effectiveness in the operation of the business. Therefore, in the event that
this internal control system is effective, the auditorS can rely on the system to reduce the
baseline tests, thereby saving time and costs.
Accordingly, the first strategy is to be implemented when the control risk is assessed to be
minimal or moderate, and the control tests will be conducted in a sufficient or limited manner.
Under conditions of ineffective customer control, Deloitte will not carry out control tests that go
directly to the basic test.
Normally, control tests are usually performed at the mid-term audit, which reduces the
workload of the end-of-period audit, especially for accounts with multiple trades, if there is no
test support control, the number of samples selected for detailed testing will be very large,
increasing the cost of the audit. For all businesses, all items, the number of samples selected to
perform this test are 25 samples.
1.3.2.2. Performance the audit process

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The auditorS examines a number of operations to assess the compliance with internal control
procedures, namely:
 Synchronization of bookkeeping: The test is based on the customer's record of the
recorded book order to compare with the practice of the customer. For example, an
enterprise requires that the second invoice of the sales invoice be accompanied by a

delivery order in order to avoid omissions of the goods shipped.
 Evaluating the order of vouchers: Select one continuous instruction of 20 different
vouchers from the second of the sales invoices recorded in the sales diary to detect
missed or repeated items.......
 Make a balance sheet of payment and send it to the buyer: If the company has a balance
sheet for the customer, choose a balance sheet to consider making this balance. How
effective or not, whether the buyer responds to the balance sheets or not.
 Approve sales operations: check whether the sale is approved by the responsible person
or not, the sale price is approved properly or not.
 Full separation of tasks in the financial accounting organization: the auditorS considers
the assignment in the accounting work, the actual observation of the accounting work,
for example, Accountability between the invoicing and the bookkeeper.
 The independence of the tester - control in the performance of sales operations. For
example: choose a continuous series of sales invoices to review collated sales
transactions with vouchers to confirm the authenticity of recording business.
More specifically, the auditorS implements procedures to ensure audit objectives for revenue
items:
Table 1.2. Tests of control
Audit objectives
Recorded
exists

revenue

Tests of control
actually Select sequentially the sales invoices reconcile the items
recorded with each invoice and review the sales vouchers.

Sales operations have been Examine the list or detailed book of sales and receipts of
properly approved

each buyer in comparison with the sales order, the shipping
documents allow for sale on the approved invoices and
vouchers and compare with the right to term the
responsibility of the approver
All sales are recorded

Select a continuous series of shipping invoices or sales
invoices and consider recording them in the accounting
book

The number of items sold is Comparing prices of goods on each invoice with the

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valued

prescribed price list or approving prices for each sale

Sale of goods is recorded in Review unpaid bills of lading to verify remaining unpaid
time
invoices
Record and collect payments Compares the recording of the sales activity from the sales
accurately
diary to the cash register details.
Add the numbers on the payment details book and
compare it to the sales log and general ledger.
a) Perform analytical procedures
 Comparison of sales and service revenue this period and the previous period, compared
with the planning period

 Compare the net interest income to the net revenue between accounting periods to
assess the profitability of the sales of service products through accounting periods.
 Make a breakdown of sales by type of sales and consider abnormal fluctuations
 Analysis of turnover fluctuations through months, quarter.
 Monthly gross margin and determine the cause of abnormal fluctuations
 Compare the unrealized revenue of the period compared to the previous period, taking
into account the abnormal fluctuations.
 Carry out revenue recognition procedures. For example, interviewing sales staff for
unusual or similar operations, reviewing terms related to sales.
b) Detailed balance checking procedures
Detailed testing procedures are performed based on key items and repurchase items. The
important items are usually items of great value or unusual nature. The value of these items is
usually greater than the level that the auditorS estimates from the time of the planning phase.
Random items are usually items that have a small value. If the sum of the errors generated on
these items can be materialized, there are likely to be significant differences. These items are
usually selected by software. Based on the selected samples, auditorS conducts a check on the
realities of sales and service provision:
 Explain whether the company's revenue recognition policies are consistent with current
accounting policies and regulations, consistent with the previous accounting year.
 Comparing the sales and service operations recorded in the accounting books, the sales
diary with the relevant original documents such as orders, economic contracts, sales
orders, delivery bills, bills of lading , sales invoice ... combined review and check payment
process.

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 Examine the sample of a large-scale sales operation and compare the money transactions
such as receipts, bank statements, other related documents.
 Checking the completeness of sales turnover: Comparing the original documents into the

accounting books to check the recording of the sales and service operations in the detail
book, the sales log is full or not. .
 Check the classification and presentation of sales and service provision
 Check the accounting of turnover on accounting books to ensure that the turnover is
accounted for correctly
 To examine the classification of turnover, such as the difference between revenue from
sale and sale, turnover from immediate payment, barter turnover, turnover from sale of
goods and provision of services with other incomes, In relation to each type of tax rate,
different products.
 Check whether the statement of revenue on financial statements is correct for the
current accounting year.
 Accurately check the amount of sales revenue
 Check quantity, unit price and calculation on sales invoice and service delivery.
 Check the exchange rate for sales and service.
 Compare the bill of lading, orders, sales orders, .. to determine the type and quantity of
goods
 Compare the data on the sales invoice with the detail book and the general ledger
 Comparing the unit's price policy to determine the unit price of goods
 Consider whether discounted sales prices are in line with the applicable accounting
policies and the current accounting regime.
 Check the accuracy of sales
 Check the documents of some turnover arising before and after the closing of accounting
books for a number of days to determine whether the turnover was wrongly accounted
for the accounting period. The auditorS shall perform by comparing the date inscribed on
the invoice with the date inscribed on the accounting book
 Inspection of some ex-warehousing bills on a number of days immediately before and
after the closing of accounting books to ensure that the revenue is recognized when the
goods are delivered to customers. This inspection is very necessary if the auditorS finds
out that the goods have not been delivered to customers but the customers have not yet
accepted the payment.

1.3.2.3. Completing the audit
Ending the audit is the final step in the process of auditing financial statements in general and
audit of revenue in particular. AUDITORS and AUDITORS must review and evaluate the
conclusions drawn from the evidence gathered and use these conclusions as a basis for their

15


opinion on the financial audit report. Therefore, in order to ensure that the financial information
submitted to the user is reliable and reasonable, the auditorS and audit firm should perform the
following tasks:
 Carry out an analytical procedure for an overview of revenue items in the statement of
income
 Review the evidence collected in relation to the item of revenue is complete to be able to
make an audit conclusion.
 Evaluate the auditorS's work to see if it is fully compliant with the auditing guidelines
 Ask the customer to provide a manager's letter of account for the revenue item
 Review the information of the item of revenue in relation to the items on the financial
statements to uncover the unreasonable.
 The accredited auditorS also performs additional procedures, such as reviewing events
occurring after the end of the year, reviewing business hypotheses.
After performing the above steps, the auditorS shall make an audit conclusion for the revenue
item. The auditorS figures out the weaknesses of the internal control system with items of
revenue that will be reported to the management at the end of the audit. The list of adjusting
entries as well as the difference of balance will also be discussed by the auditorS with the
customer to adjust the audit. Basing themselves on the viewpoints and treatment on differences
detected in the course of auditing of the enterprise's turnover items, the AUDITORS give their
opinions on the revenue items on the released reports.

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PART II: APPLYING AUDIT PROCESS TO AUDITING
REVENUE CYCLE AT PNJ
2.1. PLANNING THE AUDIT
2.1.1. Overall plan
 Understanding the client
Phu Nhuan Jewelry Joint stock Company is a joint stock company established in accordance with
the Business Registration Certificate No. 0300521758 dated 02 January 2004 issued by the
Department of Planning and Investment and Ho Chi Minh City Investment and the amended
Business Registration Certificate.
The parent company is listed on Ho Chi Minh City Stock Exchange (HOSE) on March 23, 2016
under Decision No. 129 / DKK, signed by General Director of Ho Chi Minh City Stock Exchange.
December 2008. Stock code is PNJ.
The total number of employees of the parent company as at 31 December 2016 is 3,951 (31
December 2015: 3,443).
Main business lines and activities
The business and operations of the company in the current year are trading in wines, silver,
jewelry and gems, and importing and exporting gold, silver and gemstone jewelry.
Fiscal year
The normal business cycle of the pharmaceutical company shall be implemented within 12
months.
Corporate structure
The parent company is located at 170 Phan Dang Luu, Ward 3, Phu Nhuan District, Ho Chi Minh
City, Vietnam. In addition, the parent company has two hundred and sixteen (216) stores located
in different provinces and cities in Vietnam.
As at 31 December 2016, subsidiaries of the parent company include:
- CAO Fashion One-Member Limited Liability Company ("CFC") is a one-member limited liability
company established under the Law on Enterprises of Vietnam pursuant to Business Registration
Certificate No. 0309279212 issued by the Ministry of Planning and Investment. Ho Chi Minh City

Investment on August 14, 2016. CFC's registered office is located at 170E Phan Dang Luu Street,
Phu Nhuan District, Ho Chi Minh City, Vietnam. CFC's principal activity is the production and
trading of gold, silver and silver jewelry, art and craft products, and CFC's chartered capital of

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VND 10,000,000,000. The voting rights of Parent Company as at 31 December 2016 are 100% (as
at 31 December 2015: the same).
- PNJ One Member Limited Liability Company ("PLC") is a one member limited liability company
incorporated under the Law on Enterprises of Vietnam pursuant to the Business Registration
Certificate 50 0310521330 issued by the Department of Planning and Investment Investment in
Ho Chi Minh City on 1G December 2010. PLC is headquartered in the business of building blocks
at 205 Phan Dang Luu Street, Phu Nhuan District, Ho Chi Minh City, Vietnam. PLC's main activity
is providing inspection and accounting services related to gold, silver and precious metals. the
PLC's tenure is 10,000,000,000 VND. The voting rights of the Parent Company as at 31 December
2016 are 100% (as at 31 December 2015: the same).
As at 31 December 2016, the parent company has 43 branches located in different provinces and
cities in Vietnam. In particular, some branches include:
- Branch of Phu Nhuan Gold Jewelery Joint Stock Company - PN Branch Bien Hoa
- Branch of Phu Nhuan Gold Jewelery Joint Stock Company - PNJ Hue Branch
- Branch of Phu Nhuan Precious Stone Joint Stock Company - PNJ Vinh Long Branch
- Branch of Phu Nhuan Gold Jewelery Joint Stock Company - PNJ Nha Trang Branch
- Branch of Phu Nhuan Jewelry Joint Stock Company - PNJ Da Nang Branch
- Branch of Phu Nhuan Jewelry Joint Stock Company - PNJ Hanoi Branch
 Accounting systems, policies
Financial Statements of PNJ are presented in USD currency, in accordance with the historical cost
principle and in accordance with Vietnamese Accounting Standards, Vietnamese Accounting
System and other current regulations in Vietnam.
The financial year of the Company commences on 1 January and ends on 31 December annually.

 Revenue recognition
Revenue is recognized when all five (5) below are satisfied:
(a) The Company has transferred substantially all risks and rewards of ownership of the goods or
merchandise to the buyer;
(b) The Company no longer holds the right to manage the goods as the owner of the goods or
the control of the goods;
(c) The Revenue can be measured reliably;

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(d) It is probable that the economic benefits associated with the transaction will flow to the
Company
(e) Determining the costs associated with the sale.
 Internal control in revenue cycle
For non-parent customers, PNJ Company sets a credit limit for each customer. After receiving
orders from customers, sales staff will move into the "management system" of the company. The
system will check the status of orders for pricing, quantity, and credit limits of customers.
Sales staff will enter the price of the goods into the system for each period based on the
company's goals and pricing policy. This price must be approved by the Sales Manager and the
Director. Once approved, the price will be transferred to the "management system". Once the
client's meeting is approved, the sales staff will enter the name of the product, the label, the
customer name, the management system will automatically set the price of the product for the
client's meeting. If there is a change in pricing policy for customers, the process must be
repeated in the order of the steps above.
After receipt of the order, the accounting department will check the validity and issue an
automatic invoice from the company's system, then the goods will be shipped to the customer
on the same day as the date the invoice is issued. . PNJ recognized revenue when the goods have
been delivered to the buyer's warehouse. In practice, sales to non-parent companies are less
frequent.

Based on the initial assessment of AUDITORS about the approval of the sale of goods and the
recognition of revenue from PNJ Company is reliable.
 Perform preliminary analytical procedures
The preliminary analysis of business operations on customers' financial reports helps AUDITORS
to have more general views on customers, but on the other hand, it helps AUDITORS to first
delineate the items or accounts that have Unusual fluctuations to scrutinize by these items or
accounts contain a great deal of risk of misstatements.

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Table 2.1: Preliminary analytical procedures of income statement
Difference
Items
Sales Revenue
Sales deduction

2016

2015

(+/-)

(%)

8.615.363.154.443 7.739.128.121.334
50.772.664.226


33.092.915.485

Cost of goods sold 7.153.297.291.319 6.537.985.006.949
Gross profit

Operating profit

1.411.293.198.898 1.168.050.198.900

548.093.427.340

197.096.520.168

 Determine financial statement materiality and performance materiality (PM)
Assessing materiality is a very important element of the audit. Determining the level of
significance determines the acceptable level of misstatement for the entire financial statement,
identifies the scope of the audit, determines the nature, extent and duration of the audit, and To
evaluate the impact of detected misstatement and not detect them on the FSs. The critical
evaluation is a relatively complex matter that requires AUDITORS to have a clear understanding
of customers, Audit risk assessment and customer requirements.
Deloitte Vietnam has developed specific guidelines for critical evaluation in the following table:

Table 2.2: Instruction to materiality
Types of customer

items

Rate


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Listed companies

Non-listed companies

Profit before tax

5% - 10%

Total assets

2%

Equity

2%

Profit after tax

10%

Sales revenue

0.5% - 3%

Materiality is based on revenue and is higher than 2%
Branch of the transnational
with unregistered companies on the stock market.

companies
The level of significance at the branch should be
lower than that of the parent company.
(Source from documents for the audit of Deloitte Vietnam)
PNJ is a company registered on the stock market, the PM is calculated based on total revenue in
2016, estimated at 0.5% -3% of total revenue.
After determining the materiality level for the entire financial statement, in order to set up the
audit process for each item or account balance, AUDITORS determine the performance
materiality for each account balance or item. Performance materiality is determined based on
financial statement materiality but less than this value, usually performance materiality is in the
range of 80% -90% financial statement materiality.

Table 2.3: Performance materiality
Items

Caculation

Sales revenue

8.615.663.154.453

Reason

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Rate:

3%


Financial statement materiality

268,460,854,633

Performance materiality

160,656,656,984

This rate is in the range of 0.5% to 3%

= Sales revenue * rate
268,460,854,633*80%

2.1.2. Performing detail plan
 Risk assessment
Audit risk assessment is an important part of the detailed audit planning process. It helps
AUDITORS identify the risks that may be encountered during the audit process as well as
delineate potentially risky accounts or items to focus on. For revenue items at PNJ, the risk
assessment also follows the general process including:
- Inherent Risk Assessment: PNJ customer is the customer that has been audited from the
previous year, the AUDITORS based on the previous year data gathered together with the
preliminary analysis of the financial statements of the customer to make conclusions of inherent
risk. Based on the data and analysis results, AUDITORS concludes that for the revenue item at
PNJ there is no potential risk.
- Controls risk assessment: By preliminary investigation of the control system for the revenue
item, the AUDITORS recognizes that the customer has a fairly controllable system and assessed
controls risk is medium.
- Detection risk assessment: The risk assessment is based on the results of the inherent risk,
control risk and the desired level of audit risk. As for revenue, AUDITORS expects the level of
detection risk is low. Inherent risk and control risk have been identified at low and intermediate

levels. So, the risk of detection is also low.
After performing the audit risk assessment, AUDITORS will respond to questions about the
auditing procedures for the revenue item to determine the specific audit program for this item.
2.2. PERFORMING THE AUDIT
The initial stages of the
audit
preparation
phase are primarily intended to enable the auditorS to develop an effective and efficient audit
plan and audit program. In the course of auditing, the AUDITORS shall perform audit procedures
to obtain sufficient and valid evidence. As with the audit of other items, the audit stage in the
revenue audit process also complies with the Tasks including conducting test of controls, carrying
out analytical procedures, performing test of details of balances.

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2.2.1. Test of controls
After understanding and realizing that the internal control system of PNJ was initially evaluated as effective.
AUDITORS carries out control procedures that are implemented to collect evidence of the designs and
operations of the internal control system:
To evaluate the efficiency and effectiveness of the internal control system, AUDITORS conducted an
interview with the accounting department and business department to determine the presence and
impact of the internal control system on the Company's operations.

Table 2.4: Tests the effectiveness of internal control
Questions
1. Does the company send the
announcement to the customer first?

YES

offer

and

price

2. Can the price be changed?

NO

N/A

X
X

3. Does the company have a discount policy, trade discount?

X

4. Did the shipment sales have the correct plan signed with
X
the customer?
5. Is there an approval by a competent person when selling
X
a batch?
6. The company has a policy of commission or economic
incentives if the sales department sells a lot of goods?
7. Sales department is independent of sales accounting?

X

X

8. Does the company know about the collusion between
X
sales man and customers?
9. Are there any risks to the goods on the way to the
X
customer?
AUDITORS initial assessment of effectiveness of internal control system for revenue
cycle is effective

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In addition, AUDITORS conducted control tests for the revenue items: To confirm the initial results of
AUDITORS on the control risk for the revenue items, AUDITORS proceeded to select samples of sales
invoices in the days at the end of 2016 to check the validity of the VAT invoices, the selling prices matched
with the posted price announcement, the business strategy of the Company, ... the test results did not
detect any errors. Therefore, AUDITORS assessed the control risk for revenue retained at the initial level for
this item.
2.2.2. Analytical procedures
Table 2.5: Analysis of 2016 sales revenue
2015
Code

Price

Sales in
2015


2016
Sales in
2016

Sales of
2015
recorded
in 2016

Sales in
2016
Adjusted 2016
recorded sales revenue
in 2017

DHKF1221

3.1

29,300,840 29,578,110 1,019,040

408,850

30,188,300

DKSJFKS1313

2.2

10,268,910 17,022,450 1,336,300


747,480

17,611,270

SDKHFWEK131

1.2

33,269,210 27,245,790 2,198,210

446,656

29,444,000

DSJFHDSK154

1.2

20,814,020 18,013,850 1,979,790 2,161,540

17,832,100

According to the table above, 2016 sales included shipments from the end of 2015, besides those
shipments at the end of 2016 were recorded in 2017, AUDITORS should pay attention to check more
accurate on the cutoff.

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