A comparative analysis of the impact of the International Standards on Auditing adoption on the quality of the audit report in common-law and code-law countries

BANKING ACADEMY

FALCULTY OF ACCOUNTING – AUDITING

GRADUATION THESIS

A COMPARATIVE ANALYSIS OF THE IMPACT OF THE

INTERNATIONAL STANDARDS ON AUDITING ADOPTION

ON THE QUALITY OF THE AUDIT REPORT IN COMMON￾LAW AND CODE-LAW COUNTRIES

Lecturer Ph.D. Le Thi Thu Ha

Student Dang Thanh Tung

Class K20CLCH

Student Code 20A4050410

STATEMENT OF ORIGINALITY OF THE THESIS

I declare that this written submission represents my ideas in my own words,

and where others' ideas or words have been included, I have adequately cited and

referenced the sources. It has not been applied for any degree or previously

submitted anywhere for any award. I also declare that I have adhered to all honesty

and integrity principles and have not misrepresented or fabricated, falsified any

ideas, data, and sources in my submission. I understand that any violation of the

above will result in disciplinary actions by Banking Academy and from whom

proper permission has not been taken when needed.

Signature

Dang Thanh Tung

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ACKNOWLEDGEMENTS

First of all, I would like to express my deep sense of gratitude and sincere

thanks to my supervisor, Ph.D. Le Thi Thu Ha, the Vice Dean of the Faculty of

Accounting and Auditing, for her enthusiasm and constructive guidance throughout

my graduation thesis. Her encouragement and helpful advice had significantly

enriched and improved my work. Without her motivation and instructions, this

paper would have been impossible to be done.

I want to express my tremendous appreciation to lectures of the Banking

Academy of Vietnam in general and of the Faculty of Accounting and Auditing in

particular for imparting comprehensive knowledge to me. My graduate experience

deviated from subjects that the seasoned lectures organized.

Last but not least, I would like to extend my heartfelt thanks to my entire

family and friends. They are always a great source of unceasing encouragement and

support during my whole journey.

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TABLE OF CONTENTS

STATEMENT OF ORIGINALITY OF THE THESIS......................................... i

ACKNOWLEDGEMENTS..................................................................................... ii

TABLE OF CONTENTS........................................................................................ iii

LIST OF ABBREVIATIONS...................................................................................v

LIST OF TABLES AND FIGURES..................................................................... vii

ABSTRACT...............................................................................................................1

INTRODUCTION.....................................................................................................2

CHAPTER 1: THEORETICAL BACKGROUND ON AUDITING

STANDARDS AND AUDIT REPORTS.................................................................5

1.1. Overview of common-law and code-law systems............................................5

1.1.1. Characteristics of common-law system .....................................................5

1.1.2. Characteristics of code-law system............................................................6

1.2. Overview of International Standards on Auditing .........................................7

1.2.1. Introduction to International Auditing and Assurance Standards Board...7

1.2.2. Introduction to International Standards on Auditing .................................8

1.2.3. Auditing Standards on Audit Disclosure .................................................13

1.2.4. International Standards on Auditing adoption .........................................21

1.3. Theoretical background of the audit report..................................................22

1.3.1. Definition .................................................................................................22

1.3.2. Contents of an audit report.......................................................................23

1.3.3. Audit opinion ...........................................................................................24

1.3.4. Stakeholders approach to the audit report................................................25

1.3.5. How is an audit report considered to be quality?.....................................26

CHAPTER SUMMARY.........................................................................................27

CHAPTER 2: A COMPARATIVE ANALYSIS OF THE IMPACT OF THE

INTERNATIONAL STANDARDS ON AUDITING ADOPTION ON THE

QUALITY OF THE AUDIT REPORT IN COMMON-LAW AND CODE￾LAW COUNTRIES ................................................................................................28

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2.1. Financial statements audit process.................................................................28

2.2. Impacts of common-law and code-law system to accounting and

auditing practices...................................................................................................30

2.3. The quality of audit report in common - law countries................................33

2.3.1. The United Kingdom................................................................................33

2.3.2. The United States of America ..................................................................44

2.3.3. Singapore..................................................................................................53

2.4. The quality of audit report in some code - law countries.............................57

2.4.1. France .......................................................................................................57

2.4.2. Denmark...................................................................................................61

2.4.3. Vietnam....................................................................................................65

2.5. Conclusion on the impact of the International Standards on Auditing

adoption in common-law and code-law countries................................................69

CHAPTER SUMMARY.........................................................................................71

CHAPTER 3: RECOMMENDATIONS FOR IMPROVING THE QUALITY

OF THE AUDIT REPORTS IN VIETNAM........................................................72

3.1. The adoption of the International Financial Reporting Standards.............72

3.2. Improving the Vietnamese Standards on Auditing ......................................73

CHAPTER SUMMARY.........................................................................................76

CONCLUSION........................................................................................................77

REFERENCES

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LIST OF ABBREVIATIONS

No. Abbreviations Explanation

1 AASC Auditing and Assurance Standards Committee

2 AICPA American Institute of Certified Public Accountants

3 APB The Auditing Practices Board

4 BGB Bürgerliches Gesetzbuch

5 CAM Critical Audit Matter

6 CNCC The Compagnie Nationale des Commissaires aux Comptes

7 DBA Danish Business Authority

8 E.C. The European Commission

9 E.U. The European Union

10 FRC The Financial Reporting Council

11 GAAP Generally Accepted Accounting Principles

12 GAAS Generally Accepted Auditing Standards

13 IAASB The International Auditing and Assurance Standards Board

14 IAG The International Auditing Guidelines

15 IAPC The International Auditing Practices Committee

16 IAPN The International Auditing Practice Notes

17 IASC The International Auditing Standards Committee

18 ICAEW The Institute of Chartered Accountants in England and

Wales

19 ICPAS The Institute of Certified Public Accountants of Singapore

20 IESBA The International Ethics Standards Board for Accountants

21 IFAC The International Federation of Accountants

22 IFRS The International Financial Reporting Standards

23 ISA The International Standards on Auditing

24 ISCA Institute of Singapore Chartered Accountants

25 ISQC The International Standards on Quality Control

26 KAM Key Audit Matter

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27 MOF Ministry of Finance

28 PCAOB Public Company Accounting Oversight Board

29 PLC Public Limited Company

30 QA Quality Affirmation

31 ROSC Report on the Observance of Standards and Codes

32 SEC Securities and Exchange Commission

33 SSA Singapore Standards on Auditing

34 The U.K. The United Kingdom

35 The U.S. The United States

36 VACPA Vietnam Association of Certified Public Accountants

37 VAS The Vietnamese Accounting Standards

38 VFRS Vietnamese Financial Reporting Standards

39 VSA Vietnamese Standards on Auditing

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LIST OF TABLES AND FIGURES

Table 1.2: Basis of ISA Adoption by Jurisdiction ....................................................22

Table 2.1: Key differences between ISAs and the United State Auditing

Standards on Reporting .........................................................................46

Table 2.2: Form of the audit report under standards.................................................66

Figure 2.1: Burberry Group PLC - Audit report .......................................................35

Figure 2.2: Burberry Group PLC - Audit report .......................................................36

Figure 2.3: Burberry Group PLC - Audit report .......................................................37

Figure 2.4: Burberry Group PLC - Audit report .......................................................38

Figure 2.5: Burberry Group PLC - Audit report .......................................................39

Figure 2.6: Burberry Group PLC - Audit report .......................................................40

Figure 2.7: Burberry Group PLC - Audit report .......................................................41

Figure 2.8: Burberry Group PLC - Audit report .......................................................42

Figure 2.9: Burberry Group PLC - Audit report .......................................................43

Figure 2.10: American Psychological Association, Inc. - Audit report....................51

Figure 2.11: American Psychological Association, Inc. - Audit report....................52

Figure 2.12: CFA Society Singapore - Audit report .................................................54

Figure 2.13: CFA Society Singapore - Audit report .................................................55

Figure 2.14: CFA Society Singapore - Audit report .................................................56

Figure 2.15: Sartorius Stedim Biotech S.A - Audit report........................................59

Figure 2.16: Sartorius Stedim Biotech S.A - Audit report........................................60

Figure 2.17: Sergel A/S - Audit report......................................................................62

Figure 2.18: Sergel A/S - Audit report......................................................................63

Figure 2.20: Sergel A/S - Audit report......................................................................64

Figure 2.21: Phu Nhuan Jewelry JSC, - Audit report ...............................................68

Figure 2.22: Phu Nhuan Jewelry JSC, - Audit report ...............................................69

Figure 3.1: Roadmap of IFRS adoption in Vietnam.................................................73

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