The study of effectiveness of audit procedures in detecting frauds related to inventory in Vietnam

52. In pricing stock, consider whether historical or replacement cost is lower. 3.08 -7.353 0.000 53. Review contracts with suppliers and customers and enquire of management about the possibility of the inclusion of consigned or other non-owned stock, or of owned that is not included. 3.43 -3.074 0.003 55. Review warehouse records for duplicate locations for the same items. 3.13 -6.555 0.000 56. Account for all used and unused tags to make sure none are lost, added or intentionally omitted (record tag numbers for those used and unused for subsequent follow-up). 2.89 -9.554 0.000 8. Reviewing general documents about the result of inventory counting of clients, interviewing people conducting inventory counting and their methods to process result after counting. 3.44 -2.571 0.012 37. Sending confirmation letters to ask warehouse holder to confirm the amount of inventory put in leased warehouse (if material). 3.15 -5.904 0.000 Source: The result from T test - one sample analysis 423 19 auditing procedures (accounting for 32.2%) are evaluated effective at moderate level in detecting inventory frauds (table 2). Those procedures have points from 3.51 to 3.90, which are not statistically significantly different from 3.639 (│t│0.05). Among those 19 procedures, there are 7 out of 12 test of control procedures; 3 out of 11 analytical procedures; 4 out of 14 procedures about physical testing and 5 out of 22 test of details procedures related to inventory transactions. The remaining 18 auditing procedures among 59 auditing procedures (accounting for 37.29%) are evaluated effective at low level in detecting inventory frauds (table 2). Those procedures have points from 2.60 to 3.48, which are statistically significantly lower than 3.639 (t<-1.96 and sig.<0.05). Among those 18 procedures, there are 3 out of 12 test of control procedures; 3 out of 11 analytical procedures; 2 out of 14 procedures about physical testing and 10 out of 22 test of details procedures related to inventory transactions. Test of details procedures account for big proportion (55.55%) among those lowly effective procedures. In brief, in classifying auditing procedures with different levels of effectiveness in detecting frauds, the study results are similar to the one of Moyes (1996), Owusu- Ansah et al. (2002) and Alleyne et al. (2010). Basically, auditing procedures directly collecting audit evidences are evaluated effective at high level and auditing procedure indirectly collecting audit evidences are evaluated effective at low level. However, some procedures which are evaluated effective at high level in previous studies are evaluated effective at moderate level in the study, including procedures 1, 10, 42, 54. The procedure 59 is evaluated the most effective in the study, but effective at low level in previous studies. Comparing between respondent groups in evaluating the effectiveness of auditing procedures Firstly, in terms of the difference between male and female auditors in evaluating the effectiveness of auditing procedures, the t test–two samples shows that there is no significant difference between male and female auditors in evaluating the effectiveness of auditing procedures, except for 3 out of 59 procedures. 2 out of those 3 procedures (procedures 9 and 26) are evaluated more effective in detecting frauds by female auditors than by male auditors; the procedure 23 is evaluated more effective in detecting frauds by male auditors than by female auditors. The study result is not consistent with the one of Alleyne et al. (2010) which shows that male auditors evaluate 19 out of 56 auditing procedures significantly more effective than female auditors do. Secondly, in terms of the difference in evaluating the effectiveness of auditing procedures between auditors working in Big-4 firms and auditors working in non-Big-4 firms, there are 3 inventory physical testing procedures (procedures 29, 30, 35), 1 analytical procedure (procedure 15) and 1 test of control procedure (procedure 54). Hence, the study result is similar to the one of Alleynne et al. (2010) which shows 9 out of 56 procedures different in evaluating its effectiveness between various auditing firms. With 5 out of 59 procedures being different in evaluating its effectiveness, it is inconclusive about the effect of auditing firm characteristics on the evaluation of auditors about effectiveness of inventory auditing procedures. 424 Thirdly, in terms of the difference in evaluating the effectiveness of auditing procedures between auditors with various working experience, based on the result from t test- two sample, there is no difference in most of the 59 auditing procedures, except for 9 procedures. Among those 9 procedures, there are 2 test of control procedures (procedures 6 and 10); 2 analytical procedures (procedures 11, 12); 1 physical testing procedure (procedure 37) and 4 test of details procedures (procedures 33, 38, 48, 53). The study result is similar to the one of Alleynne et al. (2010) but inconsistent with the one of Moyes (1996). Moyes (1996) proves the significant relationship between auditors’ experience and their evaluation of effectiveness of auditing procedures. 4. Conclusions and Policy Implications According to the study results from auditor survey about evaluating the effectiveness of inventory auditing procedures, auditing firms need to consider selecting auditing procedures with high effectiveness in detecting inventory frauds when making their auditing engagement plan. Among highly effective auditing procedures in detecting inventory frauds, 2 test of control procedures being highly evaluated are observing inventory count and assessing the effect of applying information technology on inventory management. The good assessment of continuance and effectiveness of internal control will support auditors to determine well the scope of substantive tests to enhance auditing quality. In case that auditors’ capacity is limited in assessing information technology, for clients with high audit risk, auditors need to use experts’ opinion (Nguyen Thi Lan Anh, 2017). In addition, 5 analytical procedures such as horizontal, vertical and ratio analysis need to be used to recognize abnormal characteristics in inventory numbers, then design other suitable auditing procedures. For example, the procedure Discuss with client management the stock and warehousing cycle or Perform analytical procedures by computing ratios and comparing them with previous years is evaluated with high points in detecting frauds (>4). Among those highly effective auditing procedures, physical testing procedures account for a big proportion (36.36%) and 57.14% among testing of inventory physical existence procedures. The result proves that auditors highly evaluate the testing of inventory physical existence which is used to compare with other informations of clients. Besides, test of details related to collecting directly auditing evidence about potential frauds need to be added into audit programs. During an auditing engagement, besides adding highly effective auditing procedures into auditing plan, auditors can flexibly conduct moderately effective auditing procedures in order to collect more evidences and consolidate their conclusions about inventory information on client’s reports. For example, auditors can implement an analytical procedure by calculating financial ratios related to inventory and comparing with ratios in previous years to realize abnormal changes to consider additional procedures; examining inventory import and export procedures to assess the reliability of information on accounting documents or checking selling and inward return policies of clients. For auditing procedures effective at low level, auditors need to consider whether applying those procedures, given the aim of only detecting inventory frauds, the time and money cost of an audit engagement. 425 The study results show that there is no significant difference in evaluating the effectiveness of inventory auditing procedures between auditors working in Big-4 firms and auditors working in non-Big-4 firms. However, non-Big-4 firms need to consider the effectiveness of the procedure Tour warehouse facilities and become familiar with storage, marking, and location procedures as auditors working Big-4 firms evaluate the procedure up to 4.08 point. Besides, there is no significant difference in evaluating the effectiveness of inventory auditing procedures between male and female auditors, so auditing firms do not need to consider gender when assigning tasks for auditors. However, male auditors need to consider applying the procedure Re-count a sample of client's counts to make sure the recorded counts are accurate on the tags (also check descriptions and unit of count, such as dozen or gross) as female auditors evaluate the procedure up to 4.06 point. Limitations and suggestions for future research Despite trying our best to eliminate limitations of the study, due to the limitation of time and resources, we do not study in an auditing sample which reflect better population. Moreover, our auditing sample may not be totally objective as during the survey process, we randomly select respondents based on our relationships with respondents or friends of respondents. For future research, we suggest researchers should seek to obtain a more objective and larger sample. Besides, researchers can evaluate the effectiveness of auditing procedures related to other components of financial statements such as receivable account or payable account. 5. 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