Compliance of Vietnamese accounting standards for FDI

Foreign-invested enterprises (FDI) in Vietnam, according to the provisions of the Law on Independent Auditing 2011 and related legal documents, must conduct annual financial statement audits. The objective of the audit is to ensure the truthfulness and reasonableness of financial statements and compliance with current accounting and legal regulations.

1. What are the regulations on auditing financial statements in foreign-invested enterprises?

FDI enterprises are required to conduct financial audits if they fall into the following cases:

  • They are listed companies or have issued securities to the public.
  • They are public companies, subsidiaries of foreign parent companies.
  • Foreign-invested enterprises as required by Vietnamese law.
  • The audit process is conducted by independent auditing companies licensed to operate in Vietnam. The audit report, once completed, will be submitted to regulatory agencies such as the tax authority, the State Securities Commission (for listed companies), and other relevant parties.

How to conduct Vietnamese accounting standards

2. How to conduct financial statement audits in FDI enterprises

a. Choosing an auditing company Foreign-invested enterprises must choose a reputable independent auditing company licensed by the Ministry of Finance to operate in Vietnam. This auditing company will be responsible for checking, evaluating and confirming the financial statements of the enterprise.

b. Preparing financial documents Before starting the audit, FDI enterprises need to fully prepare financial documents, including:

  • Financial statements (Balance sheet, Business performance report, Cash flow statement).
  • Accounting books and related documents.
  • Audit reports of previous years (if any).

c. Performing the audit process The process of auditing financial statements for FDI enterprises includes the following steps:

  • Reviewing the internal accounting system: The auditor will assess the adequacy of the enterprise’s internal accounting system, verifying financial transactions and controlling risks.
  • Verifying financial data: The auditor will compare and cross-check the financial data in the report with the original documents to ensure honesty and reasonableness.
  • Evaluating compliance: The auditor will check whether the enterprise complies with legal regulations and Vietnamese accounting standards (VAS).

d. Preparing the audit report After completing the audit, the auditing company will prepare an audit report with an assessment of the honesty and reasonableness of the financial statements. This audit report may give the following conclusions:

  • Unqualified opinion: The financial statements reflect honestly and reasonably.
  • Conditional acceptance opinion: Some minor issues but do not have a major impact on the financial statements.
  • Unacceptable opinion: The financial statements have serious errors.
  • Rejecting audit opinion: The auditor cannot draw conclusions due to lack of evidence or lack of cooperation from the enterprise.

3. Practical difficulties when auditing financial statements for FDI enterprises

a. Differences in accounting standards between countries Many FDI enterprises have difficulty applying Vietnamese accounting standards (VAS) due to differences with international accounting standards (IFRS). This often leads to adjusting financial data to comply with regulations in Vietnam.

b. Difficulty in providing financial documents Some FDI enterprises do not fully prepare financial documents before conducting the audit, causing difficulties for auditors in the process of verifying data.

c. High audit costs For large-scale enterprises or enterprises operating in specific industries, audit costs can be very high. This sometimes becomes a burden for enterprises, especially when having to conduct annual audits.

d. Time constraints Some enterprises do not comply with the deadline for submitting audit reports, leading to administrative fines or affecting the enterprise’s reputation.

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4. Necessary notes when conducting financial statement audits for FDI enterprises

a. Compliance Vietnamese accounting standards and laws FDI enterprises need to ensure that the accounting system and financial statements are prepared in accordance with Vietnamese accounting standards (VAS) and comply with Vietnamese laws.

b. Choosing an experienced auditing company FDI enterprises should choose an auditing company with experience in auditing foreign-invested enterprises to ensure the accuracy and effectiveness of the auditing process.

c. Prepare complete financial documents It is very important to prepare complete financial documents such as financial statements, accounting books, and related documents. This helps the audit process go smoothly and quickly.

d. Ensure audit time FDI enterprises must comply with the deadline for submitting financial statements and audits as prescribed by law. Failure to submit on time may result in administrative sanctions or affect the reputation of the enterprise.

5. Illustrative example

ABC Company is an FDI enterprise operating in the manufacturing sector in Vietnam, with investment capital from Korea. Every year, ABC Company must conduct an audit of its financial statements to comply with the provisions of Vietnamese law and meet the requirements of its parent company in Korea. In 2023, the company selected an independent auditing company in Vietnam to conduct the audit. The audit process went smoothly, with the financial statements receiving an unqualified opinion from the auditor, affirming that ABC Company’s financial statements fairly and fairly reflect the company’s financial situation.

6. Legal basis

Regulations on auditing financial statements for foreign-invested enterprises are mentioned in the following legal documents:

Law on Independent Auditing 2011: Regulations on the rights and obligations of the parties in conducting independent audits.
Law on Enterprises 2020: Regulations on financial reporting and auditing regimes for FDI enterprises accounting.
Vietnam Accounting Standards (VAS): Accounting standards that must be followed when preparing financial statements in Vietnam.
Decree 41/2018/ND-CP: Regulations on administrative sanctions in the field of accounting and auditing.

Auditing financial statements is a mandatory process for foreign-invested enterprises in Vietnam, to ensure transparency and honesty in financial statements. The auditing process not only helps businesses comply with legal regulations but also enhances their reputation with investors and management agencies. S4B Vietnam is committed to supporting businesses in conducting financial statement audits, accounting system, ensuring legal compliance and enhancing financial transparency.

S4B Vietnam

  • Address: Unit 701B – 701C, Tower A, Handi Resco 521 Kim Ma Street, Ba Dinh District, Hanoi, Vietnam.
  • Tel: + 84 24 3974 4181
  • Email: service@s4b.com.vn

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