Circular No. 52/1998/TT-BTC guides the organization and staffing of internal audit departments at state-owned enterprises.

CIRCULAR

Guidelines for organizing the internal audit machinery at state-owned enterprises

Implementing Decree No. 59/CP dated October 3, 1996 of the Government on financial management regulations and accounting for state-owned enterprises, the Ministry of Finance issued Decision No. 832/TC/QD/CĐKT dated October 28, 1997 to establish internal audit regulations applicable to state-owned enterprises. To effectively carry out internal audit work at enterprises, the Ministry of Finance provides guidelines for organizing the internal audit machinery at state-owned enterprises as follows:

A. GENERAL PROVISIONS

1. All state-owned enterprises including production and business enterprises, public service enterprises, corporations, industrial unions, and other independently accounted enterprises must organize an internal audit machinery with sufficient capacity to perform internal audit work in accordance with Decision No. 832/TC/QD/CĐKT dated October 28, 1997 of the Minister of Finance.

2. This Circular provides specific guidance on organizing the internal audit machinery for each type of state-owned enterprise. Other contents shall be implemented according to the provisions of the internal audit regulations promulgated together with Decision No. 832 TC/QD/CĐKT dated October 28, 1997 of the Minister of Finance.

B. SPECIFIC PROVISIONS

I. Organizing the internal audit machinery at state-owned enterprises that are Corporations and Industrial Unions (hereinafter referred to as Corporations).

The internal audit machinery of the Corporation is organized as follows: At the Corporation level, there is an internal audit department, while at member units, depending on the scale of production and business operations, whether the operating area is concentrated or dispersed, and the capability of auditors, it may be organized into internal audit teams or groups.

1. Internal Audit Department of the Corporation.

1.1 The internal audit department of the Corporation must be organized independently from other functional departments of the Corporation and directly under the direction and leadership of the General Director. The staffing of the department ranges from 3 to 5 people.

1.2 The head of the internal audit department of the Corporation is the Chief Auditor appointed by the General Director. The Chief Auditor and auditors cannot concurrently hold management and operational positions within the Corporation.

1.3 The Chief Auditor of the Corporation must meet the following criteria:

- Meeting the standards for internal auditors as stipulated in Article 12 of the Internal Audit Regulations promulgated pursuant to Decision No. 832/TC/QD/CĐKT dated October 28, 1997 of the Minister of Finance.

- Possessing the ability to organize and manage the internal audit activities of the Corporation.

1.4 Procedures and formalities for appointing the Chief Auditor of the Corporation:

The Corporation must submit a proposal for appointing the Chief Auditor to the State Capital and Asset Management Agency at Enterprises, which includes the following documents:

A letter proposing the appointment of the Chief Auditor of the Corporation.

A resume confirmed by the appointing authority.

Copies of the graduation certificate in economics, finance, accounting, or business administration and the certificate of completion of internal audit training programs for the appointee.

Within 15 days from receiving complete and valid documents, the State Capital and Asset Management Agency at Enterprises is responsible for reviewing and responding in writing.

Based on the written agreement of the State Capital and Asset Management Agency at Enterprises, the General Director of the Corporation issues a decision to appoint the Chief Auditor.

1.5 The Chief Auditor of the Corporation will be dismissed if they violate any of the following circumstances:

Violating laws, policies, financial systems, accounting systems, management systems of the State, resolutions, decisions of the Board of Directors, Management Board, and being disciplined with a warning or higher.

Being dishonest, impartial, covering up, or intentionally distorting the results of internal audits.

During the course of work, if found to lack the organizational and managerial capabilities for internal audit activities of the Corporation.

The dismissal decision of the Chief Auditor must be signed by the General Director and sent to the State Capital and Asset Management Agency at Enterprises.

1.6 The operating costs of the internal audit department, including salaries and allowances of the Chief Auditor and auditors, are included in the management expenses of the Corporation. The Chief Auditor and auditors are classified according to the salary grade of civil servants and receive wages and bonuses according to the wage and bonus distribution system for state-owned enterprises prescribed by the Government, linked to the performance of the enterprise.

1.7 The main tasks of the internal audit department of the Corporation include:

Assisting the Corporation's leadership in evaluating the implementation of internal regulations, checking the effectiveness of the internal control system, enforcing financial and accounting work, complying with laws, policies, and systems of the State, and implementing resolutions and decisions of the Board of Directors and Management Board.

Through internal audit work, proposing measures to the Corporation's leadership to improve financial and accounting management, and recommending to competent authorities the handling of violations of the State's financial and accounting systems.

Training, guiding, and directing the auditing staff in the Corporation on professional matters.

Organizing audits at the Corporation headquarters and member units according to the audit plan approved by the General Director. Checking, processing, and summarizing the results of internal audits of the Corporation and its member units.

2. Organizing the internal audit machinery at member enterprises of the Corporation.

2.1 Depending on the scale of production and business operations and the volume of work requiring audits at member units, internal audit teams or groups can be organized with staffing ranging from 2 to 3 people.

For independent member enterprises of the Corporation with legal personality, an independent internal audit team (or group) must be established, directly under the direction of the Enterprise's General Director.

For dependent member units of the Corporation, depending on the characteristics of each unit, the internal audit department of the Corporation may directly conduct audit work or arrange auditors to operate directly at dependent units.

2.2. The number of internal auditors in the audit team (or group) shall be determined by the General Director of the enterprise. The Head of the audit team (group) shall be appointed by the General Director of the member enterprise. The Head of the audit team (group) and the internal auditors shall operate independently and shall not concurrently hold other positions within the enterprise.

2.3. The standards, procedures, and formalities for appointing and dismissing the Head of the internal audit team (group) shall be carried out according to the regulations governing the appointment and dismissal of the Head of the internal audit department of the Corporation, but shall be decided by the General Director of the member enterprise. In cases of appointment, there must be a written agreement from the State Capital and Asset Management Bureau at the location where the main office of the enterprise is situated.

2.4. The operating costs of the internal audit team (group), including the salaries and allowances of the auditors, shall be included in the management expenses of the enterprise.

2.5. The internal audit team (group) at member units, in addition to their regular duties of directly auditing the enterprise according to the provisions set forth in the internal audit regulations, shall also be subject to technical guidance from the internal audit department of the Corporation and participate in audits organized by the internal audit department of the Corporation.

II. Organization of the Internal Audit Department in Independent Enterprises

Independent enterprises (which are not members of the Corporation) must organize the internal audit department in the form of an internal audit team (group) under the direction of the General Director, as stipulated in point 2 of section I above for member enterprises of the Corporation.

C. IMPLEMENTATION PROVISIONS

1. The State Capital and Asset Management General Department shall be responsible for organizing training sessions on internal audit matters for state-owned enterprises in the second and third quarters of 1998, monitoring, and inspecting the establishment of internal audit departments in state-owned enterprises.

2. By the fourth quarter of 1998, state-owned enterprises must complete the establishment of an internal audit department capable of auditing the financial reports for the year 1998 of the enterprise.

State capital and asset management agencies at enterprises and state-owned enterprises are responsible for implementing this Circular. Any difficulties encountered during implementation should be promptly reported to the Ministry of Finance for study and appropriate amendments./.