Decision No. 832-TC/QÐ/CÐKT on the issuance of the Internal Audit Regulation

 Pursuant to …;

OF THE MINISTER OF FINANCE NUMBER 832 TC/QD/CĐKT
ON OCTOBER 28, 1997 REGARDING THE ISSUANCE
INTERNAL AUDIT REGULATIONS

THE MINISTER OF FINANCE

- BASED ON THE STATUTE ON ACCOUNTING AND STATISTICS ISSUED PURSUANT TO DECREE NO. 06 LCT/HĐNN8 ON MAY 20, 1988 OF THE STATE COUNCIL OF THE SOCIALIST REPUBLIC OF VIETNAM;
- BASED ON THE COUNCIL OF MINISTERS DECISION NO. 276/CT DATED JULY 28, 1992 ON UNIFIED MANAGEMENT OF FEES AND LICENSE FEES (NOW THE PRIME MINISTER);
- TO IMPLEMENT DECREE NO. 59/CP OF SEPTEMBER 3, 1996 OF THE GOVERNMENT ON ACCOUNTING AND AUDIT WORK IN STATE ENTERPRISES.

Pursuant to …;

Article 1: ATTACHED TO THIS DECISION ARE THE INTERNAL AUDIT REGULATIONS TO SERVE AS A BASIS FOR STATE ENTERPRISES TO APPLY WITHIN THEIR ENTERPRISES.

Article 2: THESE REGULATIONS SHALL TAKE EFFECT FROM JANUARY 1, 1998. STATE ENTERPRISES, THE DIRECTOR OF THE MINISTRY OF FINANCE’S OFFICE, HEADS OF THE ACCOUNTING SYSTEM DEPARTMENT, AND HEADS OF THE STATE CAPITAL AND ASSET MANAGEMENT GENERAL DEPARTMENT AT ENTERPRISES SHALL BE RESPONSIBLE FOR IMPLEMENTING THESE PROVISIONS.                                                    

REGULATIONS
INTERNAL AUDIT
(APPLICABLE TO STATE ENTERPRISES)
(ISSUED ACCOMPANYING DECISION NO. 832 TC/QD/CĐKT, OCTOBER 28, 1997
of the Minister of Finance)

PART I
GENERAL PROVISIONS

Article 1: ACCOUNTING DATA, FINANCIAL REPORTS OF THE ENTERPRISE ARE LEGAL GROUNDS FOR EVALUATING THE SITUATION AND RESULTS OF BUSINESS OPERATIONS, THE COMPLIANCE WITH THE STATE AND OTHER RELATED PARTIES' OBLIGATIONS.

Article 2: THE ENTERPRISE IS LIABLE UNDER THE LAW FOR THE COMPLETENESS, TRUTHFULNESS, AND REASONABILITY OF THE ACCOUNTING DATA AND INFORMATION IN THE FINANCIAL REPORTS THAT HAVE BEEN PUBLISHED.

Article 3: THE ENTERPRISE MUST REGULARLY ORGANIZE INTERNAL AUDITS TO EVALUATE THE QUALITY AND RELIABILITY OF ECONOMIC AND FINANCIAL INFORMATION; THE SAFETY OF THE ENTERPRISE'S ASSETS; THE COMPLIANCE WITH LAWS, POLICIES, AND REGULATIONS OF THE STATE, AS WELL AS RESOLUTIONS AND DECISIONS OF THE BOARD OF MANAGEMENT AND THE MANAGEMENT BOARD OF THE ENTERPRISE IN THE ENTERPRISE'S ACTIVITIES (INCLUDING JOINT STOCK COMPANIES AND JOINT VENTURES WHERE THE STATE ENTERPRISE'S CONTRIBUTION EXCEEDS 50%).

Article 4: BASED ON THESE REGULATIONS, THE ENTERPRISE SHALL BUILD AND MAINTAIN AN APPROPRIATE AND EFFECTIVE INTERNAL CONTROL SYSTEM WITHIN THE ENTERPRISE AND ITS SUBSIDIARIES.

Article 5: SCOPE OF INTERNAL AUDIT IMPLEMENTATION

1. AUDIT OF FINANCIAL REPORTS AND MANAGEMENT ACCOUNTING REPORTS OF THE ENTERPRISE AND ITS SUBSIDIARIES;

2. COMPLIANCE AUDIT;

3. OPERATIONAL AUDIT.

Article 6: INTERNAL AUDIT HAS THREE FUNCTIONS: VERIFICATION, CONFIRMATION, AND EVALUATION.

INTERNAL AUDIT HAS THE FOLLOWING TASKS:

1. VERIFY THE SUITABILITY, EFFECTIVENESS, AND EFFICIENCY OF THE INTERNAL CONTROL SYSTEM;

2. VERIFY AND CONFIRM THE QUALITY AND RELIABILITY OF ECONOMIC AND FINANCIAL INFORMATION IN FINANCIAL REPORTS AND MANAGEMENT ACCOUNTING REPORTS BEFORE APPROVAL;

3. VERIFY COMPLIANCE WITH BUSINESS OPERATING PRINCIPLES AND MANAGEMENT, ESPECIALLY COMPLIANCE WITH LAWS, POLICIES, FINANCIAL AND ACCOUNTING REGULATIONS, POLICIES, RESOLUTIONS, AND DECISIONS OF THE BOARD OF MANAGEMENT AND THE MANAGEMENT BOARD OF THE ENTERPRISE;

4. DETECT WEAKNESSES, DEFICIENCIES, AND FRAUD IN MANAGEMENT AND ASSET PROTECTION; RECOMMEND MEASURES TO IMPROVE AND PERFECT THE MANAGEMENT AND BUSINESS OPERATIONS SYSTEM OF THE ENTERPRISE.

Article 7: AT THE END OF THE AUDIT, THE INTERNAL AUDITOR MUST PREPARE AN AUDIT REPORT, RECOMMEND REMEDIAL ACTIONS FOR ANY ERRORS. THE INTERNAL AUDIT REPORT MUST BE SUBMITTED TO THE BOARD OF MANAGEMENT, THE MANAGEMENT BOARD, AND PRESENTED TO THE ENTERPRISE'S WORKER AND STAFF MEETING OR THE SHAREHOLDER MEETING. THE ANNUAL FINANCIAL REPORT OF THE ENTERPRISE MUST INCLUDE THE INTERNAL AUDIT REPORT.

PART II
PROVISIONS ON CONTENT, PROCEDURE, AND METHODS
OF INTERNAL AUDIT

Article 9: CONTENT OF INTERNAL AUDIT WORK.

1. OPERATIONAL AUDIT

- VERIFY THE EFFICIENT USE OF RESOURCES (HUMAN RESOURCES, MATERIALS, GOODS, ASSETS, CAPITAL, BUSINESS ADVANTAGES...) OF THE ENTERPRISE;

- VERIFY THE EFFECTIVENESS OF BUSINESS OPERATIONS; DISTRIBUTION AND USE OF INCOME; RESULTS OF CAPITAL PRESERVATION AND DEVELOPMENT.

- REVIEW AND EVALUATE THE EFFECTIVENESS OF FUNCTIONAL UNITS IN ACHIEVING THE ENTERPRISE'S BUSINESS OBJECTIVES.

2. COMPLIANCE AUDIT

- VERIFY COMPLIANCE WITH LAWS, POLICIES, FINANCIAL AND ACCOUNTING REGULATIONS, MANAGEMENT REGULATIONS OF THE STATE, AND THE IMPLEMENTATION OF POLICIES, RESOLUTIONS, DECISIONS, AND REGULATIONS OF THE BOARD OF MANAGEMENT AND THE MANAGEMENT BOARD;

- VERIFY COMPLIANCE WITH REGULATIONS ON PRINCIPLES, PROCEDURES, AND MANAGEMENT PROCEDURES IN THE ENTIRE SYSTEM AND EACH STEP OF THE INTERNAL CONTROL SYSTEM;

- VERIFY COMPLIANCE WITH PRINCIPLES, POLICIES, AND ACCOUNTING STANDARDS FROM THE ISSUE OF DOCUMENTS, APPLICATION OF ACCOUNTING ACCOUNTS, RECORDING IN LEDGERS, INFORMATION SYNTHESIS, AND REPORTING OF FINANCIAL REPORTS AND MANAGEMENT ACCOUNTING REPORTS, TO THE STORAGE OF ACCOUNTING DOCUMENTS...

3. AUDIT OF FINANCIAL REPORTS AND MANAGEMENT ACCOUNTING REPORTS

- VERIFY AND CONFIRM THE TIMELINESS, COMPLETENESS, OBJECTIVITY, AND RELIABILITY OF FINANCIAL REPORTS AND MANAGEMENT ACCOUNTING REPORTS BEFORE THE (GENERAL) MANAGER APPROVES AND PUBLISHES THEM;

- REVIEW AND EVALUATE FINANCIAL REPORTS AND MANAGEMENT ACCOUNTING REPORTS; PROVIDE NECESSARY RECOMMENDATIONS AND ADVICE FOR BUSINESS OPERATIONS TO ENSURE RATIONALITY AND EFFICIENCY.

Article 10: PROCEDURES FOR INTERNAL AUDIT WORK

1. PLAN AND SELECT AUDIT METHODS

- DEVELOP A PLAN, DEFINE OBJECTIVES, CONTENT, SCOPE, AND TIMEFRAME FOR INTERNAL AUDIT;

- DETERMINE THE SCALE OF THE AUDIT; METHODS, WAYS OF CONDUCTING THE AUDIT, ORGANIZATIONAL MEASURES; ORGANIZE AUDIT FORCES (INCLUDING INTERNAL AND EXTERNAL AUDITORS AND EXPERTS REQUIRED);

2. PREPARATORY WORK FOR AUDIT

- STUDY DOCUMENTS AND MATERIALS RELATED TO THE ENTERPRISE'S BUSINESS SITUATION, TASKS, PLANS, AND CONDITIONS, MEASURES, POLICIES, AND REGULATIONS DURING THE AUDIT PERIOD. MAKE A PRELIMINARY ASSESSMENT OF CHANGES IN BUSINESS ENVIRONMENT AFFECTING THE ENTERPRISE'S OPERATIONS;

- UNDERSTAND NEW POLICIES AND MEASURES IN ACCOUNTING AND AUDITING.

- Review previous audit reports, documents, and audit files (if available), including external documents related to the audit; summarize the information that needs to be verified during the upcoming audit; collect and prepare samples, programs, and guidelines for the audit to be conducted.

3. Conducting the Audit

- During the audit process, internal auditors must review, gather, and evaluate sufficient relevant evidence, including external evidence...

- Examine, assess, and implement policies and regulations in the actual operation of the enterprise.

- Evaluate the possibility of errors, mistakes, and fraud for each type of transaction, each economic activity. Assess the materiality and risk of transactions arising within the enterprise.

- Perform analysis and survey key accounts, conduct supplementary surveys on details; examine subsequent events, evaluate the audit results.

- The steps to carry out the audit must follow the procedures of an audit and the audit steps must be recorded in the audit documents and files.

4. Concluding the Audit

4.1. Upon completion of the audit

Internal auditors must prepare an audit report;

The audit report must fully present the contents and results of the audit according to the objectives and requirements set for each audit; confirm the completeness and reasonableness of the financial statements, annual management accounting reports before submission for approval; propose recommendations and measures to address errors, fraud, violations, and necessary solutions to improve the quality and effectiveness of business management of the enterprise;

The audit report is sent to the Chairman of the Board of Directors, to the (General) Director of the enterprise. The circulation and publication of the internal audit report depend on the nature of the audit and are decided by the Chairman of the Board of Directors, (General) Director. Specifically, the audit report on financial statements and management accounting reports are attached to the financial statements and management accounting reports before circulation.

4.2. Follow-up on the audit results is the work following the audit to recheck the implementation of recommendations, handling proposals, and solutions stated in the audit report in the management and business operation departments of the enterprise.

Article 11: Methods of conducting internal audits

Depending on the nature of the audit, auditors must select and apply appropriate audit methods and procedures consistent with the audit objectives and requirements. Selected and applied procedures and methods include observation, physical inventory verification, confirmation, examination; comparison of documents, records, systems, laws; collection and evaluation of evidence; calculation, comparison, analysis, computer-based testing; synthesis, selection of information, determination of causes and the degree of relevance of each cause; prediction, forecasting trends and possibilities; and other inspection and evaluation steps deemed necessary by the auditor in specific cases.

CHAPTER III
INTERNAL AUDITORS

Article 12: Persons appointed or assigned to serve as internal auditors must meet the following criteria:

1. Possess integrity, objectivity, have no criminal record, and have not been disciplined at or above the warning level due to economic, financial, or accounting misconduct;

2. Have graduated from a university majoring in economics, finance, accounting, or business administration;

3. Have worked in the field of financial management and accounting for five years or more, including at least three years working in the enterprise where they are assigned as an internal auditor;

4. Have undergone training in auditing and internal auditing according to the unified program of the Ministry of Finance and obtained certification.

Article 13: Appointment and Removal of Internal Auditor Positions

Internal auditors are directly appointed and removed by the General Director or Director. Internal auditors who have been removed due to disciplinary violations may not be reappointed.

Internal auditors are absolutely prohibited from assuming responsibilities for managing or operating businesses.

Article 14: Responsibilities of Internal Auditors

1. Internal auditors perform tasks according to the approved audit plan by the General Director or Director and are responsible to the (General) Director for the quality, truthfulness, and reasonableness of the audit report and the financial and accounting information that has been audited.

2. During the performance of their duties, internal auditors must comply with the law, adhere to auditing principles and standards, and current policies and systems of the State.

3. Auditors must be objective and uphold independence in their auditing activities. They must continuously enhance their professional skills, update knowledge, and maintain professional ethics.

4. Adhere to the principle of confidentiality regarding audited data and documents (excluding cases required by courts or related to professional standards).

Article 15: Rights of Internal Auditors

1. Independence in professional and technical matters. Not to be influenced or interfered with when conducting audit activities and presenting opinions in the audit report.

2. Right to request relevant departments and individuals being audited and related departments to provide information and documents for the audit work.

3. Right to sign off on internal audit reports conducted personally or take responsibility for performing assigned audit tasks.

4. Propose opinions, solutions, recommendations, advisory opinions for improving and perfecting management and business operations; prevent errors, fraud, and improper actions in the enterprise...

5. Right to retain opinions presented in the internal audit report, and right to request state authorities to reconsider the decision of the (General) Director regarding the removal of an auditor.

PART IV
ORGANIZATION OF THE INTERNAL AUDIT DEPARTMENT

Article 16: Internal Audit Department Structure

1. Enterprises must establish an internal audit organization to carry out internal audit work within the enterprise. The internal audit organization of the enterprise shall be organized into departments, divisions, or groups under the direct supervision of the General Director of the enterprise.

The internal audit organization includes: Head of Internal Audit Department, Deputy Head of Internal Audit Department (if any), Internal Audit Group Leaders, and Internal Auditors. The number of internal auditors depends on the scale of business operations, operating areas, the number of member units, the complexity of tasks, management requirements, and the professional qualifications and capabilities of the auditors.

In production conglomerates (State-owned Corporations, Associations of Enterprises,...) must establish an internal audit department with sufficient manpower and capability to conduct audits within the unit and its member units.

2. The internal audit department shall be organized independently from other management and business operation departments within the enterprise (including the accounting and finance department); it shall be directly directed and led by the General Director of the enterprise.

Upon the request of the internal audit department, the General Director may assign experts from other specialized fields within the enterprise, or hire external experts (if necessary) to participate in certain aspects or the entire audit process.

Article 17: Head of Internal Audit Department

The Head of Internal Audit Department leads the internal audit department of the enterprise.

The Head of Internal Audit Department is appointed by the General Director after obtaining written opinions from the General Department, the State Capital and Asset Management Agency at the enterprise (Ministry of Finance).

The Head of Internal Audit Department is responsible for signing and bearing responsibility before the General Director and the law for the internal audit reports.

The Head of Internal Audit Department has duties and powers:

1. To proactively develop annual audit plans and programs.

2. To organize internal audits within the enterprise according to approved audit plans and programs by the General Director.

3. To manage, allocate, and assign tasks to auditors, and implement training and education measures to continuously improve the professional qualifications and capabilities of auditors and the internal audit organization.

4. To propose to the General Director regarding the promotion, appointment, reward, and disciplinary actions for internal auditors.

5. To request the participation of auditors from member units or specialists from other relevant departments within the enterprise to conduct audits when necessary.

6. To recommend changes in policies and strategies to enhance efficiency in management and business operations.

7. When discovering violations of laws or decisions contrary to policies, regulations, the Head of Internal Audit Department must report to competent authorities to promptly address these issues.

Article 18: The internal audit organization in enterprises with subordinate units.

- For member units in State-owned Corporations, Associations of Enterprises with independent legal status: Must establish an independent audit department or arrange some internal auditors to perform internal audits.

- For dependent member enterprises without independent legal status: Depending on the scale of business operations and operating areas, internal auditors can be appointed to operate directly at subordinate or dependent units.

Internal auditors working in member enterprises with independent legal status, or without independent legal status, are directly or indirectly under the internal audit organization of the superior unit and are directly directed by the General Director or Director.

CHAPTER V
IMPLEMENTATION

Article 19: This regulation takes effect from January 1, 1998.

Based on this regulation, State-owned Corporations organize and implement internal audit work for the Corporation and each member company.

During the implementation process, if there are difficulties or obstacles, they should be reported to the Ministry of Finance for unified resolution. Issues deemed inappropriate should be reported promptly to the Ministry of Finance for study and amendment.