Decision No. 89/2007/QD-BTC dated October 24, 2007 of the Ministry of Finance promulgating the regulation on selection of auditing firms accredited to audit securities-issuing organizations, securities-listing organizations and securities-trading organizations

DECISION

ISSUING REGULATIONS ON SELECTION OF AUDITING ENTERPRISES FOR ACCREDITATION TO AUDIT ISSUING ORGANIZATIONS, LISTED ORGANIZATIONS AND SECURITIES BUSINESS ORGANIZATIONS

THE MINISTER OF FINANCE

Pursuant to the Law on Enterprises 60/2005/QH11 of the National Assembly dated 29 November 2005; Pursuant to the Law on Securities 70/2006/QH11 of the National Assembly dated 29 June 2006, and Decree 14/2007/ND-CP of the Government dated 19 January 2007 implementing the Law on Securities;

Pursuant to Decrees of the Government 105/2004/ND-CP dated 30 March 2004 on independent auditing ["Decree 105"], and 133/2005/ND-CP dated 31 October 2005 amending Decree 105 ["Decree 133"];

Pursuant to Decree 77/2003/ND-CP of the Government dated 1 July 2003 on the functions, duties, powers and organizational structure of the Ministry of Finance;

On the proposal of the Director of the Auditing & Accounting Regimes Department and of the Chairman of the State Securities Commission;

DECIDES:

Article 1. To issue with this Decision the Regulations on selection of auditing enterprises for accreditation to audit issuing organizations, listed organizations and securities business organizations ["stipulated securities organizations"].

Article 2. This Decision shall be of full force and effect fifteen (15) days from the date of its publication in the Official Gazette, and shall replace Decision 76/2004/QD-BTC of the Minister of Finance dated 22 September 2004 issuing Regulations on selection of accredited auditing enterprises to audit issuing organizations, listed organizations and securities business organizations.

Article 3. The Chairman of the State Securities Commission, the Director of the Auditing & Accounting Regimes Department, the Head of the Office of the Ministry of Finance, heads of relevant units under the Ministry of Finance, heads of auditing enterprises in Vietnam, and heads of issuing organizations, listed organizations and securities business organizations shall be responsible for implementation of this Decision.

REGULATIONS

ON SELECTION OF AUDITING ENTERPRISES FOR ACCREDITATION TO AUDIT ISSUING ORGANIZATIONS, LISTED ORGANIZATIONS AND SECURITIES BUSINESS ORGANIZATIONS
(Issued with Decision 89/2007/QD-BTC of the Minister of Finance dated 24 October 2007)

I. GENERAL PROVISIONS

Article 1. Governing scope

1. These Regulations apply to auditing enterprises which are accredited by the Ministry of Finance to conduct audits of organizations issuing securities to the public, of listed organizations and of securities business organizations, being the auditing enterprises stipulated in articles 20 and 23 of Decree 105 and in article 1 of Decree 133 which satisfy all the conditions stipulated in these Regulations.

2. These Regulations shall also apply to the entities stipulated in article 2 of these Regulations ["stipulated securities organizations"].

Article 2. Entities whose annual financial statements must be audited by an accredited auditor

It shall be compulsory for the following entities to have their annual financial statements audited by an accredited auditing enterprise:

1. Enterprises and organizations conducting a public issue of securities (hereinafter all referred to as issuing organizations).

Any enterprise or organization which has a plan to conduct a public issue of securities within the following three (3) years must engage an accredited auditing enterprise to audit its financial statements for the two (2) years prior to the year of issuance.

2. Organizations listing securities on the Stock Exchange and at a Securities Trading Centre (hereinafter all referred to as listed organizations).

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

Article 3. The annual financial statements of issuing organizations, listed organizations and securities business organizations ["the stipulated securities organizations"] which must be audited shall comprise:

1. Accounting balance sheet.

2. Report on business operational results.

3. Cash flow report.

4. Explanation of the financial statements.

5. Consolidated financial statements (an issuing organization which is a parent company must prepare consolidated financial statements in accordance with the law on accounting).

6. Additional reports as stipulated in regulations of the Ministry of Finance.

Article 4. Quarterly and six-monthly financial statements of the stipulated securities organizations which require an auditor's opinion before being published, must be examined by a practising auditor of an auditing enterprise which has been accredited pursuant to these Regulations in accordance with Auditing Standard 910 (Examination and Check of Financial Statements) issued with Decision 195/2003/QD-BTC of the Minister of Finance dated 28 November 2003.

II. CRITERIA AND CONDITIONS FOR SELECTION OF AUDITING ENTERPRISES AND AUDITORS

Article 5.

An auditing enterprise must satisfy all the following criteria and conditions in order to be accredited:

1. The criteria and conditions stipulated in articles 20 and 23 of Decree 105 and in article 1 of Decree 133.

2. The following criteria and conditions stipulated in these Regulations:

2.1 A domestic auditing enterprise must have a minimum charter capital or equity of two (2) billion dong; and an auditing enterprise with foreign owned capital must have a minimum charter capital of three hundred thousand (300,000) US dollars.

2.2 The auditing enterprise must have at least seven (7) practising auditors who satisfy all the criteria and conditions stipulated in article 8 of these Regulations.

2.3 The auditing enterprise must have conducted auditing activities in Vietnam for the following periods of time:

(a) A minimum of three (3) full years from the date of its establishment up until the date it lodges an application to be registered as an accredited auditing enterprise. If an auditing enterprise must convert its form pursuant to Decrees 105 and 133, the date of its establishment shall be deemed to be the date recorded in its business registration certificate prior to conversion.

(b) If an auditing enterprise has conducted auditing activities in Vietnam for a full six (6) months but less than three (3) years calculated from the date of its establishment up until the date it lodges an application to be registered as an accredited auditing enterprise, then its seven (7) practising auditors must have at least three full years' auditing experience since the date of issuance of their auditor's certificates and they must satisfy all the conditions stipulated in article 8.1 and in sub-clauses (a), (d), (dd), (e) and (g) of article 8.2 of these Regulations.

2.4 The auditing enterprise must have a minimum of thirty (30) clients who were annually audited during the two most recent years. In the case of an enterprise which has only operated for the period stipulated in clause 2.3(b) above, the auditing enterprise must have at least thirty (30) audit clients as at the time of lodging its application to be registered as an accredited auditing enterprise.

2.5 The auditing enterprise must lodge on time a complete application file for registration as an accredited auditing enterprise pursuant to article 10 of these Regulations.

2.6 The auditing enterprise must not be in breach of the provisions in sub-clauses (a), (b) and (d) of article 12.1 of these Regulations.

An auditing enterprise which commits a breach as stipulated in sub-clause (d) of article 12.1 or which commits a breach relating to auditing practice and is dealt with in accordance with law for such breach, shall not be considered for accreditation until after the expiry of one year.

Article 6. Accredited auditing enterprises shall not be permitted to conduct audits of issuing organizations, listed organizations and securities business organizations ["stipulated securities organizations"] in the following circumstances:

1. The circumstances stipulated in article 27 of Decree 105.

2. The circumstances stipulated in these Regulations, comprising:

(a) The auditing enterprise has an economic relationship with the stipulated securities organization such as capital contribution, joint venture, shareholding capital contribution and so forth, or vice versa.

(b) The auditing enterprise and the stipulated securities organization both have the same institutional or individual owner who owns five per cent (5%) or more of each party.

(c) The auditing enterprise is a client of the stipulated securities organization to be audited and the auditing enterprise is currently enjoying preferential conditions provided by such stipulated securities organization (such as receipt of credit on preferential conditions, or receipt of an unsecured guarantee and so forth).

(d) The auditing enterprise is currently providing, or has provided in the previous two (2) consecutive years, services of posting entries in accounting books, preparation of financial statements, providing internal audit services, conducting asset valuation, [and/or] providing management consultancy or financial advice to the stipulated securities organization to be audited.

Article 7. Only auditing enterprises which are accredited pursuant to these Regulations may carry out a joint or associated audit for a stipulated securities organization.

Article 8. Practising auditors and representatives of the leaders of auditing enterprises which are accredited to conduct audits of the stipulated securities organizations must satisfy the following criteria and conditions:

1. The criteria and conditions stipulated in article 14 of Decree 105, in Circular 64-2004-TT-BTC of the Ministry of Finance dated 29 June 2004 providing guidelines on Decree 105, and in Circular 60-2006- TT-BTC of the Ministry of Finance dated 28 June 2006 providing guidelines on criteria and conditions for establishment and operation of auditing enterprises.

2. The criteria and conditions stipulated in these Regulations, comprising:

(a) They are named in the list of registered practising auditors certified by the Vietnam Association of Certified Public Accountants (VACPA) and they are not people who have registered to sell their time to auditing enterprises.

(b) Vietnamese practising auditors must have auditing experience of at least two (2) full years since the date of grant of their auditor's certificates.

(c) Foreign practising auditors must at least two (2) full years experience of auditing practice in Vietnam.

(d) They must not be voting shareholders or lawful representatives of voting shareholders of the stipulated securities organization to be audited.

(dd) They must not be people with managerial or executive responsibilities in the stipulated securities organization to be audited.

(e) They must not be clients currently enjoying preferential conditions provided by the stipulated securities organization to be audited.

(g) They must not be people with a close family relationship such as the parent, spouse, child or sibling of a person with managerial or executive responsibility (including the chief accountant) of the stipulated securities organization to be audited.

II. PROCEDURES FOR ACCREDITATION OF AUDITING ENTERPRISES

Article 9. Dates for considering and granting accreditation to auditing enterprises

1. Once each year, the State Securities Commission shall consider and grant accreditation to auditing enterprises which satisfy all the conditions to conduct audits of the stipulated securities organizations.

2. Any auditing enterprise which wishes to be granted accreditation to audit the stipulated securities organizations shall, in the period from 1 October until 30 October each year, lodge with the State Securities Commission two sets of an application file in accordance with article 10 of these Regulations.

Article 10. An application file to be registered as an accredited auditing enterprise shall comprise:

1. Application to be registered as an accredited auditing enterprise on the standard form stipulated in Appendix 1.

2. Notarized copies of the first and most recent business registration certificate (or investment certificate) and of the company charter.

3. List of the registered practising auditors certified by the Vietnam Association of Certified Public Accountants (VACPA) enclosing summarized curriculum vitae and including a summarized history of the work experience of the practising auditors and of the director of the auditing enterprise.

4. Report on the financial and operational status of the auditing enterprise during the previous year, containing:

(a) Financial statements (audited financial statements if the auditing enterprise falls into the category of enterprises for which it is compulsory that their financial statements be audited).

(b) Lists of clients who were annually audited during the two most recent years, or up until the time of lodging the application applicable to an auditing enterprise which calculates its term of operation pursuant to clause 2.3(b) of article 5 above.

(c) Organizational and operational status and auditing experience of the practising auditors and of the auditing enterprise.

(d) Breaches of law (if any) which the auditing enterprise has committed.

(dd) Any major fluctuations in the financial year which impact on the organization, operation and business operational results of the auditing enterprise.

(e) Any major fluctuations within the year relating to the practising auditors (any increase or reduction in the number of auditors, any breach of professional ethics by an auditor, and so forth).

An auditing enterprise lodging an application for registration for the second or further time shall not be required to lodge the data stipulated in clause 2 or the summarized curriculum vitae stipulated in clause 3 of this article (unless there is are changes to the CVs).

Article 11. Publication of the list of accredited auditing enterprises and of the list of accredited practising auditors

1. At the latest by 15 November each year, the State Securities Commission shall publicly announce the list of auditing enterprises and the list of practising auditors of auditing enterprises which are accredited to conduct audits of the stipulated securities organizations. This public announcement shall be made on the standard form in Appendix 2 to this Circular and sent to the following addresses:

(a) The written announcement shall be sent to all ministries, ministerial equivalent bodies, State corporations, Departments of Finance, business registration offices in provinces and cities, the Stock Exchange, Securities Trading Centres, Vietnam Association of Certified Public Accountants, the Auditing & Accounting Regimes Department under the Ministry of Finance, and the entities stipulated in clauses 2 and 3 of article 2 of these Regulations. The Stock Exchange and Securities Trading Centres must publicly display the list of accredited auditing enterprises and the list of accredited practising auditors at trading locations.

(b) The announcement shall be published on the websites of the State Securities Commission, the Ministry of Finance and Vietnam Association of Certified Public Accountants.

In a case where the State Securities Commission does not grant accreditation to an auditing enterprise to conduct audits of the stipulated securities organizations, the SSC shall provide official written notification specifying its reasons.

2. If during the term of accreditation the number of accredited practising auditors decreases to an insufficient number in terms of the requirements in article 5 of these Regulations, then the accredited auditing enterprise must provide written notification to the SSC enclosing a list of the new auditors it is proposed to add.

3. Based on the list of accredited auditing enterprises and the list of accredited practising auditors, any of the stipulated securities organizations may consider and select an auditing enterprise and a practising auditor to sign a contract for the conduct of audits of its units.

Article 12. Suspension or cancellation of accredited status

1. A practising auditor or an auditing enterprise shall have its accredited status suspended for a fixed period in the following circumstances:

(a) Breach of the obligations stipulated in clauses 3 and 4 of article 13 of these Regulations.

(b) Auditing results do not meet the requirements as appraised by the State Securities Commission on the basis of the accounting standards, auditing standards and provisions of relevant laws.

(c) The auditing enterprise fails to have the full number of seven accredited practising auditors throughout a period of six (6) consecutive months.

(d) A law agency is currently dealing with claims regarding auditing results.

2. Any auditing enterprise or practising auditor whose accredited status has been suspended for a fixed period may continue to perform audits pursuant to signed contracts and audits currently being performed, but shall not be permitted to sign new contracts with any stipulated securities organization as from the date of notification from the State Securities Commission up until the next date on which accreditation is granted.

3. A practising auditor or an auditing enterprise shall have its accredited status rescinded in the following circumstances:

(a) An accredited auditing enterprise voluntarily withdraws its application for registration.

(b) An auditing enterprise has its business registration certificate (or investment licence) withdrawn [or revoked], or a practising auditor has his or her auditor's certificate withdrawn [or revoked] pursuant to article 36.1 of Decree 105.

(c) Serious breach of the obligations stipulated in article 13 of these Regulations.

4. Any practising auditor or auditing enterprise which has its accredited status rescinded shall not be permitted to continue conducting an audit for any stipulated securities organization as from the date of notification from the State Securities Commission up until the next date on which accreditation is granted.

5. Any practising auditor or auditing enterprise which has its accredited status rescinded in the circumstances stipulated in sub-clauses (b) or (c) of clause 3 of this article shall not be considered for accreditation until a period of two (2) years has expired.

Article 13. Accredited auditing enterprises shall have the following obligations:

1. To have a firm grasp of the provisions of the law on securities and securities market relating to financial statements of entities which they audit.

2. To explain or to provide information and data related to auditing activities when complaints are made, at the request of the State Securities Commission.

3. If an auditing enterprise during the course of an audit discovers that the stipulated securities organization being audited has failed to comply with the law and regulations on audited financial statements, it must notify such organization and recommend that the latter take measures to prevent, amend and deal with such breach; and the auditing enterprise shall record its opinion in the audit report or in a management letter regarding any breach which has not yet been dealt with in accordance with the auditing standards.

4. If an auditing enterprise after distributing an audit report suspects or discovers that the audited organization has committed a serious error or breach due to non-compliance with the law and regulations on audited financial statements, it must conduct procedures to notify such organization and third parties in accordance with the auditing standards and at the same time shall notify the State Securities Commission.

5. To maintain confidentiality of information in accordance with the law on accounting.

6. If it is discovered that an auditing enterprise has prepared an untruthful or inaccurate audit report causing loss to the client and to users of the audit results, then such auditing enterprise shall be liable to pay compensation for loss caused to the client or the auditing enterprise shall be dealt with in accordance with law.

7. Accredited auditing enterprises must discharge other obligations stipulated by law.

IV. ORGANIZATION OF IMPLEMENTATION

Article 14. The State Securities Commissions shall have the following responsibilities:

1. To receive application files for registration to participate in auditing the stipulated securities organizations; to maintain confidentiality of information in such files in accordance with law.

2. To consider application files and when necessary to conduct an on-the-spot inspection at the enterprise in order to conduct procedures for accreditation or to discover whether the applicant fails to satisfy the conditions for accreditation; to conduct procedures to suspend or rescind accredited status; and to publicly announce the list of accredited auditing enterprises and the list of accredited practising auditors. In discharging these responsibilities, the State Securities Commission shall co- ordinate with other entities which have been assigned responsibility to administer auditing practice such as the Auditing & Accounting Regimes Department under the Ministry of Finance, and Vietnam Association of Certified Public Accountants.

3. To receive audited financial statements of the stipulated securities organizations, and to discharge its State administrative responsibilities in accordance with law.

4. If the State Securities Commission has any doubts during the process of using information and data in financial statements which have been audited by an accredited auditing enterprise, it may directly conduct a re-verification and issue an administrative decision on the basis of the results of its re- verification.

Article 15

The Minister of Finance shall issue any decision on amendments or additions to theses Regulations.