What is the subject of auditing? Types of audit subjects, audit part of each subject: material business, business process business…
I. What is the audit subject?
The audit subjects are all issues that need to be audited first and foremost, the financial performance of the units.
The first audit object is accounting documents because this is what managers and investors are interested in. Accounting documents often include balance sheets, business performance reports, accounting books and vouchers, etc.
However, in some cases, accounting figures and documents will no longer be meaningful if not linked to the financial situation of the audited unit. Due to the complexity of financial relationships and the limited level and means of information processing, accountants usually cannot collect all financial information.
Therefore, auditing is not only limited to accounting documents but also includes the status of financial activities, whether or not reflected in accounting documents. Furthermore, to be consistent with the development of accounting and management needs, auditing is also concerned with other areas of management such as: the efficiency of resource use, the performance of specific programs, goals, projects, etc.
>> See more: Procedures for establishing an auditing company.
II. Types of audit subjects
Pursuant to Article 15 of Decree No. 17/2012/ND-CP dated February 13, 2012 and Article 37 of the Law on Independent Audit dated March 29, 2011, the audit subjects include:
- Year-end financial statements of foreign-invested enterprises (including auditing enterprises);
- Annual financial statements established and operating under the Law on Credit Institutions, including foreign credit institutions headquartered in Vietnam;
- Financial statements of securities trading enterprises and securities issuing organizations;
- Annual financial reports of state-owned enterprises (except state-owned enterprises operating in confidential fields as prescribed by the state);
- Financial statements of enterprises and organizations in which the State owns 20% or more of voting rights at the time of settlement;
- Annual financial report of ODA funded project.
III. Factors forming audit objects
1. Current status of financial activities
Financial activities are using money to resolve economic relationships in investment, business, distribution and payment to achieve certain economic benefits.
Financial relationships are the content of financial activities and money is just the form of expression, the means to resolve those economic relationships.
2. Accounting documents
Accounting documents are a system of vouchers, books, tables and financial accounting reports. According to the Accounting Law, accounting documents are:
- Document;
- Accounting books;
- Financial statements;
- Management accounting reports;
- Audit report;
- Accounting audit report;
- Other documents related to accounting…
3. Current status of assets and financial transactions
In a business or career unit, assets are expressed in many different physical forms with different requirements for specifications, quality, preservation, maintenance, etc., stored in many different warehouses and yards with different managers.
The relationship between managers as well as between managers and property owners is also carried out according to different trends and methods, in addition, these trends increasingly increase the gap between owners and those who preserve and use the property.
On the other hand, when production develops, the scale of assets also increases, the scale of business expands, economic connections will become more and more diverse and complex, leading to the possibility of a gap between assets and their reflection in accounting information…
That reality has promoted the birth of auditing along with the necessity of putting the reality of assets into the audit object.
Assets in business have various physical forms and sources of formation, they are always in motion and are expressed by specific transactions. Based on this motion process, the specific characteristics of each type of asset, the economic relationship of each type and the diversity of transactions, auditing is divided into specific audit sections suitable for its subjects, including:
- Auditing of material operations;
- Auditing of cash or fund transactions;
- Auditing of business process operations;
- Audit of capital creation and repayment transactions.
4. Efficiency and performance
Originating from the practical requirements of management in the context of increasingly expanding business scale and career activities, while resources are increasingly limited. Especially, in today’s increasingly fierce competition, to save and gain competitive advantage, the issue of efficiency and effectiveness needs to be raised for each specific business:
- This is a newly emerging subject of auditing and it has begun to develop strongly since the 80s of the 20th century;
- Efficiency and effectiveness are part of business auditing and are associated with a specific business, project or program;
- Before conducting a performance and efficiency audit, it is necessary to set specific and clear standards. Specific standards here can be goals, processes, regulations, technical parameters or economic indicators…;
- It is often more difficult to set standards for performance auditing than for efficiency auditing standards;
- While performance standards always include specific organizational goals and objectives, effectiveness standards are often determined by the relationship between inputs and outputs.
IV. Frequently asked questions about audit subjects
1. To check the assets and financial operations of the unit, what audit procedures need to be performed?
The audit sections applied include: auditing of cash or fund transactions, auditing of material transactions, auditing of business process transactions, auditing of capital creation and capital repayment transactions.
2. Why does the audit subject include both the effectiveness and efficiency of operations, programs and projects?
Due to the increasing scale of business and career activities while resources are increasingly limited, especially the increasingly fierce competition in the market, in order to save costs and resources, and at the same time gain competitive advantage, the issue of efficiency and effectiveness needs to be raised for each specific business.