Tiếng Việt| THE MINISTRY OF FINANCE | SOCIALIST REPUBLIC OF VIET NAM |
| No: 219/2000/QD-BTC | Hanoi, December 29, 2000 |
PROMULGATING AND ANNOUNCING SIX (6) VIETNAMESE AUDIT STANDARDS (SECOND PHASE)
THE FINANCE MINISTER
Pursuant to the Governments Decree No.15/CP of March 2, 1993 on the tasks, powers and State management responsibilities of the ministries and ministerial-level agencies;
Pursuant to the Governments Decree No.178/CP of October 28, 1994 on the tasks, powers and organizational apparatus of the Finance Ministry;
Pursuant to the Governments Decree No.07/CP of January 29, 1994 promulgating the Regulation on independent audit in the national economy;
In order to meet the requirements of renewing the economic and financial management mechanisms, raising the quality of independent audit in the national economy; to examine and inspect the quality of independent audit activities and make healthy the financial information in the national economy;
At the proposals of the directors of the Accounting Regime Department and the Office of the Finance Ministry,
DECIDES:
Article 1.- To promulgate six (6) Vietnamese audit standards (second phase) with the following codes and appellations:
1. Standard No.250 - Considering the observance of laws and regulations in the audit of financial reports;
2. Standard No.310 - Understanding of business situation;
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4. Standard No.510 - First- year audit- Fiscal year-starts balance;
5. Standard No.520 - Analytical process;
6. Standard No.580 - Directors exposition.
Article 2.- The Vietnamese audit standards promulgated together with this Decision shall apply to the independent audit of financial reports. The services of independent audit of other financial information and the relevant services of the auditing companies shall comply with the specific regulations of each standard.
Article 3.- This Decision takes effect 15 days after its signing.
Article 4.- Auditors and auditing companies operating lawfully in Vietnam shall have to deploy the implementation of the Vietnamese audit standards in their activities.
The director of the Accounting Regime Department, the director of the Ministrys Office and the heads of concerned units under and attached to the Finance Ministry shall have to guide and inspect the implementation of and implement this Decision.
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SYSTEM OF VIETNAMESE AUDIT STANDARDS
CONSIDERING THE OBSERVANCE OF LAWS AND REGULATIONS IN THE AUDIT OF FINANCIAL REPORTS
(Issued together with Decision No. 219/2000/QD-BTC of December 29, 2000 of the Finance Minister)
GENERAL PROVISIONS
1. This standard aims to prescribe the basic principles and procedures and guide ways of applying the basic principles and procedures related to the auditors and auditing companies when considering the observance of laws and regulations by the audited units in the process of auditing the financial reports.
2. When drawing up plans and carrying out procedures for audit, when evaluating the results and making reports on audit, auditors and auditing companies must pay attention to the question that the non-observance of laws and relevant regulations by audited units may greatly affect the financial reports, though in an audit of financial reports all acts of non-observance of laws and relevant regulations cannot be fully detected.
3. The assessment and determination of acts of non-observance of laws and regulations generally do not professionally rest with auditors and auditing companies. Where it must be determined whether acts of non-observance of laws and regulations greatly affect the financial reports or not, the auditors and auditing companies shall have to consult with the legal experts or concerned functional bodies.
4. The regulations and guidance on responsibilities of auditors and auditing companies in considering "frauds and errors" in an audit of financial reports are prescribed in another specific standard but not in this standard.
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Auditors and auditing companies must abide by the provisions of this standard when considering the observance of laws and regulations in the process of auditing the financial reports.
The audited units and the parties using the auditing results must have necessary knowledge about the principles and procedures prescribed in this standard in order to fulfill their duties and coordinate with auditors and auditing companies in dealing with relations in the auditing process.
Terms used in this standards are construed as follows:
6. Laws and regulations mean legal documents promulgated by competent bodies (the National Assembly, the National Assembly Standing Committee, the State President, the Government, the Prime Minister, the ministries and ministerial-level agencies, the agencies attached to the Government; joint documents of competent agencies, organizations, Peoples Councils and Peoples Committees of all levels and other agencies prescribed by law); documents issued by the superiors of professional societies, Management Boards and directors, which are not contrary to laws and related to production and business activities as well as economic and financial and accounting management belonging to the units domains.
7. Non-observance means acts of wrongly implementing, omitting, inadequately and/or untimely implementing or not implementing laws and regulations, whether unintentionally or intentionally, by units. These acts committed by collectives, individuals in the names of units or the units representatives. This standard does not mention acts of non-observance committed by collectives or individuals of units but not relating to the financial reports of units.
CONTENTS OF THE STANDARD
The audited units responsibility in the observance of laws and regulations
8. Directors (or the heads) of the audited units have the responsibility to ensure that their units strictly observe laws and current regulations; to prevent, detect and handle acts of non-observance of laws and regulations in their units.
9. The audited units must apply measures and procedures to prevent and detect acts of non-observance of laws and regulations, including:
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- Establishing and operating an appropriate and efficient internal control system;
- Elaborating and following the rules in business activities of units, applying measures for monitoring, timely commendation and discipline;
- Using legal consultancy services, including financial and accounting consultancy services in order to properly meet the requirements of laws and regulations;
- Organizing the internal audit sections suitable to the sizes and requirements of units;
- Fully achieving legal documents and relevant regulations which the units have to abide by and documents related to cases of dispute, lawsuits.
Auditors scrutiny of the observance of laws and regulations
10. The audited units have the responsibility to observe laws and regulations. Through the audit of annual financial reports, the auditors and auditing companies shall help the audited units prevent and detect acts of non-observance of laws and regulations.
11. The risk which always confronts the audit is that it is very difficult to detect all errors that greatly affect the financial reports, even when the audit has been carefully mapped out and carried out in strict accordance with the auditing standards. The causes of the auditing risk include:
- The units internal control systems and accounting systems fail to fully satisfy the requirements of the legal documents and regulations related to their operations and financial reports;
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- Auditors use the sampling method;
- The auditing evidences are often characterized more by judging and convincing than sure confirmation;
- Units may deliberately cover their acts of violation (Example: collusion, cover-up, forgery of documents, deliberately making wrong accounting) or deliberately supply false information to auditors.
12. When drawing up plans for and performing the audit, auditors and auditing companies must take professionally cautious attitude (as provided for in Vietnamese audit standard No. 200), and must pay attention to acts of non-observance of laws and regulations, thus leading to errors which greatly affect the financial reports. When detecting an act of intentional non-observance of laws and regulations, auditors shall have to take into account the possibility of other violations committed by such unit. On the contrary, if such act is unintentional, the auditors must not necessarily apply the above caution.
13. Where the law or an auditing contract requires the report on the observance of given provisions of law, auditors and auditing companies shall have to draw up plans for inspection of the observance of such provisions by the audited units.
14. In order to draw up auditing plants, auditors must have the general knowledge of law and regulations related to the business activities and lines of the audited units; must thoroughly grasp the units ways and measures to implement laws and regulations. Auditors shall have to pay attention to the regulations the violation of which will greatly affect the financial reports, or affect the audited units capability for constant operation.
15. In order to obtain the overall understanding of laws and regulations related to the audited units, the auditors shall apply the following measures:
- Using the available knowledge related to business activities and lines of units;
- Requesting units to provide and explain their internal regulations and procedures related to the observance of laws and regulations;
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- Scrutinizing the units specific regulations on and procedures for the settlement of disputes upon their occurrence or sanctions;
- Discussing with relevant functional bodies, law consultants and other individuals for further understanding of laws and regulations related to the units activities.
16. Basing themselves on the overall understanding of laws and regulations related to activities of audited units, the auditors and auditing companies shall have to proceed with necessary procedures for determining acts of non-observance of laws and regulations related to the process of elaborating financial reports, paying special attention to the following procedures:
- Exchanging ideas with directors (or heads) of the audited units on the observance of laws and regulations;
- Consulting with relevant functional bodies.
17. Auditors shall have to gather all appropriate auditing evidences on the non-observance of laws and regulations by units, thus greatly affecting the financial reports. Auditors must have adequate understanding of laws and regulations with a view to considering the observance of laws and regulations when auditing databases related to information on the financial reports.
18. When legal documents and regulations related to units business activities and lines see changes in each period, the auditors and auditing companies shall have to examine the observance of these regulations in their proper temporal relations with the elaboration of the financial reports.
19. Apart from the principles and procedures already mentioned in paragraphs 16, 17 and 18, the auditors and auditing companies need not carry out other procedures for inspecting the observance of laws and regulations by units if those procedures fall outside the scope of auditing the financial reports.
20. The carrying out of procedures for auditing financial reports will help auditors and auditing companies detect acts of non-observance of laws and regulations.
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22. After carrying out the examination procedures as required by this standard, if being unable to gather evidences on acts of non-observance of laws and regulations, the auditors may regard the units as having observed laws and regulations.
Procedures which must be carried out upon the detection of acts of non-observance of laws and regulations
23. Auditors must always attach importance to clues leading to acts of non-observance of law and regulations by units. A number of these clues are mentioned in Appendix No.1.
24. When detecting information related to acts of non-observance of laws and regulations, the auditors and auditing companies must inquire into the nature of such acts, the circumstance in which such acts are committed and the relevant information for the assessment of possible impacts on the financial reports.
25. When deeming that acts of non-observance of laws and regulations have affected the financial reports, the auditors shall have to take into account:
- The possible financial consequences, even risks, which force the audited units to cease their operation;
- The necessity to explain the financial consequences in the section on explanation of financial reports;
- The degree of effect on the truthfulness and logic of the financial reports.
26. When having any doubts about or detecting acts of non-observance of laws and regulations, the auditors shall have to note down and keep in auditing dossiers such detection and discuss with the directors (or heads) of the audited units. Such a dossier shall include the extract of accounting vouchers and books, minutes of meetings and other relevant documents.
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28. Where it is unable to gather adequate information in order to do away with doubts about acts of non-observance of laws and regulations, the auditors and auditing companies must examine the impact of the lack of evidences and present such in the auditing report.
29. Auditors and auditing companies shall have to analyze the consequences of the non-observance of laws and regulations related to auditing work, particularly on the reliability of the expositions of the directors. Auditors shall have to re-evaluate the risks and re-examine the directors expositions in the following cases where:
- The internal control system fail to detect and fail to prevent acts of non-observance;
- Acts of non-observance have not been mentioned in the expositions, particularly acts which the units have deliberately concealed.
Notification on acts of non-observance of laws and regulations.
Notification to directors (or heads) of the audited units.
30. In the course of audit, the auditors shall have to notify the directors (or the heads) of the units of the acts of non-observance of laws and regulations, which have been detected by the auditors. The auditors are allowed not to notify non-observance acts if they are determined as not having caused considerable consequences, except otherwise agreed upon by the auditors and the units.
31. If auditors and auditing companies determine that acts of non-observance of laws and regulations are intentionally committed and greatly affect the financial reports, they must immediately notify their findings in writing to the directors (or the heads) of the units.
32. If auditors and auditing companies detect that directors (or heads) of units are involved in acts of non-observance of laws and regulations, thus greatly affecting the financial reports, they must consult with legal experts and report such to the superior authorities of the audited units.
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33. If auditors conclude that acts of non-observance of laws and regulations have greatly affected the financial reports but not been correctly reflected in the financial reports though the auditors have requested the amendments and adjustments, such auditors shall have to state their opinions of partial acceptance or non-acceptance.
34. If units fail to create conditions for auditors to adequately gathers appropriate auditing evidences for the assessment of acts of non-observance of laws and regulations, which greatly affect the financial reports, the auditors shall have to give their opinions of partial acceptance or their refusal to give opinions as they have been restricted in auditing scope.
35. If being unable to gather adequate evidences on acts of non-observance of laws and regulations, which have occurred, auditors must examine their impacts on the financial reports.
Notification to concerned functional bodies.
36. Auditors and auditing companies have the responsibility to keep confidential the customers information and data. Yet, if audited units have committed acts of non-observance of laws and regulations, depending on the legal requirements, the auditors and auditing companies must notify such acts to concerned functional bodies. For this case, the auditors are allowed to make prior consultation with legal experts.
Auditors and auditing companies withdraw from auditing contracts.
37. When deeming that the audited units fail to take necessary measures to handle acts or signs of non-observance of laws and regulations, including acts which do not greatly affect the financial reports, the auditing companies are allowed to terminate the auditing contracts. The auditing companies shall have to carefully consider and consult with legal experts before making such decisions.
38. When substitute auditors request the incumbent auditors to supply information on customers, the latter have the responsibility:
- If allowed by customers to discuss about their work, to supply the substitute auditors with information on acts of non-observance of laws and regulations, the reasons for termination of contracts as well as their recommendations on whether to refuse or accept the contracts.
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MAIN CLUES TO ACTS OF NON-OBSERVANCE OF LAWS AND REGULATIONS
- Examination, inspection and investigation were already conducted by concerned functional bodies regarding the violations of laws and regulations such as borrowing and lending, payment relations, fines,...;
- Payments were made without clear reasons or loans were provided to people with positions, powers;
- Payments for services were too high as compared to other enterprises of the same branches or to the actual value of the provided services themselves;
- Purchase/ sale prices are too high or too low as compared to market prices;
- Enterprises have maintained unusual ties with companies which have had many special rights, favorable business or companies which have been suspected of meeting with problems;
- Payment has been made to a country other than the country which has produced or supplied such goods, services;
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- Failing to strictly and fully observe the prescribed accounting regimes;
- Revenue and expenditure operations have not been approved or the operation of recording has been conducted in contravention of regulations;
- The units have already been denounced or ill-rumored by mass media or people;
- The enterprises production and/or business results have not been stable, their business result reports have seen constant changes;
- The expenses for management and advertisements have been too high;
- The appointment of chief accountants has been made in contravention of regulations;
- The inventory regime has been implemented in contravention of regulation.
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GENERAL PROVISIONS
1. This standard aims to prescribe the basic principles and procedures and guide ways of applying the basic principles and procedures in order to inquire into the business situation and the use of such knowledge in the process of auditing the financial reports.
2. To perform the auditing of financial reports, the auditors must have necessary and adequate understanding of the business situation in order to be able to assess and analyze events, operations and practical activities of the audited units, which, according to the auditors, greatly affect the financial reports, the inspection by auditors or the auditing reports. Example: Auditors use their knowledge of business situation to determine potential risks as well as controlled risks and determine the contents, order and scope of auditing procedures.
3. The auditors knowledge needed for performing an audit shall include their overall knowledge of the economy, the units operation spheres, more specific knowledge of organization and operation of the audited units. The auditors knowledge of the units must not necessary up to the level of the directorate of the audited units.
The specific contents of matters to be understood when auditing the financial reports are presented in Appendix No.1. The auditors may add contents to this list and may not apply this entire list to a specific audit.
4. This standard shall apply to the audit of financial reports and also to the audit of other financial information as well as relevant services of the auditing companies.
The auditors and auditing companies must abide by the provisions of this standard in the process of auditing financial reports.
CONTENTS OF THE STANDARD
Information gathering
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6. After accepting the auditing contracts, the auditors shall have to gather necessary detailed information right from the time the auditing work starts. In the course of audit, the auditors shall have to always examine, evaluate, update and supplement new information.
7. The gathering of necessary information on units business situation is a process of continuous accumulation, including the gathering, evaluation and comparison of the gathered information with the auditing evidences at all stages of the auditing process. Example: Information gathered at the stage of plan elaboration must still be continuously updated and further supplemented at the subsequent stages so that the auditors fully understand the units activities.
8. For auditing contracts of the subsequent year, the auditors shall have to update and re-evaluate the information gathered previously, particularly the information in the auditing dossiers of the previous years. The auditors shall have to pay attention to the existing problems detected in the previous year and complete all procedures with a view to detecting considerable changes which have arisen after the previous audit.
9. The auditors gather information on business situation from the following sources:
- The practical experiences about the units and the business lines of the audited units in the sum-up reports, working minutes, the press;
- The previous years auditing dossiers;
- The consultation with the directors, chief accountants or officials as well as employees of the audited units;
- The consultation with the internal auditors and the examination of internal audit reports of the audited units;
- The consultation with other auditors and consultants who have provided services for the audited units or work in the same fields with the audited units;
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- The consultation of publications relating to the audited units operation domains (Example: Statistical figures of the Government, specialized press, banks information, securities markets information);
- The legal documents and regulations which affect the audited units;
- Field surveys of the offices, workshops of the audited units;
- The documents supplied by the audited units (Example: Resolutions and minutes of meetings, materials sent to shareholders or superior bodies, internal management reports, periodical financial reports, policies on economic management, finance, tax, accounting system, internal control documents, regulations on powers, functions and tasks of each section in the units).
Use of knowledge
10. The knowledge of business situation constitutes an important basis for the auditors to make professional assessments. The level of business situation knowledge and the rational use of such knowledge will help the auditors in the following job:
- Assessing risks and determining noteworthy issues;
- Drawing up plans and conducting the auditing work efficiently;
- Assessing the auditing evidences;
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11. In the auditing process, understanding the business situation is very important, which helps the auditors assess the following specific aspects:
- Evaluation of possible risks and controlled risks;
- Analysis of business risks and handling options of the directors (or the heads);
- Elaboration of auditing plans and programs;
- Determination of the importance and evaluation of its compatibility in the auditing process;
- Evaluation of the adequacy and appropriateness of the auditing evidences;
- Evaluation of accounting estimates and expositions of the directors;
- Determination of areas which require special attention in auditing and necessary auditing skills;
- Determination of concerned parties and operations arising among the concerned parties;
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- Determination of unusual circumstances (Example: Fraudulence or non-observance of laws and regulations; statistical figures contradicting the figures of financial reports);
- Making questionnaires and evaluation of the reasonability of the answers;
- Consideration of the compatibility of the accounting regime, information presented on the financial reports.
12. Audit assistants who are employed by auditors and auditing companies and assigned to perform auditing work must have certain knowledge of the business situation so as to perform their work. Besides, the assistants must gather supplementary information to meet the requirements of their work and exchange such information with other members of their groups.
13 In order to effectively use the knowledge of business situation, the auditors shall have to evaluate and examine the overall impacts of their knowledge on the units financial reports as well as the consistency of the data in the financial reports as compared with the auditors knowledge of the business situation./.
THE SPECIFIC CONTENTS OF AUDITORS KNOWLEDGE ABOUT THE AUDITED UNITS BUSINESS SITUATION
A. GENERAL KNOWLEDGE OF THE ECONOMY
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- Interest rates and financial capability of the economy;
- The inflation rate and currency unit value;
- The Governments policies:
+ Monetary and banking policies (Example: Interest rates, exchange rates, credit limits,);
+ Financial policies;
+ Tax policies (Example: value added tax, import and export tax; enterprise income tax,);
+ Investment promotion policies (Example: The Governments support programs,);
- Fluctuation of the securities market and the ratios to secure safety in business activities of the audited units;
- Control of foreign exchange and exchange rates.
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- Requirements on the environment and relevant matters;
- Market and competition;
- Characters of business operation (constant or seasonal);
- Changes in production technology and business;
- Business risks (Example: High technologies, markets tastes, competition,);
- Shrinkage or expansion of business scale;
- Unfavorable conditions (Example: Rise or fall of supply and demand, war, prices,);
- Important rates and statistical figures on annual business activities;
- Accounting standards, regimes and relevant matters;
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- Sources of supply (Example: Commodities, services, labor,) and prices thereof.
C. INTERNAL FACTORS OF THE AUDITED UNITS
1. Important ownership and management characters
- The Management Board:
+ The number of its members and composition;
+ The prestige and experience of each individuals;
+ The independence from the director and the control of the directors activities;
+ Periodical meetings;
+ The existence and operation scope of the Control Board;
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+ Changes in professional advisers (if any).
- The director (or the head) and the executive apparatus:
+ Personnel change (Example: the director, deputy-director, chief accountant,);
+ Experience and prestige;
+ Income;
+ Key finance officials and their positions in the unit;
+ Chief accountant and accounting personnel;
+ Regimes of material incentives, commendation, discipline;
+ Using accounting drafts and estimates;
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+ Pressure on the director (or the head);
+ Management information systems.
- Type of enterprise (Example: State-run, collective, private, equitized, limited liability, foreign-invested enterprises);
- Permitted business fields, scope and subjects;
- Permitted operation duration;
- Capital owners and concerned parties (Example: Domestic, foreign, prestige and experience,);
- Capital structure (recent or anticipated changes,);
- Chart on organization of production and business apparatus;
- Operation scope;
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- Chart on organization of the managerial apparatus;
- Management targets and strategic plans;
- Shrinkage or expansion of business operation (already planned or recently implemented);
- Financial sources and measures;
- Function and operational quality of the internal audit section (if any);
- The directors views on and attitude toward the internal control system;
- The auditing companies and auditors in the previous years.
2. The units business situation
(Products, markets, suppliers, expenditure, professional activities)
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- Production conditions, warehouses and storing yards, offices;
- Issues concerning human resources (Example: Labor quantity and quality, human resource distribution, supply sources, wage levels, employee regulation, collective labor contract and trade union, the implementation of the retirement regime and the Governments regulations on labor,);
- Products, services and markets (Example: Customers and principal contracts, terms on payments, rates of accumulative profits, percentage of dominant markets, competitive rivals, export, pricing policies, fame of goods articles, warranty, goods order, marketing trends, strategy and targets, production process,�);
- Key goods and service suppliers (Example: long-term contracts, the stability of suppliers, payment terms, forms of import, forms of supply,�);
- Goods in stock (Example: Location, quantity, quality, specifications,�);
- Commercial advantages, the right to use labels, invention patents�;
- Important expenses;
- Research and development;
- Assets, debts, operations in foreign currencies and foreign exchange risk insurance operations;
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- Management information systems (present status, anticipated changes,�);
- Loan debt structure, terms on debt narrowing and restriction.
3. Financial capability
(Factors relating to the financial situation and profit-generating capability of the audited units).
- Important rates and statistical data on business operation;
- Trends of fluctuation of the financial results.
4. Environment for making reports
(Objective impacts on the units� directors (or heads) in making the financial reports.
5. Legal factors
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- Financial policies and tax policies;
- Requirements on the auditing reports;
- Users of financial reports.
AUDITING EVIDENCES
(Issued together with the Finance Minister’s Decision No. 219/2000/QD-BTC of December 29, 2000)
GENERAL PROVISIONS
1. This standard aims to prescribe the basic principles and procedures and guide the ways of applying the basic principles and procedures to the quantity and quality of auditing evidences to be gathered when auditing financial reports.
2. The auditors and auditing companies shall have to adequately gather the appropriate auditing evidences for use as basis to state their opinions on the financial reports of the audited units.
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The auditors and auditing companies shall have to abide by the provisions of this standard in the process of gathering and processing the auditing evidences.
The audited units (customers) and the parties using the auditing results must have necessary knowledge of this standard for coordination in work and the handling of relations related to the process of supplying and gathering the auditing evidences.
4. The auditing evidences shall be gathered through the proper combination between controlled experiment and basic experiment procedures. In a number of cases, the auditing evidences can only be gathered through basic experiments.
Terms used in this standard shall be understood as follows:
5. Auditing evidences mean all materials and information gathered by auditors and related to the audit and on the basis of such information the auditors shall formulate their opinions.
The auditing evidences include accounting materials, vouchers and books, the financial reports and materials and information from other sources.
6. Controlled experiment (inspection of control system) means the inspection conducted to gather auditing evidences on the conformability and efficient operation of the accounting system and the internal control system.
7. Basic experiment (basic inspection) means the inspection conducted to gather auditing evidences related to financial reports, aiming to detect key errors which affect the financial reports. "Basic experiments" shall include:
a/ Detailed inspection of operations and balances;
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CONTENTS OF THE STANDARD
Adequate and appropriate auditing evidences
8. The auditors shall have to adequately gather the appropriate auditing evidences for each kind of their opinion. The "adequacy" and "appropriateness" must always go hand in glove and shall apply to the auditing evidences gathered from controlled experiments and basic experiments. "Adequacy" is the criteria indicating the quantity of auditing evidences. "Appropriateness" is the criteria indicating the quality and reliability of the auditing evidences. Usually, the auditors shall base themselves more on the evidences of critical and persuasive character than on evidences of affirmative character. The auditing evidences are often gathered from various sources and in various forms, serving as basis for the same database.
9. In the course of formulating their opinions, the auditors must not necessarily check all available information. The auditors may make conclusions on the account balances, economic operations or internal control systems on the basis of sampling inspection by the statistical method or personal judgment.
10. The auditors� assessment of the adequacy and appropriateness of the auditing evidences largely depends on:
. The nature, content and extent of the potential risks of the whole financial report, of each account balance or each type of operation;
. The accounting system, the internal control system and the evaluation of controlled risks;
. The importance of the inspected clauses and items;
. Experiences from previous inspections;
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. The sources and reliability of materials and information.
11. When gathering auditing evidences from controlled experiments, the auditors shall have to examine the adequacy and appropriateness of the auditing evidences which serve as basis for their assessment of controlled risks.
12. Auditors should gather auditing evidences from the accounting system and the internal control system in terms of:
Designing: The accounting system and the internal control system are designed in a way so as to be able to ward off, detect and correct key errors;
Implementation: The accounting system and the internal control system exist and operate efficiently throughout the period of examination.
13. When gathering auditing evidences from basic experiments, the auditors shall have to examine the adequacy and appropriateness of the evidences gathered from basic experiments together with evidences gathered from controlled experiments with a view to confirming the database of the financial reports.
14. Database of financial reports means the basis of clauses, items and information presented in the financial reports, which the directors (of the heads) of the units have the responsibility to elaborate on the basis of the prescribed standards and accounting regimes, which must be expressed clearly or with grounds for each index in the financial reports.
The database of a financial report must meet the following criteria:
a/ Tangibility: An asset or a debt reflected in the unit�s financial report must actually exist (availability) at the time of making the report;
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c/ Occurrence: An operation or an event, which is already recorded, must occur and relate to the unit during the period of examination;
d/ Adequacy: All assets, debts, operations or transactions, which have occurred and related to financial reports must be reported fully with all relevant events;
e/ Assessment: An asset or a debt is recorded according to appropriate value on the basis of existing standards and accounting regimes (or acknowledged);
f/ Accuracy: An operation or an event is inscribed strictly according to its value, turnover or expenditures are acknowledged according to prescribed periods, correct clauses and items and mathematically correct.
g/ Presentation and announcement: Clauses and items are classified, expressed and announced in conformity with the existing accounting standards and regime (or accepted).
15. The auditing evidences must be gathered for each database of a financial report. Evidences related to a database (such as the actual existence of goods in stock) can not make up for the lack of evidences related to other databases (such as the value of such stocked goods). The content, order and scope of basic experiments vary according to each database. Experiments may supply auditing evidences for various databases at a time (like the recovery of collectible amounts may supply evidences for the actual existence and value of such collectible amounts).
16. The reliability of auditing evidences depends on their sources (inside or outside), forms (image, documents or voices) and each specific case. The evaluation of the reliability of auditing evidences rely on the following principles:
. Evidences originating from outside the units are more reliable than evidences originating from the inside;
. Evidences originating from inside the units shall be more reliable when the accounting system and the internal control system operate efficiently;
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. Evidences in forms of documents and images are more reliable than evidences recorded verbally.
17. Auditing evidences shall be more convincing when they are confirmed by information from various sources and in various forms. In this case, the auditors may have higher reliability for auditing evidences than cases where information are obtained from separate evidences. On the contrary, where the evidences from this source contradict with evidences from other sources, the auditors shall have to determine procedures for necessary supplementary inspection to solve the above-said contradiction.
18. In the auditing process, the auditors must take into account the relationship between the expenses for the gathering of auditing evidences and the profits gained from such information. Arising difficulties and expenses for gathering evidences must not be the reasons for ignoring a number of necessary inspection procedures.
19. When having doubts about databases which may greatly affect the financial reports, the auditors shall have to gather more auditing evidences to get rid of such doubts. If unable to adequately gather appropriate evidences, the auditors shall have to give their opinions of whether to accept them partially or not to give any comments.
Methods of gathering auditing evidences
20. The auditors shall gather auditing evidences by the following methods: examination, observation, investigation, certification, calculation and analytical process. The application of these methods depends partially on the time of gathering auditing evidences.
21. Examination: means the scrutiny of accounting vouchers and books, financial reports and relevant documents or the inspection of tangible assets. The above-said examination supply evidences of high or low reliability depending on the contents and sources of the evidences and on the effectiveness of the internal control system for the process of treating such documents. Four following major sources of documents shall supply the auditors with evidences of varied reliability:
. Documents compiled and kept by the third party;
. Documents compiled by the third party and kept by the audited units;
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. Documents compiled and kept by the audited units.
The inspection of tangible assets shall supply reliable evidences on the actual existence of the assets, which are, however, not necessary the reliable evidences on the ownership and value of such assets.
22. Observation: means the monitoring of a phenomenon, a process or a procedure performed by other people (Example: Auditors observe the actual inventory or the control procedures carried out by units�).
23. Investigation: means the search for information from knowledgeable people inside and outside the units. The investigation carried out by officially sending documents, interviews or exchanges of investigation results will supply auditors with information not yet available, or supplementary information for the consolidation of already obtained evidences.
24. Certification: means the reply to a request for the supply of information aiming to verify again the information already available in the accounting documents (Example: Auditors request the units to send letters to customers for direct verification of the balances of collectible amounts of the customers�).
25. Calculation: means the examination of mathematical accuracy of data in the accounting vouchers and books, financial reports and other relevant documents or the independent calculation by auditors.
26. Analytical process: means the analysis of data, information and important rates thereby to find out trends and fluctuations and to find out relations contradicting with other relevant information or the big disparity with the anticipated value./.
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(Issued together with the Finance Minister’s Decision No. 219/2000/QD-BTC of December 29, 2000)
GENERAL PROVISIONS
1. This standard aims to prescribe the basic principles and procedures and guide the ways of applying the basic principles and procedures, which are related to the fiscal year- start�s balance when examining the financial report of the first year. This standard also requires the auditors to know uncertain events or existing commitments at the time of the beginning of the fiscal year in case of auditing the financial report of the first year.
2. When auditing the first year�s financial report, the auditors shall have to adequately gather appropriate auditing evidences in order to ensure that:
a) The year-start�s balance contains no errors which greatly affect the current year�s financial report;
b) The year-end balance of the previous fiscal year is accurately carried forward or properly re-classified in case of necessity;
c) The accounting regime has been consistently applied or the changes in the accounting regime have been adjusted in the financial reports and fully presented in the explanation of the financial report.
3. This standard shall apply to auditing the financial report of the first year and also to the first-year auditing of other financial information.
The auditors and auditing companies must abide by the provisions of this standard in the process of auditing the first year�s financial report.
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Terms used in this standard shall be understood as follows:
4. The year-start balance: means the balance of the book-keeping account at the time of the beginning of the fiscal year. The year-start balance is elaborated on the basis of the balance at the end of the previous fiscal year.
The year-start balance is subject to the impact of:
a/ Economic events and operations in the previous years;
b/ The accounting regimes applied in the previous year.
5. The first year: means the year of auditing when the financial report of the previous year:
- Has not yet been audited; or
- Has been audited by other auditing companies.
CONTENTS OF THE STANDARD
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6. The adequacy and appropriateness of the to be-gathered auditing evidences on the year-start balances depend on:
- The accounting regime applied by units;
- The previous year�s financial report either audited or not yet audited and the content of the previous year�s auditing report (if already audited);
- The content and nature of accounts and risks with major errors affecting the current year�s financial report;
- The importance of the year-start balance relating to the current year�s financial report.
7. The auditors must examine the year-start balances already reflected according to the accounting regime applied in the previous year and applied consistently in the current year. If there are changes in the accounting regime, the auditors shall have to examine such changes as well as the implementation and presentation thereof in the current year�s financial report.
8. When the previous year�s financial report is audited by another auditing company, the auditors of the current year may gather the auditing evidences on the year-start balance by way of examining the auditing files of the auditors of the previous year. In this case, the current year�s auditors should pay attention to the professional capability and independence of the previous year�s auditors. If the auditing report of the previous year�s auditors has not fully accepted the financial report, the current year�s auditors must pay attention to the reasons for non-total acceptance by the previous year�s auditors.
9. When the previous year�s financial report has not yet been audited or has already been audited but failed to satisfy the current year�s auditors, after filling in the procedures prescribed in Paragraph 08 but failing to adequately gather appropriate auditing evidences, the auditors shall have to carry out the auditing procedures specified in Paragraph 10 and Paragraph 11.
10. For the year-start balances regarding the short-term debts and working assets, auditors may gather auditing evidences when carrying out the current year�s auditing procedures.
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+ Example 2: "For goods in stock at the beginning of the year, the auditors shall have to carry out additional auditing procedures by way of supervising the actual inventory in the year or at the year-end, comparing the quantity, import and export value from the year-start to the time of actual inventory and find out the year-start�s goods in stock".
+ Example 3: "For bank deposit credit balance, collectible and payable amounts, the procedure for certification of the year-start balance by the third person may be carried out".
The combination of these auditing procedures will provide auditors fully with appropriate auditing evidences.
11. For fixed assets, investment amounts and long-term debts, the auditors shall have to examine the vouchers proving the year-start balances. In a number of certain cases, for investment amounts and long-term debts, the auditors may get the certification of the year-start balances from the third party or carry out additional auditing procedures.
Conclusion and making of auditing reports
12. After carrying out the above-mentioned auditing procedures, if the auditors are still unable to adequately gather appropriate auditing evidences on the year-start balances, the report on the auditing of the first year�s financial report shall be made according to one of the following types:
a/ The auditing report of type "Opinion of partial acceptance" (or "Exclusion opinion")
Example 1:
"�We could not supervise the actual inventory of goods in stock on December 31, X1, as by that time we had not been appointed auditors. The additional auditing procedures also do not permit us to examine the truthfulness of the volume of goods in stock by above-said time.
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b/ The auditing report of type "Opinion of refusal" (or "Opinion of being unable to give opinions")
Example 2:
"�We could not supervise the actual inventory of goods in stock on December 31, X1, as by that time we had not been appointed auditors. Due to the unit�s limitation we could not examine the goods in stock at the beginning of the year with the value of VND XX as well as we did not receive the certifications of debts to be recovered at the beginning of the year with the value of VND XY on the accounting balance sheet on December 31, X1. To us, because of the importance of these events, we refuse to give our opinions (or cannot give our opinions) on the unit�s financial report ending on December 31, X2".
13. Where the year-start balance contains many errors which greatly affect the current year�s financial report, the auditors shall have to notify such to the director (or the head) of the unit and, after getting the consent of the director, to the previous year�s auditors (if any).
Where the year-start balance contains many errors which greatly affect the current year�s financial report as mentioned above, but the audited unit has failed to treat and present them in the financial report, the auditors shall give the "Opinion of partial acceptance" or "Opinion of non-acceptance".
14. Where the current year�s accounting regime sees changes as compared with the previous year�s accounting regime and such changes have not been handled and fully presented in the explanation of the financial report, the auditor shall give the "Opinion of partial acceptance" or "Opinion of non-acceptance".
15. Where the previous year�s auditing report fails to give the " Opinion of total acceptance", the auditor shall have to examine the reasons therefor and its impact on the current year�s financial report. Example, due to the auditing scope limit or the inability to determine the year-start balance of goods in stock but such does not greatly affect the current year�s financial report, the auditor may give the opinion of total acceptance. If the reasons for non-total acceptance of the previous year�s financial report remain and greatly affect the current year�s financial report, the auditor shall have to give proper opinion in the current year�s auditing report./.
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GENERAL PROVISIONS
1. This standard aims to prescribe the basic principles and procedures and guide the ways of applying the basic principles and procedures related to the analytical process (procedures) in the course of auditing the financial reports.
2. The auditors must carry out the analytical process when making the auditing plans and the overall examination of the audit.
The analytical process is also carried out at other stages of the auditing process.
3. This standard shall apply to the audit of financial reports and also to the audit of other financial information and relevant services of the auditing companies.
The auditors and auditing companies must abide by the provisions of this standard in the course of performing the audit and providing relevant services.
The audited units (customers) must have necessary knowledge of this standard for coordination with auditors in supplying necessary information and documents related to the audit.
Terms used in this standard shall be understood as follows:
4. Analytical process: means the analysis of data, information and important rates, in order through which, to find out trends and fluctuations as well as relations, which contradict other relevant information or see great disparity with the anticipated value.
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Contents and purposes of the analytical process
5. The analytical process covers the comparison of financial information, such as:
- Comparing corresponding information in the period with those of the previous periods;
- Comparing reality with the unit�s plan (Example: Production plan, sales plan�);
- Comparing reality with the auditor�s estimates (Example: Estimated depreciation expense�);
- Comparing the reality of the unit with those of other units of the same operation scale in the same branch, or with the statistical figures, norms of the same branch (example: Investment rate, combined profit percentage�).
6. The analytical process also includes the consideration of relations:
- Between financial information (Example: The relation between combined profit and turnover�);
- Between financial information and non-financial information (Example: The relation between the labor expense and the number of employee�).
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The selection of the analytical process, method and extent of application shall depend on the professional assessment of the auditors.
8. The analytical process shall be used for the following purposes:
- Assisting the auditors to determine the contents, order and scopes of other auditing procedures;
- The analytical process is applied as a basic experiment when the use of this measure is more efficient than the detailed examination in reducing the detected risks relating to the database of the financial report;
- Examining the entire financial report in the final assessment of the audit.
The analytical process shall apply when making the auditing reports
9. The auditors shall have to apply the analytical process in the course of making auditing reports in order to inquire into the business situation of units and determines areas prone to risks.
The analytical process shall assist the auditors to determine the contents, order and scopes of other auditing procedures.
10. The analytical process applicable in the course of making auditing reports is based on financial information and non-financial information (Example: The relation between turnover and sale volume or between the quantity of products turned out and the capacity of machinery, equipment�).
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11. In the course of auditing, with a view to reducing detected risks related to the database of the financial reports, the auditors shall have to implement the analytical process or detailed examination or both. In order to determine appropriate auditing procedures for a specific auditing purpose, the auditors shall have to assess the efficiency of each auditing procedure.
12. The auditors shall have to discuss with the directors, chief accountants or representatives of the audited units about the capability to supply information and the reliability of necessary information for the application of the analytical process, including the analytical results already achieved by the units. The auditors may use the analytical data of the units if they believe in such data.
13. When applying the analytical process, the auditors shall have to consider the following factors:
- The objectives of the analysis and the reliability of the obtained results;
- The units� characters and the extent of information details (Example: The analytical process applicable to the financial information of each member unit shall yield more efficiency than the application only to the general information of units�);
- The availability of financial information and non-financial information;
- The reliability of information (Example: The correctness of plans or estimates�);
- The appropriateness of information (Example: The feasibly formulated plans are better than those which contain only targets to be achieved);
- The sources of information (Example: Information from the outside is more reliable than information supplied by units�);
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- Knowledge gained from audits of the previous periods together with the knowledge of the efficiency of the accounting system and the internal control system, and arising matters, which have led to the adjusted book-entries in the previous period.
The analytical process applicable in the stage of overall assessment of the audits
14. During the stage of overall assessment of the audits, the auditors shall have to apply the analytical process in order to get the overall conclusion on the compatibility of the major aspects of the financial report with their own knowledge about the business situation of the units. The analytical process shall assist auditors to reconfirm the conclusions obtained throughout the process of examining accounts or clauses, items on the financial report. On that basis, the auditors shall be assisted in making general conclusions on the truthfulness and logic of the entire financial report. However, the analytical process also points to matters which require the auditors to conduct the supplementary audit.
The reliability of the analytical process
15. The analytical process shall apply to information which are real and interrelated. The results of analyzing the relations shall provide the auditors with auditing evidences on the adequacy, accuracy and reasonability of the data compiled by the accounting system. The reliability of the analytical process depends on the auditors� assessment of risks which cannot be detected by the analytical process (Example: The analytical results do not reflect the big fluctuation or disparity but there are in fact important errors�).
16. The reliability on the results of the analytical process depends on the following factors:
- The importance of accounts or operations (Example: For goods in stock , which are considered important, not only the analytical process but also other procedures for detailed inspection shall be applied before making conclusions. On the contrary, for collectable debts which are considered unimportant, only the analytical results may be used as basis for making conclusions...);
- Other auditing procedures for the same auditing target (Example: The procedure for inspection of the money-collecting operation before the date of book closure for collectable amounts shall confirm or deny the results of the process of analyzing debts to be collected according to time-limits,�);
- The anticipated accuracy of the analytical process (Example: Auditors often prefer the comparison and analysis of the combined profit percentages between the current year and the previous year to the comparison of irregular expenses between the previous year and the current year�);
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17. The auditors must re-check the control procedures in order to create information for use in the analytical process. Where the control procedures are effective, the auditors shall put more trust on the reliability of the information and the analytical results are also more reliable. The auditors must examine simultaneously the accounting control procedures and the non-financial information control procedures (Example: Where the units control the making of sale invoices together with the quantity of sold goods, the auditors shall check simultaneously the procedures for control of sale invoices and control of the quantity of sold goods).
Investigation of unusual factors
18. Where the analytical process detects important disparities or irrational relationships among corresponding information, or big disparities with the estimated data, the auditors shall have to carry out the investigation procedures in order to adequately collect appropriate auditing evidences.
19. The investigation of import disparities or irrational relationships often start by requesting the directors (or heads) of the audited units to supply information and proceed with the following procedures:
- Reexamining the answers of the directors (or the heads) by comparing them with other auditing evidences already obtained in the course of auditing;
- Considering and implementing other procedures if the directors (or the heads) are still unable to give the explanation or have given unsatisfactory explanation./.
DIRECTORS EXPOSITIONS
(Issued together with the Finance Minister’s Decision No. 219/2000/QD-BTC of December 29, 2000)
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1. This standard aims to prescribe the basic principles and procedures and guide the ways of applying the basic principles and procedures to the gathering and use of the expositions of the directors (of the heads) of the audited units as auditing evidences, the procedures applicable to evaluate and archive the expositions of the directors (or the heads) of the units, the handling measures when the directors (or the heads) of the units refuse to supply appropriate expositions in the process of auditing financial reports.
2. The auditors shall have to gather expositions of the directors (or the heads) of the audited units.
3. This standard shall apply to the audit of financial reports and also to the audit of other financial information and relevant services of the auditing companies.
The auditors and auditing companies shall have to abide by the provisions of this standard in the course of auditing the financial reports.
The audited units (customers) and the parties using the auditing results must have necessary knowledge of this standard for coordination with the auditors and auditing companies in work as well as in handling of relations in auditing.
Terms used in this standard shall be understood as follows:
4. Directors (or the heads) are the highest representatives at law of enterprises or organizations such as directors, general directors, owners, heads of units. In a number of cases, the heads are chairmen of the Managing Councils or the Management Boards (hereinafter called collectively the directorates).
CONTENTS OF THE STANDARD
The audited unit directors� acknowledge of the responsibility for the financial reports
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Using directors� expositions as auditing evidences
6. In case of lack of appropriate auditing evidences, the auditors shall have to gather the written expositions of the directors of the audited units on matters which are deemed to greatly affect the financial reports. In order to limit the misunderstanding between auditors and directors of the units, the written explanations must be re-certified in writing by the directors. Appendix No.1 gives examples on matters expressed in the written expositions of directors or in the auditors� written requests for certification by the directors.
07. Matters requested to be explained in writing by directors are restricted to specific or general matters which greatly affect the financial reports. For matters which are deemed necessary, the auditors shall have to inform the directors clearly of their opinions on the importance of the matters which should be explained.
08. In the course of auditing, the directors (or heads) of the audited units shall send their written expositions to the auditors and auditing companies voluntarily or at the request of the auditors. When the expositions are related to matters which greatly affect the financial reports, the auditors shall have to do the following:
- Gathering auditing evidences from information inside or outside the units for verification of the directors� expositions;
- Assessing the reasonability and consistency between the directors� expositions and other gathered auditing evidences;
- Determining the extent of understanding about the explained matters by the exposition makers.
9. The directors� expositions cannot substitute the auditing evidences gathered by auditors. (Example: The director�s explanation about the cost price of a fixed asset cannot substitute the auditing evidence on the cost price of that asset such as invoice issued by the seller or the approved report on settlement of completed project). The auditors� failure to adequately gather appropriate auditing evidences on a matter which greatly affects the financial report while such evidences can be gathered will lead to the restriction on the auditing scope though that matter has already been explained by the director.
10. In a number of cases, the directors� expositions are the only gathered auditing evidence. (Example: Auditors must not gather other evidences to prove the director�s decision to make some long-term investment�).
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Archiving into the auditing files the directors� expositions
12. The auditors shall have to keep in the auditing files the directors� expositions in form of summarizing the verbal exchanges or written explanations for use as auditing evidences.
13. The written expositions evaluated as auditing evidences are more valuable than the verbal explanations. The written expositions are demonstrated in the following forms:
- The director�s written exposition;
- The auditor�s letter listing all his/her understanding of the director�s explanations, which are certified by the director as correct;
- The minutes of meetings of the Management Boards or financial reports already signed for approval by the directors.
Basic details of a written exposition
14. When requesting the unit�s director to make the exposition, the auditor shall have request that such documents be addressed directly to him/her with the contents: the information to be explained, day, month, full name and signature of the exposition maker of his/her certification in the exposition.
15. Usually, the director�s written exposition is inscribed with the same day and month inscribed on the auditing report. Some cases require the making of written explanations right in the course of auditing or after the date inscribed on the financial report but before the date inscribed on the auditing report. In specific cases, the explanation is made and announced after the issuance of the auditing report. (Example: the date of issuance of shares�).
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Handling measures to be applied if directors refuse to supply explanations
17. If directors refuse to supply explanations requested by auditors, thus restricting the auditing scope, the auditors must give their "opinion of partial acceptance" or "opinion of refusal". In this case, the auditors shall have to re-evaluate the reliability of all other explanations of the directors in the course of auditing and consider the extent of their effect on the financial report.