Circular 51/2024/TT-NHNN providing independent audit of commercial banks, foreign bank branches

CIRCULAR

Providing independent audit of commercial banks, non-bank credit institutions, micro-finance institutions and foreign bank branches

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Pursuant to the Law on the State Bank of Vietnam dated June 16, 2010;

Pursuant to the Law on Credit Institutions dated January 18, 2024;

Pursuant to the Law on Independent Audit dated March 29, 2011;

Pursuant to the Decree No. 102/2022/ND-CP dated December 12, 2022 of the Government defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam; the Decree No. 146/2024/ND-CP dated November 6, 2024 of the Government amending, supplementing and annulling a number of articles of the Government’s Decree No. 102/2022/ND-CP of December 12, 2022, defining the functions, tasks, powers and organizational structure of the State Bank of Vietnam, and Decree No. 26/2014/ND-CP of April 7, 2014, on the organization and operation of banking inspection and supervision bodies, which was amended and supplemented under the Government’s Decree No. 43/2019/ND-CP of May 17, 2019;

At the proposal of the Chief of the Banking Supervision Agency;

The Governor of the State Bank of Vietnam promulgates the Circular providing independent audit of commercial banks, non-bank credit institutions, micro-finance institutions and foreign bank branches.

Chapter I

GENERAL REGULATIONS

Article 1. Scope of regulation

1. This Circular provides for independent auditing of financial statements and provision of assurance services for the operation of internal control systems in the making and presentation of financial statements for commercial banks, non-bank credit institutions, micro-finance institutions, and foreign bank branches.

2. The commercial banks, non-bank credit institutions, micro-finance institutions, and foreign bank branches shall conduct independent audits in accordance with relevant laws and must comply with Articles 11, 12, 13, and 14 of this Circular in the following cases:

a) Hire an independent audit organization to evaluate part or all of the internal control system at the request of the State Bank of Vietnam (hereinafter referred to as the State Bank) as prescribed in Clause 3, Article 57 of the Law on Credit Institutions;

b) Hire an independent audit organization to audit financial statements and evaluate the financial status as a basis for developing the remedial plan as required by the State Bank as prescribed in Clause 4, Article 156 of the Law on Credit Institutions;

c) Hire an independent audit organization to audit financial statements in accordance with Clause 1, Article 167 of the Law on Credit Institutions;

d) Hire an independent audit organization to conduct independent audits to serve the requirements of banking inspection and supervision according to Government regulations on the organization and operation of banking inspection and supervision bodies.

Article 2. Subjects of application

This Circular applies to:

1. Commercial banks, non-bank credit institutions, micro-finance institutions, foreign bank branches (hereinafter referred to as credit institutions, foreign bank branches).

2. Independent audit organizations, certified public accountants, auditors and other organizations and individuals related to independent audits of credit institutions and foreign bank branches.

Article 3. Interpretation of terms

In this Circular, the following terms are construed as follows:

1. Independent audit of credit institutions and foreign bank branches means the audit by certified public accountants or independent audit organizations of financial statements and provision of assurance services for the operation of the internal control system in the making and presentation of financial statements of credit institutions and foreign bank branches under audit contracts.

2. Independent audit organization is an audit enterprise or foreign audit enterprise branch in Vietnam.

Article 4. Scope of audit

1. Credit institutions and foreign bank branches shall select independent audit organizations under this Circular to perform:

a) Audit of financial statements;

b) Assurance services for the operation of internal control systems in the making and presentation of financial statements.

2. The review of semi-annual financial statements, audit of finalization reports of completed projects and other to-be-audited matters (if any) of credit institutions and foreign bank branches complies with relevant applicable laws.

Article 5. Encouragement of audit

The State Bank encourages credit institutions and foreign bank branches to use independent audit services to audit their restrictions in order to assure safety in their operations.

Chapter II

SPECIFIC PROVISIONS

Article 6. Time of selection of independent audit organizations

Before the end of a fiscal year, a credit institution or foreign bank branch shall select an independent audit organization under this Circular to audit its financial statements and provide assurance services for the operation of the internal control system in the making and presentation of financial statements for the subsequent fiscal year.

Article 7. Competence to select independent audit organizations

1. For a credit institution being a limited liability company, the Members’ Council shall decide to select an independent audit organization.

2. For a credit institution being a joint-stock company, the Shareholders’ General Meeting shall decide to select an independent audit organization, except for the case specified in Clause 3 of this Article.

3. For a credit institution under special control being a joint-stock company, the Board of Directors shall decide to select an independent audit organization.

4. For a foreign bank branch, the director general (director) shall decide to select an independent audit organization.

Article 8. Contents of independent audit

1. Independent audit of financial statements of credit institutions and foreign bank branches is audit of:

a) Report on the financial situation;

b) Report on business results;

c) Statement of cash flow;

d) Note of financial statements.

2. Performance of assurance services for the operation of the internal control systems in the making and presentation of financial statements of credit institutions and foreign bank branches.

Article 9. Opinions of independent audit

Based on audit results, certified public accountants and independent audit organizations shall give opinions under Clause 1, Article 48 of the Law on Independent Audit.

Article 10. Results of independent audit

1. The result of independent audit of a credit institution or foreign bank branch covers:

a) Audit report on financial statements;

b) Report on the performance of assurance services on the operation of the internal control system in the making and presentation of financial statements;

c) Management letter and related documents and evidence.

2. The audit reports on financial statements and the reports on the performance of assurance services on the operation of the internal control systems in the making and presentation of financial statements of credit institutions and foreign bank branches must comply with the law on independent audit, accounting and audit standards of Vietnam and other relevant laws.

3. The management letter must reflect specific matters and events in the audit process, including: the practical situation, possibility of risks, recommendations of the auditor and opinions of managers and executives of the credit institution or foreign bank branch related to these events. The management letter must contain at least the following contents:

a) General approach, scope of the audit and additional requirements;

b) Evaluation of changes in important policies and practices related to the financial statements and the operation of the internal control systems in the making and presentation of financial statements of credit institutions and foreign bank branches;

c) Risks that may have material impacts on the financial statements and the operation of the internal control systems in the making and presentation of financial statements of credit institutions and foreign bank branches;

d) Adjustment proposals of the independent audit organization and the certified public accountant concerning matters and events that have had or may have material impacts on the financial statements and the operation of the internal control systems in the making and presentation of financial statements of credit institutions and foreign bank branches;

dd) Opinions divergent from those of managers and executives of the credit institution or foreign bank branch on matters that may have material impacts on the financial statements and the operation of the internal control system in the making and presentation of the financial statements of the credit institution or foreign bank branch or on opinions of the certified public accountant and independent audit organization. The certified public accountant and the independent audit organization shall clearly state how these divergent opinions have been handled and the level of impact of the issue;

e) Other issues agreed upon in the audit contract.

Article 11. Requirements for independent audit organizations conducting audits of commercial banks, non-bank credit institutions, and foreign bank branches

1. Having been established and engaged in audit activities in Vietnam for at least 3 years.

2. Having equity capital and allocated capital of VND 10 billion or more.

3. Having 5 or more certified public accountants to audit a commercial bank, non-bank credit institution, or foreign bank branch. Of whom at least three have two or more years’ audit experience in the financial and banking field.

4. The certified public accountants and representatives of independent audit organizations participating in auditing commercial banks, non-bank credit institutions, and foreign bank branches must meet all the criteria specified in Article 13 of this Circular.

5. Having no relations of bond and asset purchase, capital contribution, joint venture or share purchase with the audited commercial banks, non-bank credit institutions or foreign bank branches;

6. Being other than a client provided with unsecured credit, being other than a client provided with credit and other services under preferential terms by the audited commercial bank, non-bank credit institution or foreign bank branch;

7. Not having audited the to-be-audited commercial banks, non-bank credit institutions or foreign bank branches for five consecutive years preceding the year of audit.

8. Not being disciplined for violating the law on independent audit in the 2 consecutive years preceding the audit year.

9. Audit organizations and certified public accountants carrying out audit of commercial banks, non-bank credit institutions and foreign bank branches must be on the lists of audit organizations and lists of certified public accountants approved to audit entities with public interests as announced by the Ministry of Finance for the audit period.

In case a commercial bank or non-banking credit institution is an entity with public interests in the securities sector, the audit organization or certified public accountant carrying out audit of such commercial bank or non-bank credit institution must be on the list of audit organizations and the list of certified public accountants approved to audit entities with public interests in the securities sector as announced by the State Securities Commission of Vietnam for the audit period.

10. Not falling in case they may not conduct audit specified in Article 30 of the Law on Independent Audit.

11. Complying other requirements on independent audit stipulated in the Law on Independent Audit and guiding documents of the Law on Independent Audit.

Article 12. Requirements for independent audit organizations to conduct audits of micro-finance institutions

1. The certified public accountants and representatives of independent audit organizations participating in auditing micro-finance institutions must meet all criteria specified in Article 13 of this Circular.

2. Audit organizations and certified public accountants carrying out audit of micro-finance institutions must be on the lists of audit organizations and lists of certified public accountants approved to audit entities with public interests as announced by the Ministry of Finance for the audit period.

 3. Not carrying out audit of the same micro-finance institution for 5 consecutive years preceding the year of audit.

4. Not falling in case they may not conduct audit specified in Article 30 of the Law on Independent Audit.

5. Complying other requirements on independent audit stipulated in the Law on Independent Audit and guiding documents of the Law on Independent Audit.

Article 13. Criteria of certified public accountants and representatives of independent audit organizations participating in auditing credit institutions and foreign bank branches

1. Being other than a client provided with unsecured credit, being other than a client provided with credit and other services under preferential terms by the audited credit institution, foreign bank branch;

2. Not being disciplined for violating the law on independent audit in the 2 consecutive years preceding the audit year.

3. Not falling in case they may not conduct audit specified in Article 19 of the Law on Independent Audit.

4. Complying other requirements on independent audit stipulated in the Law on Independent Audit and guiding documents of the Law on Independent Audit.

Article 14. Responsibilities of independent audit organizations and certified public accountants participating in auditing credit institutions and foreign bank branches

1. Fully complying with Articles 18 and 29 of the Law on Independent Audit and other relevant regulations on independent audit.

2. Taking responsibility for the completeness, accuracy and timeliness of information provided to credit institutions and foreign bank branches in the process of selecting independent audit organizations.

3. Complying with legal regulations relating to financial statements and operations of credit institutions and foreign bank branches.

4. Explaining or providing information and data relating to auditing activities at the request of the State Bank.

5. During the audit process, if detecting the audited credit institution or foreign bank branch fails to comply with relevant laws on the scope of audit, notifying and proposing the credit institution or foreign bank branch to prevent, remedy and handle wrongdoings; writing opinions in the audit report or management letter as required in Clauses 2 and 3, Article 10 of this Circular.

6. After releasing the audit report, if having any doubts or detecting the audited credit institution or foreign bank branch commits material wrongdoings due to its non-compliance with relevant laws and regulations on the scope of audit, the independent audit organization shall carry out procedures to notify them to the audited unit and third parties according to Vietnamese audit standards and to the State Bank.

Article 15. Responsibilities of credit institutions and foreign bank branches

  1. Selecting independent audit organizations in accordance with this Circular.

2. Within 30 days after deciding to select an independent audit organization, sending a notice of the selected independent audit organization to the State Bank according to the following provisions:

a) A credit institution or foreign bank branch shall send a notice to the State Bank (via the Banking Supervision Agency), except the case specified at Point b of this Clause;

b) A foreign bank branch subject to micro-safety inspection and supervision by a State Bank branch of a province or centrally run city (below referred to as provincial-level State Bank branch) shall send a notice to the provincial-level State Bank branch of the locality where its head office is based.

3. Fully complying with the obligations prescribed in Article 39 of the Law on Independent Audit and other relevant law regulations on independent audit.

4. Within 90 days from the end of a fiscal year, to send the independent audit result to the State Bank under Point a or b, Clause 2 of this Article.

5. Notifying the State Bank in writing in case of disputes arising from independent audit results, including reports, explanations and proposed solutions in accordance with relevant legal regulations.

6. Disclosing financial information in accordance with current regulations.

Article 16. Responsibilities of State Bank branches in provinces and cities in which the credit institutions or foreign bank branches are based

1. Analyzing, evaluating and handling the received independent audit results in accordance with Clause 4, Article 15 of this Circular.

If detecting that a certified public accountant or an audit organization violates the law in the course of carrying out independent audit of a credit institution or foreign bank branch, a provincial-level State Bank branch shall report thereon and propose prompt solutions to the State Bank Governor (via the Banking Supervision Agency).

2. Reporting to the Governor of the State Bank (via the Banking Supervision Agency) upon receiving written notice from credit institutions and foreign bank branches as prescribed in Clause 5, Article 15 of this Circular.

3. Inspecting and examining the implementation of the provisions of this Circular and handle according to their competence or propose to the State Bank Governor (via the Banking Supervision Agency) to handle credit institutions and foreign bank branches that violate the provisions of this Circular and other relevant law regulations on independent audit.

4. Give expert opinions in the monetary and banking field in audit reports and management letters of foreign bank branches in provinces and cities subject to micro-safety inspection and supervision by provincial-level State Bank branches at the request of law enforcement bodies.

Article 17. Responsibilities of the Banking Supervision Agency

1. Synthesizing and submitting to the Governor of the State Bank the reports of provincial-level State Bank branches specified in Clause 2, Article 16 of this Circular.

2. Analyzing, evaluating and recommending the handling of independent audit results of credit institutions and foreign bank branches.

3. Reporting and proposing to the Governor of the State Bank the following contents:

a) Cases specified in Clause 5, Article 15 of this Circular;

b) Notifying the Ministry of Finance upon discovery or receipt of a report from a provincial-level State Bank branch as prescribed in Clause 1, Article 16 of this Circular on certified public accountants and auditing organizations violating legal provisions in the process of conducting independent audits of credit institutions and foreign bank branches.

4. Inspecting and examining the implementation of the provisions of this Circular and handle according to their competence or propose to the State Bank Governor to handle credit institutions and foreign bank branches that violate the provisions of this Circular and other relevant regulations on independent audit.

Article 18. Responsibilities of units of the State Bank

Based on the functions and tasks assigned or assigned by the Governor of the State Bank, the units shall give expert opinions in the monetary and banking field in audit reports and management letters of credit institutions and foreign bank branches at the request of law enforcement bodies, except for the cases specified in Clause 4, Article 16 of this Circular.

Article 19. Resolution of disputes over independent audit

The resolution of disputes related to independent audit of credit institutions and foreign bank branches complies with the Law on Independent Audit and relevant laws.

Chapter III

IMPLEMENTATION PROVISIONS

Article 20. Effect

1. This Circular shall take effect from January 15, 2025.

2. The regulations on independent audit for commercial banks, non-bank credit institutions, micro-finance institutions, and foreign bank branches in the Circular No. 39/2011/TT-NHNN dated December 15, 2011 of the Governor of the State Bank providing independent audit for credit institutions and foreign bank branches, the Circular No. 24/2021/TT-NHNN dated December 31, 2021 of the Governor of the State Bank amending and supplementing a number of articles of the Circular No. 39/2011/TT-NHNN dated December 15, 2011 of the Governor of the State Bank providing independent audit for credit institutions and foreign bank branches cease to be effective from the effective date of this Circular.

Article 21. Transitional provision

Audit contracts signed before the effective date of this Circular shall continue to be implemented according to the signed audit contracts. In case of amendments or supplements to audit contracts signed before the effective date of this Circular, the contents of the amendments or supplements must comply with this Circular and relevant laws.

Article 22. Responsibilities for implementation organization

The Chief of the Office, Chief of the Banking Supervision Agency, heads of the units of the State Bank of Vietnam, credit institutions, foreign bank branches; independent audit organizations; certified public accountants, auditors and related organizations and individuals shall organize the implementation of this Circular./.