Law on Independent Audit, No. 67/2011/QH12

THE PRESIDENT

Order No. 06/2011/L-CTN of April 8, 2011, on the promulgation of law

THE PRESIDENT OF THE SOCIALIST REPUBLIC OF VIETNAM

Pursuant to Articles 103 and 106 of the 1992 Constitution of the Socialist Republic of Vietnam, which was amended and supplemented under Resolution No. 51/2001/QH10 of December 25, 2001 of the Xth National Assembly, the 10th session;

Pursuant to Article 91 of the Law on Organization of the National Assembly;

Pursuant to Article 57 of the Law on Promulgation of Legal Documents,

PROMULGATES:

the Law on Independent Audit,

which was passed on March 29, 2011, by the XIIth National Assembly of the Socialist Republic of Vietnam at its 9th session.

President of the Socialist Republic of Vietnam
NGUYEN MINH TRIET

Law on Independent Audit

(No. 67/2011/QH12)

Pursuant to the 1992 Constitution of the Socialist Republic of Vietnam, which was amended and supplemented under Resolution No. 51/2001/QH10;

The National Assembly promulgates the Law on Independent Audit.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Law provides for principles, conditions, scope and forms of independent audit activities; rights and obligations of certified public accountants, audit firms, Vietnam-based branches of foreign audit firms and auditees.

Article 2. Subjects of application

This Law applies to auditors, certified public accountants, audit firms, Vietnam-based branches of foreign audit firms, auditees, auditors’ professional organizations and other organizations and individuals involved in independent audit activities.

Article 3. Application of the Law on Independent Audit, international agreements and relevant laws

1. Domestic or foreign organizations and individuals that are engaged in independent audit activities in the Vietnamese territory shall comply with this Law and other relevant laws.

2. In case a treaty to which the Socialist Republic of Vietnam is a contracting party contains provisions different from those of this Law, such treaty prevails.

Article 4. Purposes of independent audit

Independent audit activities aim to contribute to promoting publicity and transparency of economic and financial information of auditees and other businesses and organizations; making the investment environment healthier; thrift practice, waste combat and corruption prevention and combat; detecting and stopping violations of law; raising the effect and effectiveness of the State’s economic and financial management and administration and businesses’ operation.

Article 5. Interpretation of terms

In this Law, the terms and phrases below are construed as follows:

1. Independent audit means the examination of and giving of independent opinions on financial statements by certified public accountants, audit firms or Vietnam-based branches of foreign audit firms, and other audit jobs under an audit contract.

2. Auditor means a person who is granted an auditor certificate under law or possesses a foreign certificate accredited by the Ministry of Finance and has passed a test in Vietnamese law.

3. Certified public accountant means an auditor who is granted an audit practice registration certificate.

4. Audit participants include certified public accountants, auditors and other members.

5. Audit firm means a firm fully meeting the conditions for providing audit services specified in this Law and other relevant laws.

6. Auditee means a business or an organization which is audited by an audit firm or a Vietnam-based foreign audit firm branch under an audit contract.

7. Entity with public interests means a business or an organization, the nature and scope of operation of which are largely related to public interests.

8. Audit practice means activities of providing audit services of certified public accountants and audit firms or Vietnam-based branches of foreign audit firms.

9. Financial statement audit means that certified public accountants, audit firms or Vietnam-based branches of foreign audit firms examine and give their opinions on the truthfulness and reasonability of material aspects of financial statements of auditees according to audit standards.

10. Compliance audit means that certified public accountants, audit firms or Vietnam-based branches of foreign audit firms examine and give their opinions on auditees’ compliance with laws and regulations.

11. Operational audit means that certified public accountants, audit firms or Vietnam-based branches of foreign audit firms examine and give their opinions on the economy, effect and effectiveness of operation of a section or the whole of an auditee.

12. Auditor’s report means a document made by a certified public accountant, an audit firm or a Vietnam-based branch of a foreign audit firm after completing an audit, giving their opinions on financial statements and other contents audited under an audit contract.

13. Vietnam-based branch of a foreign audit firm means a dependent unit of a foreign audit firm which has no legal person status and has all of its obligations and commitments guaranteed by the foreign audit firm.

Article 6. Audit standards and ethical standards of accounting and audit profession

1. Audit standards means regulations and guidelines on requirements, principles and procedures for auditing and dealing with relations arising in audit activities which must be complied with by audit participants and audit firms or Vietnam-based branches of foreign audit firms.

2. Ethical standards of the accounting and audit profession means regulations and guidelines on principles for and contents of application of the profession’s ethical standards applicable to audit participants and audit firms or Vietnam-based branches of foreign audit firms.

3. Audit standards and ethical standards of the accounting and audit profession serve as a basis for inspection and appraisal of audit quality and professional ethics of audit participants and audit firms or Vietnam-based branches of foreign audit firms.

4. The Ministry of Finance shall set out audit standards and ethical standards of the accounting and audit profession based on international standards.

Article 7. Validity of auditor’s reports

1. Auditor’s reports on financial statements appraise the truthfulness and reasonability of these statements, and conformity with accounting standards and regimes promulgated by competent agencies or organizations.

2. Auditor’s reports on compliance appraise the compliance with laws and regulations in the management and use of money, assets and other resources of auditees.

3. Auditor’s reports on operation appraise the economy, effect and effectiveness of the management and use of money and assets and other resources of auditees.

4. Auditor’s reports are used for:

a/ Shareholders, investors, parties to joint ventures or associated businesses, clients and other organizations and persons that have direct interests in or are related to auditees to deal with interest and obligation relations with stakeholders.

b/ State agencies to perform management and administration according to their assigned functions and tasks;

c/ Auditees to identify, handle and promptly prevent errors and shortcomings in their operations.

Article 8. Principles of independent audit

1. Observance of law and responsibility before law for professional operations and auditor’s reports.

2. Compliance with Vietnamese audit standards and ethical standards of accounting and audit profession; compliance with audit standards other than Vietnamese ones as required by audit contracts in the performance of audit jobs.

3. Independence, honesty and objectiveness.

4. Information confidentiality.

Article 9. Compulsory audit

1. Compulsory audit means audit of annual financial statements, reports on settlement of completed projects and other financial information of auditees defined in Clauses 1 and 2, Article 37 of this Law and other relevant laws.

2. Contracts on audit of annual financial statements of businesses or organizations subject to compulsory audit of financial statements must be signed at least thirty days before the end of the annual accounting period.

3. When submitting their financial statements to competent state agencies and when disclosing their financial statements, businesses and organizations subject to compulsory audit shall enclose with these statements auditor’s reports. In case state agencies receive financial statements of these businesses without enclosed auditor’s reports, they shall report such to competent state agencies for handling under law.

Article 10. Encouragement of audit

The State encourages businesses and organizations to hire audit firms or Vietnam-based branches of foreign audit firms to audit their financial statements, reports on settlement of completed projects and perform other audit jobs before submitting them to competent state agencies or before conducting financial disclosure.

Article 11. State management of independent audit

1. The Government performs the unified state management of independent audit.

2. The Ministry of Finance is answerable to the Government for performing the state management of independent audit, having the following tasks and powers:

a/ To elaborate and submit to competent state agencies for promulgation, or promulgate according to its competence legal documents on independent audit;

b/ To elaborate and submit to the Government for decision strategies and policies for development of independent audit;

c/ To specify conditions for sitting examinations and the organization of examinations for grant of auditor certificates; to grant, revoke and manage auditor certificates;

d/ To set the form of certificate of eligibility for provision of audit services; to grant, renew, modify and revoke this certificate;

e/ To stop the provision of audit services;

f/ To inspect, examine and handle complaints and denunciations related to, and handle violations of the law on independent audit;

g/ To inspect and examine independent audit operations of auditors’ professional organizations;

h/ To provide for updating of knowledge for auditors and certified public accountants;

i/ To provide for registration and management of audit practice; to publicize the list of audit firms, Vietnam-based branches of foreign audit firms and certified public accountants;

j/ To provide for audit service quality control;

k/ To review and assess independent audit activities and take measures to support the development of independent audit;

l/ To undertake international cooperation in independent audit.

3. Ministries and ministerial-level agencies shall, within the ambit of their tasks and powers, coordinate with the Ministry of Finance in performing the state management of independent audit.

4. Provincial-level People’s Committees shall, within the ambit of their tasks and powers, perform the state management of independent audit in their respective localities.

Article 12. Auditors’ professional organizations

1. Auditors’ professional organizations are established and operate under the law on associations and shall comply with the law on independent audit.

2. Auditors’ professional organizations may provide refresher courses for auditors and certified public accountants and perform some tasks related to independent audit specified by the Government.

Article 13. Prohibited acts

1. Audit participants and audit firms and Vietnam-based branches of foreign audit firms are strictly prohibited from:

a/ Purchasing, receiving as gifts or donations or holding stocks or capital contribution portions of auditees, regardless of their quantities;

b/ Purchasing or selling bonds or other assets of auditees, thereby affecting the independence under the ethical standards of the accounting and audit profession;

c/ Receiving or demanding any sums of money or benefits other than service charges and expenses payable by auditees as agreed upon in signed contracts;

d/ Harassing or deceiving clients and auditees;

e/ Disclosing information on audit dossiers, clients or auditees, unless these clients or auditees so consent or the law so provides;

f/ Untruthfully informing or introducing qualifications, experience and capability to provide services of certified public accountants and audit firms or Vietnam-based branches of foreign audit firms;

g/ Fighting for clients in forms of obstructing, luring, buying off or colluding with clients and other unfair competition practices;

h/ Collecting debts for auditees;

i/ Colluding or hooking up with auditees in falsifying accounting documents, financial statements and audit dossiers, and falsely reporting on audit results;

j/ Forging or making untruthful declarations in audit dossiers;

k/ Renting or borrowing auditor certificates and audit practice registration certificates for conducting professional operations;

l/ Providing audit services while failing to satisfy the conditions specified in this Law;

m/ Other acts banned by law.

2. In addition to the acts specified in Clause 1 of this Article, auditors and certified public accountants are also prohibited from performing the following acts:

a/ Practicing audit in an individual capacity;

b/ Forging, leasing or lending to others or letting others use their names and auditor certificates or audit practice registration certificates for conducting audit activities;

c/ Working for two or more audit firms and Vietnam-based branches of foreign audit firms at a time;

d/ Other acts banned by law.

3. Auditees and related organizations and individuals are strictly prohibited from:

a/ Selecting and signing audit contracts with organizations and individuals that fail to satisfy the conditions for practicing audit;

b/ Refusing to provide information and documents necessary for audit at the request of certified public accountants or audit firms or Vietnam-based branches of foreign audit firms;

c/ Obstructing the performance of audit participants;

d/ Providing falsified, untruthful, insufficient or untimely information and documents relevant to the audit;

e/ Buying off, offering bribes to or colluding with audit participants and audit firms or Vietnam-based branches of foreign audit firms in order to falsify accounting documents, financial statements, audit dossiers and auditor’s reports;

f/ Covering up violations of financial and accounting laws;

g/ Intimidating, taking revenge on or forcing audit participants to falsify audit results.

h/ Other acts banned by law.

4. Organizations and individuals are strictly prohibited from illegally intervening in or obstructing professional activities of certified public accountants, audit firms and Vietnam-based branches of foreign audit firms; abusing their positions and powers to violate regulations on the grant of certificates of eligibility for provision of audit services or audit practice registration certificates, examination and quality control of audit services, disciplining, and handling of administrative violations in independent audit.

Chapter II

AUDITORS AND CERTIFIED PUBLIC ACCOUNTANTS

Article 14. Standards of auditors

1. An auditor must fully meet the following standards:

a/ Having full civil act capacity;

b/ Having good ethics and sense of responsibility, and being upright, honest and objective;

c/ Possessing a university or higher degree in finance, banking, accounting, audit or another discipline as required by the Ministry of Finance;

d/ Possessing an auditor certificate as required by the Ministry of Finance.

2. Persons possessing foreign certificates accredited by the Ministry of Finance, having passed a Vietnamese law test in Vietnamese and fully meeting the standards specified at Points a and b, Clause 1 of this Article may be accredited as auditors.

Article 15. Audit practice registration

1. A person who fully satisfies the following conditions may register for audit practice:

a/ Being an auditor;

b/ Having actually practiced audit for full thirty six months or more;

c/ Having participated in all knowledge-updating programs.

2. Persons who fully satisfy the conditions specified in Clause 1 of this Article shall register for audit practice and be granted audit practice registration certificates under regulations of the Ministry of Finance.

3. Applicants for audit practice registration certificates shall pay a fee prescribed by law.

4. An audit practice registration certificate is valid only when its holder works as a full-timer under a labor contract for an audit firm or a Vietnam-based branch of a foreign audit firm.

Article 16. Persons ineligible for audit practice registration

1. Cadres, civil servants and public employees.

2. Persons currently banned from practicing audit under legally effective court judgments or rulings; persons currently examined for penal liability; persons convicted of any economic or position-related crime related to finance or accounting who have not yet had their convictions remitted; persons currently subject to the administrative handling measure of education in commune, ward or township or confinement to medical treatment or educational establishments.

3. Persons with previous convictions for economic crimes of serious or higher degree.

4. Persons having violated the law on finance, accounting, audit or economic management and subsequently been administratively sanctioned, within one year after the issuance of such sanctioning decision.

5. Persons whose audit practice is stopped.

Article 17. Rights of certified public accountants

While practicing audit at audit firms or Vietnam-based branches of foreign audit firms, certified public accountants have the following rights:

1. To practice audit under this Law.

2. To be professionally independent.

3. To request auditees to sufficiently and promptly provide necessary information and documents and explain matters related to audited contents; to request inventory of assets and comparison of debts of auditees related to audited contents; to examine all dossiers and documents related to economic and financial operations of auditees inside or outside these units in the course of conducting audit.

4. To verify and certify economic and financial information relevant to auditees inside and outside these units in the course of conducting audit.

5. To request related organizations and individuals to provide through auditees necessary documents and information relevant to audited contents.

6. Other rights provided by law.

Article 18. Obligations of certified public accountants

When practicing at audit firms or Vietnam-based branches of foreign audit firms, certified public accountants have the following obligations:

1. To adhere to the principles of independent audit.

2. To refrain from intervening in operations of clients or auditees in the course of conducting audit.

3. To refuse to conduct audit for clients or auditees if deeming they can’t be independent, are professionally incapable or ineligible as provided by law.

4. To refuse to conduct audit in case their clients or auditees make requests contrary to professional ethics or requirements or against the law.

5. To participate in all annual knowledge-updating programs.

6. To regularly update professional knowledge and improve professional experience.

7. To audit and examine audit dossiers or sign audit dossiers and take responsibility for their auditor’s reports and activities.

8. To make periodical or extraordinary reports on their audit activities at the request of competent state agencies.

9. To comply with this Law and laws of host countries in case of practicing audit overseas.

10. To satisfy requirements on examination and quality control of audit services under regulations of the Ministry of Finance.

11. Other obligations specified by law.

Article 19. Cases in which certified public accountants may not conduct audit

A certified public accountant may not conduct audit in the following cases:

1. He/she is a member, founding shareholder or purchaser of shares of or contributor of capital to the auditee.

2. He/she holds the post of manager, executive, member of the control board or chief accountant of the auditee.

3. He/she held the post of manager, executive, member of the control board or chief accountant of the auditee in the fiscal years to be audited.

4. Within two years after he/she ceases to hold the post of manager, executive, member of the control board or chief accountant of the auditee.

5. He/she is currently performing or performed in the preceding year the job of keeping accounting books, making financial statements or conducting internal audit for the auditee.

6. He/she is currently providing or provided in the preceding year services other than those specified in Clause 5 of this Article which affect their independence according to the ethical standards of the accounting and audit profession.

7. His/her parents, spouses, children or blood siblings have material financial interests, direct or indirect, in the auditee according to the ethical standards of accounting and audit profession or hold the post of post of manager, executive, member of the control board or chief accountant of the auditee.

8. Other cases specified by law.

Chapter III

AUDIT FIRMS

Article 20. Types of audit firms and Vietnam-based branches of foreign audit firms

1. The following types of business may provide audit services:

a/ Limited liability company with two or more members;

b/ Partnership;

c/ Private enterprise.

2. Vietnam-based branches of foreign audit firms may provide audit services under law.

3. Businesses and business branches ineligible for providing audit services may not use the word “audit” in their names.

4. Audit firms may not contribute capital for establishing other audit firms, unless they join foreign audit firms in contributing capital for establishing other audit firms in Vietnam.

Article 21. Conditions for grant of certificates of eligibility for provision of audit services

1. When applying for a certificate of eligibility for provision of audit services, a limited liability company with two or more members must fully meet the following conditions:

a/ Having a business registration certificate, enterprise registration certificate or investment certificate in accordance with law;

b/ Having at least five certified public accountants, of whom at least two are capital contributors;

c/ Having its at-law representative, director or general director being a certified public accountant;

d/ Assuring a legal capital prescribed by the Government;

e/ Assuring that capital contribution portions of its institutional members do not exceed the level prescribed by the Government. Representatives of these institutional members are certified public accountants.

2. When applying for a certificate of eligibility for provision of audit services, a partnership must fully meet the following conditions:

a/ Having a business registration certificate, enterprise registration certificate or investment certificate in accordance with law;

b/ Having at least five certified public accountants, of whom at least two are partners;

c/ Having its at-law representative, director or general director being a certified public accountant.

3. When applying for a certificate of eligibility for provision of audit services, a private enterprise must fully meet the following conditions:

a/ Having a business registration certificate, enterprise registration certificate or investment certificate in accordance with law;

b/ Having at least five certified public accountants, including its owner;

c/ Being owned by its director.

4. When applying for a certificate of eligibility for provision of audit services, a Vietnam-based branch of a foreign audit firm must fully meet the following conditions:

a/ The foreign audit firm is licensed to provide independent audit services in accordance with the law of the country in which the foreign audit firm is headquartered;

b/ Having at least two certified public accountants, including its director or general director;

c/ The director or general director of the branch does not hold the post of manager or executive in another business in Vietnam;

d/ The foreign audit firm sends to the Ministry of Finance a document guaranteeing the fulfillment of all obligations and commitments of its Vietnam-based branch;

e/ The foreign audit firm assures the maintenance of a capital amount not lower than the legal capital level prescribed by the Government.

5. Past six months after registering the provision of audit services, if audit firms or Vietnam-based branches of foreign audit firms are not granted certificates of eligibility for provision of audit services, they shall carry out procedures for deletion of the business line of provision of audit services.

Article 22. Dossiers of application for certificates of eligibility for provision of audit services

A dossier of application for a certificate of eligibility for provision of audit services comprises:

1. An application for a certificate of eligibility for provision of audit services.

2. A copy of the business registration certificate, enterprise registration certificate or investment certificate.

3. Copies of audit practice registration certificates of certified public accountants.

4. Full-time labor contracts of certified public accountants.

5. Documents evidencing capital contributions, for limited liability companies.

6. Other papers specified by the Ministry of Finance.

Article 23. Time limit for granting certificates of eligibility for provision of audit services

1. Within thirty days after receiving a valid dossier, the Ministry of Finance shall grant a certificate of eligibility for provision of audit services to an audit firm or a Vietnam-based foreign audit firm branch. In case of refusal, the Ministry of Finance shall reply in writing, clearly stating the reason.

2. In case of necessity to clarify a matter related to the dossier of application for a certificate of eligibility for provision of audit services, the Ministry of Finance may request the applying audit firm or Vietnam-based foreign audit firm branch to explain it.

Article 24. Re-grant or modification of certificates of eligibility for provision of audit services

1. A certificate of eligibility for provision of audit services shall be re-granted or modified in the following cases:

a/ There is a change in its contents;

b/ It is lost or damaged;

c/ Division, split-up, merger, consolidation or ownership transformation of the audit firm.

2. A dossier of application for re-grant or modification of a certificate of eligibility for provision of audit services comprises:

a/ An application for re-grant or modification of the certificate;

b/ The granted original certificate, unless it is lost;

c/ Other documents relevant to the re-grant or modification of the certificate.

3. Within twenty days after receiving a valid dossier, the Ministry of Finance shall re-grant or modify a certificate of eligibility for provision of audit services. In case of refusal, the Ministry of Finance shall reply in writing, clearly stating the reason.

Article 25. Fee for grant or modification of certificates of eligibility for provision of audit services

1. Audit firms and Vietnam-based branches of foreign audit firms which apply for grant, re-grant or modification of certificates of eligibility for provision of audit services shall pay a fee.

2. The Minister of Finance shall specify fee rates for grant, re-grant and modification of certificates of eligibility for provision of audit services.

Article 26. Changes subject to notification to the Ministry of Finance

Within ten days after the occurrence of a change in the following details or any of the following change, an audit firm or a Vietnam-based foreign audit firm branch shall notify it in writing to the Ministry of Finance:

1. The list of certified public accountants.

2. Failure to meet any of the conditions specified in Articles 21 and 31 of this Law.

3. Name or location of the head office of the audit firm.

4. Director or general director, at-law representative or capital contribution portions of members.

5. Suspension of provision of audit services.

6. Establishment, termination of operation, renaming or relocation of the office of the audit service branch.

7. Division, split-up, merger, consolidation, transformation or dissolution.

Article 27. Termination of provision of audit services and revocation of certificates of eligibility for provision of audit services

1. An audit firm or a Vietnam-based foreign audit firm branch will have its provision of audit services terminated when falling into any of the following cases:

a/ It operates beyond the scope of operation of audit firms specified in Clause 1, Article 40 of this Law;

b/ It fails to meet any of the conditions specified in Clauses 1, 2, 3 and 4, Article 21 of this Law in three consecutive months;

c/ It commits a serious error or violation in its professional operations or violates audit and ethical standards of the accounting and audit profession.

2. An audit firm or a Vietnam-based foreign audit firm branch will have its certificate of eligibility for provision of audit services revoked when falling into any of the following cases:

a/ It makes untruthful declarations or falsifies or forges the dossier of application for a certificate of eligibility for provision of audit services;

b/ It fails to provide audit services in twelve consecutive months;

c/ It fails to remedy violations specified in Clause 1 of this Article within sixty days after the date of termination;

d/ It is dissolved, falls bankrupt or terminates the provision of audit services at its own will;

e/ It has its business registration certificate, enterprise registration certificate or investment certificate revoked;

f/ The foreign audit firm which has a Vietnam-based branch is dissolved, falls bankrupt or has its license revoked or its operation terminated by a competent agency of the country in which this firm is headquartered;

g/ It commits a violation specified in Clauses 11 and 15, Article 59 of this Law.

3. Audit firms or Vietnam-based branches of foreign audit firms having their certificates of eligibility for provision of audit services revoked shall stop providing audit services on the date revocation decisions take effect.

4. The Ministry of Finance shall specify the termination of provision of audit services, revoke certificates of eligibility for provision of audit services, and notify decisions on termination of provision of audit services or revocation of certificates of eligibility for provision of audit services for seven days on its website.

Article 28. Rights of audit firms and Vietnam-based branches of foreign audit firms

1. Audit firms have the following rights:

a/ To provide services specified in Article 40 of this Law;

b/ To receive service charges;

c/ To set up branches to provide audit services;

d/ To set up audit service-providing establishments overseas;

e/ To join in international audit organizations and auditors’ professional organizations;

f/ To request auditees to sufficiently and promptly provide necessary information and documents and explain matters relevant to audited contents; to request inventory of assets and comparison of debts of auditees relevant to audited contents; to examine all dossiers and documents relevant to economic and financial operations of auditees inside or outside these units in the course of audit;

g/ To verify and certify economic and financial information relating to auditees obtained inside or outside these units in the course of audit;

h/ To request related organizations and individuals to provide through auditees necessary documents and information relevant to audited contents;

i/ Other rights provided by law.

2. Vietnam-based branches of foreign audit firms have the rights specified at Points a, b, f, g, h and i of this Article.

Article 29. Obligations of audit firms and Vietnam-based branches of foreign audit firms

1. To operate in accordance with their certificates of eligibility for provision of audit services.

2. To appoint personnel with relevant professional qualifications for providing quality audit services; to manage professional operations of certified public accountants.

3. To annually notify lists of their certified public accountants to competent state agencies.

4. To pay damages to clients and auditees in accordance with audit contracts and law.

5. To purchase professional liability insurance for their certified public accountants or set up reserve funds for occupational risks under regulations of the Ministry of Finance.

6. To notify auditees of the latter’s signs of violations of the economic, financial and accounting laws.

7. To provide information on their certified public accountants and their own information to competent state agencies.

8. To provide audit dossiers and documents when requested in writing by competent state agencies.

9. To report periodically or extraordinarily on independent audit activities.

10. To provide timely, sufficient and accurate information and documents at the request of competent agencies in the course of examination and inspection, and take responsibility for the accuracy and truthfulness of provided information and documents; to comply with competent state agencies’ regulations on examination and inspection.

11. To take responsibility before law and their clients for audit results under signed audit contracts.

12. To take responsibility before users of audit results when the latter:

a/ Have interests directly related to audit results of auditees on the date of signing auditor’s reports;

b/ Have reasonable knowledge about financial statements and grounds for making financial statements which are accounting standards and regimes and other relevant laws;

c/ Have prudently used information in audited financial statements.

13. To refuse to conduct audit when finding that they cannot be independent, are professionally incapable or ineligible.

14. To refuse to conduct audit when their clients or auditees make requests contrary to professional ethics, professional or operational requirements or against the law.

15. To control audit quality and submit to audit service quality control under regulations of the Ministry of Finance.

16. Other obligations specified by law.

Article 30. Cases in which audit firms and Vietnam-based branches of foreign audit firms may not conduct audit

1. An audit firm may not conduct audit in the following cases:

a/ It is currently performing or performed in the previous year the job of keeping accounting books, making financial statements or conducting internal audit for the auditee;

b/ It is currently providing or provided in the previous year services other than those specified at Point a of this Clause which affect its own independence or the independence of its certified public accountants and according to the ethical standards of the accounting and audit profession;

c/ Audit participants, its managers or executives are members or founding shareholders of or have purchased shares or contributed capital to the auditee, or have other economic or financial relations with the auditee according to the ethical standards of the accounting and audit profession;

d/ Parents, spouses, children or blood siblings of its managers or executives are members or shareholders of or have purchased shares or contributed capital to and have material influence on the auditee, or are managers, executives, members of the control board or chief accountant of the auditee;

e/ Managers, executives, members of the control board or the chief accountant of the auditee are concurrently capital contributors of and have material influence on the audit firm;

f/ It and an auditee have a same founding or co-founding individual, business or organization;

g/ The auditee conducted in the previous year or is currently conducting audit of financial statements of the very audit firm;

h/ Other cases specified by law.

2. A Vietnam-based foreign audit firm branch may not conduct audit in the following cases:

a/ It is currently performing or performed in the previous year the job of keeping accounting books, making financial statements or conducting internal audit for the auditee;

b/ It is currently providing or provided in the previous year services other than those specified at Point a of this Clause which affect its own independence or the independence of its certified public accountants according to the ethical standards of the accounting and audit profession;

c/ Audit participants, its managers or executives are members or founding shareholders of, have purchased shares or contributed capital to the auditee, or have other economic or financial relations with the auditee according to the ethical standards of the accounting and audit profession;

d/ Parents, spouses, children or blood siblings of its managers or executives are members or shareholders of, have purchased shares or contributed capital to and have material influence on the auditee or are managers, executives, members of the control board or chief accountant of the auditee;

e/ Managers, executives, members of the control board or the chief accountant of the auditee are concurrently persons having material influence on the branch according to the ethical standards of the accounting and audit profession;

f/ The auditee conducted in the previous year or is currently conducting audit of financial statements of the very branch;

g/ Other cases specified by law.

Article 31. Audit firm branches

1. Conditions for an audit firm branch to provide audit services:

a/ The audit firm fully meets the conditions for provision of audit services specified in Article 21 of this Law;

b/ The branch has at least two certified public accountants, including its director. These two certified public accountants must not be concurrently auditors registered for practice at the audit firm headquarters or other branches.

c/ The branch obtains a written approval of the Ministry of Finance.

2. Audit firm branches which fail to meet the conditions specified in Clause 1 of this Article for three consecutive months will have their provision of audit services terminated.

3. In case an audit firm has its provision of audit services terminated, the provision of audit services by its branches are also terminated.

Article 32. Overseas establishments of audit firms

1. Audit firms may set up their overseas audit service establishments under Vietnam’s investment law and laws of host countries.

2. Within thirty days after the setting up or termination of operation of its overseas audit service establishment, an audit firm shall send a written notice, enclosed with copies of documents on the setting up or termination of operation of the establishment, to the Ministry of Finance.

Article 33. Suspension of provision of audit services

1. Audit firms and Vietnam-based branches of foreign audit firms may suspend the provision of audit services for not more than twelve consecutive months.

2. In case audit firms suspend the provision of audit services, their branch shall also suspend the provision of audit services.

3. Audit firms and Vietnam-based branches of foreign audit firms which suspend the provision of audit services before completing audit contracts already signed with their clients shall reach agreement with these clients on contract performance.

4. When resuming their operation, audit firms and Vietnam-based branches of foreign audit firms must meet the conditions specified by law and notify such in writing to the Ministry of Finance at least ten days before the date of operation resumption.

Article 34. Termination of provision of audit services

1. An audit firm shall terminate the provision of audit services in the following cases:

a/ It terminates the provision at its own will;

b/ It is divided, split up, merged, consolidated or dissolved;

c/ It has its business registration certificate, enterprise registration certificate, investment certificate or certificate of eligibility for provision of audit services revoked;

d/ Its director, for private enterprises, is dead;

e/ Other cases specified by the law on enterprises.

2. A Vietnam-based foreign audit firm branch shall terminate the provision of audit services in the following cases:

a/ It terminates the provision under a decision of the parent audit firm;

b/ It terminates the provision under Point c or e, Clause 1 of this Article.

3. In case of termination of the provision of audit services under Point a, Clause 1 of this Article, an audit firm shall notify such in writing to the Ministry of Finance at least thirty days before the date of termination.

4. The Ministry of Finance shall specify procedures for terminating the provision of audit services.

Article 35. Termination of operation of audit firm branches

1. An audit firm branch shall terminate its operation in the following cases:

a/ Under a decision of its parent audit firm;

b/ Its parent audit firm terminates operation;

c/ Other cases specified by the law on enterprises.

2. Audit firms have the rights and perform the obligations of their branches and settle matters related to the termination of operation of their branches.

Article 36. Foreign audit firms

Foreign audit firms may conduct audit activities in Vietnam in the following forms:

1. Contributing capital to audit firms established and operating in Vietnam for establishing new audit firms.

2. Setting up their branches.

3. Providing cross-border audit services under regulations of the Government.

Chapter VI

AUDITEES

Article 37. Auditees

1. Businesses and organizations of which annual financial statements are required by law to be audited by audit firms or Vietnam-based branches of foreign audit firms include:

a/ Foreign-invested businesses;

b/ Credit institutions established and operating under the Law on Credit Institutions;

c/ Financial institutions, insurance businesses, insurance brokerage businesses;

d/ Public companies, issuing organizations and securities-trading organizations.

2. Businesses and organizations which must be audited by audit firms or Vietnam-based branches of foreign audit firms include:

a/ State enterprises other than those operating in the fields involving state secrets as classified by law which must have their annual financial statements audited;

b/ Businesses and organizations implementing projects of national importance or state-funded group-A projects other than those in the fields involving state secrets which must have their reports on settlement of completed projects audited;

c/ Businesses and organizations with state capital contributions and other state-funded projects specified by law which must have their annual financial statements or reports on settlement of completed projects audited;

d/ Audit firms and Vietnam-based branches of foreign audit firms which must have their annual financial statements audited.

3. The audit of financial statements and reports on settlement of completed projects of businesses and organizations specified at Points a, b and c, Clause 2 of this Article cannot substitute for the audit by the State Audit.

4. Other businesses and organizations which are willing to be audited.

Article 38. Rights of auditees

1. To select audit firms or Vietnam-based branches of foreign audit firms and certified public accountants that are fully qualified for audit practice under law, for signing audit contracts, unless otherwise provided by law.

2. To request audit firms or Vietnam-based branches of foreign audit firms to provide information in their audit practice registration dossiers and information on certified public accountants and audit firms or Vietnam-based branches of foreign audit firms conducting audit.

3. To refuse to provide information and documents irrelevant to audited contents.

4. To request replacement of audit participants when having grounds to believe that these participants violate the principles of independent audit in the course of audit.

5. To discuss and explain in writing matters indicated in draft auditor’s reports which they consider inappropriate.

6. To lodge complaints about acts of audit participants in the course of audit when having grounds to believe that these acts are unlawful.

7. To demand compensations in case audit firms or Vietnam-based branches of foreign audit firms cause damage to them.

8. Other rights provided by law.

Article 39. Obligations of auditees

1. To provide sufficiently, accurately, truthfully, promptly and objectively necessary information and documents at the request of certified public accountants and audit firms or Vietnam-based branches of foreign audit firms, and take responsibility before law for provided information and documents.

2. To satisfy requests of certified public accountants and audit firms or Vietnam-based branches of foreign audit firms for collection of audit evidence as required by audit standards and correction of misstatements so that auditor’s reports contain no exceptions for contents ineligible for exceptions specified in Clauses 2 and 3, Article 48 of this Law. In case misstatements are not corrected according to opinions of audit firms or Vietnam-based branches of foreign audit firms, auditees shall explain in writing at the request of competent state agencies and owner representatives of auditees.

3. To coordinate with and create favorable conditions for certified public accountants to conduct audit.

4. To refrain from limiting the scope of matters which need to be audited.

5. To respond to recommendations of audit firms or Vietnam-based branches of foreign audit firms regarding problems or misstatements in financial statements and their observance of law in order to take timely remedies.

6. To notify promptly and sufficiently violations of law and breaches of audit contracts in auditing activities of certified public accountants and audit firms or Vietnam-based branches of foreign audit firms to competent state agencies.

7. To pay audit service charges as agreed upon in audit contracts.

8. In case of signing an audit contract with an audit firm or a Vietnam-based foreign audit firm substitute for three or more consecutive years, to request this audit firm or Vietnam-based foreign audit firm to change their certified public accountants to sign auditor’s reports.

9. Other obligations specified by law.

Chapter V

INDEPENDENT AUDIT ACTIVITIES

Section 1

OPERATION OF AUDIT FIRMS

Article 40. Scope of operation of audit firms and Vietnam-based branches of foreign audit firms

1. Audit firms and Vietnam-based branches of foreign audit firms may provide the following services:

a/ Audit services, including audit of financial statements, operational audit, compliance audit, audit of reports on settlement of completed projects, audit of financial statements for taxation and other audit jobs;

b/ Services of examination of financial statements, financial information and other assurance services.

2. In addition to services specified in Clause 1 of this Article, audit firms may register for providing the following services:

a/ Economic, financial and tax consultancy;

b/ Corporate management, transformation and restructuring consultancy;

c/ Consultancy on application of information technology to administration of businesses and organizations;

d/ Accounting services under the accounting law;

e/ Appraisal of prices of assets and assessment of business risks;

f/ Services of training in financial, accounting and audit knowledge;

g/ Other relevant financial, accounting and tax services specified by law.

3. Businesses possessing certificates of eligibility for provision of audit services under this Law may provide accounting services under the accounting law without having to register for the provision of such services.

4. When providing services specified in Clauses 1 and 2 of this Article, audit firms must fully meet the conditions specified in this Law and other relevant laws.

Article 41. Acceptance to provide audit services

1. Audit firms and Vietnam-based branches of foreign audit firms may accept to provide audit services suitable to their own capacity and within the scope of client requests.

2. When accepting to provide audit services, audit firms and Vietnam-based branches of foreign audit firms shall notify their clients of their rights, obligations and professional liability in providing audit services and limits of their and their certified public accountants’ financial liability for audit risks.

3. Audit firms and Vietnam-based branches of foreign audit firms may not transfer audit services on which they have signed contracts to others, unless their clients so consent.

4. Audit firms and Vietnam-based branches of foreign audit firms shall appoint persons to take charge of each audit. Persons in charge of an audit must be certified public accountants. Auditor’s reports must be signed by these persons.

Article 42. Audit contracts

1. Audit firms and Vietnam-based branches of foreign audit firms shall provide audit services under audit contracts.

2. Audit contracts are agreements between audit firms or Vietnam-based branches of foreign audit firms and their clients on provision of audit services. An audit contract shall be made in writing and has the following principal details:

a/ Names and addresses of the client or his/her/its representative and representative of the audit firm or Vietnam-based foreign audit firm branch;

b/ Purposes and scope of and jobs involved in audit service(s) and the audit contract performance period.

c/ Rights, obligations and responsibilities of the contracting parties;

d/ Form of auditor’s report and other forms of presenting audit results such as management letters and other reports;

e/ Audit service charge and other expenses agreed upon by the parties.

Article 43. Obligation to maintain confidentiality

1. Certified public accountants, audit firms and Vietnam-based branches of foreign audit firms may not disclose information on audit dossiers, clients and auditees, unless clients or auditees so consent or the law so provides.

2. Certified public accountants, audit firms and Vietnam-based branches of foreign audit firms may not use information on audit dossiers, clients and auditees to harm the interests of the State, public interests, rights and legitimate interests of agencies, organizations and individuals.

3. Audit firms and Vietnam-based branches of foreign audit firms shall build and operate internal control systems in order to maintain confidentiality.

4. State agencies, auditors’ professional organizations and related individuals are obliged to keep confidential information provided to them on audit dossiers, clients and auditees under law.

Article 44. Audit service charge

1. Audit service charge shall be agreed upon by audit firms or Vietnam-based branches of foreign audit firms and their clients in audit contracts on the following bases:

a/ Jobs, volume and characteristics of the work;

b/ Working duration and conditions of certified public accountants and auditors employed to provide services;

c/ Qualifications, experience and reputation of certified public accountants, audit firms or Vietnam-based branches of foreign audit firms;

d/ Level of liability and deadline for service provision.

2. Audit service charge shall be calculated on the following bases:

a/ Working hours of certified public accountants or auditors;

b/ Each audit service with a package charge;

c/ Audit contracts for many periods with a fixed charge rate for each period .

Article 45. Audit process

1. An audit involves the following steps:

a/ Acceptance and maintenance of clients and elaboration of audit plans;

b/ Performance of audit;

c/ Conclusion of audit, making of auditor’s report and post-audit handling.

2. Certified public accountants, audit firms and Vietnam-based branches of foreign audit firms shall follow the steps of the audit process according to audit standards.

Section 2

AUDITOR’S REPORTS

Article 46. Auditor’s reports on financial statements

1. An auditor’s report on a financial statement shall be made according to audit standards and have the following details:

a/ Object(s) of the audit;

b/ Responsibilities of the auditee and the audit firm or Vietnam-based foreign audit firm branch;

c/ Scope of and bases for the audit;

d/ Place and time of making the auditor’s report;

e/ Audit opinions on the audited financial statement;

f/ Other details according to audit standards.

2. The date of signing the auditor’s report must not be earlier than the date of signing the financial statement.

3. Auditor’s reports must be signed by certified public accountants assigned by audit firms or Vietnam-based branches of foreign audit firms to take charge of audits and at-law repre-sentatives of audit firms or persons authorized in writing by these representatives. Persons authorized in writing by at-law representatives must be certified public accountants.

4. Auditor’s reports on consolidated financial statements of business groups and corporations organized after the parent company-affiliated company model shall be made according to audit standards.

Article 47. Auditor’s reports on other audit jobs

Auditor’s reports on other audit jobs shall be made in accordance with Article 46 of this Law and audit standards relevant to each audit.

Article 48. Audit opinions

1. Based on audit results, certified public accountants and audit firms or Vietnam-based branches of foreign audit firms shall give their opinions on financial statements and other audited contents according to audit standards.

2. The Ministry of Finance shall specify contents ineligible for exceptions in auditor’s reports in conformity with audit standards.

3. Competent state administrations and representatives of auditees’ owners may request audit firms, Vietnam-based branches of foreign audit firms and auditees to explain exceptions in auditor’s reports.

Section 3

AUDIT DOSSIERS

Article 49. Audit dossiers

1. Certified public accountants, audit firms and Vietnam-based branches of foreign audit firms shall collect and file in audit dossiers necessary documents and information related to each audit and sufficient to serve as a basis for forming their audit opinions and proving that the audit has been performed in accordance with law and audit standards.

2. Certified public accountants, audit firms and Vietnam-based branches of foreign audit firms shall make audit dossiers according to audit standards.

Article 50. Preservation and archive of audit dossiers

1. Audit dossiers must be fully and safely preserved in the course of use.

2. An audit dossier must be archived for twelve months after the date of issuance of an auditor’s report for an audit. The duration of archive of audit dossiers is at least ten years.

3. At-law representatives of audit firms or Vietnam-based branches of foreign audit firms shall organize the preservation and archive of audit dossiers in a safe, adequate, lawful and confidential manner.

4. Audit dossiers to be archived must be complete, systematic and classified and arranged into separate dossier sets in a temporal order and for each audit contract or audit.

5. The Government shall specify the archive, use and destruction of audit dossiers.

Article 51. Dossiers and documents on related services

The preservation, archive, use and destruction of dossiers and documents on related services specified at Point b, Clause 1, Article 40 of this Law shall be carried out under Articles 49 and 50 of this Law.

Section 4

QUALITY CONTROL OF AUDIT SERVICES

Article 52. Quality control of audit services

1. Audit firms and Vietnam-based branches of foreign audit firms shall build and operate systems for quality control of services specified in Clause 1, Article 40 of this Law, policies and procedures for quality control of each audit.

2. Audit firms and Vietnam-based branches of foreign audit firms shall submit to the competent agency’s control of quality of services specified in Clause 1, Article 40 of this Law.

3. The Ministry of Finance may mobilize auditors, certified public accountants and other experts to control audit service quality. The mobilization and arrangement of persons to participate in the quality control must ensure their independence and objectiveness.

4. In case of necessity, the Minister of Finance may set up an experts’ council to advice on the handling of recommendations on auditor’s reports and audit quality.

5. The Ministry of Finance shall promulgate a regulation on quality control of the services specified in Clause 1, Article 40 of this Law.

Chapter VI

AUDIT OF FINANCIAL STATEMENTS OF ENTITIES WITH PUBLIC INTERESTS

Article 53. Entities with public interests

1. Credit institutions established and operating under the Law on Credit Institutions.

2. Financial institutions, insurance businesses and insurance brokerage businesses.

3. Public companies, issuing organizations and securities-trading organizations as specified by the securities law.

4. Businesses and other organizations related to public interests due to the nature and scope of their operation as specified by law.

Article 54. Approval of firms to audit financial statements of entities with public interests

1. Audit firms or Vietnam-based branches of foreign audit firms auditing financial statements of entities with public interests must be approved by a competent agency.

2. The Ministry of Finance shall specify criteria and conditions for selection, procedures for consideration and approval and cases of suspension or termination of the eligibility of audit firms, Vietnam-based branches of foreign audit firms and certified public accountants for auditing financial statements of entities with public interests, unless otherwise provided by law.

Article 55. Disclosure of information on audit firms, Vietnam-based branches of foreign audit firms and certified public accountants approved to audit financial statements of entities with public interests

Information on audit firms, Vietnam-based branches of foreign audit firms and certified public accountants approved to audit financial statements of entities with public interests which must be disclosed includes:

1. Information on certified public accountants, audit firms and Vietnam-based branches of foreign audit firms.

2. Information relating to quality assurance.

3. Information relating to inspection, disciplining, handling of violations, settlement of disputes and public surveillance.

Article 56. Transparency reports

1. Audit firms and Vietnam-based branches of foreign audit firms which fully meet the criteria and conditions for being approved to audit financial statements of entities with public interests shall post on their websites their annual transparency reports within ninety days after the end of a fiscal year.

2. Transparency reports must be signed by at-law representatives of audit firms or Vietnam-based branches of foreign audit firms.

3. The Ministry of Finance shall specify contents of transparency reports mentioned in Clause 1 of this Article.

Article 57. Responsibilities of entities with public interests

1. To build and operate appropriate and effective internal control systems.

2. To organize internal audit under law in order to protect safety of assets; to assess the quality and reliability of economic and financial information, and the observance of the State’s law, regimes and policies and their own regulations.

Article 58. Independence and objectiveness

1. Audit firms and Vietnam-based branches of foreign audit firms may not appoint certified public accountants to audit an entity with public interests for five consecutive fiscal years.

2. A certified public accountant who has audited an entity with public interests may only hold the post of manager, executive or member of the control board or chief accountant of such entity twelve months after the completion of the audit.

Chapter VII

HANDLING OF VIOLATIONS AND SETTLEMENT OF DISPUTES

Article 59. Violations of the law on independent audit

Violations of the law on independent audit include:

1. Providing audit services without a certificate of eligibility for provision of audit services or not indicated in such a certificate.

2. Signing auditor’s reports, for individuals who fail to fully meet the conditions of certified public accountants.

3. Violating regulations on registration of audit service provision or audit practice.

4. Violating the Ministry of Finance’s regulations on inspection and control of audit service quality.

5. Violating regulations on audit of financial statements of entities with public interests.

6. Violating the principle of keeping confidential information relating to audit dossiers, clients and auditees.

7. Committing prohibited acts specified in Article 13 of this Law.

8. Violating regulations on cases in which audit services must not be provided specified in Articles 19 and 30 of this Law.

9. Providing audit services when the number of certified public accountants required by this Law is insufficient; violating regulations on legal capital, purchase of professional liability insurance or setting up of reserve funds for occupational risks.

10. Causing errors due to lack of prudence or falsifying audit results or dossiers.

11. Deliberately certifying fraudulent or erroneous financial statements, or colluding or hooking up with others in falsifying accounting documents or audit dossiers and providing untruthful information and reporting data.

12. Violating regulations on making, data collection, classification, use, preservation and archive of audit dossiers and dossiers and documents on other related services.

13. Making untruthful declarations in order to obtain audit practice registration certificates and certificates of eligibility for provision of audit services.

14. Committing frauds in order to obtain audit practice registration certificates and certificates of eligibility for provision of audit services.

15. Forging, erasing or modifying audit practice registration certificates and certificates of eligibility for provision of audit services.

16. Violating the principle of independent audit.

17. Untruthfully reporting or failing to report under regulations.

18. Violating the provisions of Clauses 1, 2, 3 and 4, Article 39 of this Law, for auditees.

19. Other acts in violation of the law on independent audit.

Article 60. Handling of violations of the law on independent audit

1. Organizations and individuals that commit violations specified in Article 59 of this Law are subject to the following handling forms:

a/ Caution;

b/ Fine;

c/ In addition to the handling forms specified at Points a and b of this Clause, violators may have their certificates of eligibility for provision of audit services, auditor certificates or audit practice registration certificates revoked or their practice registrations terminated, or be banned from participating in independent audit activities.

2. Individuals who violate the provisions of this Law may, depending on the nature and seriousness of their violations, be also examined for penal liability.

3. Violators of this Law may, apart from being handled under Clauses 1 and 2 of this Article, also have their names posted on the website of the Ministry of Finance or the auditors’ professional organization. If causing damage, they shall pay compensations under law.

4. The Government shall specify the handling of violations of the law on independent audit.

Article 61. Settlement of disputes over independent audit

1. A dispute over independent audit shall be settled as follows:

a/ Disputing parties shall themselves conciliate disputed contents;

b/ In case of unsuccessful conciliation, disputing parties may institute a lawsuit at court under law.

2. The statute of limitations for instituting a lawsuit for settlement of a dispute over independent audit is three years after the signing of the auditor’s report.

Chapter VIII

IMPLEMENTATION PROVISIONS

Article 62. Transitional provisions

1. Within two years after the effective date of this Law, audit service providers that operate before the effective date of this Law and fully meet the conditions specified in this Law will be granted certificates of eligibility for provision of audit services.

2. Within three years after the effective date of this Law, holders of auditor certificates granted before the effective date of this Law may register for audit practice under this Law without having to meet the condition of the actual period of acting as auditors specified at Point b, Clause 1, Article 15 of this Law.

3. Foreign-invested single-member limited liability audit firms which are established and operate under law before the effective date of this Law may continue operating as single-member limited liability companies until the expiration of their investment certificates or investment licenses.

Article 63. Effect

This Law takes effect on January 1, 2012.

Article 64. Implementation detailing and guidance

The Government shall detail and guide the implementation of articles and clauses of this Law as assigned; and guide other necessary contents of this Law to meet state management requirements.

This Law was passed on March 29, 2011, by the XIIth National Assembly of the Socialist Republic of Vietnam at its 9th session.-

Chairman of the National Assembly
NGUYEN PHU TRONG