Decision No. 09/2017/QD-KTNN dated August 15, 2017 of the State Audit of Vietnam on promulgating the Regulation on entrustment or hiring of audit firms to perform audits

DECISION

Promulgating the Regulation on entrustment or hiring of audit firms to perform audits[1]

Pursuant to the June 24, 2015 Law on State Audit;

Pursuant to the June 22, 2015 Law on Promulgation of Legal Documents;

At the proposal of the Director of the Audit Policy and Quality Control and the Director of the Department of Legal Affairs;

The State Auditor General decides to promulgate the Regulation on entrustment or hiring of audit firms to perform audits.

Article 1.To promulgate together with this Decision the Regulation on entrustment and hiring of audit firms to perform audits.

Article 2.This Decision takes effect 45 days after its signing and replaces Decision No. 03/2011/QD-KTNN of December 9, 2011, of the State Auditor General promulgating the Regulation on hiring or entrustment of audit firms to perform audits.

Article 3.The heads of the units attached to the State Audit Office of Vietnam and related organizations and individuals shall implement this Decision.

State Auditor General
HO DUC PHOC

Regulation on entrustment or hiring of audit firms
to perform audits

(Promulgated together with the State Auditor General’s Decision No. 09/2017/QD-KTNN of August 15, 2017)

Chapter I

GENERAL PROVISIONS

Article 1.Scope of regulation

This Regulation prescribes the entrustment or hiring by the State Audit Office of Vietnam of audit firms to audit agencies and organizations that manage and use public finance and public assets in accordance with the Law on State Audit; defines the powers and responsibilities of parties involved in the entrustment or hiring of audit; prescribes the scope of entrustment or hiring of audit; conditions on audit firms to be entrusted or hired to perform audits; prescribes the council of appraisal of audit firms and the procedures and order for selection of audit firms to perform audits.

Article 2.Subjects of application

This Regulation applies to the State Audit Office of Vietnam; audit firms to be entrusted or hired to perform audits and parties involved in the entrustment of hiring of audits by the State Audit Office of Vietnam.

Article 3.Interpretation of terms

In this Regulation, the terms below are construed as follows:

1.Entrustment of auditmeans the State Audit Office of Vietnam’s assignment of an audit firm to perform in the name of the State Audit Office of Vietnam an entire audit according to the audit standards and process set or accepted by the State Audit Office of Vietnam.

2.Hiring of an audit firmmeans the State Audit Office of Vietnam’s hiring of an audit firm to audit some contents or some units under an audit plan according to the audit standards and process and management and professional regulations of the State Audit Office of Vietnam.

Article 4.Principles of application

1. Audit may be entrusted or hired only with regard to audited objects within the scope of audit entrustment or hiring prescribed in Article 8 of this Regulation.

2. Audit may be entrusted to or hired from audit firms that fully meet the conditions prescribed in Article 9 of this Regulation.

3. The entrustment or hiring of audit firms shall be expressed in contracts.

4. An audit firm that is entrusted or hired to perform an audit shall take responsibility before the State Audit Office of Vietnam and law for the accuracy, truthfulness and lawfulness of their audit data, documents and conclusions. The State Audit Office of Vietnam shall decide on the use of, and check and supervise, the audit data, documents as well as conclusions and recommendations of audit firms.

5. An audit firm that is entrusted or hired to perform an audit shall keep confidential documents, data and information about activities of the audited entity in accordance with regulations of the State Audit Office of Vietnam and law.

6. An audit firm that is entrusted or hired to perform an audit may not entrust or hire a third party to perform such audit.

Article 5.Examination and supervision of the performance of audit entrustment or hiring contracts

1. The State Audit Office of Vietnam has the power and responsibility to examine and supervise the performance of contracts on entrustment or hiring of audit firms according to these contracts, this Regulation and law.

2. Audit firms that are entrusted or hired to perform audits shall submit to the examination and supervision by the State Audit Office of Vietnam of their performance of the contracts signed with the latter and of the audit quality.

3. Examination and supervision activities of the State Audit Office of Vietnam shall be carried out under laws as well as regulations of the State Audit Office of Vietnam.

Article 6.Formation of the Council of appraisal of audit firms

1. The State Audit Office of Vietnam shall form the Council of appraisal of audit firms to give advice to the State Auditor General on the selection of audit firms qualified to be entrusted or hired to perform audits.

2. The Appraisal Council must be composed of:

a/ The State Auditor General or a State Auditor Deputy General in charge of the unit of the State Audit Office of Vietnam which wishes to entrust or hire audit firms, as the Council chairman;

b/ Representatives of the Department of Administration of the State Audit Office of Vietnam (1 leader of the Department of Administration as the permanent member and 1 leader as the secretary member);

c/ A representative of the leadership of the Department of General Affairs as a member;

d/ The head of the unit of the State Audit Office of Vietnam which wishes to entrust or hire audit firms, as a member;

dd/ A representative of the leadership of the Department of Audit Policy and Quality Control, as a member;

e/ A representative of the leadership of the Department of Legal Affairs as a member.

Article 7.Funds for entrustment or hiring of audit firms

Annually, based on the needs for entrustment or hiring of audits, the State Audit Office of Vietnam shall prepare a cost estimate for the entrustment or hiring of audit firms. The fund for the entrustment or hiring of audit firms shall be incorporated in the annual state budget estimate of the State Audit Office of Vietnam or prepared as an additional budget for unplanned tasks in accordance with the Law on the State Budget.

Chapter II

SPECIFIC PROVISIONS

Article 8.Scope of audit entrustment or hiring

1. The State Audit Office of Vietnam may entrust or hire audit firms to audit the following agencies and organizations (except those specified in Clause 2 of this Article):

a/ Socio-political organizations, socio-political professional organizations, social organizations, socio-professional organizations using state budget funds;

b/ Public non-business units;

c/ Management units of investment projects using state budget funds or state budget-originated funds, ODA and NGO funds (when requested);

d/ Associations, unions, confederations and other organizations with operation funds partly supported by the State;

dd/ Enterprises with over 50% state-held charter capital, enterprises with 50% or less state-contributed charter capital; enterprises managing and using public finance or assets;

e/ Units that are provided with price subsidies or subsidies by the State, units with state-guaranteed loans;

f/ Other agencies and organizations as decided by the State Auditor General.

2. The State Audit Office of Vietnam may not entrust or hire audit firms to audit the following agencies and organizations:

a/ Ministries, ministerial-level agencies, government-attached agencies and other central agencies;

b/ Agencies assigned to perform state budget collection and spending tasks at all levels;

c/ People’s Councils and People’s Committees at all levels, other local agencies;

d/ People’s armed forces units;

dd/ Units managing the State’s reserve funds, reserve funds of all sectors and levels, other financial funds of the State;

e/ Organizations managing national assets;

f/ Political organizations;

g/ Agencies and organizations using and managing public finance and public assets classified as state secrets.

Article 9.Conditions for audit firms to be entrusted or hired to perform audits

To be entrusted or hired to perform audits, an audit firm must fully meet the following conditions:

1. Having satisfied all conditions for lawful operation and been approved to be named on the publicized list annually selected by the Ministry of Finance, State Securities Committee or World Bank.

2. Having not committed any audit quality-related violations which were handled by a state agency or an audit association over the last 3 years.

3. In the current year and previous two years having not provided the services of recording accounting books and making financial statements and services of internal audit, asset valuation, management and financial consultancy to clients to be audited as entrusted or hired by the State Audit Office of Vietnam; having not provided the above services in the audit period falling in the audit contents entrusted or hired by the State Audit Office of Vietnam.

4. Its managers and executives not being founding members or shareholders or not purchasing shares from or contributing capital to to-be audited entities, or not having other economic and financial relations with to-be audited entities according to the code of professional ethics of accountants and auditors.

5. Its managers and executives having no natural parents, spouses, natural children or siblings being founding members or shareholders or purchasing shares from or contributing capital to and having significant influence on to-be audited entities, or being managers, executives, control board members or chief accountants of to-be audited entities.

6. Managers, executives, control board members or chief accountants of to-be audited entities not being concurrently persons contributing capital to and having significant influence on the audit firm.

7. The audit firm and to-be audited entity sharing no founder or co-founder.

Article 10.Selection procedures and order

1. When there is a need for audit entrustment or hiring, the State Audit Office of Vietnam shall announce the entities the audit of which will be entrusted or hired; and the procedures and dossiers for registration of eligibility to be entrusted or hired to perform audits in accordance with the Bidding Law.

2. Audit firms that fully meet the conditions prescribed in Article 9 of this Regulation and wish to be entrusted or hired to perform audits shall register with the State Audit Office of Vietnam (via its Department of Administration). A dossier must comprise:

a/ A written request for being entrusted or hired to perform audits;

b/ A certified copy of the business registration certificate (or investment certificate) and the company charter;

c/ The certificate of eligibility to provide audit services;

d/ A list of clients in the last 3 years;

dd/ A list of registered auditors who possess an audit practice registration certificate granted by the Ministry of Finance, enclosed with the CVs and summaries of the working process of the certified auditors and director of the audit firm;

e/ Other documents as requested by the State Audit Office of Vietnam.

3.  Depending on the entities to be audited and the demand for audit entrustment or hiring and the list of registered audit firms, the Council of appraisal of audit firms shall submit to the State Auditor General a list of qualified audit firms. The Department of Administration of the State Audit Office of Vietnam shall assume the prime responsibility for, and coordinate with the units attached to the State Audit Office of Vietnam that need audit entrustment or hiring in, assisting the State Auditor General in selecting contractors in accordance with the Bidding Law.

Article 11.Contracts on entrustment or hiring of audit firms to perform audits

1. The State Audit Office of Vietnam and an audit firm shall sign a contract on audit entrustment or hiring. This contract must contain the following principal contents:

a/ Name and address of the entrusting or hiring party and entrusted or hired party (name, head office address, phone and fax numbers, transaction account, representative, etc.);

b/ Details of audit entrustment or hiring (purpose, subject matter, scope (details, time of audit, to-be audited object)…by the State Audit Office of Vietnam to the audit firm);

c/ Professional regulations: applicable audit standards and process; code of ethics of auditors, supervision of audit activities, control of audit quality, etc;

d/ Responsibilities and powers of involved parties;

dd/ Outcomes of contract performance (audit report, audit minutes, verifications of audited data, notes of auditors, audit evidence, etc.);

e/ Charge rate for audit entrustment or hiring and mode of charge payment;

f/ Commitment on performance and deadline for completion; procedures for settling contract disputes;

g/ Effect and effective period of the contract;

h/ Other terms (if any).

2. The model contract on audit entrustment or hiring shall be prescribed by the State Audit Office of Vietnam.

Article 12.Responsibilities and powers of the State Audit Office of Vietnam

1. Responsibilities:

a/ To issue audit decisions;

b/ To coordinate with and create favorable conditions for audit teams and auditors of audit firms to perform audits (below referred to as auditors for short);

c/ To fully and timely pay charges for audit entrustment or hiring as contracted;

d/ To examine and supervise the performance under Article 16 of this Regulation;

dd/ Other responsibilities as prescribed by law.

2. Powers:

a/ To request audit firms to fully and timely provide audit plans and accurate audit data and results as well as information and documents relating to entrusted or hired audits;

b/ To request audit firms to replace auditors on duty when there are signs showing that these auditors breach audit standards and processes, regulations on professional management or legal provisions;

c/ To examine and supervise the performance of contracts on audit entrustment or hiring; to check and approve audit reports and minutes of audit firms under regulations of the State Audit Office of Vietnam;

d/ To request audit firms to give written explanations about issues raised in draft audit plans, audit reports and minutes which they find unclear or irrelevant;

dd/ To request audit firms to pay compensation for damage they have caused to audited entities and the State Audit Office of Vietnam;

e/ To unilaterally terminate the contract when the entrusted or hired audit firm breaches the contract;

f/ Other powers as prescribed by law.

Article 13.Responsibilities and powers of audit firms entrusted or hired to perform audits

1. Responsibilities:

a/ To perform audits under contracts on audit entrustment or hiring and comply with professional requirements written in the contracts:

- If hired to perform audits, to comply with audit standards, rules and processes and management and professional regulations of the State Audit Office of Vietnam in the course of performing audits;

- If entrusted to perform audits, to comply with audit standards and processes adopted or accepted by the State Audit Office of Vietnam.

b/ To arrange auditors with suitable professional qualifications to ensure audit quality. Not to arrange an auditor to perform audits in the cases he/she:

- Has purchased shares, contributed capital to or have relations in economic benefits with the to-be audited entity;

- Has once held a managerial or executive position, worked as a control board member, the chief accountant or an accounting manager in the to-be audited entity during the financial years to be audited;

- Worked as a manager, an executive, a control board member, the chief accountant or an accounting manager in the to-be audited entity in the last five years before giving up such position;

- Being a parent, an adoptive parent, a parent-in-law, the spouse, a child, a sibling of the head, chief accountant or accounting manager of the to-be audited entity;

- Has once committed improper acts related to audit quality which have been handled by a state agency or professional audit association.

c/ To compensate for damage caused due to the fault of their certified auditors or employees to the audited entities, the State Audit Office of Vietnam and related organizations and individuals while performing audits;

d/ To promptly notify the State Audit Office of Vietnam of signs of violation of economic, financial or accounting laws in the audited entities;

dd/ To promptly notify the State Audit Office of Vietnam when the audited entities and related organizations and individuals:

- Refuse to provide information and documents to be used for audits when so requested by audit firms and auditors.

- Obstruct activities of auditors.

- Report false, untruthful, insufficient, untimely or biased information relating to audits.

- Buy off or give bribes to audit firms or auditors.

- Conceal acts that violate regulations on public finance and public assets;

- Illegally intervene in audit activities and results of auditors.

e/ To provide information about auditors, audit firms and audit records and documents at the request of the State Audit Office of Vietnam;

f/ To report timely and honestly to the State Audit Office of Vietnam if they fall into the cases that may affect the independence and objectivity specified in Article 9 of this Regulation;

g/ To comply with requirements of the State Audit Office of Vietnam regarding reporting, examination and supervision;

h/ To perform other responsibilities as prescribed by law and audit entrustment or hiring contracts.

2. Powers:

a/ To be professionally independent when performing services under audit entrustment or hiring contracts;

b/ To enjoy service charges paid by the State Audit Office of Vietnam;

c/ In the course of performing audits:

- To request audited entities to fully and timely provide necessary information and documents and to explain issues related to audit contents; to take stock of, collate and verify debts of audited entities related to audit contents;

- To request related organizations and individuals to provide information and documents relating to audit contents within the scope of audits for use as audit evidence.

d/ Other powers as prescribed by law.

Article 14.Responsibilities and powers of auditors of audit firms while performing audits

1. Auditors of audit firms which are hired to perform audits have the following responsibilities and powers while performing audits:

1.1. Responsibilities:

a/ To perform audit tasks and take responsibility before the head of the audit group or team for the performance of assigned audit tasks; to make assessments, verifications, conclusions and recommendations on audit contents after fully collecting and assessing appropriate audit evidence;

b/ To comply with laws, operation principles, standards and process of the State Audit Office of Vietnam, the code of conduct of auditors and other relevant regulations issued by the State Audit Office of Vietnam;

c/ To take responsibility before the State Auditor General and law for evidence they have used and for assessments, verifications, conclusions and recommendations they have made;

d/ To collect audit evidence and other working documents under regulations of the State Audit Office of Vietnam;

dd/ To keep confidential information and documents collected in the audit process;

e/ While performing audit tasks, to produce letters of introduction, practice registration certificates granted by the Ministry of Finance and identity cards;

f/ To promptly and fully report to the head of the audit firm and person competent to decide on the formation of an audit team when there emerge cases specified in Article 28 of the Law on State Audit and other circumstances that affect the independence of auditors;

g/ When committing illegal acts, to be disciplined or examined for penal liability depending on the nature and severity of such acts; to pay compensation in accordance with law for any damage caused.

1.2. Powers:

a/ To be professionally independent;

b/ To request audited entities to fully and timely provide necessary information and documents and to explain audit-related issues; to take stock of assets and collate debts of audited entities related to audit contents;

c/ To check and certify economic and financial information relating to audit contents available in and outside the audited entities in the course of performing audits in accordance with law and regulations of the State Audit Office of Vietnam;

d/ To request related organizations and individuals to provide necessary documents and information related to audit contents in accordance with law and regulations of the State Audit Office;

dd/ Other powers as prescribed by law and the State Audit Office of Vietnam.

2. While performing audits, auditors of audit firms entrusted to perform audits have the responsibilities and powers as being hired to perform audits under Clause 1, Article 14 of this Regulation, and concurrently comply with the provisions of the Law on Independent Audit and standards and processes accepted by the State Audit Office of Vietnam.

Article 15.Rights and obligations of audited entities

Audited entities have the rights and obligations prescribed in Articles 56 and 57 of the Law on State Audit, specifically as follows:

1. Rights of an audited entity:

a/ To request the audit team to produce the audit decision, and auditors to produce their letters of introduction, practice registration certificates granted by the Ministry of Finance and identity cards;

b/ To refuse to provide information and documents not relating to audit contents, to request replacement of audit team members when having evidence that such members are not honest and impartial while performing their tasks or not qualified to work as audit team members under Article 28 of the Law on State Audit;

c/ To give written explanations on issues mentioned in draft audit reports if deeming them inappropriate;

d/ To lodge complaints about acts of audit team members in the course of audit when having grounds to believe that such acts are illegal;

dd/ To lodge complaints about assessments, verifications, conclusions and recommendations in audit reports when having grounds to believe that they are illegal;

e/ To request the State Audit Office of Vietnam to pay compensation for damage caused to the audited entity in accordance with law;

f/ Other rights as prescribed by law.

2. Obligations of an audited unit:

a/ To comply with the audit decision;

b/ To fully and promptly make and send financial statements, reports on capital use and finalization and management of investment projects; collection and spending plan, and budget execution and finalization report to the audit team as requested;

c/ To fully and promptly provide necessary information and documents to serve the audit as requested by the audit team and auditors, and take responsibility before law for the accuracy, truthfulness and objectivity of such information and documents;

d/ To fully and promptly answer and explain audit-related issues as requested by the audit team and auditors;

dd/ To sign audit minutes;

e/ To fully and promptly implement audit conclusions and recommendations of the State Audit Office of Vietnam concerning the management and use of public finance and assets; to implement measures to redress weaknesses in its activities according to conclusions and recommendations of the State Audit Office of Vietnam, and send a written report on such implementation to the State Audit Office of Vietnam;

f/ Pending the settlement of its complaint, to fully and promptly implement audit conclusions and recommendations of the State Audit Office of Vietnam, unless the implementation of such conclusions and recommendations is suspended under decision of the State Auditor General or a competent state agency.

Article 16.Responsibilities units attached to the State Audit Office of Vietnam

1. Responsibilities of advisory units:

a/ The Department of Administration of the State Audit Office of Vietnam shall sum up the needs and cost estimates for the entrustment or hiring of audit firms from the units into a cost estimate for the entire sector for submission to competent authorities for decision; act as the standing body of the Council of appraisal of audit firms; assume the prime responsibility for, and coordinate with the units which wish to entrust or hire audits in, selecting contractors under the Bidding Law and reporting them to the State Auditor General for approval; coordinate with the units which wish to use collaborators in advising the State Auditor General on contents of audit entrustment or hiring contracts; sign contracts with audit firms on the list approved by the State Auditor General; supervise the performance of the contracts and liquidate the contracts (after the audit reports are published);

b/ The Department of General Affairs shall join the Council of appraisal of audit firms, appraise overall audit plans and audit reports of audit teams and appraise audit results before they are accepted;

c/ The Department of Audit Policy and Quality Control shall join the Council of appraisal of audit firms, and appraise overall audit plans; examine and supervise audit quality and audit dossiers under the Regulation on audit quality control and at the request of the State Auditor General;

d/ The Department of Legal Affairs shall appraise the legality of audit entrustment or hiring contracts, appraise audit reports of audit teams and audit results before their acceptance.

2. Responsibilities of units of the State Audit Office of Vietnam which wish to entrust or hire audit firms:

a/ Annually, based on the needs for entrustment or hiring of audit firms for specific types of audits or audit contents, to propose the needs for entrustment or hiring of audit firms together with their plans (clearly stating their requests) and cost estimates to the State Auditor General (via the Department of Administration). When there is an unexpected need, to send an official letter to the State Auditor General for additional approval;

b/ To join the Council of appraisal of audit firms; to appraisal the overall audit plan; to monitor, supervise and control audit quality, appraise audit minutes and audit reports of audit firms as decentralized by the State Audit Office of Vietnam;

c/ To assume the prime responsibility for, and coordinate with the Department of Administration of the State Audit Office of Vietnam and audit firms entrusted or hired to perform audits in, accepting audit results as the basis for the Department of Administration of the State Audit Office of Vietnam to liquidate the contracts.

Chapter III

IMPLEMENTATION PROVISIONS

Article 17.Organization of implementation

1. The heads of the units attached to the State Audit Office of Vietnam and related organizations and individuals shall implement this Regulation.

2. Any issues or problems and difficulties arising in the course of implementation should be promptly reported to the Department of Audit Policy and Quality Control for summarization and reporting to the State Auditor General for appropriate amendment and supplementation.-

State Auditor General
HO DUC PHOC