Auditing means checking and verifying the truthfulness of financial statements, thereby helping to provide the most accurate information about the financial status of an organization. Auditing also plays a very important role when it comes to ensuring the transparency of businesses. Therefore, Vietnamese law has strict regulations in the field of auditing. In this article, LSX legal firm provides: “Types of enterprises subject to audit in Vietnam”
Legal grounds
- Decree 41/2018/ND-CP
- Decree 17/2012/ND-CP
- Circular 40/2020/TT-BTC
- Law on Independent Audit 2011
What is audit?
Accounting and auditing relate to each other directly. In fact, accountants will provide information about an organization’s finances through financial statements.
Audit plays the role to check and verify the truthfulness of those financial statements, thereby helping to provide the most accurate information about the financial position of that organization.
In other words, auditing means the process of collecting and evaluating the evidence related to audited financial information (provided by accountants) in order to determine and report on the degree of correspondence between that information with established standards.
Auditing aims at at a lot of people who have interest in the financial situation of an organization but do not have expertise in finance or accounting. So, they need auditors to learn and make appropriate assessments to help them make the best decisions.
Audit classification
State Audit: Conducted by the State audit agency to state-owned enterprises in accordance with the law and free of charge.
Independent audits: Conducted by auditors at independent companies that specialize in the service of financial statements and other financial and economic services depending on the requirements of the client. This type of audit is trusted by third parties or investors.
Internal auditors: Internal auditors of a company or organization. They perform audits at the request of the members of the Management Board or the Board of Directors. In usual, these audit reports are only used internally by the company, with little external confidence, because these auditors are also internal employees and work under the company Board of Directors.
Audited entities
Enterprises and organizations whose annual financial statements, as prescribed by law, must be audited by the audit firm, branches of the foreign audit firm in Vietnam, include:
- Firstly, enterprises with foreign owned capital.
- Secondly, credit institutions established and operate under the Law on credit institutions, including branches of foreign banks in Vietnam.
- Thirdly, financial organizations, insurance companies, reinsurance companies, insurance brokerage companies, and branches of foreign non-life insurance companies.
- Fourthly, public companies, securities issuing organizations, and securities trading organizations.
Other enterprises and organizations subject to compulsory auditing under relevant provisions of law.
Enterprises and organizations subject to audit by the audit firm and branches of foreign audit firms including:
- Firstly, state enterprises, except those operating in the field of state secrets as prescribed by law; must be audited for the annual financial statements.
- Secondly, enterprises, and organizations implementing the national important projects; group-A projects using state funds; except for the projects in the field of state secrets as prescribed by law; must be audited for the settlement report of project completion.
- Thirdly, enterprises and organizations with 20% or more of the voting rights held by state groups, and state corporations at the end of the fiscal year must be audited for annual financial statements;
- Fourthly, enterprises with 20% or more of the voting rights held by securities listing, issuing, and trading organizations; at the end of the fiscal year must be audited for annual financial statements.
- Lastly, the audit firm and branches of foreign audit firms in Vietnam must be audited for annual financial statements.
Notes on audited financial statements
Enterprises and organizations subject to the audit of annual financial statements as stipulated in Clause 1 and Clause 2 of Article 15 of Decree 17/2012/ND-CP, if prescribed by law, must make the consolidated or comprehensive financial statements must implement audit for consolidated or general financial statements.
The audit of financial statements and settlement reports of project completion applicable to enterprises and organizations as stipulated in points a and b Clause 2 of Article 15, Decree 17/2012/ND-CP shall not substitute the audit by State Audit.
Other enterprises and organizations voluntary to audit.
Enterprises and organizations that must be audited by the foreign auditing firms
- State owned enterprises, except for the state owned enterprises operating in the field of state secrets as prescribed by law, must audited for the annual financial statements;
- Enterprises, organizations implementing the national important projects, group-A projects using state funds, except for the projects in the field of state secrets as prescribed by law, must audited for the settlement report of completed projects;
- Enterprises and organizations with state contributed capital and the projects funded by other State capital prescribed by the Government, must audited for the annual financial statements or the settlement report of completed projects;
Auditing firms, branches of foreign auditing firms in Vietnam must audited for the annual financial statements.
Penalties for the act of not performing audit
Article 53, Decree No. 41/2018/ND-CP stipulates penalties for administrative violations in the field of independent accounting and auditing:
- A fine ranging from VND 40,000,000 to VND 50,000,000 for audited entities that do not perform mandatory audits of financial statements, completed project finalization statements, consolidated financial statements, general financial statements, and other audits according to the provisions of the law on independent audit and other relevant laws.
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Related questions
Firstly, comply with professional ethics, be truthful, integrated, and abide by law.
Secondly, have professional accounting knowledge and skills.
Full name, year of birth, hometown or nationality, photos of the person who is issued certificate of registration for audit practice.
Number and issuance date of the auditor’s certificate.
Name of the auditing enterprise where the auditor registered to work as practitioner.
Number of Certificate of registration for audit practice.
The term of Certificate of registration for audit practice.
Officials and public employees; professional servicemen and officers; national defense workers and public employees, police officers.
People banned from practicing accounting under an effective court’s judgment or decision; people undergoing criminal prosecution, people sentenced to imprisonment or were convicted of economic crimes or other crimes related to finance, accounting and have not had their criminal records expunged; Also, people put on probation, and people forcibly sent to reform schools or rehabilitation centers.
People convicted of serious economic crimes and have not had their criminal records expunged.
Any person that incurred a penalty for an administrative violation against regulations of law on finance; accounting, audit within the previous 06 months; if the penalty is a warning, or 01 years; if the penalty is other than a warning.
People suspended from accounting practice.
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