Auditing financial statements is the process by which professional auditors or auditing firms provide an opinion on the fairness and reasonableness of material aspects of financial statements.
What are financial statements?
According to Articles 3 and 29 of the 2015 Accounting Law:
“Article 3. Interpretation of terms
Financial statements are a system of economic and financial information of an accounting entity, presented in the forms prescribed by accounting standards and accounting regulations.
Article 29. Financial statements of accounting units
The financial statements of an accounting entity are used to summarize and explain the financial position and operating results of the accounting entity. These financial statements include:
a) Financial statement;
b) Report on operational results;
c) Cash flow statement;
d) Explanatory notes to the financial statements;
e) Other reports as required by law.
Accordingly, financial statements include reports on the assets, equity, and liabilities of a business, as well as its financial situation and business results for the period.
In other words, financial accounting reports are a means of presenting the profitability and financial status of a business to interested parties (business owners, investors, lenders, tax authorities, and other regulatory agencies, etc.). audit of financial statements
What is financial statement auditing?
An audit report is a document prepared by a practicing auditor, an auditing firm, or a branch of a foreign auditing firm in Vietnam after the completion of an audit, providing an opinion on the financial statements and other matters audited according to the audit contract.
Auditing financial statements Financial statements (FS) are audits conducted by practicing auditors, auditing firms, and branches of foreign auditing firms in Vietnam to examine and provide opinions on the fairness and reasonableness of financial statements. These audits must be based on the material aspects of the audited entity's financial statements as stipulated by auditing standards.
An auditor is a person who has been granted an auditor's certificate in accordance with the law, or a person who holds a foreign certificate recognized by the Ministry of Finance and has passed an examination on Vietnamese law.
A practicing auditor is an auditor who has been granted a Certificate of Registration for Auditing Practice.
An auditing firm is an enterprise that meets the requirements to conduct auditing services as stipulated in this Law and other relevant legal regulations.
An audited entity is a business or organization that is audited by an auditing firm or a branch of a foreign auditing firm in Vietnam under an audit contract.
Contents of the audit report
In order for auditors to have grounds to form an audit opinion, Vietnamese auditing standards require auditors to obtain reasonable assurance that the financial statements, taken as a whole, are free from material misstatement due to fraud or error. Reasonable assurance is a high level of assurance and is only achieved when the auditor has obtained sufficient appropriate audit evidence to reduce the audit risk (the risk that the auditor will give an inappropriate opinion when the financial statements contain material misstatement) to an acceptable low level. audit of financial statements
However, in financial statement audits, reasonable assurance is not absolute assurance, as there are always inherent limitations to the audit process, meaning that most of the audit evidence that auditors rely on to draw conclusions and opinions is more persuasive than conclusive.
Based on the audit results, practicing auditors and audit firms, including branches of foreign audit firms in Vietnam, must provide opinions on the financial statements and other audited matters in accordance with the auditing standards.
The audit report on the financial statements is prepared in accordance with auditing standards and includes the following contents:
a) The subject of the audit;
b) Responsibilities of the audited entity and the auditing firm, or the branch of a foreign auditing firm in Vietnam;
c) Scope and basis for conducting the audit;
d) Location and time of preparing the audit report;
e) Auditor's opinion on the audited financial statements;
f) Other content as prescribed by auditing standards.
The value of an audit report
After completing the audit of financial statements, the auditor must issue an audit report. The audit report on financial statements assesses the fairness and reasonableness of the financial statements, in accordance with accounting standards and accounting regulations issued by competent authorities or organizations.
The audit report is used to:
- Shareholders, investors, joint venture partners, customers, and other organizations and individuals with direct or related interests in the audited entity handle the relationships regarding the rights and obligations of the relevant parties;
- State agencies manage and operate according to their assigned functions and duties;
- The audited entity promptly identifies, addresses, and prevents errors and weaknesses in its operations.
EXPERTIS has summarized and presented to businesses the issues related to auditing financial statements. In addition to the above content, if your business has any other questions that have not been answered, please contact EXPERTIS's Consulting Department for prompt assistance.