NATIONAL ECONOMICS UNIVERSITY
ADVANCED EDUCATIONAL PROGRAMS
ESSAY ON AUDITING
RESEARCH TOPIC: AUDIT EVIDENCE AND PROCEDURES FOR
OBTAINING AUDIT EVIDENCE.
Student
: Nguyen Thi Ngoc Hoa
Major
: Auditing
Class
: Auditing 62A
Student’s ID : 11201536
Supervisor
: Dr. Bui Thi Minh Hai
Ha Noi, 2023
TABLE OF CONTENTS
INTRODUCTION ............................................................................................................. 3
CHAPTER 1: GENERAL THEORY ON AUDIT EVIDENCE AND
PROCEDURES FOR OBTAINING AUDIT EVIDENCE. ....................................... 5
1.1. Concepts and roles of audit evidence .....................................................5
1.1.1. Definitions ...........................................................................................5
1.1.2. The role and significance of audit evidence ........................................6
1.2. The appropriateness and sufficiency of audit evidence ........................7
1.2.1. The appropriateness of audit evidence ................................................7
1.2.2. The sufficiency of audit evidence ........................................................8
1.3. Classification of audit evidence .................................................................9
1.3.1. Classification based on source ...........................................................10
1.3.2. Classification based on type evidence ............................................... 11
1.3.3. Special audit evidence ....................................................................... 11
1.4. Auditor's decisions on collecting audit evidence .................................18
1.5. Audit procedures for obtaining audit evidence ...................................19
1.5.1. Inspection ...........................................................................................20
1.5.2. Observation ........................................................................................21
1.5.3. External Confirmation .......................................................................22
1.5.4. Recalculation .....................................................................................23
1.5.5. Reperformance ...................................................................................23
1.5.6. Analytical Procedures ........................................................................24
1.5.7. Inquiry................................................................................................25
CHAPTER 2: THE CURRENT STATE OF APPLYING PROCEDURES FOR
OBTAINING AUDIT EVIDENCE IN AUDIT FIRMS IN VIETNAM. ................. 26
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2.1. Inspection .................................................................................................26
2.1.1. Inspection of documents ....................................................................26
2.1.2. Inspection of tangible assets ..............................................................26
2.2. Observation ..............................................................................................27
2.3. External Confirmation .............................................................................29
2.4. Recalculation ............................................................................................30
2.5. Analytical procedure ................................................................................31
2.6. Inquiry ......................................................................................................31
CHAPTER 3: ASSESSMENT AND RECOMMENDATIONS OF APPLICATION
PROCEDURES FOR OBTAINING AUDIT EVIDENCE IN AUDIT FIRMS IN
VIETNAM. ....................................................................................................................... 33
3.1. Assessment ..............................................................................................33
3.1.1. Advantages ........................................................................................33
3.1.2. Limitations .........................................................................................35
3.2. The inherent necessity of refining procedure for obtaining audit
evidence in audit firms in Vietnam. ........................................................................36
3.3. Recommendations to enhance procedures for obtaining audit
evidence for auditing firms in Vietnam ..................................................................37
3.3.1. General Solutions ..............................................................................37
3.3.2. Specific solutions for each procedure for obtaining audit evidence .38
CONCLUSION ................................................................................................................ 41
REFERENCES ................................................................................................................ 42
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INTRODUCTION
Engaging in market economy activities is crucial for investors, business owners,
and government agencies in terms of financial economics. It is imperative to have
reliable information for making investment decisions, business decisions, and
management decisions. Given its practical impact, financial consulting and auditing
have become indispensable in the market economy. Financial consulting and auditing
serve as positive conditions to ensure strict compliance with legal and accounting
standards, as well as ensuring that financial figures and documents are reasonably honest
and accurate. Overall, the demand for auditing in Vietnam is expanding, simultaneously
necessitating higher quality in auditing services.
Conducting a financial report audit necessitates the auditing company to
undertake various tasks, which must be carried out in three stages: audit planning,
execution of the plan, and conclusion of the audit. While some tasks are specific to one
of the three stages, there are also many processes that must be carried out consistently
throughout the entire audit process, such as audit preparation, gathering audit evidence,
evaluating internal control systems, and assessing significant risks. Among these, the
task of searching for and obtaining audit evidence is of utmost importance, and is a task
that auditors must always perform in a financial report audit.
The issue of audit evidence is inseparable from every activity of the auditor in a
financial report audit. The auditor will gather information and documentation to form
the basis for their opinion in the audit report. The credibility of their comments largely
depends on the documentation collected by the auditor and used as the foundation for
their opinion. Recognizing the significance of audit evidence, in this auditing course
project, I have chosen the topic “Audit Evidence and Procedures for Obtaining Audit
Evidence by Audit Firms” in order to have the opportunity to conduct research to
enhance my understanding, while also hoping that this article will contribute to
improving the quality of audit evidence.
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This topic is divided into three primary chapters:
 Chapter 1: General theory on audit evidence and procedures for obtaining
audit evidence.
 Chapter 2: The current state of applying procedures for obtaining audit
evidence in audit firms in Vietnam.
 Chapter 3: Assessment and recommendations of application procedures for
obtaining audit evidence in audit firms in Vietnam.
I wish to express my deep appreciation to Dr. Bui Thi Minh Hai for offering
invaluable support during this topic's fulfillment.
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CHAPTER 1: GENERAL THEORY ON AUDIT EVIDENCE AND
PROCEDURES FOR OBTAINING AUDIT EVIDENCE.
Auditing stands as a cornerstone of financial accountability and trust in the
modern business world. At its core lies the meticulous process of gathering and
evaluating audit evidence - a task that demands precision, methodology, and a deep
understanding of financial systems. This chapter embarks on a comprehensive
exploration of the fundamental theory underpinning audit evidence and the procedures
employed to obtain it. By dissecting the principles that govern the sufficiency,
appropriateness, and reliability of evidence, a solid foundation is laid for a rigorous
examination of auditing practices.
1.1. Concepts and roles of audit evidence
1.1.1. Definitions
The essence of auditing is the process where auditors collect audit evidence to
serve as the basis for their opinion on the audited entity. Different types of audit evidence
will have varying impacts on the formation of the audit opinion. Therefore, auditors
need to have specific awareness of these types of evidence in order to assess them
effectively in audit practice. Audit evidence plays a crucia
l role as the foundation for forming the audit conclusion. Consequently, the
success of the entire audit depends primarily on the acquisition and subsequent
evaluation of audit evidence by the auditor.
According to the Internal Standard on Auditing 500 (ISA 500), audit evidence is
“the information used by the auditor in arriving at the conclusions on which the auditor’s
opinion is based. Audit evidence includes both information contained in the accounting
records underlying the financial statements and other information.”
According to Vietnam Auditing Standard No. 500, "Audit Evidence": "Audit
evidence encompasses all the documents and information that auditors collect in relation
to the audit, and based on this information, auditors form their opinions."
In accordance with this definition, audit evidence includes documents,
information contained in records and ledgers, including financial reports, as well as
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other documents and information. Auditors and auditing firms must gather sufficient and
appropriate audit evidence to form their opinions on the financial reports of the audited
entity. Evidence serves as specific proof for audit conclusions. The concept of audit
evidence clearly highlights its fundamental nature and its relationship with audit
conclusions. In auditing, along with the audit conclusions expressed in the audit report,
audit evidence is the product of the auditing process: it not only provides the legal basis
for audit conclusions but also establishes trust for those concerned.
According to Vietnam Auditing Standard No. 500, it is stated: "Auditors and
auditing firms must gather sufficient and appropriate audit evidence to form their
opinions on the financial reports of the audited entity." Therefore, auditors must collect
adequate and appropriate evidence before issuing their audit opinions. However,
determining what constitutes "appropriate" and "sufficient" evidence is not a
straightforward matter.
1.1.2. The role and significance of audit evidence
Audit evidence holds significant importance in forming the auditor's opinions
and decisions regarding the auditing process. It serves as the foundation and one of the
determining factors for accuracy and risk in the auditor's opinion. Consequently, the
success of the audit primarily depends on the collection and subsequent evaluation of
evidence by the auditor. When auditors fail to gather sufficient and accurately assess
appropriate evidence, it becomes challenging to make an accurate assessment of the
audited entity.
Auditing Standard No. 500 stipulates: "Auditors and auditing firms must gather
sufficient and appropriate audit evidence to form their opinions on the financial reports
of the audited entity."
This highlights a crucial significance for independent auditing organizations,
state audit bodies, or legal authorities. Audit evidence also serves as the basis for
supervising and assessing the quality of auditors' activities during the auditing process.
This supervision can be carried out by management for auditors conducting the audit or
by the judiciary for auditing entities in general (in the event of legal proceedings
involving auditors or auditing firms).
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1.2. The appropriateness and sufficiency of audit evidence
In practical auditing, based on the collection and evaluation of audit evidence,
the auditor will form an opinion in the form of an audit conclusion. Therefore, audit
evidence directly influences the audit conclusion. The critical issue is the need to gather
persuasive audit evidence.
The persuasiveness of audit evidence is determined by two essential qualities:
appropriateness and sufficiency.
1.2.1. The appropriateness of audit evidence
The appropriateness is the measure of the quality of audit evidence; that is, its
relevance and its reliability in providing support for the conclusions on which the
auditor's opinion is based.
Appropriateness implies that audit evidence must be relevant to the audit
objective. Audit evidence may be relevant to one or multiple different objectives. For
example, when an auditor observes inventory to verify its existence, they may also
obtain measurement evidence based on that observation. However, various types of
evidence may be specific to serving a particular objective. The auditor needs to grasp
this aspect to appropriately coordinate audit work, avoiding redundancy and thereby
enhancing the efficiency of the audit process.
The reliability of information to be used as audit evidence, and therefore of the
audit evidence itself, is influenced by various factors, such as the source and nature of
the information, timing, and the objectivity of the audit evidence. These factors are
explained as follows:
Source and nature of the information collected: In relation to this issue, VSA.
500 "Audit Evidence" provides assumptions about the impact of information sources on
the reliability of audit evidence as follows:

Audit evidence obtained from external sources is more reliable than evidence
obtained from internal sources.

Evidence collected from internal sources will have a high level of reliability when
related internal control systems are effective.
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
Audit evidence obtained directly by the auditor (for example, observation of the
application of a control) is more reliable than audit evidence obtained indirectly
or by inference (for example, inquiry about the application of a control).

Audit evidence in documentary form, whether paper, electronic, or other
medium, is more reliable than evidence obtained orally (for example, a
contemporaneously written record of a meeting is more reliable than a subsequent
oral representation of the matters discussed).

Audit evidence provided by original documents is more reliable than audit
evidence provided by photocopies or facsimiles, or documents that have been
filmed, digitized or otherwise transformed into electronic form, the reliability of
which may depend on the controls over their preparation and maintenance.
Timing of the collection of audit evidence: The timing of the collection of audit
evidence can also affect the reliability of audit evidence. The timing of audit evidence
will be particularly important in verifying current assets, short-term liabilities. For
example, evidence obtained from the physical count of inventory at the time of preparing
the balance sheet will be more reliable than a count at a different time during the year.
Objectivity of audit evidence: In essence, the more objective the audit evidence,
the higher its reliability. For example, evidence obtained from independent external
sources is considered more objective than audit evidence provided by the audited entity.
Evidence related to estimates or forecasts made by the board of directors, such as
estimates of potentially obsolete or damaged inventory, or estimates of the percentage
of accounts receivable that are likely to be collected, is always considered to be subject
to a degree of subjectivity.
1.2.2. The sufficiency of audit evidence
Sufficiency is the measure of the quantity of audit evidence. The quantity of audit
evidence needed is affected by the auditor's assessment of the risks of misstatement (the
higher the assessed risks, the more audit evidence is likely to be required) and also by
the quality of such audit evidence (the higher the quality, the less may be required).
Obtaining more audit evidence, however, may not compensate for its poor quality
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The adequacy of audit evidence refers to the quantity and types of audit evidence
that need to be collected. There is no specific standard that dictates how much evidence
is sufficient; it depends on the assessment of the auditor. This assessment is contingent
on specific situations, and in such cases, the auditor must consider factors that affect the
adequacy of audit evidence. Factors influencing the adequacy of audit evidence include:
Firstly, the effectiveness of the evidence. The less reliable the evidence, the more
need there is to collect. A single (or few) pieces of low reliability evidence may not be
sufficient to make a reasonable assessment of the specific audit subject.
Secondly, the materiality. The more significant the specific subject being audited,
the greater the quantity of audit evidence needed for the auditor to make a reliable
opinion about the audit subject. The auditor must detect any material misstatements
affecting the financial report. Material misstatements are typically those with significant
monetary value. If errors occur in these areas, they may have a significant impact on the
financial report. Conversely, in smaller-scale items, if there are errors, they may have
less of an impact on the financial report.
Thirdly, the level of risk. Specific subjects (such as accounts, departments,
operations, etc.) that are assessed to have a higher risk require a greater amount of audit
evidence to be collected, and vice versa.
Fourthly, the economic aspect. Auditors always face limitations in resources, so
the collection of sufficient audit evidence must be done within a reasonable time frame
and acceptable cost levels. Auditors must always weigh the benefits obtained against the
costs incurred in the process of gathering audit evidence.
1.3. Classification of audit evidence
Each type of evidence has a different level of reliability, and the reliability of
evidence is a crucial factor in collecting and using them in the most effective and rational
way. The reliability may depend on the source (internal or external to the business), form
(visual, documentary, or oral), and specific circumstances. To assist the auditor in
reasonably determining the reliability of evidence for favorable collection and
utilization, the classification of evidence is of paramount importance. It enables the
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auditor to identify high-reliability evidence, thereby reducing audit risks and minimizing
audit costs.
1.3.1. Classification based on source
The classification of audit evidence is based on the origin of the information and
documents related to the financial statements that the auditor collects during the audit
process. In this classification, evidence is categorized as follows:
Firstly, evidence that the auditor directly examines and discovers, such as selfinventory, asset verification, observation of internal control activities... This type of
evidence has the highest level of reliability because it is performed directly by the
auditor. However, it may still be time-sensitive (for example, the physical nature of
inventory during different periods may yield different results).
Secondly, evidence issued and stored by other parties within the business, such
as sales invoices, purchase invoices, fixed asset transfer records... This type of evidence
is highly persuasive as it comes from external sources. However, this type of evidence
still has the potential to be altered, which can affect the reliability of the audit regarding
the control activities within the business.
Thirdly, evidence issued by the entity but stored externally, such as disbursement
vouchers, sales invoices... This is a type of evidence with high persuasiveness as it is
provided by a third party (however, it must ensure the independence of the provider from
the business).
Fourthly, evidence issued and stored by external parties: This type of evidence is
often collected through confirmation letters, and it is highly persuasive as it is directly
collected by the auditor (the persuasiveness will diminish if the auditor cannot control
the confirmation letter sending process). It includes various types such as debt
confirmation forms, accounts receivable confirmation forms, bank account balance
confirmations...
Fifthly, evidence issued by external parties and internally circulated, such as
timecards, payroll payment records, summary records, detailed records, product
inspection reports, bills of lading... The origin of this evidence constitutes a large and
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quite common portion. It provides information quickly and at a low cost. However,
because this evidence originates internally from the business, it is only truly reliable
when the internal control system of the business is genuinely effective. Therefore, its
persuasiveness is not very high.
1.3.2. Classification based on type evidence
In this classification, audit evidence is categorized into three distinct types:
Classification based on tangible assets, classification based on factual evidence obtained
through documentation, and classification based on evidence gathered through
interviews.
Firstly, evidence classified based on tangible assets: In this classification, all
audit evidence collected by the auditor comes from tangible assets such as fixed assets,
inventory, cash, or other valuable documents. Corresponding to this type of evidence are
records such as fixed asset inventories, inventory counts, cash counts, etc. Tangible
evidence is the most authentic and reliable type of evidence among all types, as they are
physical assets that can be seen and touched.
Secondly, evidence classified based on documentation: This type of audit
evidence primarily consists of evidence gathered by the auditor from the provision of
documentary information by relevant parties in response to the auditor's request. This
type of evidence serves as reference and the auditor needs to verify them to determine
whether they are accurate or not.
Thirdly, evidence classified based on interviews: Unlike the aforementioned
types of evidence, in this method, the auditor directly interviews individuals involved in
the financial matters of the business. Based on the information obtained from these
interviews, the auditor will conduct further investigation and verification to ascertain
the truthfulness and reach a conclusion.
1.3.3. Special audit evidence
In addition to the audit evidence collected through the techniques mentioned
earlier, in certain special cases, auditors must gather additional audit evidence. Common
types of evidence in this category include expert opinions, explanations from
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management, the use of internal auditor's documents, documents from other auditors, or
evidence from related parties.
1.3.3.1. Evidence produced by a management's expert
Management's expert – An individual or organization possessing expertise in a
field other than accounting or auditing, whose work in that field is used by the entity to
assist the entity in preparing the financial statements.
This type of evidence is used during the planning phase of the audit. When
auditors gather foundational information about the audited entity, they need to anticipate
the need for expert opinions if deemed necessary. They should consider and evaluate
factors such as the materiality of the item to be examined in relation to the overall
financial information, the content and complexity of the items, including any risks and
errors associated with them, and other effective audit evidence applicable to these items.
For a specific issue that auditors may not have in-depth expertise on, such as
evaluating the value of artworks, artistic creations, minerals, etc., auditors may seek the
opinion of an expert on that matter. However, even if auditors use information produced
by a management’s expert as audit evidence, auditing standards still require the auditor
to be ultimately responsible for the opinion they provide in the audited financial
statements.
1.3.3.2. Evidence produced by management’s explanations
The auditor must collect evidence regarding the acknowledgment of
responsibilities by the management (Director's explanations) for the preparation and
presentation of the financial statements... This is done by obtaining the management's
explanatory documents. However, the Director's explanations do not absolve the auditor
from the responsibility for the opinion expressed in the audit report. Explanations from
management do not substitute for other audit evidence. In certain circumstances,
explanations from management may be considered as reasonable audit evidence if such
explanations are deemed credible.
VSA 580 regarding "explanations from management" stipulates: "The auditor
must obtain explanations from the Director (or the person in charge) of the audited
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entity." This evidence is used to recognize the Board of Directors' responsibility for the
reliability and legality of the information in the financial statements through the internal
control system and the accounting system. The auditor verifies and provides their
opinion on the reliability and reasonableness of the information in the financial
statements.
The content of the explanations typically consists of three main types of
commitments:
Type I: General explanations about the responsibility of the Board of Directors
(independence, objectivity, honesty) in accurately presenting the financial statements.
Type II: Detailed explanations about specific aspects, elements contributing to
accuracy and reasonableness, including confirmations of rights and obligations,
valuations and allocations, as well as classifications and presentations.
Type III: Explanations about the relationship between the Board of Directors and
the auditor.
The form of explanations includes written explanations in the form of: The
Director's explanatory document; A letter from the auditor listing all their understanding
of the Director's explanations and confirming their accuracy; Minutes of board meetings
or financial reports that have been approved by the Director.
Key elements of the explanatory document include: The explanatory document
must be sent directly to the auditor with content comprising of explanatory information,
date, full name, signature of the author or confirmer in the Director's explanatory
document recorded on the audit report. In specific cases, the explanatory document may
be prepared before or after the issuance date of the audit report. The Director of the
respective units usually signs the explanatory document, and in special cases, the auditor
may accept an explanatory document from other members within the unit who have been
authorized by the Director.
Collection and use of the Director's explanations
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Assessment of the Director's explanations: The auditor needs to collect audit
evidence from information within or outside the unit to verify if the Director's
explanations align with other audit evidence. The auditor must understand the reasons
and review the reliability of both the audit evidence and the Director's explanations;
determine the level of understanding of the issues that have been explained by the
preparer of the explanatory document.
Some limitations of the explanatory document: The Director's explanations
cannot replace other audit evidence collected by the auditor; the reliability of the
Director's explanations is not high because this type of evidence is provided by the
entity, making it subject to the integrity and honesty of the Director. VSA 580, paragraph
17 states: "The auditor must reassess the reliability of all other explanations from the
Director during the audit process and consider their impact on the financial statements,
and must give an opinion accepting or rejecting each part."
In addition to the content in the aforementioned standard, the auditor may request
the Director to provide additional explanations depending on the type of business,
enterprise, and the significance of each item in the financial statements
1.3.3.3. Documentation from internal auditors, other auditors
Documentation from internal auditors.
The auditor may also use the internal audit documentation of the client entity as
audit evidence if it is deemed to be sufficiently reliable. This helps reduce but not replace
audit procedures and audit costs. 'Effective and appropriate internal audit functions will
reduce the extent of work that independent auditors have to do, but cannot replace the
work of independent auditors' (International Standards and Principles of Auditing, 1992,
page 92).
This evidence is used to assist the auditor in determining the schedule, content,
and scope of audit procedures.
According to VSA 610 'Using the Work of Internal Auditors', paragraph 12 states:
Initial evaluation of the internal audit activity is based on the following key criteria: the
position of internal audit within the organizational structure of the entity affects the
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objectivity and independence of internal audit; the role of internal auditors; the
professional competence of internal auditors, the professional skepticism of internal
auditors; the performance and effectiveness of internal auditors in the previous financial
year.
The process of collecting and using the documentation of internal audit:
Establishing communication and coordinating with internal auditors; evaluating and
reviewing internal audit documentation: the evidence collected is complete and
appropriate to serve as a solid, reasonable basis for drawing conclusions...
When using internal audit documentation, the auditor must have control over the
internal audit process, and the auditor should only use the internal audit documentation
for units with an effectively functioning internal audit function. When using internal
audit documentation and finding that the internal auditor has identified certain errors in
a particular item, with their own skepticism and judgment, the auditor must conduct a
more thorough examination, perform additional procedures to gather more evidence
about that item.
Documentation from other auditors.
In cases where the client was audited by another audit firm in prior years, the new
auditor may use the documentation of the independent auditor. However, the auditor
must take full responsibility when using this evidence.
Vietnamese Auditing Standards No. 600 'Using the Work of Another Auditor',
paragraph 17 stipulates: 'Another auditor must coordinate with the principal auditor in
cases where the principal auditor uses their audit findings.'
The purpose of using this evidence is when auditing the financial statements of
an entity that includes the consolidation of financial information of a higher-level entity
with one or more lower-level entities and other economic entities. The auditor uses the
audit documentation of other auditors (who are responsible for auditing the financial
statements and signing the audit reports of the units consolidated into the financial
statements of the higher-level entity) regarding the financial information of those units.
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The process of collecting and using the documentation of other auditors: When
planning, and if it is anticipated that the documentation of other auditors will be used,
the auditor must assess the professional competence of the other auditor based on: the
audit firm, the location where the other auditor practices, other colleagues, clients –
individuals with professional relationships with the other auditor, and have direct
communication with the other auditor. When the auditor concludes that the
documentation of the other auditor is not usable and the auditor cannot perform
additional audit procedures for the financial statements of the lower-level entity and
other economic entities audited by the other auditor, if it is found to have a material
impact on the audited financial statements, the auditor must provide an opinion with a
limitation of scope.
The auditor needs to inform the other auditor about: Independence requirements
related to the higher-level entity, lower-level entity, and other economic entities, and
collect an explanatory document regarding compliance with those requirements; the use
of documentation and audit reports of the other auditor, and the cooperation between the
two parties from the planning stage; specific issues of concern, procedures for
identifying intercompany transactions that need to be stated in the explanatory document
in the audit schedule; requirements related to accounting, auditing, reporting, and
collecting an explanatory document regarding compliance with those requirements.
In cases where the other auditor issues or is expected to issue a modified audit
report, the auditor must reevaluate the nature and extent of the impact of those
modifications on the financial statements audited by the auditor and may need to modify
their own report.
The auditor must retain in their records relevant documents related to the
financial statements audited by the other auditor, documents regarding the performance
of audit procedures, and conclusions obtained from the audit procedures, the name of
the other auditor and their conclusions, even if they are not material. However, the
auditor is ultimately responsible for audit risks when using the documentation of the
other auditor.
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In practice, this cooperation is challenging to implement, and the auditor only
reviews audit reports of another audit firm issued in the previous year, in which the
auditor is concerned with the findings and opinions of the other auditor in the audit
conclusion, and the auditor must gather additional evidence on issues that have a
material impact on the financial statements of the entity.
Currently, there are regulations from the State on quality control of accounting
and auditing services and the quality assessment body of other audit firms, so the use of
documentation from other auditors still faces many limitations.
1.3.3.4. Evidence procuded by related parties
The auditor may also use evidence from related parties to draw conclusions
regarding related matters in the Financial Statements. Parties are considered related if
one party has the ability to audit or significantly influence the other in financial decisionmaking and operations. Related parties can also be understood as entities with the
capacity to manage, control, or significantly influence the audited entity in the process
of operational or financial decision-making. Collecting evidence from the client's related
parties is crucial. 'If the auditor is unable to obtain sufficient and appropriate audit
evidence about related parties and transactions with such parties, the auditor shall
describe in the auditor's report the nature of the limitations on the scope of the audit and,
where practicable, the auditor's conclusion about the possible effects on the financial
statements' (International Standards and Principles of Auditing, 1992, page 158).
The auditor collects evidence about related parties by applying certain
procedures:
 Reviewing confirmation letters for receivables, payables, and confirmations from
banks. This helps the auditor gain a better understanding of the inherent nature
of the relationships between the various related parties;
 Reviewing significant investment and financing transactions of the entity, such
as large-scale purchases or sales of shares;
 Verifying unusual transactions that the auditor finds suspicious. This may help
the auditor identify new related parties;
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 Verifying or collecting information through investigations, interviews, sending
confirmation letters to lawyers, banks, tax authorities, customs, etc.;
 Verifying the amounts and total value of transactions with related parties.
1.4. Auditor's decisions on obtaining audit evidence
The critical issue is to clearly identify the quantity of sufficient and appropriate
evidence needed to comprehensively assess the audited entity. The auditor's decision on
collecting evidence can be divided into four types:
Decision on the audit procedures to be applied:
Audit procedures provide detailed guidance on the process of collecting specific
individual audit evidence to be gathered at a particular point in an audit. For example,
detailed instructions on the process of collecting material inventory count, cash in the
safe, or detailed instructions on comparing various payment transactions with cash
disbursements, journal entries, or details in shipping documents.
These instructions are typically organized in a specific order to help the auditor
use them throughout the audit.
Decision on the sample size to be selected for a specific procedure:
After selecting the audit procedure, the auditor determines the sample size. The
sample size may include one or all elements in the population being examined. For
example, in the audit procedure of Receipt Vouchers, assuming there are 5,000 receipt
vouchers within the scope of the audit (Q1/2005), the auditor may choose a sample size
of 300 receipt vouchers for detailed examination. This sample size selection method
may vary between audits.
Decision on the specific items to be selected from the population:
Once the sample size is determined for each audit procedure, the auditor needs
to identify specific individual elements for specific testing. For example, after deciding
on 300 vouchers from a population of 5,000 receipt vouchers for detailed examination,
the auditor can select specific elements in various ways: (a) Selecting 100 vouchers per
month. (b) Selecting 300 vouchers with the highest monetary value; (c) Randomly
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selecting vouchers; (d) Using the auditor's judgment or a combination of the above
methods.
Decision on the timing of completing the procedures:
Determining the timing of audit procedures can be done either soon after the
accounting period reflected in the financial statements ends but before the financial
statements are finalized, or it can be done much later after the end of that accounting
period. However, clients usually want the audit firm to complete the audit within a
certain timeframe from the end of the accounting period.
The results of these decisions are reflected in the audit program (Chapter Five),
which describes the audit procedures, the sample size of different items to be selected,
and the completion time for each component of the financial statements.
1.5. Audit procedures for obtaining audit evidence
The auditor should obtain audit evidence to draw reasonable conclusions on
which to base the audit opinion by performing audit procedures to:
 Obtain an understanding of the entity and its environment, including its internal
control, to assess the risks of material misstatement at the financial statement and
relevant assertion levels (audit procedures performed for this purpose are referred
to as risk assessmentprocedures);
 When necessary, or when the auditor has determined to do so, test the operating
effectiveness of controls in preventing or detecting material misstatements at the
relevant assertion level (audit procedures performed for this purpose are referred
to as tests of controls); and
 Detect material misstatements at the relevant assertion level (audit procedures
performed for this purpose are referred to as substantive procedures and include
tests of details of classes of transactions, account balances, and disclosures, and
substantive analytical procedures).
According to VSA 500: "The auditor gathers audit evidence using the following
methods: inspection, observation, inquiry, confirmation, computation, and analytical
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procedures. The application of these methods may depend on the time available for
gathering audit evidence."
Each audit may have different objectives and specific targets, and the audited
entities themselves may have different characteristics. Additionally, each method of
obtaining audit evidence provides different levels of reliability, and each method has its
own strengths and weaknesses. Therefore, based on professional judgment and the
specific circumstances of each case, the auditor selects the appropriate method for
gathering evidence.
1.5.1. Inspection
According to VSA 500 “Inspection involves examining records or documents,
whether internal or external, in paper form, electronic form, or other media, or a physical
examination of an asset. Inspection of records and documents provides audit evidence
of varying degrees of reliability, depending on their nature and source and, in the case
of internal records and documents, on the effectiveness of the controls over their
production.”
Inspection of records or documents: Inspection of records and documents
provides audit evidence of varying degrees of reliability, depending on their nature and
source and, in the case of internal records and documents, on the effectiveness of the
controls over their production.
This type of inspection is conducted in two ways:
 Starting from a pre-existing conclusion, the auditor gathers documents to support
this conclusion. For example, the auditor checks legal documents regarding
ownership rights.
 The auditor examines documents related to a transaction from its initiation until
it is recorded in the books, and vice versa. This process can be carried out in two
directions: starting from the original documents - verifying their recording
 in the ledger, or starting from the ledger - verifying against the relevant original
documents.
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The advantage of this procedures is that it is relatively convenient to implement,
as documents are usually readily available. Additionally, the cost of gathering evidence
is lower compared to other techniques. However, there are certain limitations. The
reliability of the evidence depends on the source of the documents and the effectiveness
of the internal control system. Provided documents can be altered or forged, potentially
compromising objectivity. Therefore, verification through other technical methods may
be necessary.
Inspection of Tangible Assets: Inspection of tangible assets consists of physical
examination of the assets. Inspection of tangible assets may provide appropriate audit
evidence with respect to their existence, but not necessarily about the entity's rights and
obligations or the valuation of the assets. Inspection of individual inventory items
ordinarily accompanies the observation of inventory counting.
The advantage of this procedure is that the evidence is highly reliable as it
provides concrete proof of the existence of assets and is characterized by objectivity.
However, it also has certain limitations. For some fixed assets such as buildings,
machinery, and equipment, conducting a physical count only confirms the existence of
the asset, but does not provide information about ownership rights. For intangible assets,
a physical count cannot capture crucial details such as quantity, quality, technical
condition, ownership, or the method used for valuation. Due to these limitations,
evidence obtained through physical counts is always supplemented with other forms of
evidence to arrive at a correct audit conclusion.
1.5.2. Observation
According to VSA 500: “Observation consists of looking at a process or
procedure being performed by others, for example, the auditor's observation of
inventory counting by the entity's personnel, or of the performance of controls.
Observation provides audit evidence about the performance of a process or procedure,
but is limited to the point in time at which the observation takes place, and by the fact
that the act of being observed may affect how the process or procedure is performed.”
The advantage of this procedure is that the evidence obtained is relatively reliable
because it is collected by the auditor themselves. However, it is important to note that
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this evidence only reflects the situation at the time of observation. The evidence obtained
through this technique may not provide a comprehensive view, so it needs to be
supplemented with other types of evidence.
1.5.3. External Confirmation
Confirmation, which is a specific type of inquiry, is the process of obtaining a
representation of information or of an existing condition directly from a third party.
According to VSA 500: “An external confirmation represents audit evidence
obtained by the auditor as a direct written response to the auditor from a third party (the
confirming party), in paper form, or by electronic or other medium. External
confirmation procedures frequently are relevant when addressing assertions associated
with certain account balances and their elements.”
The confirmation procedure can be carried out in two forms: negative
confirmation and positive confirmation. In the case of negative confirmation, the auditor
requests the confirmee to respond if there is a discrepancy between the actual
information and the information the auditor requested to confirm. In the case of positive
confirmation, the auditor requests the confirmee to respond to all confirmation letters,
regardless of whether there is a discrepancy between the confirmed figures and those of
the third party. The second form thus provides higher reliability for the confirmation
technique, but it also comes with higher costs. Therefore, depending on the importance
of the information to the auditor, they will choose the appropriate form.
The confirmation letter (once it has been signed and stamped by the client
company) can be directly sent by the auditor to the third party for confirmation as
requested, and then sent back to the auditor's address. Alternatively, the audited entity
may send the confirmation request letter to the third party at the auditor's request, but
the response letter must still be sent directly to the auditor. The auditor must maintain
control over the entire process of sending and receiving confirmation letters. This
procedure is designed to ensure the independence of the confirmation technique for the
audited entity.
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The advantage of this procedure is that the evidence obtained is highly reliable if
the auditor follows the correct procedures and ensures the following requirements:
 The information must be confirmed as requested by the auditor.
 Confirmation must be done in writing.
 Independence of the third party.
 The auditor must oversee the entire process of sending and receiving
confirmation letters.
However, it has the limitation of relatively high costs, which may restrict its
application, especially when the audited entity is large in scale, has wide-ranging
relationships, or operates in multiple countries. Furthermore, auditors also need to be
mindful of the possibility of arrangements between the audited entity and the third party
regarding the confirmations.
1.5.4. Recalculation
According to VSA 500: “Recalculation consists of checking the mathematical
accuracy of documents or records. Recalculation may be performed manually or
electronically.”
The advantage of this procedure is that it provides highly reliable numerical
evidence. However, the calculations and allocations can sometimes be overly complex
and time-consuming, especially when the audited entity is large in scale or operates in
diverse business areas. Additionally, revaluation focuses solely on the numerical
accuracy without considering the appropriateness of the calculation method used.
Therefore, it is often used in conjunction with other techniques such as analysis and
examination.
1.5.5. Reperformance
According to VSA 500: “Reperformance involves the auditor's independent
execution of procedures or controls that were originally performed as part of the entity's
internal control.”
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1.5.6. Analytical Procedures
According to VSA 500: “Analytical procedures consist of evaluations of
financial information through analysis of plausible relationships among both financial
and non-financial data. Analytical procedures also encompass such investigation as is
necessary of identified fluctuations or relationships that are inconsistent with other
relevant information or that differ from expected values by a significant amount.”
The analysis encompasses relationships between financial information and
between financial and non-financial information. Therefore, the analytical procedures
consist of three elements: prediction, comparison, and evaluation.

Prediction: This involves estimating account balances, values of indicators, rates,
or trends.

Comparison: It entails cross-referencing the predicted figures with the data in the
financial statements.

Evaluation: This step utilizes specialized methods and techniques (such as
interviews and observations) to analyze and draw conclusions regarding any
disparities identified during the comparison.
Analytical procedures are employed to gather audit evidence, which includes
three types: Reasonableness testing, trend analysis, and ratio analysis. Specifically:

Reasonableness testing: This involves comparing actual data with plans,
forecasts, industry benchmarks, and expected results from auditors. The aim is to
identify significant discrepancies and focus on areas where errors are more likely
to occur in the planning, execution, and completion phases of the audit.

Trend analysis: This entails examining changes in various indicators (e.g.,
account balances, cost and income items, business transactions) over time to
detect any unusual fluctuations that warrant further investigation.

Ratio analysis: It involves comparing different indicators to assess their logical
relationships and determine if they are reasonable. Ratios can also be compared
with industry benchmarks to evaluate their reasonableness.
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Analytical procedures are considered a relatively straightforward auditing
procedure that is cost-effective and efficient. It provides evidence of consistency,
accuracy, and legal validity in accounting terms, enabling auditors to pinpoint the audit
focus and avoid getting bogged down in testing specific transactions.
1.5.7. Inquiry
According to VSA 500: “Inquiry consists of seeking information of
knowledgeable persons, both financial and non-financial, within the entity or outside the
entity. Inquiry is used extensively throughout the audit in addition to other audit
procedures. Inquiries may range from formal written inquiries to informal oral inquiries.
Evaluating responses to inquiries is an integral part of the inquiry process.”
Inquiry is crucial as it helps auditors gather additional evidence and strengthen
their arguments. To achieve good results, auditors need to pre-research the topics for
discussion, carefully select questions, adopt an affable attitude, as interviewing is also
an art.
The accuracy of this evidence is typically not very high and is usually used to
support other evidence or to gather feedback. When using this technique, auditors should
pay attention to objectivity and the level of understanding of the interviewee. If deemed
significant, the information should be properly documented in the audit file.
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CHAPTER 2: THE CURRENT STATE OF APPLYING PROCEDURES FOR
OBTAINING AUDIT EVIDENCE IN AUDIT FIRMS IN VIETNAM.
In the fast-paced economic landscape of Vietnam, where businesses are
continually evolving and expanding, the role of auditing has become increasingly
pivotal. Ensuring financial integrity and transparency is paramount, and at the heart of
this lies the acquisition of robust audit evidence. This chapter delves into the present
state of applying procedures for obtaining audit evidence within audit firms operating
in Vietnam.
2.1. Inspection
2.1.1. Inspection of documents
This procedure is commonly utilized in audits due to its convenient evidence
collection process. It is easy to implement since the documents are typically readily
available within the entity, and the cost of collection is lower compared to other methods.
However, the issue of document alteration or forgery still persists, significantly reducing
the reliability of evidence gathered through this method.
2.1.2. Inspection of tangible assets
This procedure enables auditors to gather highly reliable evidence. However,
auditors may not fully exploit its advantages. The process of conducting an inventory
count is resource-intensive and requires specialized knowledge. For instance, when
verifying the quantity of unexploited coal in inventory, auditors may need to engage a
specialist. Typically, auditors participate in the entity's inventory count at the end of the
year, on December 31st. However, such participation is limited because the timing of
the audit and the inventory count do not always align. Audit contracts are usually signed
at the beginning of the following year, after the inventory count has taken place. The
time allocated for the audit is typically short, often just one week, making it challenging
for auditors to employ the most effective inventory counting methods for all of the
entity's inventory. Additionally, audit firms are usually very busy during the audit
season, which can lead to a shortage of manpower for conducting inventory counts at
the audited entity.
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The physical verification technique (inventory count) is quite commonly used by
auditors in audit firms for auditing accounts related to inventory, tangible fixed assets,
cash, and other payment documents. This is because it provides evidence of the
existence of assets. However, due to time constraints (typically an audit lasts only 3 to
5 days) and the timing of audit contract signings, there are cases where auditors cannot
witness the physical verification of tangible assets of the audited entity as of December
31st. In such cases, auditors often rely on the inventory report provided by the entity as
effective evidence, and re-verification is seldom performed due to time limitations.
In some cases where suspicion or lack of trust in the internal control system of
the entity arises, auditors may propose collaboration with the client to perform
alternative audit procedures. During the audit, auditors request the entity's accounting
department to print the fixed asset register, inventory turnover report, and detailed cash
book. They then randomly select some assets for physical verification, followed by
reconciliation to determine the year-end balance. If discrepancies arise, they must be
explained.
For entities unable to perform alternative audit procedures, proper documentation
detailing the reasons for the inability must be provided and retained in the working
papers.
Typically, if the audit contract is signed before the year-end, the audit firm will
be provided with an inventory count schedule by the client. Based on this schedule, the
director will assign auditors to directly participate in the inventory count or witness it
on the year-end date. However, in practice, the inspection of tangible assets has not been
effectively utilized in some audit firms. Some client entities do not involve auditors in
the inventory count, and for those that do, auditors often witness the count rather than
directly participate. In the process of witnessing the inventory count, auditors have not
yet made accurate notes or assessments of the client's inventory counting process.
2.2. Observation
This procedure is commonly employed by auditors at the initial stage of
familiarizing themselves with the audited entity. As the audit commences, auditors
typically meet with the management team of the entity to gather explanations, enabling
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them to observe the demeanor and professionalism of the company's management.
Auditors also engage in observing the working processes of employees, as well as the
production and business operations of the entity, in order to gain insights into the
operating environment and the status of the entity's operations.
During the planning phase, in some audit firms, for new clients, auditors often
conduct visits to the workshops and offices. For existing clients, auditors review the
previous audit results and audit files. The observation technique applied in this phase
offers the advantage of gathering evidence through direct observation, thus ensuring
objectivity and reliability. However, it is limited to a specific point in time, and may not
necessarily reflect a continuous occurrence.
In the execution phase of the plan, auditors utilize the observation method to
assess the efficiency of material usage in production, identifying any wastage or
effectiveness. They also observe whether machinery and equipment are properly
maintained in accordance with regulatory requirements, and if they are used for their
intended purposes. Additionally, auditors observe the implementation of occupational
safety and the storage of goods in warehouses. The results of these observations are
recorded by auditors, and discrepancies, areas for improvement, or strengths are
communicated to the entity for rectification or enhancement.
If the entity accepts the auditor's findings, the auditor can use these results as
reliable evidence. However, if the entity does not accept the findings, the auditor needs
to combine other testing procedures to form their own conclusion. In practice, due to
time constraints, auditors often use observation techniques in conjunction with other
procedures such as inventory counting or interviews. For instance, during an audit at
Company A, the auditor noticed a batch of goods in the entity's warehouse. However,
this batch was not recorded in the entity's inventory list. Through interviews with the
warehouse manager and the entity's supervisor, the auditor learned that the batch had
actually been sold to a customer. However, the customer had temporarily stored the
goods in the entity's warehouse due to transportation constraints. After examining the
sales contract, sales invoice, and the entity's records related to the sold batch, the auditor
accepted the explanations provided by the customer.
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2.3. External Confirmation
This procedure is widely used due to its high reliability in providing evidence.
Affirmative confirmation provides higher reliability than negative confirmation, but it
also comes with significantly higher costs. Therefore, in practice, audit firms often
coordinate between these two types of confirmation letters. Audit firms send affirmative
confirmation letters for important items with large balances, high inherent risks, and
assessed high control risks, which have a significant impact on other items. On the other
hand, accounts receivable with small amounts, low likelihood of errors, and no
significant impact are confirmed using negative confirmation letters. For instance, when
auditing Accounts Receivable, which includes a few customers with relatively large
balances and many customers with relatively small balances, the audit firm will send
affirmative confirmation letters to customers with large balances, and select a sample of
customers with small balances to send negative confirmation letters.
In the event of discrepancies between the confirmation letters from customers
and the entity's records, the auditor will request an explanation from the entity, or
propose a resolution. If the entity is unable to explain the discrepancy, the stated balance
is considered inaccurate and does not accurately reflect the current status. The auditor
then reconciles the figures on related detailed ledgers provided by the customer with the
detailed statement to reestablish the actual balance.
When confirmation letters are not responded to, auditors typically send second
and third follow-up letters. Finally, if no response is received, auditors may resort to
alternative techniques such as sending faxes, telegrams, making phone calls, or
conducting alternative procedures like examining related documents such as contracts,
purchase orders, and delivery receipts.
Furthermore, in practice, there are cases where audits are conducted over a short
period, and confirmation letters are not received by the end of the audit. Usually, in some
audit firms, before sending confirmation letters to third parties, auditors often collect
confirmation letters obtained directly by the client. Auditors only send confirmation
letters to the objects that the client has not yet cross-referenced. This often leads to a
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high risk of errors for the objects that auditors do not directly send confirmation letters
to, as clients may engage in fraud.
Based on working papers, it is evident that confirmation letters to third parties
are rarely received in full. Therefore, auditors often have to perform alternative audit
procedures, such as verifying post-closing date payments. Additionally, it can be
observed that the most concerning issue when auditing accounts payable is detecting
unrecorded liabilities. To identify unrecorded liabilities, auditors often send
confirmation letters to suppliers with low or zero end-of-period balances.
In some audit firms, the choice of confirmation letter type depends on the
auditor's judgment and the materiality of the item. Confirmation letters without amounts
are typically used in cases where auditors do not trust the entity's figures, as this type of
identification confirmation has higher reliability. Sending confirmation letters must be
done before the audit team conducts the audit at the client's company to ensure that the
confirmed balance results are complete before auditors decide on detailed testing. In
some audit firms, before conducting the audit at the client's company, the audit team
leader often directly contacts the client's representative to request the client to carry out
the confirmation letter procedures (according to the firm's template). For accounts
receivable, advances, and bank deposits, auditors request the client to send confirmation
letters for the end-of-period balances at 100%. If all the balances are confirmed by third
parties to be in agreement, the auditor will have a basis to reduce detailed testing to save
time and costs. However, if discrepancies exist, the auditor will need to pay special
attention to identifying the cause of the discrepancy. For clients audited for the first year
by the firm, to ensure the accuracy of opening balances for accounts payable and
deposits, the firm sends confirmation letters with accompanying written content along
with the end-of-period balance confirmation.
2.4. Recalculation
This procedure is often not widely applied by auditors, as it is time-consuming
and costly. Typically, auditors only employ this technique when they observe significant
fluctuations in quantities between the audit year and the previous years, or when they
identify deficiencies in the competence of the accounting staff.
30
In some audit firms, the re-computation technique is frequently used and is often
combined with document verification. This technique is commonly applied when
auditing accounts and transactions with a numerical nature, such as depreciation,
allocation of prepaid expenses, interest expenses, etc. The calculations are usually
performed by auditors using Excel software. For example, to re-compute whether the
allocation of short-term prepaid expenses in account 142 (VSA) of the entity is correct
or not, instead of manually calculating, auditors will use Excel to input data and
formulas into a table designed by the auditor. This allows auditors to quickly obtain
results. The auditor will then compare the calculated result with the entity's depreciation
schedule to provide an opinion on the accuracy of the entity's financial data.
2.5. Analytical procedure
This procedure requires auditors to have a high level of technical expertise and
strong analytical skills, but it provides highly reliable evidence. Therefore, reputable
audit firms often utilize this method. However, it has not become a truly effective tool
for all audit firms. Additionally, the analytical process is sometimes not documented in
the working papers of the auditors.
In reality, the majority of the analytical work is carried out by the audit team
leader. In some audit firms, the analysis is only done in the minds of the auditors and is
rarely documented in the working papers to determine what should be audited and how.
Generally, auditors use analysis to guide their basic testing. However, because this
technique demands a great deal of experience and judgment, it is mostly applied by the
audit team leaders.
2.6. Inquiry
In practice, many audit firms have developed a system of questionnaires
consisting of hundreds of sample questions that auditors can conveniently and
effectively use in specific interview contexts. When conducting interviews, auditors
always ensure the principle that at least one question should be asked to at least two
individuals to enhance the reliability of the answers. In case of conflicting responses,
auditors will expand the scope of the interview to ensure high reliability of the evidence
obtained.
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In some audit firms, interviewing clients to understand their industry and
business operations, accounting systems, procedures for recording economic
transactions, and report preparation is only carried out for new clients. For recurring
clients, information about business activities will be obtained from the previous year's
audit files, and management will be interviewed to update any new information.
If, during the planning phase, auditors use interviewing techniques to make a
preliminary assessment of the client's internal control system, then during the execution
phase, auditors will conduct detailed evaluations of the internal control system or assess
control risks for each account and cycle. Additionally, throughout the process, auditors
frequently encounter issues that they cannot explain. At that point, auditors will use the
interviewing technique with the client to obtain a reasonable explanation. For example,
during the examination of the inventory ledger, auditors discovered a separate record for
'In – Out – On-hand' that did not specify the account name. The auditors interviewed the
client's inventory accountant about this issue and learned that it was a record of the 'In
– Out – On-hand' for products displayed in the old store. Combining interviewing with
observation, the auditors concluded that all the products were display items at the old
store and currently have almost no recoverable value, but the entity did not make any
provisions. Therefore, the auditors recommended that the client make additional
provisions or take other appropriate measures.
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CHAPTER 3: ASSESSMENT AND RECOMMENDATIONS OF APPLICATION
PROCEDURES FOR OBTAINING AUDIT EVIDENCE IN AUDIT FIRMS IN
VIETNAM.
3.1. Assessment
3.1.1. Advantages
Inspection
This procedure is frequently employed by audit firms in each audit engagement.
Its usage is clearly stipulated in the financial reporting audit procedures of audit
companies, and the content is consistently adhered to in accordance with current
Vietnamese auditing standards.
Audit firms have established procedures for financial reporting audits, ensuring
that all employees in the company execute this technique thoroughly, accurately, and
with high effectiveness. Additionally, in many cases, auditors combine this technique
with other methods, resulting in highly reliable audit evidence.
Observation
During the audit process, auditors not only rely on the observation technique
alone but often combine it with other techniques such as interviews and cross-checks.
This results in audit evidence with a high level of reliability.
Auditors at audit firms possess the ability to observe and make judgments.
Therefore, the use of the observation technique in the audit process often leads to high
effectiveness.
External confirmation
In the financial reporting audit process of audit firms, the confirmation procedure
is clearly stipulated. Audit firms have created templates for confirmation letters, which
distinctly outline the content that auditors need to carry out in order to collect
confirmations from relevant parties of the client. This facilitates a convenient
environment for auditors when implementing the confirmation technique, reducing the
time of the audit and achieving high efficiency.
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Recalculation
Auditors are equipped with personal computers to facilitate the audit process. In
each audit, audit teams are provided with at least one laptop to carry out their tasks. As
a result, the calculation technique is always used effectively, providing accurate and
prompt results, serving the audit process.
Audit firms also have clear regulations for assigning tasks to each member during
the audit process. Accordingly, in cases where complex calculations and verifications
are required, these tasks are assigned to team leaders or experienced individuals, while
other team members focus on checking and calculating items that involve simpler
computations, reducing the likelihood of errors. Consequently, the effectiveness of the
audit is enhanced, and the potential risks associated with the audit are minimized.
Analytical procedures
By comparing current financial data with historical figures and industry
benchmarks, auditors can identify significant fluctuations or anomalies that may warrant
further investigation. This procedure also provides a systematic approach to detect
potential misstatements or irregularities in the financial statements, enhancing the
overall reliability of the audit. Moreover, analytical procedures can be applied at various
stages of the audit, allowing for early identification of potential issues and facilitating
timely corrective actions. They can be particularly useful in assessing the reasonableness
of financial information provided by management, acting as a valuable cross-check to
other audit procedures.
Inquiry
All auditors have extensive experience and solid expertise in their respective
fields. Hence, when conducting inquiry-interviews, they yield highly effective results,
gathering evidence with high reliability.
All interviews are prepared by auditors in advance, ensuring that the information
collected is comprehensive. This aids auditors in shortening the audit time and enhances
the efficiency of their work.
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Auditors often combine the interview technique with other methods, such as
observation and physical inventory counting, to re-evaluate the responses of the
interviewees. This results in compelling audit evidence and provides auditors with a
deeper understanding of the client company's operations.
3.1.2. Limitations
Inspection
Alongside the advantages of inspection to gather evidence for the audit process,
audit firms in Vietnam still face certain limitations in its application. This is because, in
each audit, the selection of documents to be collected and the process of examining them
depends on the individual judgment of each auditor (team leader). Therefore, audit risks
can arise if auditors misjudge or overlook the significance of documents related to items
in the financial statements.
Observation
The technique of observation is primarily carried out subjectively by each auditor
and sometimes occurs randomly during the audit process. Therefore, the effectiveness
of this technique varies in each audit and depends largely on the observational skills of
the auditor.
External confirmation
In practice, when conducting audits of financial reports, if the entity has already
confirmed year-end balances of receivables with relevant parties, some audit firms may
no longer perform the confirmation technique but instead collect these confirmations,
verify their accuracy, and ensure their legal validity. They accept the results and retain a
photocopy in their working files. Audit risks can be high in cases where there is collusion
between the audited entity and one or more related parties in confirming those balances.
Recalculation
In some cases, when performing calculations on a computer, auditors may fail to
verify the accuracy of the data, resulting in erroneous calculations. As a result, auditors
35
need to reperform the calculations, which increases the time spent on the audit work and
may lead to delays in completing the assigned tasks.
Analytical procedures
In reality, auditors at audit firms in Vietnam make limited use of the analytical
technique. Therefore, there are instances where auditors may not fully understand the
fluctuations and conflicts between the indicators in the financial statements, increasing
the likelihood that auditors will not detect errors or fraud in the financial reports.
In almost all audits, the analytical technique is only used based on the judgment
and inference of the auditor. The results achieved are rarely documented in the working
papers, resulting in low effectiveness and limited collection of reliable audit evidence
for the purpose of auditing financial reports.
Inquiry
Evidence obtained through this method is often highly subjective. In some cases,
when auditing certain entities operating in specialized fields, auditors may face specific
difficulties due to a lack of understanding of those areas.
3.2. The inherent necessity of refining procedure for obtaining audit
evidence in audit firms in Vietnam.
Nowadays, globalization and integration have become an essential trend of the
era worldwide. In line with this process, the Vietnamese economy is integrating with the
region and the world, and auditing activities are gradually evolving to keep up with the
general trend. From the aforementioned practical context, the complexity and diversity
of business entities are increasing, competition is intensifying, and effective
management is becoming more crucial. Furthermore, in order to attract investment,
expand production, and also in compliance with government regulations regarding
mandatory audit targets, the number of companies in need of auditing is growing.
Therefore, auditing firms are increasingly professionalizing their operations to ensure
excellence in providing services that align with the country's development.
In a market-oriented economy, the nature of auditing has undergone fundamental
changes. It is no longer just a tool for auditing, controlling, and measuring economic
36
and financial activities, but has become a financial service activity, a field of services
supporting business operations and management activities. This is a high-quality service
activity with a certain legal value and is not allowed to have defective products or
unreliable services. Independence, objectivity, legal evidence, professional ethics, and
service quality control requirements are the outstanding characteristics of this type of
service.
Especially in the current situation, state-owned enterprises are being privatized
to implement the renovation policy, which requires them to have audited reports in order
to be listed on the stock market. The quality of the audit report is assessed based on the
collected evidence. Well-collected audit evidence, following standard procedures and
techniques, of high value, will provide auditors with a basis to demonstrate the quality
of their assessment opinions, especially when facing litigation. The role of auditing will
be elevated to a more significant level in relation to legal activities related to financial
organizations.
It can be said that the procedure for obtaining audit evidence plays an extremely
important role in the success of the audit and, more broadly, in the development of the
auditing company. Perfecting audit evidence collection techniques, to obtain highquality audit evidence at a reduced cost, will enhance the quality of the audit.
3.3. Recommendations to enhance procedures for obtaining audit evidence
for auditing firms in Vietnam
3.3.1. General solutions
Employee Training Programs
Establish training programs for experienced and highly skilled audit teams,
specializing in practical areas of the economy. This helps auditors gain extensive
experience in the areas they audit, enhancing the quality of the audit.
Audit Team Composition
To improve audit quality, it is essential to build a team of specialized auditors in
specific fields who have in-depth understanding of their respective areas. When
approaching companies in a particular industry, assign auditors from the corresponding
37
specialized team. Therefore, planning the audit, audit methods, audit organization, and
personnel management during the audit process will be most effective and reasonable.
Auditors will face fewer difficulties in shaping the audit, allocating appropriate time and
evidence for the audit, as well as evaluating the internal control system to shorten the
audit process and provide a more solid foundation for the collected audit evidence.
Audit Standards
To contribute to the effectiveness of audit evidence collection by auditors, from
a macro perspective, our country also needs to develop and refine the system of audit
and accounting standards, and amend and supplement economic laws to align with the
current Vietnamese economy. Establishing a comprehensive set of audit laws is
necessary. This will help avoid significant legal loopholes that companies may exploit,
such as using fake documents or invoices. However, it should be subject to state
approval, as it can have a significant impact on the audit evidence collection process.
Establishing regulations for professional judgment in audit evidence obtaining
When collecting and searching for audit evidence, auditors often rely on their
professional experience to assess the internal control system of the unit to be audited.
These situations can lead to mistakes and subsequently, the company may bear the risks
associated with the auditor's subjectivity in evaluating the internal control system. To
mitigate these risks, companies should implement policies and regulations for auditors
when collecting audit evidence through professional judgment.
3.3.2. Specific solutions for each procedure for obtaining audit evidence
Inspection
Based on the current situation, auditors can address this by:

The audit firm should expedite the contract signing process with clients before
the end of the fiscal year to facilitate timely participation in physical inventory
counts. For regular clients, maintaining regular communication to participate in
year-round inventory counts can significantly reduce audit costs.
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
Auditors should conduct thorough research on suitable inventory verification
methods for each type of asset. For each type, auditors need to understand their
specific characteristics to ensure efficient inventory counts. In cases where expert
opinions are utilized, it is advisable to select highly qualified experts to provide
reliable conclusions.

The audit firm should have a staffing plan in place to prevent personnel shortages
for on-site inventory counts at the audited entity.
Observation
Since observational evidence is only valid at the time of observation, companies
undergoing audits often make preparations in advance. Therefore, when the audit firm
receives an engagement request from a company, auditors should take investigative
measures and observe the client under a different guise before signing the contract.
When at a client's site, auditors should observe the assets within the entity to provide a
broad evaluation of the scale of capital and the operational status of the company.
External Confirmation
For sending confirmation letters, auditors should carefully review and select
which items to include for confirmation. Items that can be verified using alternative
methods to save costs should be identified. The company should send confirmation
letters as early as possible to ensure timely responses. In cases of delayed responses,
auditors should have alternative procedures and protocols.
Recalculation
Before employing this method, auditors should utilize other methods such as
analysis, confirmation, etc., to identify specific areas of suspicion regarding distinct
items. Auditors should subsequently recalculate to arrive at final conclusions regarding
those areas of concern. Auditors should apply modern calculation software to optimize
efficiency. It is advisable to combine this method with others to obtain more reliable
evidential support.
Analytical procedures
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When using the analytical procedure, auditors should utilize a variety of financial
ratios reflecting industry-specific traits. Comparative analysis of the company's
financials against peers within the same industry facilitates assessment of operational
effectiveness, competitive posture, and growth potential.
Companies should establish specific benchmarks for each analytical indicator to
allow auditors to conveniently track and evaluate them.
During analysis, auditors should visually represent indicators, using pie charts
for ratio representation and bar charts to illustrate trends. This provides a clear view of
fluctuations in each indicator, offering a more comprehensive overview.
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CONCLUSION
The essence of auditing is the process of gathering and evaluating evidence
regarding the issues to be audited, primarily the financial statements of a specific
economic entity, with the purpose of confirming and reporting on the compliance of
these reports with established standards. The collection and evaluation of audit evidence
form the core of all tasks that an auditor must undertake.
In practical auditing, based on the collection and evaluation of audit evidence,
the auditor will form an audit opinion. The key question is to obtain convincing
evidence. The persuasiveness of audit evidence is determined by two important
characteristics: effectiveness and completeness. By combining all the evidence from the
entire audit, the auditor can determine when they are sufficiently convinced to issue an
audit report. In cases where the auditor cannot gather sufficient evidence about a
significant matter, they may fulfill their legal and professional obligations by presenting
a carefully worded disclaimer in their audit report due to uncertainty. However, it is not
normal for the client company when they are unable to provide credible evidence to
support the balances in the accounts.
To enhance the quality of audit evidence collection, it is necessary to organize
the audit work in a thorough and comprehensive manner, expand the scope of evidence
collection, and leverage effective techniques in gathering audit evidence. Auditors
should also recommend to the finance department to provide sufficient funding for
additional transportation and equipment.
Due to limited technical and practical knowledge, it is unavoidable that this essay
will contain some errors and imperfections. I eager to receive feedback from my
supervisor to enhance my essay’s quality. Once again, I would like to express my sincere
gratitude to Dr. Bui Thi Minh Hai for guiding me to complete this essay on auditing.
Sincerely thanks!
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REFERENCES
1. Ministry of Finance (2012), Auditing Standard No. 200: issued with Circular
No. 214/2012/TT-BTC, dated December 6, 2012, by the Ministry of Finance.
2. Ministry of Finance (2012), Auditing Standard No. 500: Audit Evidence, issued
with Circular No. 214/2012/TT-BTC, dated December 6, 2012, by the Ministry
of Finance.
3. Ministry of Finance (2012), Auditing Standard No. 520: Analytical Procedures,
issued with Circular No. 214/2012/TT-BTC, dated December 6, 2012, by the
Ministry of Finance.
4. Ministry of Finance (2012), Auditing Standard No. 580: issued with Circular
No. 214/2012/TT-BTC, dated December 6, 2012, by the Ministry of Finance.
5. Prof. Dr. Nguyen Quang Quynh and Assoc. Prof. Dr. Nguyen Thi Phuong Hoa.
2017. Textbook on Auditing Theory. Hanoi: National Economics University
Publishing House
6. Prof. Dr. Nguyen Quang Quynh and Assoc. Prof. Dr. Ngo Tri Tue. 2021.
Textbook on Financial Auditing. Hanoi: National Economics University
Publishing House.
7. Prof. Dr. Nguyen Quang Quynh. 2018. Textbook on Operational Auditing.
Hanoi: National Economics University Publishing House.
8. Arens, Elder, & Beasley, Auditing and Assurance Services, 16th Edition
Pearson Prentice Hall (2017)
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