Decision No. 76/2004/QD-BTC dated September 22, 2004 of the Ministry of Finance promulgating the Regulation on selection of accredited auditing enterprises for securities issuing, listing or trading organizations

DECISION

PROMULGATING THE REGULATION ON SELECTION OF ACCREDITED AUDITING ENTERPRISES FOR SECURITIES ISSUING, LISTING OR TRADING ORGANIZATIONS

THE MINISTER OF FINANCE

Pursuant to June 12, 1999 Enterprise Law No. 13/1999/QH10;

Pursuant to the Government's Decree No. 144/2003/ND-CP of November 28, 2003 on securities and securities market;

Pursuant to the Government's Decree No. 105/2004/ND-CP of March 30, 2004 on independent audit;

Pursuant to the Government's Decree No. 77/2003/ND-CP of July 1, 2003 prescribing the functions, tasks, powers and organizational structure of the Finance Ministry;

At the proposals of the director of the Accounting and Auditing Regime Department, the chairman of the State Securities Commission and the director of the Finance Ministry's Office,

DECIDES:

Article 1.- To promulgate together with this Decision the Regulation on selection of accredited auditing enterprises for securities-issuing, -listing or -trading organizations.

Article 2.- This Decision takes effect 15 days after its publication in the Official Gazette and replaces Decision No. 26/2000/QD-UBCK2 of January 5, 2000 of the chairman of the State Securities Commission promulgating the Regulation on selection of independent auditing organizations for securities-issuing or -trading organizations.

Article 3.- The chairman of the State Securities Commission, the director of the Accounting and Auditing Regime Department, the director of the Finance Ministry's Office, the heads of the concerned units under the Finance Ministry, the directors of the auditing enterprises operating in Vietnam and the heads of the units issuing securities to the public, the organizations listing securities at the central trading market, the fund management companies and the securities investment funds shall have to implement this Decision.

REGULATION

ON SELECTION OF ACCREDITED AUDITING ENTERPRISES FOR SECURITIES-ISSUING, -LISTING OR - TRADING ORGANIZATIONS

(Promulgated together with the Finance Minister's Decision No. 76/2004/QD-BTC of September 22, 2004)

I GENERAL PROVISIONS

Article 1.- Scope of application

This Regulation shall apply to auditing enterprises accredited by the Finance Ministry to audit organizations issuing securities to the public, securities-listing organizations and securities-trading organizations, which are auditing enterprises defined in Articles 20 and 23 of the Government's Decree No. 105/2004/ND-CP of March 30, 2004 on independent audit, and satisfy the conditions prescribed in this Regulation.

This Regulation shall also apply to the subjects defined in Article 2 of this Regulation.

Article 2.- Subjects which must have their annual financial statements audited by accredited auditing enterprises include:

1. Enterprises conducting the issuance of stocks or bonds to the public (hereinafter referred collectively to as issuing organizations).

2. Organizations listing their securities at the central trading market (hereinafter referred collectively to as listing organizations).

3. Securities companies, fund management companies and securities investment funds (hereinafter referred collectively to as securities trading organizations).

Article 3.- Annual financial statements of securities-issuing, -listing or -trading organizations, which must be audited, include:

1. Accounting balance sheets;

2. Business operation result reports;

3. Cash flow reports;

4. Explanations of financial statements;

5. Additional reports according to the regulations of the Finance Ministry (the State Securities Commission).

Article 4.- Quarterly and biannual financial statements of securities-issuing, -listing or
-trading organizations, which require opinions of auditors before being publicized, must be examined by practicing auditors of auditing enterprises accredited under this Regulation in compliance with the provisions of Auditing Standard No. 910 "Examination and checking of financial statements," promulgated together with the Finance Minister's Decision No. 195/2003/QD-BTC of November 28, 2003.

II. STANDARDS AND CONDITIONS FOR SELECTING AUDITING ENTERPRISES AND AUDITORS

Article 5.- Accredited auditing enterprises must fully satisfy the following standards and conditions:

1. The conditions prescribed in Articles 20 and 23 of the Government's Decree No. 105/2004/ND-CP of March 30, 2004 on independent audit.

2. The conditions prescribed in this Regulation:

a/ Having a charter capital or an owner capital of VND 2 billion or more for domestic auditing enterprises; or a minimum charter capital of USD 300,000 for foreign-invested auditing enterprises;

b/ Having 10 practicing auditors or more, who fully satisfy the standards and conditions prescribed in Article 7 of this Regulation;

c/ Having been established and engaged in auditing activities in Vietnam for at least 5 years up to the date of filing the applications of registration for participation in auditing operations;

d/ Having at least 30 audit clients a year;

e/ Submitting dossiers of registration for participation in auditing operations in full and on time according to the provisions of Article 9 of this Regulation.

Article 6.- Already accredited auditing enterprises must not audit securities-issuing,
-listing or -trading organizations in the following cases:

1. The cases prescribed in Article 27 of Decree No. 105/2004/ND-CP;

2. The cases prescribed in this Regulation, including:

a/ Auditing enterprises have such economic relations as of capital contribution, joint ventures, share-capital contribution, etc., with securities- issuing, -listing or -trading organizations or vice versa;

b/ An auditing enterprise and a securities- issuing, -listing or -trading organization have the same shareholder owning 5% of each side's share capital or more;

c/ Auditing enterprises are clients currently enjoying the preferential conditions provided by audited securities-issuing, -listing or -trading organizations (such as provision of soft credit, guarantees without security, etc.)

d/ Auditing enterprises are currently providing or already provided in the preceding year services of recording accounting books, making financial statements, conducting internal audit, valuating assets, providing management or financial consultancy to the audited securities- issuing, -listing or -trading organizations.

Article 7.- Practicing auditors and representatives of the leaderships of accredited auditing enterprises, who audit securities- issuing, -listing or -trading organizations, must fully satisfy the following criteria and conditions:

1. The conditions prescribed in Article 14 of the Government's Decree No. 105/2004/ND-CP and the Finance Ministry's Circular No. 64/2004/TT-BTC of June 29, 2004 guiding the implementation of a number of articles of the Government's Decree No. 105/2004/ND-CP.

2. The conditions prescribed in this Regulation, including:

a/ Being named in the list of auditors registered for auditing practice certified by the Finance Ministry;

b/ Vietnamese practicing auditors must have auditing experience of at least 2 years after being granted auditor certificates;

c/ Foreign practicing auditors must have at least 2 years' experience of auditing practice in Vietnam;

d/ Not being voting shareholders or lawful representatives of voting shareholders of audited securities-issuing, -listing or -trading organizations;

e/ Not being persons with management or administration responsibilities of audited securities issuing, listing or trading organizations;

f/ Not being clients currently enjoying the preferential conditions of audited securities-issuing, -listing or -trading organizations;

g/ Having no close family relations, such as relations of parents, spouses, children, blood siblings, with persons with management and administration responsibilities (including chief accountants) of audited units.

III. PROCEDURES FOR SELECTING AND ACCREDITING AUDITING ENTERPRISES

Article 8.- Period for selecting and accrediting auditing enterprises

1. Once every two years, the Finance Ministry (the State Securities Commission) shall select and accredit auditing enterprises to audit securities-issuing, -listing or -trading organizations.

2. Before October 30 of the year of selection, auditing enterprises wishing to participate in auditing securities-issuing, -listing or -trading organizations must each submit to the Finance Ministry (the State Securities Commission) two dossier sets prescribed in Article 9 of this Regulation.

Article 9.- Dossier of registration for auditing participation comprises:

1. An application of registration for participation in auditing securities-issuing, -listing or -trading organizations (made according to a set form, not printed herein).

2. Notarized copies of the company's establishment decision or investment license, business registration and charter.

3. The list of auditors registered for auditing practice certified by the Finance Ministry and enclosed with curricula vitae of such auditors, which summarize working durations of practicing auditors and representatives of the leadership of the auditing enterprise.

4. Reports on financial status and operation situation of the auditing enterprise in the year preceding the year of registration for accreditation, including:

a/ Financial statement. Where the auditing enterprise is subject to compulsory audit, it must submit the already audited financial statement;

b/ The list of audited clients in the year;

c/ The organization, operation and auditing experience of practicing auditors and the auditing enterprise.

d/ Law violations (if any) committed by the auditing enterprise.

e/ Big changes in the fiscal year that affect the organization, operation and business operation result of the auditing enterprise.

f/ Big changes in the year related to practicing auditors (due to increase or decrease of the number of auditors, violations of professional ethics by auditors, etc.).

For cases of registration for the second time onward, the documents prescribed in Clause 2 of this Article and curricula vitae prescribed in Clause 3 of this Article are not required.

Article 10.- Publicization of the list of accredited auditing enterprises and the list of accredited practicing auditors

1. By November 15 of the year of selection at the latest, the Finance Ministry (the State Securities Commission) shall publicly announce the list of auditing enterprises and the list of practicing auditors of auditing enterprises accredited to audit securities-issuing, -listing or -trading organizations for the subsequent two years. In cases where the Finance Ministry (the State Securities Commission) does not accredit auditing enterprises to audit securities-issuing, -listing or -trading organizations, it shall make written official replies, clearly stating the reasons for non-accreditation.

2. In the accreditation duration, if the number of accredited practicing auditors decreases to the level insufficient for conducting audits, the accredited auditing enterprises shall have to send to the State Securities Commission written notices thereon enclosed with the list of new auditors proposed for addition to the list of accredited practicing auditors.

3. Basing themselves on the list of accredited auditing enterprises and the list of accredited practicing auditors, the securities-issuing, -listing or -trading organizations may consider and select auditing enterprises and practicing auditors for signing contracts on auditing their units.

Article 11.- Suspension or cancellation of accredited status

1. Auditing enterprises or practicing auditors shall have their accredited statuses suspended in the following cases:

a/ They breach the obligations prescribed in Clauses 3 and 4, Article 12 of this Regulation;

b/ Auditing results are not up to the requirements as appraised by the Finance Ministry (the State Securities Commission) on the basis of accounting standards, auditing standards and relevant law provisions;

c/ Auditing enterprises have failed to have a sufficient number of 10 accredited practicing auditors for 6 consecutive months;

d/ There exist complaints or lawsuits against auditing results to be handled by law enforcement agencies.

2. Auditing enterprises or practicing auditors that have their accredited statuses suspended may continue performing the signed auditing contracts but must not sign new contracts with securities-issuing, -listing or -trading organizations as from the date the notices of the Finance Ministry (the State Securities Commission) are issued till the date the accreditation duration expires.

3. Auditing enterprises or auditors shall have their accredited statuses cancelled in the following cases:

a/ Accredited auditing enterprises voluntarily withdraw their applications of registration for auditing participation;

b/ Auditing enterprises have their investment licenses or business registration certificates withdrawn, or practicing auditors have their auditor certificates withdrawn according to the provisions of Clause 1, Article 36 of the Government's Decree No. 105/2004/ND-CP of March 30, 2004 on independent audit.

c/ Upon the expiry of the suspension duration prescribed at Points b and c, Clause 1, Article 11 of this Regulation, but the auditing enterprises or practicing auditors still fail to remedy the faults which lead to the suspension.

d/ They seriously breach the obligations prescribed in Article 12 of this Regulation.

4. Auditing enterprises or practicing auditors that have their accredited statuses cancelled shall not be allowed to continue performing audits for securities-issuing, -listing or -trading organizations as from the date the notices of the Finance Ministry (the State Securities Commission) are issued till the date the accreditation duration expires.

Article 12.- Accredited auditing enterprises have the following obligations:

1. To firmly grasp law provisions on securities and securities market related to financial statements of audited subjects.

2. To explain or supply information and data related to auditing activities when complaints thereabout are lodged, at requests of the Finance Ministry (the State Securities Commission).

3. In the auditing course, if they detect that securities-issuing, -listing or -trading organizations fail to comply with laws and regulations related to audited financial statements, to notify such to the audited units and propose the latter to take measures to prevent, remedy and handle such violations, and give their comments on errors or violations not yet handled according to the auditing standards' provisions in auditing reports or management letters.

4. After distributing auditing reports, if they suspect or detect that audited companies commit serious errors or violations due to non-compliance with laws and regulations related to audited financial statements, to carry out the procedures for notifying such to the audited units and the third parties according to the auditing standards' provisions and concurrently to the Finance Ministry (the State Securities Commission).

5. To keep confidential information according to law provisions on audit.

6. If the State Securities Commission, when using data in already audited financial statements of the accredited auditing enterprises, detect some doubtful points, it shall directly re-examine them and issue management decisions on the basis of re-examination results.

7. In case of detecting that auditing enterprises have made untruthful or inaccurate auditing reports, thus causing damage to their clients and users of auditing results, such auditing enterprises shall have to pay compensations therefor or be handled according to law provisions.

8. Accredited auditing enterprises must perform other obligations prescribed by law.

IV. ORGANIZATION OF IMPLEMENTATION

Article 13.- The State Securities Commission shall have to:

1. Receive dossiers of registration for participation in auditing securities-issuing, -listing or -trading organizations; keep confidential information in such dossiers according to law provisions.

2. Examine dossiers and publicly announce the list of accredited auditing enterprises and the list of accredited practicing auditors, that are eligible to participate in auditing securities- issuing, -listing or -trading organizations.

3. Receive already audited financial statements of securities-issuing, -listing or
-trading organizations, and perform the State management responsibilities as prescribed.

Article 14.- The amendment and supplementation of this Regulation shall be decided by the Finance Minister.