VI In a transparent and integrated market economy, auditing plays the role of a reliable “gatekeeper,” ensuring the integrity of financial reports and the health of the investment environment. Due to its unique nature, directly related to the rights of shareholders, investors, and state management agencies, the business of providing audit services is classified as a conditional business sector with extremely strict standards. Understanding the conditions regarding the number of practicing auditors, the types of businesses permitted to be established, and professional ethical standards is a prerequisite for businesses to thrive in the market. To learn more about the roadmap and current mandatory legal criteria, let’s explore the conditions for providing audit services with Pham Consult below.
- What is independent auditing?
Independent auditing is the process by which practicing auditors, auditing firms, and branches of foreign auditing firms in Vietnam examine and provide independent opinions on financial statements and other audit work as per the audit contract.
Financial statement auditing is the process by which practicing auditors, auditing firms, and branches of foreign auditing firms in Vietnam examine and provide opinions on the fairness and reasonableness in material aspects of the financial statements of the audited entity, in accordance with auditing standards.
Compliance auditing is the process by which practicing auditors, auditing firms, and branches of foreign auditing firms in Vietnam examine and provide opinions on the compliance with laws, regulations, and rules that the audited entity is required to comply with.
Operational auditing is the process by which practicing auditors, auditing firms, and branches of foreign auditing firms in Vietnam examine and provide opinions on the economy, effectiveness, and efficiency of the operations of a part or the entire audited entity.
- Types of Auditing Firms and Branches of Foreign Auditing Firms in Vietnam
According to Article 20 of the Independent Auditing Law 2011, the types of auditing firms and branches of foreign auditing firms in Vietnam include:
– Enterprises, including the following types:
+ Limited liability companies with two or more members;
+ Partnerships;
+ Private enterprises.
– Branches of foreign auditing firms in Vietnam are permitted to conduct auditing services in accordance with the law.
Note:
– Enterprises and branches of enterprises that do not meet the conditions for conducting auditing services are not allowed to use the term “auditing” in their name.
– Auditing firms are not allowed to contribute capital to establish other auditing firms, except in the case of contributing capital with foreign auditing firms to establish an auditing firm in Vietnam.
III. Conditions for Granting a Certificate of Eligibility to Conduct Auditing Services
According to the Independent Auditing Law 2011, a Certificate of Eligibility to Conduct Auditing Services is a prerequisite for foreign auditing firms and branches in Vietnam to be allowed to conduct auditing services. Accordingly, the conditions for granting a Certificate of Eligibility to Conduct Auditing Services will differ for each type of business entity, specifically as follows:
- For Limited Liability Companies with Two or More Members
A limited liability company with two or more members, when applying for a Certificate of Eligibility to Conduct Auditing Services, must meet the following conditions:
– Possess a Business Registration Certificate, Enterprise Registration Certificate, or Investment Certificate as prescribed by law;
– There must be at least five practicing auditors, of which at least two must be contributing members. The capital contributed by the practicing auditors must account for more than 50% of the company’s charter capital;
– The legal representative, Director, or General Director of the Limited Liability Company must be a practicing auditor;
– Ensure the statutory capital as prescribed by the Government. According to Decree 17/2012/ND-CP, the statutory capital for a Limited Liability Company is 3 (three) billion Vietnamese Dong; from January 1, 2015, the statutory capital is 5 (five) billion Vietnamese Dong.
– The capital contribution of a member that is an organization must not exceed the amount prescribed by the Government. The representative of a member that is an organization must be a practicing auditor.
- For Partnership Companies
A partnership company applying for a Certificate of Eligibility to conduct auditing services must meet the following conditions:
– Possess a Business Registration Certificate, Enterprise Registration Certificate, or Investment Certificate as prescribed by law;
– Have at least five practicing auditors, of which at least two must be partners;
– The legal representative, Director, or General Director of the partnership company must be a practicing auditor;
- For Private Enterprises
Private enterprises applying for a Certificate of Eligibility to conduct auditing services must meet the following conditions:
– Possess a Business Registration Certificate, Enterprise Registration Certificate, or Investment Certificate as prescribed by law;
– Have at least five practicing auditors, including the owner of the private enterprise;
– The owner of the private enterprise is also the Director.
- For branches of foreign auditing firms in Vietnam
A branch of a foreign auditing firm in Vietnam applying for a Certificate of Eligibility to conduct auditing services must meet the following conditions:
– The foreign auditing firm is permitted to provide independent auditing services in accordance with the laws of the country where the foreign auditing firm is headquartered;
– Have at least two practicing auditors, including the Director or General Director of the branch;
– The director or general director of a branch of a foreign auditing firm is not allowed to hold a management or executive position in another business in Vietnam;
– The foreign auditing firm must send a written guarantee to the Ministry of Finance assuring that it is responsible for all obligations and commitments of its branch in Vietnam;
– The foreign auditing firm must ensure that its capital is not lower than the statutory capital level as prescribed by the Government.
Note: Within six months from the date of registration for auditing services, if the auditing firm or its branch in Vietnam is not granted a Certificate of Eligibility to conduct auditing services, it must proceed with the procedure to remove the auditing services business line.
- Application for a Certificate of Eligibility to Conduct Auditing Services
According to Article 22 of the Independent Auditing Law 2011, the application for a Certificate of Eligibility to Conduct Auditing Services includes:
– Application for a Certificate of Eligibility to Conduct Auditing Services;
– Copy of Business Registration Certificate, Enterprise Registration Certificate, or Investment Certificate;
– Full-time employment contracts of practicing auditors;
– Documents proving capital contribution for limited liability companies;
– Other documents as prescribed by the Ministry of Finance.
- Procedures for Applying for a Certificate of Eligibility to Conduct Auditing Services
The organization applying for a Certificate of Eligibility to Conduct Auditing Services shall submit a complete set of documents as prescribed to the Ministry of Finance.
Within thirty days of receiving a valid application, if no further information or clarification is required, the Ministry of Finance shall consider granting a Certificate of Eligibility to conduct auditing services to the auditing firm or branch of a foreign auditing firm in Vietnam. In case of refusal, the Ministry of Finance must provide a written response stating the reasons.
If the application for a Certificate of Eligibility to conduct auditing services is incomplete, within 10 working days from the date of receipt, the Ministry of Finance shall notify the applicant to complete the application. Upon receiving the written request for completion, the applicant must supplement and amend the application as notified and resubmit it to the Ministry of Finance. After 10 working days from the date of receiving the supplementary or amended application, if the Ministry of Finance does not issue a written request for further amendments or supplements, the Certificate of Eligibility to conduct auditing services will be considered for issuance within the prescribed time.
In cases where clarification is needed regarding issues related to the application for the Certificate of Eligibility to conduct auditing services, the Ministry of Finance will request the auditing firm or branch of a foreign auditing firm in Vietnam applying for the Certificate of Eligibility to conduct auditing services to provide explanations.
