Research on ananlytical procedures and inquires in fraud risk assessment conducted by audit firms in Vietnam

The paper has provided fraud risk assessment procedures to asses risk of material misstament due to

fraudulent financial reporting of enterprises in Vietnam. The paper has used a quantitative research

method through a survey of 68 experienced auditors and SPSS software to conduct statistical

description of analytical procedures and inquires affecting fraud risk assessment conducted by audit

firms in Vietnam. The results of research have shown that analytical procedures and inquiries which are

used popular and effective procedures in fraud risk assessment of audit firms in Viet Nam.

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ks 68 2.00 4.00 3.45 .61013 Inquires with employees within entity Employees engaged business operations not involved in preparing financial statements 68 3.00 5.00 3.76 .54956 Employees involved in initiating, processing or recording complex or unusual transactions 68 2.00 5.00 3.41 .85055 Employess of human resources department, in-house legal counsel, chief ethics officer or equivalent person charged for dealing with allegations of fraud 68 2.00 5.00 2.75 .76811 Information obtained from entity’s employees affecting fraud risk assessment Employees understand fraud risks and fraud existed entity, including management fraud. 68 2.00 4.00 3.76 .54956 524 Inquires Number of observations Minimum score Maximum score Average value Standard deviation Inquries with employees who have ever been requested to perform non-compliant control activites by management 68 1.00 5.00 3.41 1.04002 Inquries with employees who have knowledge about accounting estimates for bias by management and related party has not disclosed in notes to financial statements. 68 2.00 4.00 3.00 .91423 Inquires with Internal Audit Department and Control Board Internal auditor or Control Board has knowledge about fraud risks presented in entity 68 2.00 4.00 3.35 .76811 Inquries internal auditors or Control Board about internal control dected and prevented fraud risks, mitigated material misstatements due to fraudulent financial reporting 68 2.00 5.00 3.47 .85467 Management has appropriate responds when the internal control has detected fraud risks. 68 3.00 5.00 3.76 .64917 Valid N (listwise) 68 (Source: Results from the authors’ study) 3.2. Descriptive statistics results of analytical procedures affecting fraud risk assessment In audit plan, analytical procedures are used frequently and popularly to identify significant or unusual fuctuation of items and transaction in the financial statements. The auditors often use analytical techniques including trend analysis and ratio analysis (4.11 points and 4.29 points). However, linear regression techniques are not commonly used in fraudulent risk assessments (2.74 points). Table 2. Statistical description of analytical procedures affecting fraud risk assessment Priminilary Analytical Procedures Number of observations Minimum score Maximum score Average value Standard deviation Trend analysis 68 2.00 5.00 4.11 .90652 525 Ratio analysis 68 3.00 5.00 4.29 .67046 Regression analysis 68 1.00 4.00 2.74 .73062 Valid N (listwise) 68 (Source: Results from the authors’ study) For vertical analysis, the auditors often use financial ratios to determine the financial relationship between items in financial statements. The results show that the groups of profitability and performance ratios are likely to predict fraud risk assessment at high levels with average score of 3.8 points. Leverage ratios and liquidity activity ratios were assessed fraud risk at lowest level (3.21 and 3.17 points). Table 3. Statistical description of financial ratio analysis affecting fraud risk assessment Financial ratio analysis Number of observations Minimum score Maximum score Average value Standard deviation Liquidity activity ratio 68 2.00 5.00 3.17 .862 Profitability ratio 68 2.00 5.00 3.88 .763 Leverage ratio 68 2.00 4.00 3.21 .696 Performance ratio 68 3.00 5.00 3.85 .474 Valid N (listwise) 68 (Source: Results from the authors’ study) Through the results of the survey of fraud risk assessment in the audit planning phase, the audit firms have properly implemented audit procedures in accordance with Vietnam standards of auditing, especially analytical procedures and inquires. Based on the fraud risk assessment, the auditors determine the risk of fraud at the financial statement level and assertion level which will help the auditors determine effective audit procedures to detect fraud in financial statements. 4. Conclusions and Policy Implications Throughout the results of survey, fraud risk assessment procedures were properly implemented in auditing firms in compliance with Vietnam standard on auditing and played an important role in assisting the auditor in identifying fraud risks. Analytical procedures are important fraud risk assessment procedures for identifying material misstatements due to fraudulent financial reporting. These techiniques are often used in analytical procedures including trend analysis and ratio analysis. The results of the study are similar to Kaminski et al. (2004), Le Nguyen The Cuong (2013), Dalnial et al. (2014) but contrary to research results of Ly Tran Kim Ngan (2011), Nguyen Thi Huong Giang (2013) shown that preliminary analytical procedures are not so effective in assessing fraud risk. However, regression analysis has not commonly used in the identification of fraud risks in the level of financial statements and assertion level of audit firms in Vietnam. Inquires were highly evaluated in the gathering of information in fraud risk assessments. The results of the study are similar to that of Le Nguyen The Cuong (2013). The results of the study have shown that the the most effective inquires with those charged with government in assessing risks of fraudulent financial reporting. The those charged with government is 526 responsible for overseeing fraud risk assessment and control procedures in preparing financial statements, especially for the risk of management override control. However, inquires with internal auditors or Control Board are not evaluated high level. The auditors argued that the internal auditors or Control Board are not play appropriate role in monitoring the fraud risks of the mangagement. Through the audit procedures taken in the fraud risk assessment, the auditors determine the risks of material misstatement due to fraudulent financial reporting and allocate the risk of material misstatement to these items in financial statements. The auditors design effective audit procedures to detect fraud presented in financial statement. However, there were several limitations to this study. First, regarding the scope of the study, the author has focused on the fraud risk assessment regarding fraudulent financial reporting but has not studied risks of misappropriation of assets. Second, the author has concentrated on sending questionaires to the independent auditors. The future research will expand the interviewees such as internal auditors, fraud investigators. 5. Refferences Arens, A. A., Elder, R. J., Beasley, M. S., Hogan, C. E. (2017), Auditing and Assurance Services, Pearson Education, Inc. Association of Certified Fraud Examiners (ACFE) (2014). Report to the Nation on Occupational Fraud and AbuseAustin, Texas: ACFE 57. Bo Tai chinh (2012), Thông tư số 214/2012/TT-BTC về ban hành hệ thống chuẩn mực kiểm toán Việt Nam, ban hành ngày 6 tháng 12 năm 2012 Calderon, T.G. & Green B.P. (1994), Signaling Fraud by Using Analytical Procedures, Ohio CPA Journal, 53, pp 27-38. Dalnial, H., Kamaluddin, A., Sanusi, Z.M. & Khairuddin K.S. (2014), Detecing Fraudulent Financial Reporting through Financial Statement Analysis, Journal of Advanced Management Science, Vol. 2, No. 1, March 2014, pp 17-22. Kaminski, K. A., Sterling Wetzel, T., & Guan, L. (2004), Can financial ratios detect fraudulent financial reporting?, Managerial Auditing Journal, 19(1), pp 15-28. IAASB of IFAC (2009), International Standards on Auditing (ISA) 240 “The auditor’s responsibility to consider Fraud in an Audit of Financial Statements”, truy cập ngày 15 tháng 10 năm 2015, tại Le Nguyen The Cuong (2013), Giải pháp nâng cao trách nhiệm của kiểm toán viên độc lập đối với việc phát hiện gian lận và sai sót trong kiểm toán báo cáo tài chính của công ty niêm yết Việt Nam, Luận văn thạc sỹ, Đại học kinh tế thành phố Hồ Chí Minh, Hồ Chí Minh. Ly Tran Kim Ngan (2011), Hoàn thiện thủ tục kiểm toán nhằm phát hiện gian lận trên báo cáo tài chính của công ty niêm yết tại Việt Nam, Luận văn thạc sỹ, Đại học Kinh tế thành phố Hồ Chí Minh, Hồ Chí Minh. Ngo Thi Thu Ha (2007), Phương hướng và giải pháp nhằm nâng cao trách nhiệm của KTV độc lập đối với việc phát hiện gian lận và sai sót trong cuộc kiểm toán báo cáo tài chính, Luận văn thạc sỹ, Đại học kinh tế thành phố Hồ Chí Minh, Hồ Chí Minh. 527 Nguyen Thi Hương Giang (2013), Hoàn thiện thủ tục kiểm toán nhằm phát hiện gian lận trong báo cáo tài chính tại Việt Nam, Luận án Thạc sỹ, Đại học Kinh tế thành phố Hồ Chí Minh, Hồ Chí Minh. Nguyen Thi Thuy (2014), “Những gian lận báo cáo tài chính thường gặp”, ngày truy cập: 24/10/2015, tại tai-chinh-thuong-gap-96107.html Truong Anh (2015), Ernst & Young Nhật Bản chịu phạt 17,4 triệu USD do sai sót kiểm toán tại Toshiba, truy cập ngày 2 tháng 2 năm 2016, tại chinh-quoc-te/ernst-young-nhat-ban-chiu-phat-174-trieu-usd-do-sai-sot-kiem-toan-tai- toshiba-20151223103849586.htm.

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