Circular No. 51/2024/TT-NHNN on independent audit for commercial banks, non-bank credit institutions, microfinance organizations, and foreign bank branches

CIRCULAR

Regulations on independent auditing for commercial banks, non-bank credit institutions, microfinance organizations, and foreign bank branches.foreign bank branches

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 Independent Auditing Law dated March 29, 2011;

Pursuant to Decree No. 102/2022/NĐ-CP dated December 12, 2022 of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam; Decree No. 146/2024/NĐ-CP dated November 6, 2024 of the Government amending, supplementing, and abolishing certain articles of Decree No. 102/2022/NĐ-CP dated December 12, 2022 of the Government stipulating the functions, tasks, powers, and organizational structure of the State Bank of Vietnam and Decree No. 26/2014/NĐ-CP dated April 7, 2014 of the Government on the organization and operation of banking inspection and supervision, which has been amended and supplemented by Decree No. 43/2019/NĐ-CP dated May 17, 2019 of the Government;

At the proposal of the Director of Banking Inspection and Supervision;

The Governor of the State Bank of Vietnam promulgates this Circular stipulating independent auditing for commercial banks, non-bank credit institutions, microfinance organizations, and foreign bank branches.

PART I
GENERAL PROVISIONS

Article 1. Scope of Regulation

1. This Circular stipulates independent auditing of financial statements and performing assurance services regarding the internal control system's establishment and presentation of financial statements for commercial banks, non-bank credit institutions, microfinance organizations, and foreign bank branches.

2. Commercial banks, non-bank credit institutions, microfinance organizations, and foreign bank branches shall conduct independent auditing in accordance with relevant laws and must comply with Articles 11, 12, 13, and 14 of this Circular in the following cases:

a) Engaging an independent auditing organization to assess 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 stipulated in Clause 3, Article 57 of the Law on Credit Institutions;

b) Engaging an independent auditing organization to audit financial statements and evaluate the current financial status to serve as the basis for formulating remediation plans at the request of the State Bank as stipulated in Clause 4, Article 156 of the Law on Credit Institutions;

c) Engaging an independent auditing organization to audit financial statements as stipulated in Clause 1, Article 167 of the Law on Credit Institutions;

d) Engaging an independent auditing organization to perform independent auditing to serve the requirements of banking inspection and supervision as stipulated by the Government's regulations on the organization and operation of banking inspection and supervision.

Article 2. Applicability

This Circular applies to:

1. Commercial banks, non-bank credit institutions, microfinance organizations, and foreign bank branches (hereinafter referred to as credit institutions, foreign bank branches).

2. Independent auditing organizations, practicing auditors, auditors, and other entities and individuals related to the independent auditing of credit institutions, foreign bank branches.

Article 3. Explanation of Terms

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

1. Independent auditing of credit institutions, foreign bank branches is the auditing of financial statements and performing assurance services regarding the internal control system's establishment and presentation of financial statements of credit institutions, foreign bank branches by practicing auditors and independent auditing organizations according to the audit contract.

2. Independent auditing organization include accounting firms and branches of foreign accounting firms in Vietnam.

Article 4. Scope of Audit

1. Credit institutions, foreign bank branches must select independent auditing organizations in accordance with this Circular to perform:

a) Audit of financial statements;

b) Assurance services regarding the internal control system's establishment and presentation of financial statements.

2. The review of semi-annual financial reports, auditing of final project settlement reports, and other auditing tasks of credit institutions, foreign bank branches (if any) shall be carried out in accordance with relevant laws.

Article 5. Encouragement of Audit

The State Bank encourages credit institutions, foreign bank branches to use independent auditing services to audit limitations to ensure safety in the operations of credit institutions, foreign bank branches.

Chapter II
SPECIFIC PROVISIONS

Article 6. Time for Selecting Independent Auditors

Before the end of the fiscal year, credit institutions, foreign bank branches must select independent auditing organizations in accordance with this Circular to audit financial statements and perform assurance services regarding the internal control system's establishment and presentation of financial statements for the next fiscal year.

Article 7. Authority to Select Independent Auditors

1. The Board of Members decides on selecting an independent auditing organization to audit a limited liability company credit institution.

2. The General Shareholders' Meeting decides on selecting an independent auditing organization to audit a joint-stock company credit institution, except in the case stipulated in Clause 3 of this Article.

3. The Board of Directors decides on selecting an independent auditing organization to audit a joint-stock company credit institution under special supervision.

4. The General Director (Director) decides on selecting an independent auditing organization to audit a foreign bank branch.

Article 8. Content of Independent Audit

1. Independent auditing of financial statements of credit institutions, foreign bank branches includes auditing:

a) Financial position report;

b) Operating results report;

c) Cash flow statement;

d) Notes to the financial statements.

2. Performing assurance services regarding the internal control system's establishment and presentation of financial statements of credit institutions, foreign bank branches.

Article 9. Independent Auditor's Opinion

Based on the audit results, practicing auditors and independent auditing organizations must issue opinions in accordance with Clause 1, Article 48 of the Law on Independent Auditing.

Article 10. Results of Independent Audit

1. The results of independent auditing of credit institutions, foreign bank branches include:

a) Audit report on financial statements;

b) Report on the provision of assurance services regarding the internal control system's performance in preparing and presenting financial reports;

c) Management letter and related documents, evidence.

2. Audit reports on financial statements and assurance services regarding the internal control system's establishment and presentation of financial statements of credit institutions, foreign bank branches must comply with the provisions of the law on independent auditing, accounting standards, Vietnamese auditing standards, and other relevant legal provisions.

3. The management letter must reflect specific issues and events during the audit process, including: actual conditions, risk potential, auditor recommendations, and the views of managers and executives of credit institutions, foreign bank branches related to that event. The management letter must minimally contain the following contents:

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

b) Evaluate significant changes in policy and practice that affect the financial statements and the internal control system's activities in preparing and presenting financial reports for credit institutions and foreign bank branches;

c) Risks that may have a significant impact on the financial statements and the internal control system's activities in preparing and presenting financial reports for credit institutions and foreign bank branches;

d) Proposals for adjustments made by independent auditors and practicing auditors regarding events and matters that have affected or may significantly affect the financial statements and the internal control system's activities in preparing and presenting financial reports for credit institutions and foreign bank branches;

đ) Disagreements with management of credit institutions and foreign bank branches regarding issues that may significantly affect the financial statements and the internal control system's activities in preparing and presenting financial reports for credit institutions and foreign bank branches or the opinions of practicing auditors and independent auditing organizations. Practicing auditors and independent auditing organizations must clearly state the resolution of such disagreements and the extent of their impact;

e) Other issues agreed upon in the audit contract.

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

1. Established and have at least three years of auditing experience in Vietnam.

2. Have net assets of at least 10 billion VND.

3. At least five practicing auditors must participate in auditing a commercial bank, non-bank credit institution, or foreign bank branch. Among them, there must be at least three practicing auditors with two years or more experience in auditing in the financial and banking sectors;

4. Practicing auditors and representatives of independent auditing organizations participating in auditing commercial banks, non-bank credit institutions, and foreign bank branches must meet all the standards stipulated in Article 13 of this Circular;

5. There should be no relationship involving the purchase of bonds, assets, capital contributions, joint ventures, or shares with the commercial bank, non-bank credit institution, or foreign bank branch being audited;

6. They should not be unsecured loan customers or customers receiving preferential services from the commercial bank, non-bank credit institution, or foreign bank branch being audited;

7. They should not have conducted the main audit of the commercial bank, non-bank credit institution, or foreign bank branch for a continuous period of five years immediately preceding the audit year;

8. Not subject to legal violations related to independent auditing in the two years immediately preceding the audit year.

9. The auditing organization and practicing auditors conducting the audit of commercial banks, non-bank credit institutions, and foreign bank branches must belong to the list of auditing organizations and practicing auditors approved to conduct audits for public interest entities as published by the Ministry of Finance during the audit period;

In cases where commercial banks and non-bank credit institutions are public interest entities in the securities sector, the auditing organization and practicing auditors conducting the audit of credit institutions must belong to the list of auditing organizations and practicing auditors approved to conduct audits for public interest entities in the securities sector as published by the Securities Commission during the audit period;

10. They should not fall under the circumstances prohibited from conducting audits as stipulated in Article 30 of the Independent Auditing Law;

11. They must comply with other provisions on independent auditing as stipulated in the Independent Auditing Law and guiding documents of the Independent Auditing Law.

Article 12. Requirements for independent auditing organizations conducting microfinance organization audits

1. Auditors practicing and representatives of independent auditing organizations participating in the audit of microfinance organizations must meet the standards prescribed in Article 13 of this Circular.

2. The auditing organization and practicing auditors conducting audits of microfinance organizations listed in the approved auditing organization list and the approved practicing auditor list for public interest entities, as published by the Ministry of Finance, shall carry out the audit during the audit period.

3. Shall not conduct the main audit of such microfinance organization for a continuous five-year period immediately preceding the audit year.

4. Shall not be in a situation prohibited from conducting an audit as stipulated in Article 30 of the Independent Audit Law.

5. Shall comply with other independent audit regulations prescribed in the Independent Audit Law and guiding documents of the Independent Audit Law.

Article 13. Standards for practicing auditors and representatives of independent auditing organizations participating in the audit of credit institutions and foreign bank branches

1. Shall not be a customer currently receiving unsecured credit, nor a customer currently receiving credit or other services under preferential conditions from the credit institution or foreign bank branch being audited.

2. Not subject to legal violations related to independent auditing in the two years immediately preceding the audit year.

3. Shall not be in a situation prohibited from conducting an audit as stipulated in Article 19 of the Independent Audit Law.

4. Shall comply with other independent audit regulations prescribed in the Independent Audit Law and guiding documents of the Independent Audit Law.

Article 14. Responsibilities of independent auditing organizations and practicing auditors participating in the audit of credit institutions and foreign bank branches

1. Shall fully comply with the provisions of Article 18 and Article 29 of the Independent Audit Law and other relevant laws on independent audit.

2. Shall be responsible for the completeness, accuracy, and timeliness of information provided to credit institutions and foreign bank branches during the selection process of independent auditing organizations.

3. Shall comply with legal regulations related to financial statements and operations of credit institutions and foreign bank branches.

4. Shall explain or provide information and data related to the audit upon request of the State Bank.

5. During the audit, if discovering that the audited credit institution or foreign bank branch does not comply with legal regulations within the scope of the audit, the independent auditing organization must notify and recommend the audited credit institution or foreign bank branch to take preventive, corrective, and disciplinary measures against violations; record opinions in the audit report or management letter as required in Clause 2 and Clause 3 of Article 10 of this Circular.

6. After issuing the audit report, if there is suspicion or discovery of significant violations by the audited credit institution or foreign bank branch due to non-compliance with laws and regulations within the scope of the audit, the independent auditing organization must implement notification procedures to the audited entity and third parties according to Vietnamese auditing standards and notify the State Bank.

Article 15. Responsibilities of credit institutions and foreign bank branches

1. Select independent auditing organizations in accordance with this Circular.

2. Within thirty days from the date of the decision to select an independent auditing organization, they shall have the responsibility to notify in writing the selected independent auditing organization to the State Bank of Vietnam as follows:

a) Credit institutions and foreign bank branches shall send to the State Bank of Vietnam (through the Banking Inspection and Supervision Authority), except for cases provided for in point b of this clause;

b) Foreign bank branches subject to micro-prudential inspection and supervision by the State Bank of Vietnam branch in the province/city directly under the central government (hereinafter referred to as the State Bank of Vietnam provincial/city) shall send to the State Bank of Vietnam provincial/city where the foreign bank branch is located.

3. Fulfill all obligations prescribed in Article 39 of the Law on Independent Auditing and other relevant laws on independent auditing.

4. Within ninety days from the end of the fiscal year, submit the results of independent auditing to the State Bank of Vietnam as stipulated in points a and b of Clause 2 of this Article.

5. Notify in writing the State Bank of Vietnam in case disputes arise regarding the results of independent auditing, including reporting, explaining, and proposing solutions according to relevant laws.

6. Publicly disclose financial information in accordance with current regulations.

Article 16. Responsibilities of the State Bank of Vietnam provincial/city where the credit institution or foreign bank branch is headquartered

1. Analyze, evaluate, and handle the results of independent auditing received as prescribed in Clause 4 of Article 15 of this Circular.

In case violations of laws by auditors and auditing organizations during the implementation of independent auditing of credit institutions and foreign bank branches are discovered, the State Bank of Vietnam provincial/city shall report and propose timely handling measures to the Governor of the State Bank of Vietnam (through the Banking Inspection and Supervision Authority).

2. Report to the Governor of the State Bank of Vietnam (through the Banking Inspection and Supervision Authority) upon receiving the written notification from credit institutions and foreign bank branches as prescribed in Clause 5 of Article 15 of this Circular.

3. Inspect and supervise the implementation of this Circular and handle according to their authority or recommend the Governor of the State Bank of Vietnam (through the Banking Inspection and Supervision Authority) to handle credit institutions and foreign bank branches that violate the provisions of this Circular and other relevant laws on independent auditing.

4. Provide professional opinions on monetary and banking matters in the audit reports and management letters of foreign bank branches within the scope of micro-prudential inspection and supervision by the State Bank of Vietnam provincial/city when requested by competent authorities.

Article 17. Responsibilities of the Banking Inspection and Supervision Authority

1. Summarize and present to the Governor of the State Bank of Vietnam the reports of the State Bank of Vietnam provincial/city as prescribed in Clause 2 of Article 16 of this Circular.

2. Analyze, evaluate, and recommend actions to address the results of independent auditing of credit institutions and foreign bank branches.

3. Report and propose to the Governor of the State Bank of Vietnam the following contents:

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

b) Send notifications to the Ministry of Finance when violations by auditors and auditing organizations during the implementation of independent auditing of credit institutions and foreign bank branches are discovered or reported by the State Bank of Vietnam provincial/city as prescribed in Clause 1 of Article 16 of this Circular.

4. Inspect and supervise the implementation of this Circular and handle according to their authority or recommend the Governor of the State Bank of Vietnam to handle credit institutions and foreign bank branches that violate the provisions of this Circular and other relevant laws on independent auditing.

Article 18. Responsibilities of Units under the State Bank

Based on their assigned functions and tasks by the Governor of the State Bank or upon delegation, units shall provide opinions on specialized monetary and banking operations in audit reports and management letters of credit organizations and foreign bank branches when requested by competent authorities, except for cases stipulated in Clause 4 of Article 16 of this Circular.

Article 19. Resolution of Disputes Regarding Independent Audits

The resolution of disputes regarding independent audits of credit organizations and foreign bank branches shall be carried out in accordance with the provisions of the Law on Independent Audits and related legal documents.

Chapter III
IMPLEMENTING PROVISIONS

Article 20. Effective Date

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

2. The provisions on independent audits applicable to commercial banks, non-bank credit institutions, microfinance organizations, and foreign bank branches set forth in Circular No. 39/2011/TT-NHNN dated December 15, 2011, issued by the Governor of the State Bank concerning independent audits of credit institutions and foreign bank branches, and Circular No. 24/2021/TT-NHNN dated December 31, 2021, issued by the Governor of the State Bank amending and supplementing certain articles of Circular No. 39/2011/TT-NHNN dated December 15, 2011, concerning independent audits of credit institutions and foreign bank branches, shall cease to be effective from the date this Circular takes effect.

Article 21. Transitional Provisions

Audit contracts signed before the date this Circular takes effect shall continue to be implemented according to the signed audit contracts. In cases where audit contracts signed before the date this Circular takes effect are amended or supplemented, the contents of such amendments or supplements must comply with the provisions of this Circular and relevant laws.

Article 22. Responsibility for Implementation

The Director of the Office, the Head of the Banking Inspection and Supervision Department; Heads of units under the State Bank; credit organizations and foreign bank branches; independent auditing organizations; practicing auditors, auditors, and related organizations and individuals are responsible for organizing the implementation of this Circular./.