MINISTRY OF EDUCATION
NATIONAL ECONOMICS UNIVERSITY
NGUYEN THI DAO
PERFECTING ANALYSIS IMPLEMENTATION TO IMPROVE THE
INTERAL AUDITING’S EFFECTIVENESS IN CÓNTRUCTION
COMPANIES
MAJOR: ACCOUNTING (ACCOUNTING, AUDITING AND ANALYSIS)
CODE: 62343001
ABSTRACT OF DOCTORAL THESIS ECONOMICS
HA NOI, 2014
RESEARCH IS FINALIZED AT
NATIONAL ECONOMICS UNIVERSITY
INSTRUCSTOR:
1. PROF.DR NGUYEN QUANG QUYNH
2. DR. LE THI XUAN
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ECONOMICS
UNIVERSITY
1
INTRODUCTION
While internal audit (IA) was established and developed a long time ago in the
world, this type of audit appeared relatively late in our country. Not until 1997 did
internal audit officially come into existence and get accepted in legal documents. During
the process of development, although internal audit partly contributed to the development
of regulation in common, it has revealed problems influencing the efficiency of auditing.
This has been shown in the internal audit activities of various businesses including
construction - which is among those with developed internal audit activities and also a
sophisticated business. In Viet Nam, internal audit exists in large construction companies
which are regularly corporations. Despite major contributions in management, internal
audit has revealed problems influencing the efficiency of auditing, for instance, a
confining performance of auditing functions; the failure to meet manager’s expectations.
This has raised a matter of recognizing and solving issues deriving during the auditing
process. Analysis is considered an instrument to help internal audit solve these issues.
Thus, the author chooses the topic “Enhancing the organization of analysis activities
along with improving the efficiency of internal audit in construction corporations”.
In the world and in Viet Nam, there have been several research projects relating
to designing and applying the process of analysis in auditing as a whole, particularly in
association with the type of financial audit undertaken mainly by independent auditors.
Yet there has been no study, theoretical or practical, to investigate the analytical
organization associating with improving the efficiency of internal audit, particularly in
Vietnamese construction corporations. Therefore, the research objective of this PhD
thesis is to discover how analytical organization influences the efficiency of internal audit
in Vietnamese construction corporations. Distinctively, the author will establish an
analytical model in order to increase the efficiency of international audit in Vietnamese
construction corporations. Given that purpose, the research object of this thesis is the
organization of analyzing process in auditing which is undertaken by internal auditors.
The thesis considers only matters occurring during the activity of analytical organization
in the process of internal audit in large Vietnamese construction corporations during the
period from 2008 to 2012. The author applies the thesis approach by using a process of
conducting a complete internal audit with 4 stages in Figure 1.A below:
APPLYING THE ANALYTICAL METHOD
Planning and
designing the
auditing program
Conducting the
auditing plan
Finishing the
audit process and
making report
Examining the
conduction of
auditors’ proposals
FACTORS COMPOSING THE AUDITING EFFICIENCY INFLUENCED BY
THE ANALYZING PROCESS
CONCLUSION OF AUDITING EFFICIENCY IN RELATION
WITH EMPLOYING ANALYZING PROCESS
Figure 1.A: Research approach method of the thesis
2
The thesis uses descriptive statistics, comparative and evaluative methods, based
on a model applying the analyzing process in auditing, with data collected. The author
develops the concept of one analytical organization model applied in the internal audit
process to achieve the audit efficiency.
CHAPTER 1: GENERAL THEORY OF ANALYTICAL ORGANIZATION THE
ANALYSIS WITH THE EFFICIENCY OF INTERNAL AUDIT IN
CONSTRUCTION CORPORATIONS
1.1. Overview of analytical organization
1.1.1. The nature of analysis
Economic analysis is an instrument of economic management to “dissect”, summarize
and evaluate economic and social events to establish reliable and effective solutions with
the purpose of improving the operation of numerous management systems in the national
economy.
1.1.2. Contents and method of analysis in the corporation
The major contents of economic analysis are events, business processes that did or will
occur in units, components and corporations under affection of subjective and objective
factors. These events and business processes are expressed by a specific business
outcome revealed through figures.
Analytical method is the combination of necessary methods used to study the analytical
object, allows performing specific analytical objectives. Analytical methods in Economics
are those that study generally and comprehensively economic activities, their processes
and outcomes in order to evaluate appropriately and objectively the operation efficiency,
and to discover available reserves.
1.1.3. Analytical organization in the corporation
Analytical organization seeks to establish an optimal relation on the bases of science and
art in analysis that are correspondent with each specifically analytical object. Analytical
organization in the corporation is often dependent on business specific features, types of
business and characteristics of each corporation.
1.2. Organization of internal audit and the role of analysis
In the world, internal audit developed quite early, since the 1900s [86]. The popular
opinion is that “…the internal audit is an independent activity, ensures the objects and
3
consultative activities, is established to increase the value and improves the activities of
an organization. The internal audit assists organization in performing its objectives with
the systematic and regular approach in order to evaluate and enhance the effect in risk
management, supervision and regulatory processes” [[89, p.725]. The internal audit
organizing order of in a corporation is according to Figure 1.1:
Step 1: Making a plan for internal audit
Step 2: Performing the plan of internal audit
Step 3: Making a report of internal audit
Step 4: Examining the implementation of the internal audit proposal
Figure 1.1. Process of an internal audit
The analysis or the process of analysis is one of the basic auditing procedures. The
procedure of analysis in internal audit assists auditor in making plan, performing an
effective audit.
Analytical organization through the process or the procedure of analysis is used in the
internal audit with contents, methods, performing scopes… as being generalized in
Figure 1.2 below:
Step 1
Developing an analytical model
Step 2
Considering the independence and reliance of data
Step 3
Estimating values and comparing with book values
Step 4
Analyzing reasons of divergences
Step 5
Examining discoveries
Figure 1.2: The procedure/process of analysis
1.3. Organization of analyzing influences on the efficiency of internal audit in
corporations
1.3.1. The relation between analytical organization and internal audit efficiency
4
Different researches conducted on the efficiency of internal audit majorly concentrate on
processes, outcomes and objectives of internal audit. The relation between the efficiency
of the audit and the analytical procedure is described in figure 1.3:
The process of
analysis
Achieving the
efficiency of audit
Making audit
plans
Making plans to
target risks
Conducting the
audit plan
Conducting the
overall audit
Making an audit
report
Evaluating
eventually
Making an audit
report for users
How to apply analytical procedure in
different stages?
- Analyze to recognize the risks of
auditing objects
- Analyze to identify the risk in
association with specific objects
- Associate with other procedures
-- Analyze
the overall reasonableness
c
before giving opinions
- Analyze to assert opinions
sufficiently and appropriately
Figure 1.3. Influence of analysis on the efficiency of internal audit
1.3.2. Developing the model of analytical organization aiming to increase the efficiency
of internal audit in corporations
The first: Analysis in making strategic plan for risks is described generally in Figure
1.4 below.
Charters/regulati
ons of audit
Organization’s objectives
Management
demands
Uses of resources
Resources for priviledged sectors
Evaluating risk preferences
Audit policy
Strategic plans for internal audit
Annual audit plans
Audit Estimation
Corporation risk
examination
Quarterly audit plans
Business plans
Reporting anticipated objectives
Primitive examinations
Audit
Reporting
Specific plans
process
Figure 1.4. General model of making plan for internal audit based on risk estimation
5
Making a risk-oriented audit plan needs to be developed following a model going from
strategic planning to overall planning and to audit programming – Figure 1.5.
Organization’s objectives
Organization’s strategies
Evaluating sectional risks
Audit results as required - Objectives
Available
resources
Available
procedures
Analysis according to PESTL and
SWOT models
Strategic gaps
Required strategic plans
Performing
Evaluating
Figure 1.5. Process of making strategic audit plan
The relation of specifying the objectives is described generally in Figure 1.6.
Organization’s objectives
Objectives of each audit section
Objectives of each audit service
Audit objectives for each auditor
Figure 1.6. Levels of audit objective
Applying the approach to analyze according to the top down analytical model is
generalized in Figure 1.7
Business models of
organization
Processes
Analyzing strategic risks
Business strategic risks
Risk Evaluation
Analyzing process risks
Business process risks
Risk Evaluation
Analyzing remaining risks
Analyzing exterior
threats
Analyzing
internal threats
Risks need to be considered and applied
Figure 1.7. Strategic analytical model specifying audit objectives
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(1) In terms of analyzing strategic risks of each section: Analysis aims at assisting
auditor in specifying the position of organization in relation with external
sections/organizations, including corporation’s shareholders, and at the same time
specifying external threats or risk towards the organization’s success. In order to analyze
strategic risks, auditors need to initiate from the economic system’s factors in an
organization. Auditors will apply the five-competitive-force strategic analytical model
(Five forces) and PESTL model to identify and evaluate strategic risks – Figure 1.8
Political factors
New entrants
Economic factors
Suppliers
Rivals
Buyers
Social factors
Substitutes
Technological factors
Figure 1.8. Analyzing threats towards the business of an organization
(2) In terms of analyzing business risk from internal processes: Analysis aims to
indentify and then evaluate business risks upon given internal processes – Figure 1.9
Leader risk
Integrity risk
Compliance risk
Information risk
Operational risk
Technological risk
Financial plan
making risk
Labor resource
risk
Process risk
Figure 1.9.Analyzing risk of processes
Table 1.1 below describes analytical ratios used to indentify, measure and evaluate risks
in internal processes.
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Table 1.1. Analyzing internal threats
Risks in
processes
Inferior strategy
Management activities relating to
risks
Ratios of risk analysis and evaluation
- Relating to the initiative of
managers
- Practicing making strategy plan
- Market share
- Customer’s pleasure
- Maintaining customers
Failure in
coordinating
strategies
- Briefing task, strategy and business
plan
- Training
- Market share
- Customers’ record
- Employee’s behavior
Failure to
coordinate
strategy with
internal resource
allocation
- Regularly making plan and
estimating
- Initiative of Board of directors
- Management according to operation
- Estimating
- Applying operating cost and analysis the
movement
- Customers’ attitudes
Missing
opportunities
- Market research
- Customer surveying
- Process of developing products
- Market share
- Comparing with rivals
- Customers’ attitudes
Failure in
preventing threats
- Active supervision of Board of
directors
- Supervising rivals
- Supervising the external
environment
- Changes in market shares
- Comparing with rivals
- Changes in revenues and costs
- Appropriate structure of
encouragement
- Training
- Changing management
- Cycle of time in terms of changes in
products or processes
- Replacement costs
- Employee’s attitudes
Lack of
coordination of
processes and
functions
- Establishing the open information
exchange
- Basing on information system on the
basis of technology
- Cycle of time in terms of reporting process
- Reflections and proposals of employees
- Employee’s attitudes
Inappropriate
value for
shareholders
- Providing analysis with information
- Planning to repurchase shares
- Market value of the equity
- Price to Earning ratio
- Ratio analysis
Lack of
flexibility
Audit plan having specific time often establishes audits which are performed in a period.
This is considered as a basic task of internal audit function – Figure 1.10.
Analysis is used in specific audit plans or in audit instruction in association with specific
Business plan
Audit strategy
Resources
Methods
Audit plan with specific time
Figure 1.10. The time specific relation between strategy
and audit plan
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sections (in step of making plan). If dividing according to specifically audited
object/section/operation in association with tasks and with making plans, the analytical
procedure is applied on the basis of trend, rate and model analysis.
The second: Analysis in carrying out systematic audit. Analyses need to be specific
towards risk-based system auditing – Figure 1.11: (1) Examine activities such as systems,
factors of one system, componential systems, parallel systems and parental systems, (2)
carry out the systematic approach with carrying out specific auditing contents.
Specific audit plan
Enquiring systems and risks
Evaluating controlling activities
Strong
Weak
Appropriate with?
Controlling
actvities
No
Yes
Limited basic tests
(Report)
Analyzing discoveries of
remaining risks
Extended basic test
Generating
guarantees
Generating
proposals
Report
Final checking step
Figure 1.11. Process of auditing risk-based systems
Basic analytical techniques such as financial statement analysis according to time series,
relative financial statement analysis, ratio analysis, cash flow analysis, nonfinancial
9
measurement, comparison with rivals, will combine closely with operational
measurement using balance scorecard, PESTL, SWOT model…
The third: Analysis in the period of making auditing report and examining the
implementation of auditing proposals towards users. The analytical procedure is used
in this period in order to assist auditors in evaluating the rationality of procedures carried
out, whether audit evidences collected are sufficient and suitable for making decision or
not, as well as evaluating the legality of conclusions proposed by auditors, including
audit opinions on specific issues in an internal audit.
1.4. Experience on Analytical organization to increase the efficiency of internal
audit from several countries.
Experiences for internal audit: First: Analysis is carried out in every stage of an internal
audit in corporations; Second: Contents are analyzed according to internal audit’s
task; Third: Analysis is specified in standards and related regulations; Fourth:
Application of analytical methods is changeable depending on objective approaching
methods.
CHAPTER 2: THE STATUS OF ANALYTICAL ORGANIZATION WITH THE
EFFICIENCY OF INTERNAL AUDIT IN VIETNAMESE CONSTRUCTION
CORPORATIONS
2.1. General characteristics of Vietnamese construction corporations influencing
analytical organization in internal audit
2.1.1. The process of establishment, development of Vietnamese construction
corporations with those of internal audit
Over 50 years of continuous development, the construction industry has majorly
contributed to the achievement of economic – social tasks, step-by-step modernized,
developed and integrated into regional and international areas. Meeting huge demands for
the construction field of the economy, Vietnamese construction corporations are
significantly expanding in terms of both the quantity and size. According to 2005 Stateowned enterprise law [41], corporations which are invested and established by the State
through collecting dots without spontaneously economic association of unit members and
state-owned corporations are divided into two types: corporations established according
to Decision 90/TTg on 7/3/1994 (Corp. 90 for short) [10] and corporations established
according to Decision 91/TTg on 7/3/1994 (Corp. 91 for short) [11] of the government.
Until June, 2012, the numbers of corporations (established according to Decision 90/TTg
and Decision 91/TTg on 7/3/1994, and transformed model) were 87 Corp.90 corporations
and 21 Corp.91 corporations. Among those, 34 corporations operating in the construction
field were majorly managed by the Ministry of Construction and Transportation. Then
10
some of the corporations were transformed into company models which are Limited
Company and Parent-Child Company.
Before 1996, Vietnam did not have any official legal documents about the internal
supervision and the internal audit system. At the end of 1996, based on National Budget
Law, the Government released Decree 199/2004/NĐ-CP on 03/12/2004 “Promulgating
Regulation of managing state-owned company’s finance and managing state-owned capital
invested in other companies” [13] to create a legal corridor for organization and operation
of internal audit. Based on Decree 59/1996/ND-CP[14], the Ministry of Finance released
Decree 832/TC/QD/CDKT (28/10/1997) which promulgated “Internal audit regulation”
[6], a partial internal audit organization model[4], [5]. After 1997, internal audit was
organized in numerous large corporations, including Vietnamese construction corporations.
In construction corporations of Vietnam, internal audit is organized majorly in Corp.90.
Initial survey results before profound research showed that there were 8 corporations
organizing internal audit. Changes in business environment required that the management
needed to change and internal audit appeared. Continuous changes of construction
corporations have required changes of internal audit to meet new demands.
2.1.2. Characteristics of the construction industry having influences on the analytical
organization in internal audit of construction corporations in Viet Nam.
Operating characteristics of construction corporations in Viet Nam have influences on
internal audit organization according to 2 groups of characteristic: (I) Regarding features of
the construction industry, we need to concern specific characteristics, for example: Firstly,
diversified organizational models; Secondly,
competitions among construction
corporations continuously increase while the number of projects tends to decline due to
impacts of the government and macro economy’s policies not yet having escaped from the
worldwide economic crisis; Thirdly, the construction industry is generally sensitive with
changes in economic conditions; Fourthly, reflections of construction corporation against
negative situations; Fifthly, The Government’s regulations and policies; Sixthly, impacts of
financial and real estate markets; Seventhly, the issue of extending operations abroad;
Eighthly, the trend of merger and acquisition; Ninthly, the issue of decreasing cost and
improving operation. (II) Regarding construction corporations in Viet Nam, we need to
concern about specific characteristics, for example: Firstly, dispersive production
activities; Secondly, construction corporation’s products are often special; Thirdly,
construction must comply strictly the system of standards and processes; Fourthly,
construction generally needs to be invested largely in terms of capital; Fifthly, the issue of
using resources wastefully, and pollution…When analyzing characteristics of construction
and its products, managers have to take care of different factors of internal audit
organization in order to achieve an efficient audit in Vietnamese construction corporations,
including: (1) Internal audit is a necessary managing method to assist manager in identify
the problems influencing
objectives of the corporation; (2) The complication,
11
diversification and fluctuation in construction corporations in our country give internal
audit new requirements; internal audit has to face more problems.
2.1.3. Characteristics of organizing business management having influences on
analytical organization in internal audit of Vietnamese construction corporations.
In terms of business management in construction corporation of Viet Nam, we can describe
generally following basic characteristics which have influences on requirements for
internal audit and its capacity of meeting as well as issues being placed: The first is
organization models of construction corporations; The second is that construction
corporation is managed by various ministries; The third is that the way of management in
Vietnamese construction corporations is the lump sum based on the amount of work.
Identifying risks in the internal process in general and in the process of lump sum in
construction corporations in particular is the managers’ preference. Furthermore, internal
audit can assist superior managers in improving the current process in order to increase
the efficiency and the effectiveness of the business. This is also the expectation of
corporation managers for internal audit.
2.2. The situation of analytical organization in the internal audit of Vietnamese
construction corporations.
2.2.1. Overview of organizing internal audit in Vietnamese construction corporations.
Step 1, Planning for an internal audit: The implementation of this exercise in
construction corporations is normally set in internal audit regulations even with
corporations having internal audit sections but have yet to establish their own regulations.
However, in practice, plan-making only covers some general activities. Auditing
programs for financial statements are generally performed by internal auditors based on
their experience regarding individual account checking. However, making plans and
designing programs reveal several limitations.
Step 2, Performing internal audit plan: At this stage, auditors perform tasks
based on the plans and the programs that have already been established, internal audit
sections who are not involved in establishing programs may rely on experience alongside
with information from previous audit records and initial collections. The implementation
process has several common points: First, audit process is associated with contents of
financial audit such as fixed asset, revenue, cost, etc. Second, audit process relies on
experience; Third, this process mainly reviews previous auditing and accounting
documents and does not apply methods which are undiversified, inappropriate to audit
objects. Fourth, the process is repeated and inflexible.
Step 3, Summarizing and generating internal audit report: An internal audit
report executed by internal auditors is based on detailed description and auditor’s
summary according to the procedure of accounts in the financial statement.
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Step 4, Examining the implementation of internal audit conclusions: Low
outcomes from surveys have revealed that the proposal was not implemented or
implemented unsystematically.
2.2.2. The reality of analytical organization in internal audit of Vietnamese
construction corporations.
Analyses are conducted on different stages:
Firstly: Analysis in the planning stage. In the auditing plan established in
construction corporations, this type of analysis has been already conducted. However,
there are some key features in this stage: First, analysis barely contributes to defining
objectives of different auditing plans, from strategic plans, general to detailed audit plans;
Second, analysis ignores the identification and allocation of resources for audit program
with regards to time and audit staff. Third, the appearance of analysis in detailed audit
plans is simple, methodologies and application scopes are limited to several accounts in
financial statements such as fixed assets, revenues, labor costs, costs of project/part of
project; Fourth, the failure to identify priorities in internal audit. The above analysis also
shows that internal audit does not target issues that managers require. Therefore, this
problem influences the possibility of reaching internal audit’s objectives and the
expectation of managers.
Secondly: Analysis in the stage of plan execution. Internal audit is associated
with two main fields: verifying the confidence level of financial information, auditing
regulatory tracking which includes accounting variations. First, in terms of financial
accounting: auditors verify accounts in financial statement. Analysis is applied but at a
limit level, for example, applying comparisons between periods, calculating deviations,
estimating and comparing with market values of specific items. Evidences collected from
surveys have proved that the process of audit is heavily based on experience and is
strongly influenced by accounting verification techniques. Second, compliance audit and
operation audit: In auditing official documents and decisions, several construction
corporations evaluate compliance audit and operation audit. Outcomes from auditing
documents prove that these activities have low completion levels and most audit sections
fail to perform these activities, particularly operation audit. Compliance audit is executed
via the verification process, comparing regulations in construction, industry standards;
following with State laws in the construction field, meeting technical requirements in
construction products such as houses, roads, bridges, cellars… with the construction
process in practice, even material norm in execution. However, internal audit in
construction corporations is restricted in regulatory tracking and evaluating and does not
facilitate firm’s managers in promulgating regulation, more detailed process. While
analysis has been applied in execution stage, analytical process has several limitations:
objectives of analysis are inexplicit, analysis method is applied at a limit of scope;
analysis is not complied with identification and audit concerns of managers. This is the
main reason leading to the inefficiency of audit.
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Thirdly: Analysis in final audit stage and examining the implementation of
internal audit’s proposal in Vietnamese construction corporations. In the typical
process of internal audit, termination stage is associated with making a proposal and
internal auditing report. In terms of financial audit, auditors establish forms on data
deviations to sum up the mistakes associating with audited norms and examined technical
tasks. The content in these entry sheets are rough data of before-auditing-stage and
during-auditing-stage (which have been adjusted or reclassified) and deviations
(calculated based on accounting or internal auditing database) according to individual
account in financial statement. This is a basic analysis to evaluate auditing results and
adjustments related with accounts. Generally, if this table system is established in
execution stage, these tables often have identical structure and reporting method, etc, and
does not differentiate between auditing objectives, sectors or line of execution. Analysis
is applied at a simple level, facilitating internal auditors in specifying differences,
performing adjustment and releasing final outcome about financial statement. In terms of
operation audit and compliance audit: Analyses of related data and interviewed
outcomes prove that these kinds of audit reveal numerous limitations. Analytical content
and outcomes are applied at a simple level such as calculation of proportion, comparison
with plan, evaluation of completion level, net income per revenue ratio to evaluate
efficiency… In terms of compliance, analyses are not executed. In practice, general
analyses before conclusion about control, procedure,… which needs to be verified
generally are not concerned profoundly. Analysis is established in different stages of
internal audit programs in Vietnamese construction corporations. Analysis is applied and
partly influence on detailed internal audit stage and outcomes of audit. However, there
are limited positive impacts, even in auditing sector in which analysis procedure play an
important role. This fact affects outcome of internal audit and impact of outcome on
audited unit’s operation.
2.2.3. Influences of analytical organization on the efficiency of internal audit in
Vietnamese construction corporations.
In the construction sector, as a result of differences in operational characteristics and
backgrounds of Vietnamese construction corporations, the execution and organization of
internal audit in these corporation are diversified. The implementation process of internal
audit varies between different corporations and depends on characteristics of individual
objects in each corporation. Table 2.1 shows the outcomes of a manager survey which
includes deputy vice managers, general managers, chairmen of the boards, chairmen of
members (of both corporations with or without internal audit) about their
expectations/desires towards internal audit activities.
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Table 2.1. Overall expectations of senior managers on functions of internal audit
Concerned issues
1.
Reliable financial information
2.
Valid internal control
3.
Cooperation between sectors
4.
Corporate’s information system
5.
Business procedures (Investment,
construction,…)
6.
Risk Identification and evaluation
of business
7.
Potential problems
8.
Other issues
Very
Not
Concerned
concerned
concerned
26/28
2/28
0/28
5/28
19/28
4/28
Notes
Control
department
owned
–
3/28
6/28
19/28
Not covered in the
mandate of an
internal audit
8/28
14/28
6/28
22/28
1/28
5/28
3/28
5/28
20/28
Not covered in the
mandate of an
internal audit
3/28
10/28
15/28
Depend on defined
situations
0/28
4/28
n/a
24 cases without
answers
(Sources:
Collection
from
the
author’s
survey
–
Appendix)
Survey indicates that senior managers are concerned about the functions of internal
audit. However, their different expectations are based on different opinions about the role of
internal audit in enterprises. Results also show that senior managers expect internal audit to
concentrate on verifying financial information, internal control, information system, potential
detailed problems, business procedures. However, plan analysis based on plan documents
and auditing decision of corporation shows that the auditting field of internal audit is
financial audit, other types of audit are at a limit of quatity or quality. With respect to other
auditing types, analysis performance is restricted. Sorting out contents and auditing objects is
based on experience. This problem affects auditing discoveries and proposals of internal
audit – Table 2.2
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Table 2.2. Evaluation of senior managers towards functions of internal audit
Investigated Issues
Good Normal
Bad
1. Overall outcomes of audit tasks
3/16
8/16
5/16
2. Task completion time and timely report
4/16
5/16
7/16
3. Selection of appropriate issues
1/16
3/16
12/16
4. Level of solving problem in the planning
Notes
In the mandate of the
monitoring board
5/16
9/16
Not covered in the
2/16 mandate of an internal
audit
5. Level of solving problems in making plans
2/16
4/16
8/16
6. Auditing
1/16
5/16
10/16
process
discoveries
and
auditors’
proposals
7. Level of appropriateness of proposals
8. Performing proposals of internal audit
2/16
6/16
1/16
2/16
Not covered in the
8/16 mandate of an internal
audit
13/16 1 undefined
(Sources: Collection of the author based on objects and investigated indicators)
Outcomes released by auditors in Vietnamese construction corporations with
internal audit have shown that the rate of plan completion is at a medium level. Analysis
on auditing outcomes, appropriateness of proposals, proposal performances,… prove an
dissatisfaction of senior managers about internal audit. Definitely, the validity of internal
audit in Vietnamese construction corporations is at a low level. Analysis proves there are
several problems resulting in this inefficiency of audit.
2.3. General evaluation about the status of analytical organization in internal audit
of Vietnamese construction corporations
2.3.1. Achievements and limitations of analytical organization in internal audit of
Vietnamese construction corporations
Achievements of analytical organization are summarized: Firstly, analysis is
carried out in every stage of an internal audit in construction corporations. Secondly,
analysis is applied by auditors in practice in almost all internal audit tasks. Thirdly,
analytical analysis assists auditors in explaining discovered issues and then suggesting
proposals for these discoveries associated with specified internal audit. Fourthly, auditors
have diversified analytical techniques to facilitate auditing tasks. The fifth point is the
diversification of content in analysis, including financial information and non-financial
16
information. Sixthly, analytical objects, especially financial statements, are intensively
analyzed and to some extents supportive for auditors in commenting on financial
statements. Besides such achievements, analytical organization reveals several
limitations: First, in the planning stage, analysis has failed to assist auditors to sort out,
identify critical points and classify priorities; limitations of analysis have influences on
specifying orientations, appropriate concentrations/ allocations of resources to
successfully perform auditing tasks under restricted conditions. Second, in the performing
stage: simple techniques in analysis which mainly focus on financial auditing in every
accounts lead to deviation of auditors, concentrating on familiar accounts and following
experience; Third, in terminating and reporting stages: analysis does not identify essential
findings and assist internal auditors in examining and solving problems generated from
overall auditing tasks. Therefore, auditing proposal is at a limited level of application due
to the failure in integration in the environment of common corporate management.
Fourth, in the stage of examining proposal implementation: analysis is discontinuous or
not executed.
2.3.2. Reasons for limitations of analytical organization of internal audit in
Vietnamese construction corporations.
Firstly, administrative factors in planning and identifying audited contents of
internal audit in Vietnamese construction corporations; Secondly, reasons belonging to
auditors and the organization of internal audit in Vietnamese construction corporations;
Thirdly, the lack of general ideas in internal audit in Vietnamese construction
corporations; Fourthly, limitations on practical infrastructures of internal audit in
Vietnamese construction corporations; Fifthly, impacts of organization models of
internal audit in Vietnamese construction corporations ; Sixthly, the perception of senior
managers in Vietnamese construction corporations.
CHAPTER 3: SOLUTIONS AND ORIENTATIONS TO COMPLETE THE
ORGANIZATION OF ANALYSIS ASSOCIATED WITH ENHANCING THE
INTERNAL AUDIT’S EFFECTIVENESS OF VIETNAMESE CONSTRUCTION
CORPORATIONS
Solutions and Orientations to complete the organization of analysis associated with
enhancing the internal audit’s effectiveness of Vietnamese Construction corporations
3.1. Organization of analysis in the internal audit of Vietnamese Construction
Corporations: inevitabilities and approaches
There are five factors that make the completion of analyzing organization in internal
audit inevitable, originating from the operating environment, circumstances of
construction firms, and findings from the audit process. Firstly, because of the analysis of
internal audit of Vietnamese construction firms and their ineffectiveness of audit internal
firms; Secondly, because of research results from the analyzing process in Vietnamese
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constructions companies; Thirdly, changes in the business environment and
requirements with analyzing in internal audit of Vietnamese constructions enterprises;
Fourthly, requirements of law makers that have affected the analysis of current
requirements and the development of expectations on internal audit along with internal
controlling effectiveness at Vietnamese construction firms; Fifthly, the requirements of
analysis in the relationship with the development and complement of a system of
approaches for internal audit in the audit system of the country. There are some
approaches to complete the organization of analysis in internal audit of constructions
enterprises: Firstly, organization of analysis must be oriented towards achieving the
effectiveness of audit enhancement of Vietnamese construction companies; Secondly,
organization of analysis must be familiar with an audit orientation based on a system of
approaches that focus on risks in relation with overall mindset changes of internal audit;
Thirdly, organization of analysis must connect with an internal audit that keeps
connections with various types of audit; Fourthly, organization of analysis must conform
to the characteristics of business operation and organization, requirements of
management as well as the ability and level of management of Vietnamese construction
corporations; Fifthly, organization of analysis must be oriented to targets respective with
each period of audit operation of Vietnamese constructions firms; Seventhly, the
completion of organization of analysis must be oriented to the professional development
of internal auditors in construction corporations of Vietnam.
3.2. Solutions to complete the organization of analysis with the enhancement of
effectiveness in internal audit in Vietnamese construction corporations
3.2.1. Completing the specific process of internal audit in Vietnamese construction
enterprises
Figure 3.1 shows the common strategies for implementing the process of analysis
Step 1: Identifying the analysis objects
Step 2: Information collecting
Step 3: Approaches of measurement determination
Step 4: Data collection and calculation
Step 5: Modeling
Step 6: Analyzing
Step 7: Conclusion
Figure 3: Overall strategic of analyzing process
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3.2.2. The combination of organization analysis and business determination to identify
risks and assess processes at Vietnamese construction corporations
Figure 3.2 shows the model of combination that has been created based on the operation
approach according to the measurement of balanced scores:
Financial operation
Market operation
Market share
Attitude of customers
On time activities
Operating of major processes
Quality
Duration
Cost
Activities of resource managing processes
Skills
Technology
Suppliers
Vehicles
Figure 3.2 Combined model based on approach operating measurement of
balanced scores
Starting with resource management, auditors can analyze some resource
management operation ratios. The example is presented in table 3.1.
Table 3.1 Analyzing some resource management operation ratios in process
Number
Major processes
Duration
1.
• Period of market supply
• Operating cycle
• Revenues
Cost of process
2.
• Criteria of allocation
• Cost allocation
• Cost per activity
Related processes of Resources
management
Human resources:
• Productivity of staff
• Attitude of staff
• Revenues per person
• Capacity of staff
Information Technology:
• Reliability of information
• On time information
• System developing
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