Decree No. 17/2012/ND-CP provides detailed regulations and guidance on implementing certain provisions of the Law on Independent Auditing.

DECREE

Detailed regulations and guidance on implementation of certain provisions of the Law on Independent Auditing

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Pursuant to the Law on Organization of the Government dated December 25, 2001;

Pursuant to the Independent Auditing Law dated March 29, 2011;

At the proposal of the Minister of Finance;

The Government promulgates this Decree to provide detailed regulations and guidance on the implementation of certain provisions of the Law on Independent Auditing.

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation

This Decree provides detailed regulations and guidance on the implementation of certain provisions of the Law on Independent Auditing regarding professional organizations for auditing; auditing enterprises; cross-border provision of auditing services; auditees; audit reports and archiving, using and destroying audit records.

Article 2. Applicability

This Decree applies to auditors, practicing auditors, auditing enterprises, branches of foreign auditing enterprises, foreign auditing enterprises providing cross-border auditing services in Vietnam, auditees, professional organizations for auditing, and other organizations and individuals related to independent auditing activities.

Article 3. Explanation of Terms

In this Decree, the following terms shall be understood as follows:

1. Auditing enterprise in Vietnam: An enterprise established and operating in accordance with Vietnamese laws, meeting the conditions for auditing service business as prescribed, and having been granted a certificate of eligibility for auditing service business by the Ministry of Finance of Vietnam.

2. Person responsible for management and operation: Includes the owner, director of a private enterprise, partner of a limited liability company, Chairman of the Board of Members, Chairman of the company, Chairman of the Board of Directors, member of the Board of Directors, member of the Board of Members, Director or General Director, Deputy Director or Deputy General Director of the Company; Director, Deputy Director of Branch of Auditing Enterprise and other managerial positions as stipulated in the Articles of Association or equivalent documents of the enterprise, organization.

3. Provision of cross-border auditing services: The provision of auditing services by auditing enterprises in one country to enterprises and organizations in another country.

Chapter II

SPECIFIC PROVISIONS

Section 1

PROFESSIONAL ORGANIZATIONS FOR AUDITING

Article 4. Professional organizations for auditing

1. Professional organizations for auditing are social-professional organizations of auditors, practicing auditors, and auditing enterprises throughout the country.

2. Professional organizations for auditing shall:

a) Provide knowledge training for auditors and practicing auditors;

b) Conduct research, draft, and update the Vietnamese Auditing Standards system based on the International Auditing Standards system according to the procedures for establishing, promulgating, and announcing Vietnamese Auditing Standards, and submit them to the Minister of Finance for issuance;

c) Participate in organizing auditor examinations;

d) Coordinate with the Ministry of Finance to implement quality control checks on auditing services.

3. The Ministry of Finance shall specify the conditions, methods, reporting systems, and supervision, inspection, and audit procedures for the activities of professional organizations for auditing as stipulated in Clause 2 of this Article.

Section 2

AUDITING ENTERPRISES

Article 5. Statutory capital for Limited Liability Companies

1. The statutory capital for Limited Liability Companies is three billion Vietnamese dong; from January 1, 2015, the statutory capital is five billion Vietnamese dong.

2. During the course of operations, a Limited Liability Company must always maintain its equity on the balance sheet at a level not lower than the statutory capital as prescribed in Clause 1 of this Article. If the equity on the balance sheet of an auditing enterprise is lower than the statutory capital as prescribed in Clause 1 of this Article for a period of three months following the end of the fiscal year, the enterprise must replenish the capital.

Article 6. Members are organizations of limited liability companies with two or more members

1. An organization member may contribute up to 35% of the charter capital of a limited liability audit company with two or more members. In cases where multiple organizations contribute capital, the total amount of capital contributed by the organizations shall not exceed 35% of the charter capital of the limited liability audit company with two or more members.

3. A practicing auditor who represents an organizational member may not simultaneously contribute capital to the auditing firm as an individual.

Article 7. Contribution level of practicing auditors

1. A limited liability audit company must have at least two members contributing capital who are practicing auditors registered to practice at the company. The capital contributions of practicing auditors must account for over 50% of the charter capital of the company.

2. A practicing auditor may not be a member contributing capital to two or more auditing firms concurrently.

Article 8. Minimum capital for foreign auditing enterprises establishing branches in Vietnam and the authorized capital of foreign auditing enterprise branches in Vietnam.

1. A foreign auditing enterprise requesting issuance of a Certificate of Eligibility for Business in Audit Services for its branch in Vietnam must have net assets on the balance sheet at the end of the most recent fiscal year preceding the request for issuance of the certificate of eligibility for business in audit services for the branch of at least US$500,000 (five hundred thousand dollars).

2. The authorized capital of a foreign auditing enterprise branch in Vietnam must not be less than the statutory capital requirement for a limited liability company as stipulated in Article 5 of this Decree.

3. During the course of operation, the foreign auditing enterprise must maintain net assets on the balance sheet and the authorized capital of its branch in Vietnam at levels not lower than those specified in Clause 1 of this Article. If the net assets on the balance sheet of the foreign auditing enterprise and its branch in Vietnam fall below the levels specified in Clause 1 and Clause 2 of this Article for a period of three months following the end of the fiscal year, the foreign auditing enterprise and its branch in Vietnam must replenish capital.

Article 9. Situations in which auditing enterprises, foreign auditing enterprise branches in Vietnam are not allowed to conduct audits

The situations in which auditing enterprises, foreign auditing enterprise branches in Vietnam are not allowed to conduct audits as prescribed in Article 30 of the Independent Audit Law are detailed as follows:

1. Auditing enterprises, foreign auditing enterprise branches in Vietnam are currently conducting or have conducted within the immediately preceding fiscal year one of the following services for the audited entity:

a) Bookkeeping work, preparation of financial statements;

b) Internal audit services;

c) Design and implementation of internal control procedures;

d) Other services that affect the independence of practicing auditors and auditing enterprises, foreign auditing enterprise branches in Vietnam according to accounting and auditing professional ethics standards.

2. Members participating in the audit, persons responsible for management and operation, board of supervisors members, chief accountants (or accounting managers) of auditing enterprises, foreign auditing enterprise branches in Vietnam are members, founding shareholders or hold shares, contribute capital to the audited entity or have other economic and financial relationships with the audited entity according to accounting and auditing professional ethics standards.

3. Persons responsible for management and operation, board of supervisors members, chief accountants (or accounting managers) of auditing enterprises, foreign auditing enterprise branches in Vietnam have parents, spouses, children, brothers, sisters, or half-siblings who are members, founding shareholders or hold shares and hold 20% or more voting rights in the audited entity or are persons responsible for management and operation, board of supervisors members, controllers, chief accountants (or accounting managers) of the audited entity.

4. Persons responsible for management and operation, board of supervisors members, controllers, chief accountants (or accounting managers) of the audited entity simultaneously hold shares and hold 20% or more voting rights in auditing enterprises, foreign auditing enterprise branches in Vietnam.

5. Auditing enterprises, foreign auditing enterprise branches in Vietnam and the audited entity have the following relationships:

a) They are established or participate in establishment by the same individual or enterprise, organization;

b) They are directly or indirectly controlled, invested in under any form by another party;

c) They are managed or controlled regarding personnel, finance, and business operations by individuals belonging to one of the following relationships: spouse; parent and child (regardless of biological or adopted children, daughters-in-law, sons-in-law); brother, sister, or half-brother, half-sister; grandfather, grandmother, and grandson; grandfather, grandmother, and granddaughter; uncle, aunt, cousin, and nephew or niece;

d) They have a business cooperation agreement based on a contract;

đ) They are companies or legal entities belonging to the same network as defined by auditing standards.

6. The audited entity has conducted or is currently conducting audits of financial statements or other auditing services for the auditing enterprise, foreign auditing enterprise branch in Vietnam within the immediately preceding fiscal year.

7. The audited entity is an organization that contributes capital to the auditing firm; the audited entity is the parent company, subsidiaries, associated companies, joint ventures, superior units, subordinate units, and companies within the same group of the organization contributing capital to the auditing firm.

8. The auditing firm participates directly or indirectly in managing, controlling, or contributing capital in any form to the audited entity.

9. Other cases as prescribed by Accounting and Auditing Professional Ethics Standards and relevant laws.

Section 3

PROVISION OF CROSS-BORDER AUDITING SERVICES BY FOREIGN AUDITING FIRMS

Article 10. Entities Providing Cross-Border Audit Services

Entities providing cross-border audit services for businesses and organizations in Vietnam are auditing firms with citizenship from member states of the World Trade Organization or countries having agreements with Vietnam on the provision of cross-border audit services.

Article 11. Conditions for Providing Cross-Border Audit Services

1. Foreign auditing firms meeting all of the following conditions may register to provide cross-border audit services:

a) Authorized to provide independent audit services according to the laws of the country where the foreign auditing firm's headquarters is located;

c) Having at least five (5) certified public accountants registered by the Ministry of Finance of Vietnam, including the legal representative;

d) Having net assets on the balance sheet equivalent to five hundred thousand (500,000) US dollars at the end of the fiscal year preceding the provision of cross-border audit services in Vietnam;

e) Depositing a mandatory bond equivalent to the statutory capital stipulated in Clause 1, Article 5 of this Decree at a legally operating commercial bank in Vietnam and obtaining a payment guarantee letter from the bank committing to pay in case the liability under cross-border audit service contracts in Vietnam exceeds the amount of the mandatory bond;

2. Foreign auditing firms can only provide cross-border audit services in Vietnam after registering and being granted a certificate of eligibility to operate cross-border audit services in Vietnam by the Ministry of Finance of Vietnam. The method of providing cross-border audit services must comply with the provisions of Article 12 of this Decree.

3. Foreign auditing firms must continuously maintain the conditions stipulated in Clause 1 of this Article throughout the validity period of the Certificate of Eligibility to Operate Cross-Border Audit Services in Vietnam. When failing to meet any of these conditions, the foreign auditing firm has the responsibility to notify the Ministry of Finance within twenty (20) days from the date it no longer meets the specified conditions.

Article 12. Method of Providing Cross-border Audit Services

1. A foreign auditing firm providing cross-border audit services in Vietnam must form a joint venture with a domestic auditing firm that meets the conditions for providing audit services as stipulated by law.

2. Only an auditing firm that ensures compliance with the business conditions for audit services prescribed in Article 21 of the Independent Auditing Law and this Decree, and has obtained a Certificate of Eligibility to Conduct Audit Services may form a joint venture with a foreign auditing firm to provide cross-border services.

3. When providing cross-border audit services, a foreign auditing firm and a domestic auditing firm forming a joint venture with a foreign auditing firm must enter into an audit contract in accordance with Vietnamese law. The audit contract must contain signatures of the legal representatives of the foreign auditing firm, the domestic auditing firm, and the audited entity.

4. A foreign auditing firm and a domestic auditing firm must establish a joint venture contract regarding the provision of cross-border audit services. The joint venture contract must clearly define the responsibilities of the foreign auditing firm and the domestic firm in providing cross-border audit services.

5. Foreign auditing firms and domestic auditing firms participating in a joint venture audit contract must appoint an auditing practitioner to oversee the audit work within their respective responsibilities under the audit contract.

6. The audit report must bear the signature of the legal representative of the foreign auditing firm, the domestic auditing firm, and the auditing practitioners responsible for the audit work within each firm's responsibility under the audit contract.

7. The audit contract, joint venture contract, audit file, and audit report must be prepared simultaneously in both Vietnamese and English.

8. All payment transactions and money transfers related to the provision of cross-border audit services must be conducted through bank transfers via authorized financial institutions in accordance with Vietnamese laws on foreign exchange management.

Article 13. Responsibilities of Foreign Auditing Firms Providing Cross-border Audit Services

1. To allocate personnel with appropriate professional qualifications to ensure the quality of audit services. To comply with prohibitive provisions, situations where audits cannot be performed, and other relevant provisions concerning practicing auditors and auditing firms as stipulated in the Vietnamese Independent Auditing Law.

2. To adhere to Vietnamese auditing standards when providing cross-border audit services in Vietnam.

3. To pay taxes and fulfill other financial obligations related to the provision of cross-border audit services in Vietnam according to current Vietnamese tax laws.

4. To report to the Ministry of Finance every six months on the implementation of cross-border audit service contracts arising during the period in Vietnam. The reporting format is specified by the Ministry of Finance.

5. To dispatch a responsible person to represent the firm in reporting and explaining to relevant Vietnamese authorities regarding the audit contract, audit files, audit reports, and other issues related to the provision of cross-border services in Vietnam.

6. To submit to the Ministry of Finance an annual financial statement audited along with an independent auditor's audit report and a comment letter from the regulatory body overseeing auditing practice at the firm's main office regarding compliance with laws governing auditing activities and other corporate laws within 120 days from the end of the fiscal year.

7. To perform the rights and obligations of an auditing firm as prescribed in Articles 28 and 29 of the Vietnamese Independent Auditing Law and to comply with other relevant provisions stipulated therein.

Article 14. Responsibilities of domestic auditing enterprises participating in joint ventures with foreign auditing enterprises to provide cross-border auditing services

1. Maintain all audit files of joint venture audits conducted for provision to competent authorities upon request.

2. Bear legal responsibility for the results of the audit. Be accountable to competent authorities regarding the audit report, audit files, and other issues arising from joint venture audits with foreign auditing enterprises.

3. Report to the Ministry of Finance every six months on the situation of joint ventures with foreign auditing enterprises in providing cross-border auditing services during the reporting period. The report format is prescribed by the Ministry of Finance.

4. Undergo annual quality control of auditing services as stipulated by the Ministry of Finance.

Section 4

AUDITEES

1. Enterprises and organizations required by law to have their financial statements audited annually by auditing enterprises or branches of foreign auditing enterprises in Vietnam, including:

a) Enterprises with foreign investment;

b) Credit institutions established and operating under the Law on Credit Institutions, including branches of foreign banks in Vietnam;

c) Financial organizations, insurance enterprises, reinsurance enterprises, insurance brokerage enterprises, branches of non-life insurance enterprises from foreign countries.

2. Other enterprises and organizations required to be audited according to relevant laws.

3. Enterprises and organizations that must be audited by auditing enterprises or branches of foreign auditing enterprises in Vietnam, including:

a) State-owned enterprises, except state-owned enterprises operating in fields subject to state secrets as prescribed by law, which must be audited for annual financial statements;

b) Enterprises and organizations implementing national key projects or group A projects using state capital, except projects in fields subject to state secrets as prescribed by law, which must be audited for final project settlement reports;

c) Enterprises and organizations where state-owned corporations or holding companies hold twenty percent (20%) or more voting rights at year-end must be audited for annual financial statements;

d) Enterprises where listed organizations, issuers, and securities trading organizations hold twenty percent (20%) or more voting rights at year-end must be audited for annual financial statements;

e) Auditing enterprises or branches of foreign auditing enterprises in Vietnam must be audited for annual financial statements.

4. Enterprises and organizations required to audit annual financial statements as stipulated in Clause 1 and Clause 2 of this Article, if they are required by law to prepare consolidated financial statements or comprehensive financial statements, shall conduct audits of consolidated financial statements or comprehensive financial statements.

5. Audits of financial statements and final project settlement reports for enterprises and organizations specified in Points a and b of Clause 2 of this Article do not replace the audits performed by the National Audit Office.

6. Other enterprises and organizations voluntarily opt to be audited.

Section 5

AUDIT REPORTS

Article 16. Auditing Reports

1. Audit reports on financial statements and audit reports on other auditing tasks of entities required by law to be audited are prepared in accordance with Vietnamese auditing standards.

Article 17. Explanation on Excluded Contents for Audit Reports

1. State management agencies with authority in each relevant field have the right to request auditing enterprises, branches of foreign auditing enterprises in Vietnam, foreign auditing enterprises providing cross-border audit services, and audited units to directly explain or provide explanations in writing about excluded contents in audit reports.

2. The Chairman of the company, the Board of Directors, and the Board of Members of audited units have the right to request auditing enterprises, branches of foreign auditing enterprises in Vietnam, and foreign auditing enterprises providing cross-border audit services to directly explain or provide explanations in writing about excluded contents in audit reports.

3. When requested by the entities specified in Clause 1 and Clause 2 of this Article, auditing enterprises, branches of foreign auditing enterprises in Vietnam, foreign auditing enterprises providing cross-border audit services, and audited units shall be responsible for directly explaining or providing explanations in writing.

Chapter 6

STORAGE, USE AND DESTRUCTION OF AUDIT FILES

Article 18. Storage of Audit Files

1. Auditing enterprises and branches of foreign auditing enterprises in Vietnam must design and implement policies and procedures to maintain the confidentiality, safety, integrity, accessibility, and recoverability of audit files in accordance with the provisions of auditing standards.

2. Audit files may be stored on paper or electronic data.

3. Auditing enterprises and branches of foreign auditing enterprises in Vietnam must design and implement policies and procedures for storing audit files for a minimum period of ten years from the date of issuance of the audit report according to the provisions of auditing standards.

Article 19. Exploitation and Use of Audit Files

Audit files can only be exploited and used in the following cases:

1. According to the decision of the authorized person of the auditing enterprise, branch of foreign auditing enterprise in Vietnam based on ensuring the obligation of confidentiality as stipulated in Article 43 of the Law on Independent Auditing.

2. When requested by the People's Court, the People's Procuracy, Investigative Agency, Supervisory Agency, State Audit Office, Ministry of Finance, and other agencies and organizations as prescribed by law.

3. When requested for quality audit checks; resolving complaints, disputes in auditing activities, and other requests as prescribed by law.

Article 20. Destruction of Audit Files

1. Audit files that have exceeded their storage period, if there is no decision from the competent state agency, shall be destroyed according to the decision of the legal representative of the auditing enterprise or the director of the branch of the foreign auditing enterprise in Vietnam.

2. The auditing enterprise or branch of the foreign auditing enterprise that stores audit files shall carry out the destruction of those files.

3. If audit files are stored on paper, the auditing enterprise or branch of the foreign auditing enterprise in Vietnam shall destroy the audit files by burning, cutting, shredding by machine, or other methods but must ensure that the information and data in the destroyed audit files cannot be reused.

4. Audit files stored as electronic data shall be destroyed in accordance with the relevant laws.

5. Procedures for destroying audit documents:

a) The legal representative of the auditing enterprise or the director of the branch of the foreign auditing enterprise in Vietnam decides to establish a "Committee for Destroying Expired Audit Files." The Committee must include: The leadership of the auditing enterprise or the director of the branch of the foreign auditing enterprise in Vietnam, representatives of the storage department, and representatives of the specialized department;

b) The Committee for Destroying Audit Files must conduct an inventory, evaluation, classification of audit files by type, prepare a "List of Audit Files to be Destroyed" and a "Minutes of Destroying Expired Audit Files;"

c) The "Minutes of Destroying Expired Audit Files" must be prepared immediately after the destruction of audit files and must clearly record the types of audit files destroyed, conclusions, and signatures of the members of the Committee for Destroying Audit Files.

Article 21. Storage, exploitation, and use of electronic audit files and files, documents on other services

1. Electronic audit files stored in digital data such as magnetic tapes, floppy disks... must be arranged in chronological order and preserved with all technical conditions to prevent the deterioration of electronic evidence and unauthorized external information access.

2. In cases where electronic audit files are stored in special devices, appropriate reading devices must be stored to ensure accessibility when necessary.

3. The storage, exploitation, use, and destruction of electronic audit files shall be carried out in accordance with the provisions of Articles 18, 19, and 20 of this Decree.

4. The establishment, preservation, storage, destruction, exploitation, and use of files and documents on other services as stipulated in Point b Clause 1 Article 40 of the Independent Audit Law shall be implemented in accordance with the provisions for audit files under Articles 18, 19, 20, and Clause 1, Clause 2 Article 21 of this Decree.

Chapter III

IMPLEMENTATION

Article 22. Transitional provisions

Within two years from the date the Independent Audit Law takes effect, auditing service providers operating before the Independent Audit Law takes effect must ensure compliance with the conditions set forth in the Independent Audit Law and the provisions of this Decree to obtain a Certificate of Eligibility for Auditing Services Business. Thirty days prior to the end of the two-year transitional period, auditing firms must submit applications to the Ministry of Finance for issuance of a Certificate of Eligibility for Auditing Services Business in accordance with the provisions of the Independent Audit Law and guiding documents.

Article 23. Effectiveness of Implementation

This Decree takes effect from May 1, 2012.

Article 24. Responsibility for Implementation

The Minister of Finance is responsible for guiding the implementation of this Decree; Ministers, Heads of ministerial-level agencies, Heads of government-affiliated agencies, Chairpersons of provincial People's Committees directly under the central government are responsible for enforcing this Decree./.