“Audit Firms’ Misconduct: Unraveling the Devastating Impact”

Regarding the draft Audit Law, the Vietnam Association of Certified Public Accountants (VACPA) shared that several auditing firms (VAE, AASCS, Tri Thuc Viet, A&C, An Viet, Chuan Viet, and CAF) have expressed concerns over the proposed fine of VND 3 billion, which they deem excessive given the nature of auditing practices. The fine of VND 1.5 billion for individuals was also considered disproportionately high and could significantly impact the mental well-being and professional commitment of auditors.

VACPA conveyed the auditors’ suggestion that the Ministry of Finance clarify the offending behaviors that would lead to such penalties for individuals. They also requested the Ministry to elaborate on the rationale behind the proposed fines and organize meetings to gather feedback from auditing firms and practitioners to assess the appropriateness and potential impact of the sanctions on their operations.

In response, the Ministry of Finance acknowledged that the draft reflects insights gained from examining the practices in sectors such as securities and taxation, as well as international norms, where substantial fines are typically imposed. They highlighted instances where auditing firms and practitioners had severely breached auditing standards and ethical codes in their work for entities with public interests or in the securities sector, emphasizing that the current penalties do not adequately serve as a deterrent, as observed in international practices.

The Ministry assured that not all infractions would incur the maximum penalty and that only serious transgressions of auditing standards and ethical norms would face the proposed fines.

Addressing the concern about the 10-year statute of limitations being excessively long compared to other fields (such as taxation, which has a 5-year limit), the Ministry agreed to consider VACPA’s feedback and reduce the statute of limitations to 5 years.

Previously, the Ministry of Finance had proposed amendments to the Audit Law, suggesting more stringent penalties for non-compliant auditors and firms. Specifically, they recommended extending the statute of limitations for violations of independent auditing regulations from the current 1 year to 10 years, and increasing the maximum fine for organizations from VND 100 million to VND 3 billion and for individuals from VND 50 million to VND 1.5 billion.

In an interview with Tien Phong , economic expert Ngo Tri Long emphasized the critical role of auditing in financial reporting for businesses, investors, and financial management. He noted that inaccuracies in auditing can have far-reaching consequences, as evident in several cases where auditing lapses contributed to significant issues.

Mr. Long acknowledged that while some auditing firms may have limited capital, their mistakes can have significant repercussions. He supported the Ministry of Finance’s proposed fines, believing that stricter penalties would encourage auditing firms and practitioners to be more diligent and accountable in their work, thereby reducing violations.

Vietnam currently has approximately 2,400 auditors and over 220 auditing firms. Since 2013, the authorities have revoked the auditing qualifications of 114 individuals, suspended the business licenses of 3 auditing firms, and withdrawn the certificates of eligibility for auditing services of another 3 firms.