The determination and assessment of risk of materiality flaws in the general audit plans in Vietnam

In Clause 2, Article 9 of The Audit procedures of State Audit shall be issued together with Decision 02/2020/QD-KTNN, the determination and assessment of risk of materiality flaws in the general audit plans are regulated as follows:

2. Determine and assess risk of materiality flaws

On the basis of collected information and analysis, assessment results, State auditors shall assess inherent risks and control risks and combine into risk matrix to identify and assess risks of materiality defects depending on severity (high, moderate, low):

a) For financial audit: determine and assess risks of financial statements and risks in data level of clauses, trades, account balance and explanation. In which, pay attention to:

- When determining and assessing risks of materiality defects, pay attention to significant risks usually related to unusual trades and issues to be considered: Further intervention of heads of entities in settling audit and preparing financial; further physical intervention in data collection and processing; complicated calculation or audit principles; unusual trades hindering entities from performing control measures effectively; audit and audit estimation explained in different manners; objective and complicated assumptions; audit estimations whose measurement of said estimations contain uncertainties.

- If risks are considered significant, deem: Whether the risks originate from intentional or unintentional acts; risks related to drastic changes; complexity of trades; risks related to important trades; importance in quantifying financial information, especially quantification that contain uncertainties; risks related to major trades beyond normal operation of entities or irregularities.

- When identifying significant risks, investigate control operations of entities and risk handling measures related to said risks. In case control measures which entities apply for significant risks fail to deal with the risks, this shall be considered major flaws in internal control operations.

b) For operational audit: assess risks of events that may cause unwanted negative impact thereby leading to failure to achieve economic property, effectiveness and efficiency.

c) For compliance audit: assess risks of incompliance and possible consequences if said incompliance is related to audit contents.

Procedures for determining and assessing audit risk shall conform to regulations from Section 5 to Section 12 and Section 45 to Section 56 of State audit 1315 - Determination and assessment of risks with materiality flaws via understanding about audited entities and working environment of financially audited entities; Section 23 to Section 24 State audit standard 3000 – Guidelines for operational audit; Section 16 to Section 18 State audit standard 4000 – Guidelines for compliance audit; Instruct audit access methods based on risk assessment methods and identify materiality in each audit fields of State Audit Office of Vietnam and other relevant regulations of State Audit Office of Vietnam.

Best Regards!