Decision No. 76/2004/QD-BTC Issuing the Regulation on Selecting Certified Public Accounting Firms Approved for Issuers, Listed Entities, or Securities Trading Organizations

Pursuant to …;

Issuing the Regulation on the Selection of Certified Public Accounting Firms for Listed Companies, Issuers, or Securities Business Organizations

_____________________

THE MINISTER OF FINANCE

Pursuant to the Enterprise Law No. 13/1999/QH10 dated June 12, 1999;

Pursuant to the Decree No. 144/2003/NĐ-CP dated November 28, 2003 of the Government on Securities and the Securities Market;

Pursuant to Decree No. 105/2004/NĐ-CP dated March 30, 2004 of the Government on Independent Auditing;

Pursuant to Decree No. 77/2003/NĐ-CP dated July 1, 2003 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

At the proposal of the Director of the Accounting and Auditing Department, the Chairman of the State Securities Commission, and the Head of the Ministry of Finance's Office,

DECISION:

Article 1: The attached Decision "Regulation on the Selection of Certified Public Accounting Firms for Listed Companies, Issuers, or Securities Business Organizations" is hereby issued.

Article 2: This Decision shall take effect 15 days from the date of publication in the Official Gazette and shall replace Decision No. 26/2000/QĐ-UBCK2 dated January 5, 2000 of the Chairman of the State Securities Commission on the Provisions on the Selection of Independent Auditors for Issuers and Securities Businesses.

Article 3: The Chairman of the State Securities Commission, the Director of the Accounting and Auditing Department, the Head of the Ministry's Office, Heads of relevant units under the Ministry of Finance, Directors of auditing firms operating in Vietnam, and Heads of units issuing securities to the public, listed organizations, fund management companies, and investment funds shall be responsible for implementing this Decision.

REGULATIONS

Selection of certified public accounting firms for issuers, listed companies, or securities business organizations

________________________

(Issued pursuant to Decision No. 76/2004/QĐ-BTC dated September 22, 2004 of the Minister of Finance)

I. GENERAL PROVISIONS

Article 1: Scope of Application

This Regulation applies to certified public accounting firms approved by the Ministry of Finance to audit issuers of publicly offered securities, listed organizations, and securities business organizations as defined in Article 20 and Article 23 of Decree No. 105/2004/NĐ-CP dated March 30, 2004 of the Government on Independent Auditing and meeting the conditions stipulated in this Regulation.

This Regulation also applies to entities specified in Article 2 of this Regulation.

Article 2: Entities that must be audited annually by a certified public accounting firm approved for auditing include:

1. Enterprises that issue shares or bonds to the public (hereinafter referred to collectively as issuers).

2. Organizations listing securities on centralized trading markets (hereinafter referred to collectively as listed organizations).

3. Securities companies, fund management companies, and investment funds (hereinafter referred to collectively as securities business organizations).

Article 3: Annual financial statements of issuers, listed organizations, or securities business organizations must be audited, including:

1. Balance sheet;

2. Income statement;

3. Cash flow statement;

4. Notes to the financial statements;

5. Additional reports as prescribed by the Ministry of Finance (State Securities Commission).

Article 4: Quarterly and semi-annual financial statements of issuers, listed organizations, or securities business organizations, if required to have an auditor's opinion before being made public, must be reviewed by a practicing auditor of a certified public accounting firm approved under this Regulation according to Standard on Review Engagements No. 910 "Review of Financial Statements" issued pursuant to Decision No. 195/2003/QĐ-BTC dated November 28, 2003 of the Minister of Finance.The review work of financial statements issued pursuant to Decision No. 195/2003/QĐ-BTC dated November 28, 2003 of the Minister of Finance.‎

II. STANDARDS AND CONDITIONS FOR THE SELECTION OF CERTIFIED PUBLIC ACCOUNTING FIRMS AND AUDITORS

Article 5: Certified public accounting firms approved must meet the following standards and conditions:

1. Conditions stipulated in Article 20 and Article 23 of Decree No. 105/2004/NĐ-CP dated March 30, 2004 of the Government on Independent Auditing.

2. Conditions stipulated in this Regulation:

a) Registered capital or equity of at least 2 billion VND for domestic certified public accounting firms; minimum registered capital of 300,000 USD for foreign-invested certified public accounting firms;

b) Having at least 10 practicing auditors and meeting all the standards and conditions stipulated in Article 7 of this Regulation;

c) Having been established and engaged in auditing activities in Vietnam for at least five years as of the date of submitting the application to participate in auditing;

d) Having at least 30 audit clients annually;

e) Submitting complete and timely registration documents to participate in auditing as prescribed in Article 9 of this Regulation.

Article 6: Certified public accounting firms already approved may not conduct audits for issuers, listed organizations, or securities business organizations in the following cases:

1. Cases stipulated in Article 27 of Decree No. 105/2004/NĐ-CP;

2. Cases stipulated in this Regulation, including:

a) The certified public accounting firm has economic relations such as joint ventures, capital contributions, shareholdings, etc., with issuers, listed organizations, or securities business organizations or vice versa;

b) The certified public accounting firm and issuers, listed organizations, or securities business organizations have a common shareholder holding 5% or more of each party's shares;

c) The certified public accounting firm is a client receiving preferential conditions from the issuer, listed organization, or securities business organization being audited (such as obtaining credit with favorable terms, guarantee without collateral, etc.);

d) The certified public accounting firm is currently or has provided within the immediately preceding year services such as bookkeeping, preparation of financial statements, internal auditing, asset valuation, management consulting, and financial consulting to the issuer, listed organization, or securities business organization being audited.

Article 7: Practicing auditors and leaders representing certified public accounting firms approved to audit issuers, listed organizations, or securities business organizations must meet the following standards and conditions:

1. Conditions stipulated in Article 14 of Decree No. 105/2004/NĐ-CP and Circular No. 64/2004/TT-BTC dated June 29, 2004 of the Ministry of Finance guiding the implementation of certain provisions of Decree No. 105/2004/NĐ-CP.

2. Conditions stipulated in this Regulation, including:

a) Being listed in the register of practicing auditors confirmed by the Ministry of Finance.

b) A Vietnamese certified public accountant must have at least two years of auditing experience after obtaining the Certified Public Accountant certificate;

c) A foreign certified public accountant must have at least two years of auditing practice experience in Vietnam;

d) Not being a shareholder or a legal representative for shareholders with voting rights of the issuing organization, listed organization, or securities trading organization to be audited;

đ) Not being a person responsible for management or operation of the issuing organization, listed organization, or securities trading organization to be audited;

e) Not being a customer enjoying preferential conditions from the issuing organization, listed organization, or securities trading organization to be audited;

g) Not having close family relationships such as father, mother, wife, husband, children, or full siblings with persons responsible for management or operation (including chief accountants) of the audited entity;

III- PROCEDURE FOR SELECTING AND APPROVING AUDIT FIRMS

Article 8: Period for selecting and approving audit firms:

1. Every two years, the Ministry of Finance (State Securities Commission) conducts the selection and approval of audit firms to audit issuing organizations, listed organizations, or securities trading organizations;

2. Before October 30 of the selection year, audit firms wishing to participate in auditing issuing organizations, listed organizations, or securities trading organizations must submit two sets of application documents to the Ministry of Finance (State Securities Commission) in accordance with Article 9 of this Regulation;

Article 9: Application documents for participation in auditing include:

1. An application form for participation in auditing issuing organizations, listed organizations, or securities trading organizations (see Appendix for the form);

2. A notarized copy of the decision on establishment or investment license, business registration, and company charter;

3. A list of registered practicing auditors confirmed by the Ministry of Finance, accompanied by a brief resume, summarizing the work history of practicing auditors and the leadership representatives of the audit firm;

4. Financial statements and operational reports of the audit firm for the most recent year preceding the year of application for approval, including:

a) Financial statements. In cases where the audit firm is required to undergo mandatory auditing, it must submit audited financial statements;

b) A list of audited clients for the year;

c) Organizational structure, operational activities, and auditing experience of practicing auditors and the audit firm;

d) Any violations of laws by the audit firm (if any);

đ) Significant changes during the fiscal year affecting organizational structure, operational activities, and business results of the audit firm;

e) Significant changes during the year related to practicing auditors (due to increases or decreases in the number of auditors, ethical violations by auditors, etc.);

For subsequent applications, there is no need to submit the documents specified in Clause 2 of this Article and the brief resumes specified in Clause 3 of this Article;

Article 10: Publicize the list of approved audit firms and practicing auditors;

1. By November 15 of the selection year, the Ministry of Finance (State Securities Commission) publicly announces the list of approved audit firms and the list of practicing auditors of the audit firms approved to audit issuing organizations, listed organizations, or securities trading organizations for the next two years. If the Ministry of Finance (State Securities Commission) does not approve an audit firm to conduct audits for issuing organizations, listed organizations, or securities trading organizations, it must issue a formal letter stating the reasons for non-approval;

2. Within the approved period, if the number of approved practicing auditors decreases to a level insufficient to perform audits, the approved audit firm must notify the State Securities Commission in writing along with a list of new auditors proposed to be added to the list of approved practicing auditors;

3. Based on the list of approved audit firms and the list of approved practicing auditors, issuing organizations, listed organizations, or securities trading organizations may consider and select audit firms and practicing auditors to sign contracts for conducting audits for their entities;

Article 11: Suspension or revocation of approval status

1. Audit firms or practicing auditors will be suspended from their approved status in the following cases:

a) Violating obligations stipulated in Clause 3 and Clause 4 of Article 12 of this Regulation;

b) Auditing results failing to meet requirements based on accounting standards, auditing standards, and relevant laws as evaluated by the Ministry of Finance (State Securities Commission);

c) The audit firm not having at least ten approved practicing auditors continuously for six months;

d) Pending legal proceedings regarding auditing results;

2. Audit firms or practicing auditors whose approved status is suspended may continue to perform audits under existing contracts and ongoing audits without signing new contracts with issuing organizations, listed organizations, or securities trading organizations from the date of notification by the Ministry of Finance (State Securities Commission) until the end of the approved period;

3. Audit firms or practicing auditors will have their approved status revoked in the following cases:

a) The approved audit firm voluntarily withdraws its application to participate in auditing;

b) The audit firm has had its investment license, business registration certificate, or the practicing auditor has had his/her Certified Public Accountant certificate revoked according to Clause 1 of Article 36 of Decree 105/2004/NĐ-CP dated March 30, 2004 of the Government on Independent Auditing;

c) After the suspension period specified in point b and c of Clause 1 of Article 11 of this Regulation, the audit firm or practicing auditor has not rectified the issues leading to suspension;

d) Seriously violating obligations stipulated in Article 12 of this Regulation.

4. An auditing firm or practicing auditor whose approval status has been revoked shall not continue to audit for issuers, listed entities, or securities trading organizations from the date of notification by the Ministry of Finance (Securities Commission) until the end of the approved period.

Article 12: An approved auditing firm shall have the obligation to:

1. Be thoroughly familiar with the laws and regulations related to securities and the securities market concerning the financial statements of the audited entity.

2. Provide explanations or supply information and data related to the audit activities when there are complaints, upon request of the Ministry of Finance (Securities Commission).

3. During the audit process, if it discovers that the issuer, listed entity, or securities trading organization does not comply with the law and relevant regulations concerning the audited financial statements, it must report and recommend measures to prevent, correct, and address violations to the audited entity; record opinions in the Audit Report or Management Letter regarding unaddressed violations according to auditing standards.

4. After issuing the audit report, if there are suspicions or discoveries that the audited company has significant violations due to non-compliance with the law and relevant regulations concerning the audited financial statements, the auditing firm must follow the procedures to notify the audited entity and third parties as stipulated by auditing standards and report to the Ministry of Finance (Securities Commission).

5. Maintain confidentiality of information in accordance with the law on auditing.

6. The Securities Commission, while using data in the audited financial reports of an approved auditing firm, if it finds doubts, will directly re-examine and make management decisions based on the results of the re-examination.

7. In cases where an auditing firm prepares an audit report that is not truthful or accurate, causing damage to clients and users of the audit results, the auditing firm must bear responsibility for compensating the damage caused to the client or be subject to legal provisions.

8. An approved auditing firm must fulfill other obligations as prescribed by law.

IV. IMPLEMENTATION

Article 13: The Securities Commission is responsible for:

1. Receiving registration files for participation in audits for issuers, listed entities, or securities trading organizations; Maintaining confidentiality of information in the file in accordance with the law.

2. Examining the files and publicly announcing the list of auditing firms and the list of practicing auditors who meet the conditions to participate in audits for issuers, listed entities, or securities trading organizations.

3. Receiving audited financial statements from issuers, listed entities, or securities trading organizations and performing state management responsibilities as prescribed.

Article 14: Amendments and supplements to this Regulation shall be decided by the Minister of Finance.