Chapter 2 auditing standards

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CHAPTER 2

AUDITING STANDARDS AND
PROFESSIONAL ETHICS


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AUDITING STANDARDS
For certified public accounting firms

The International Auditing and Assurance Standards Board (IAASB)
is an independent standard-setting body that serves the public
interest by setting high-quality international standards for auditing,
assurance, and other related areas, and by facilitating their adoption
and implementation. In doing so, the IAASB enhances the quality
and consistency of practice throughout the world and strengthens
public confidence in the global auditing and assurance profession.
The IAASB’s medium-term strategy addresses the following three
main themes in the public interest:
- Supporting global financial stability;
- Enhancing the role, relevance and quality of assurance and related
services in an evolving world; and
- Facilitating adoption and implementation

of the standards.
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AUDITING STANDARDS

For government accountability office auditors
The International Organisation of Supreme Audit Institutions
(INTOSAI), which is an autonomous, independent and non-political
organisation, operates as an umbrella organisation for the external
government audit community.
INTOSAI has provided an institutionalised framework for supreme
audit institutions to promote development and transfer of knowledge,
improve government auditing worldwide and enhance professional
capacities, standing and influence of member SAIs in their
respective countries.

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AUDITING STANDARDS

For internal auditors
The Institute of Internal Auditors (IIA) is the internal audit

profession's global voice, recognized authority, acknowledged
leader, chief advocate, and principal educator. Generally, members
work in internal auditing, risk management, governance, internal
control, information technology audit, education, and security.
The mission of The Institute of Internal Auditors is to provide
dynamic leadership for the global profession of internal auditing.
Internal auditing is an independent, objective assurance and
consulting activity designed to add value and improve an
organization’s operations. It helps an organization accomplish its
objectives by bringing a systematic, disciplined approach to evaluate
and improve the effectiveness of risk management, control, and
governance processes.
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INTERNATIONAL STANDARDS ON AUDITING

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Auditing standards are general guidelines to aid auditors in fulfilling
their professional responsibilities in the audit of historical financial
statements.
They include consideration of professional qualities such as
competence and independence, reporting requirements, and
evidence.

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INTERNATIONAL STANDARDS ON AUDITING

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International Standards on Auditing (ISAs) are
issued by the International Auditing and Assurance Standards Board
(IAASB) of the International Federation of Accountants (IFAC).
-IFAC is the worldwide organization for the accountancy profession,
with 159 member organizations in 124 countries, representing more
than 2.5 million accountants throughout the world.
-The IAASB works to improve the uniformity of auditing practices
and related services throughout the world by issuing
pronouncements on a variety of audit and attest functions and by
promoting their acceptance worldwide.
ISAs do not override a country’s regulations governing the audit of
financial or other information, as each country’s own regulations
generally govern audit practices.
Most countries, including Vietnam, base their auditing standards on
ISAs, modified as appropriate for each country’s regulatory
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environment and statutory requirements.


GENERALLY ACCEPTED AUDITING STANDARDS

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10 generally accepted auditing standards (GAAS), which were

developed by the AICPA, fall into three categories:
• General standards
• Standards of field work
• Reporting standards
These standards are not sufficiently specific to provide any
meaningful guide to practitioners, but they do represent a framework
upon which the AICPA can provide interpretations.

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GENERALLY ACCEPTED AUDITING STANDARDS

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GENERALLY ACCEPTED AUDITING STANDARDS

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General standards: The general standards stress the important
personal qualities that the auditor should possess.
- Adequate Technical Training and Proficiency: have formal
education in auditing and accounting, adequate practical experience
for the work being performed, and continuing professional education.
- Independence in Mental Attitude: CPA firms are required to

follow several practices to increase the likelihood of independence of
all personnel.
- Due Professional Care: Due care includes consideration of the
completeness of the audit documentation, the sufficiency of the audit
evidence, and the appropriateness of the audit report.
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GENERALLY ACCEPTED AUDITING STANDARDS

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Standards of field work: concern evidence accumulation and other
activities during the actual conduct of the audit.
- Adequate Planning and Supervision: the audit is sufficiently
planned to ensure an adequate audit and proper supervision of
assistants.
- Understand the Entity and its Environment, Including Internal
Control: To adequately perform an audit, the auditor must have an
understanding of the client’s business and industry.
- Sufficient Appropriate Evidence: Decisions about how much and
what types of evidence to accumulate for a given set of
circumstances require professional judgment.
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GENERALLY ACCEPTED AUDITING STANDARDS

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Standards of Reporting: require the auditor to prepare a report on
the financial statements taken as a whole, including informative
disclosures.
- Must state in the auditor’s report whether the financial statements
are presented in accordance with generally accepted accounting
principles (GAAP).
- Must identify in the auditor’s report those circumstances in which
such principles have not been consistently observed in the current
period in relation to the preceding period.
- Must so state in the auditor’s report when determining that
informative disclosures are not reasonably adequate.
- Must either express an opinion regarding the financial statements,
taken as a whole, or state that an opinion cannot be expressed, in
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the auditor’s report.


VIETNAMESE STANDARDS ON AUDITING

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The purpose of this Vietnamese Standard on Auditing (VSA) is to
establish standards and fundamental principles and provide
guidance on procedures to be followed by the audit firm and the
auditor in an audit of final accounts of investment.
1999: 04 auditing standards including VSA 200, 210, 230 and 700
were established.

Up to 12/2005, 37 VSAs were established by the Ministry of Finance.
6/12/2012, the Ministry of Finance established 37 new VSAs,
replacing most of current VSAs, excluding VSA 910, VSA 920, VSA
930 and VSA 1000
8/5/2015, 4 new VSAs were established and the new VSA 1000
replaced the current one. Up to now, there are 45 VSAs in total.
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PROFESSIONAL ETHICS

What are ethics?
- Ethics can be defined broadly as a set of moral principles or values.
- Ethical behavior is necessary for a society to function in an orderly
manner. Ethics is the glue that holds a society together.
- The need for ethics in society is sufficiently important that many
commonly held ethical values are incorporated into laws.

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PROFESSIONAL ETHICS

Special need for ethical conduct in accounting professions

A CPA, as a professional, recognizes a responsibility to the public,
to the client, and to fellow practitioners, including honorable
behavior, even if that means personal sacrifice.
The reason for an expectation of a high level of professional
conduct by any profession is the need for public confidence in the
quality of service by the profession, regardless of the individual
providing it.
It is essential that the client and external financial statement users
have confidence in the quality of audits and other services.

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PROFESSIONAL ETHICS

Code of ethics for CPA firms
The code of ethics for professional Accountants was published by
the International Federation of Accountants (IFAC).
Its mission to serve the public interest by:
-contributing the development of high-quality standards and
guidance;
-facilitating the adoption
standards and guidance;

and

implementation

of

high-quality

-contributing the development of strong professional accountants,
and promoting the value of professional accountants worldwide;
-and speaking out on public interest issues.
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PROFESSIONAL ETHICS

Code of ethics for government accountability office auditors
INTOSAI has deemed it essential to establish an international Code of
Ethics for auditors in the public sector.
A Code of Ethics is a comprehensive statement of the values and
principles which should guide the daily work of auditors.
A code of ethics for auditors in the public sector should consider the
ethical requirements of civil servants in general and the particular
requirements of auditors, including the latter’s professional obligations.

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PROFESSIONAL ETHICS

Code of ethics for internal auditors
The Office of Internal Audit adopts and upholds the Code of Ethics as
promulgated by the Institute of Internal Auditors.
The purpose of The Institute’s Code of Ethics is to promote an ethical
culture in the profession of internal auditing.
A code of ethics is necessary and appropriate for the profession of
internal auditing as it is founded on the trust placed in its objective
assurance about risk management, control, and governance.

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CODE OF ETHICS FOR CPA FIRMS

A professional accountant shall comply with the following
fundamental principles:
a.Integrity – to be straightforward and honest in all professional and
business relationships
b.Objectivity – to not allow bias, conflict of interest or undue
influence of others to override professional of business judgments
c.Professional Competence and Due Care – to maintain
professional knowledge and skill at the level required to ensure that
a client or employer receives competent professional service based
on current developments in practice, legislation and techniques and

act diligently and in accordance with applicable technical and
professional standards
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CODE OF ETHICS FOR CPA FIRMS

A professional accountant shall comply with the following
fundamental principles:
d.Confidentiality – to respect to confidentiality of information
acquired as a result of professional and business relationships and
therefore not disclose any such information to third parties without
proper and specific authority, unless there is a legal or professional
right or duty to disclose, nor use the information for the personal
advantage of the professional accountant or third parties.
e.Professional Behavior – to comply with relevant laws and
regulations and avoid any action that discredits the profession.

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CODE OF ETHICS FOR CPA FIRMS

Threats: when a relationship or circumstance

creates a threat, such a threat could compromise, or could be
perceived to compromise, a professional accountant’s compliance
with the fundamental principles.
Threats fall into one or more of the following categories:
a.Self-interest threat – the threat that a financial or other interest
will inappropriately influence the professional accountant’s judgment
or behavior;
b.Self-review threat – the threat that a professional accountant will
not appropriately evaluate the results of a previous judgment made,
or activity or service performed by the professional accountant, or by
another individual within the professional accountant’s firm or
employing organization, on which the accountant will rely when
forming a judgment as part of performing a current activity or
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providing a current service,


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CODE OF ETHICS FOR CPA FIRMS

Threats fall into one or more of the following categories:
c.Advocacy threat – the threat that a professional accountant will
promote a client’s or employer’s position to the point that the
professional accountant’s objectivity is compromised;
d.Familiarity threat – the threat that due to a long or close
relationship with a client or employer, a professional accountant will
be too sympathetic to their interests or too accepting or their work;
and

e.Intimation threat – the threat that a professional accountant will
be deterred from acting objectively because of actual or perceived
pressures including attempts to exercise undue influence over the
professional accountant.
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