Decision No. 832/TC-QĐ-CĐKT on the issuance of the Internal Audit Regulation

Pursuant to …;

Regarding the issuance of the Internal Audit Regulation

THE MINISTER OF FINANCE

Pursuant to the Accounting and Statistics Ordinance issued pursuant to Decree No. 06 LCT/HĐNN8 dated May 20, 1988 of the State Council of the Socialist Republic of Vietnam;

Pursuant to Decree No. 178/CP dated October 28, 1994 of the Government on the tasks, powers, and organizational structure of the Ministry of Finance;

To implement Decree No. 59/CP dated October 3, 1996 of the Government on accounting and auditing work of state-owned enterprises.

Pursuant to …;

Article 1: Attached herewith is the Internal Audit Regulation for state-owned enterprises to apply within their respective enterprises.

Article 2: This regulation shall take effect from January 1, 1998. State-owned enterprises, the Director of the Office of the Ministry of Finance, the Heads of the Accounting System Department, and the General Directors of the State Capital and Asset Management General Department at enterprises are responsible for implementing this provision./.

 

REGULATIONS

INTERNAL AUDIT
(applicable to state-owned enterprises)
(Issued together with Decision No. 832 TC/QĐ/CĐKT dated October 28, 1997 of the Minister of Finance)

Chapter 1:
GENERAL PROVISIONS

Article 1: Accounting data, financial statements of the enterprise are legal grounds for evaluating the situation and results of production and business activities, the implementation of obligations towards the State and related parties of the enterprise.

Article 2: The enterprise must be responsible under the law for the completeness, truthfulness, and rationality of accounting data and information in published financial statements.

Article 3: The enterprise must regularly organize internal audits to assess the quality and reliability of economic and financial information; the protection of the safety of the enterprise's assets; compliance with laws, policies, and systems of the State, as well as resolutions, decisions of the Board of Directors, and the Management Board of the enterprise regarding the operation of the enterprise (including joint-stock companies and joint ventures where the state-owned enterprise's contribution exceeds 50%).

Article 4: Based on this regulation, the enterprise establishes and maintains an appropriate and effective internal control system within the enterprise and its subsidiaries.

Article 5: Scope of implementation of internal audit

1. Auditing financial reports, management accounting reports of the enterprise and its subsidiaries;

2. Compliance auditing;

3. Operational auditing.

Article 6: Internal audit has three functions: Inspection, confirmation, and evaluation.

Internal audit has the following tasks:

1. Inspecting the suitability, effectiveness, and efficiency of the internal control system;

2. Inspecting and confirming the quality and reliability of economic and financial information in financial reports, management accounting reports before submission for approval;

3. Inspecting compliance with operational principles, business management policies, especially compliance with laws, financial policies, accounting policies, resolutions, and decisions of the Board of Directors and the Management Board of the enterprise;

4. Identifying weaknesses, fraud in management and asset protection; proposing solutions to improve and perfect the management and business operation system of the enterprise.

Article 7: At the end of the audit, the internal auditor must prepare an audit report, propose recommendations and measures to address any violations (if any). The internal audit report is sent to the Board of Directors, the Management Board, and presented at the Workers' and Staffs' Conference of the enterprise or the Shareholders' Meeting. The annual financial statement of the enterprise must include the internal audit report attached.

Chapter 2:
PROVISIONS ON THE CONTENT, PROCEDURE, AND METHODS OF INTERNAL AUDIT

Article 9: Content of internal audit work.

1. Operational auditing

- Inspecting the efficient and effective mobilization, distribution, and utilization of resources (human resources, materials, goods, assets, capital..., business advantages...) of the enterprise;

- Inspecting the effectiveness of production and business operations; income distribution and utilization; results of capital preservation and development.

- Inspecting and evaluating the effectiveness of functional units in achieving the enterprise's business objectives.

2. Compliance auditing

- Inspecting compliance with laws, policies, financial regulations, accounting systems; management systems of the State and the implementation of policies, resolutions, decisions, and regulations of the Board of Directors and the Management Board;

- Inspecting compliance with provisions on principles, procedures, and management processes of the entire system as well as each stage of work and each measure in the internal control system;

- Inspecting compliance with principles, policies, and accounting standards from the preparation of vouchers, application of account systems, recording in accounting ledgers, information synthesis, and presentation of financial statements, management accounting reports, to the storage of accounting documents...;

3. Financial statement and management accounting report auditing

- Inspecting and confirming the timeliness, completeness, objectivity, and reliability of financial statements; management accounting reports before the (General) Director signs off and publishes them;

- Evaluating financial statements and management accounting reports; providing necessary recommendations and advice for production and business activities to ensure rationality and efficiency.

Article 10: The sequence of steps in an internal audit process

1. Planning and selecting audit methods

- Developing the audit plan, determining objectives, content, scope, and time for conducting the internal audit;

- Determining the scale of the audit; methods, ways of conducting the audit, organizational measures; organizing the audit team (including internal and external auditors and other specialized staff needed);

2. Audit preparation work

- Studying relevant documents and materials related to the business operations, tasks, plans, conditions, measures, policies, and regulations of the enterprise during the period to be audited. Preliminarily assessing changes in conditions and business environment affecting the enterprise's activities;

- Understanding new policies, regulations, and emerging initiatives in accounting and auditing;

- Reviewing previous audit reports and documents (if available), including external documents related to the audit; summarizing information that needs to be verified during the upcoming audit; collecting and preparing samples, programs, and guidelines for the upcoming audit;

3. Conducting the audit

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

- Examining and evaluating the implementation of policies and regulations in the actual operation of the enterprise;

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

- Performing analysis and surveying key accounts, supplementing with detailed surveys; reviewing subsequent events, evaluating the results of the audit;

- The steps of conducting the audit must follow the procedures of an audit and the steps of the audit must be recorded in 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 present all contents and results of the audit according to the goals and requirements set for each audit; confirm the completeness and reasonableness of the financial statements and 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;

The audit report is sent to the Chairman of the Board of Directors and 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 and the (General) Director. Specifically, the financial statement audit report and management accounting report are attached to the financial statements and management accounting reports before circulation;

4.2. Follow-up on the results of the audit 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; document comparison, system, and regulation review; evidence collection and evaluation; calculation, comparison, analysis, computer-assisted testing; information synthesis, selection, cause determination, and degree of relevance; prediction, forecasting trends, and possibilities; and other inspection and evaluation steps deemed necessary by the auditor in specific cases;

Chapter 3:
INTERNAL AUDITOR

Article 12: The person appointed or assigned to be an internal auditor must meet the following criteria:

1. Possess integrity, objectivity, without criminal record, and not subject to disciplinary action 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 financial management and accounting for at least five years, including at least three years working in the enterprise where the internal auditor role is assigned;

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. An internal auditor who has been removed due to disciplinary violations may not be reappointed;

Auditors absolutely cannot assume responsibility for managing or operating businesses;

Article 14: Responsibilities of internal auditors

1. Internal auditors perform tasks according to approved audit plans and are responsible to the (General) Director for the quality, truthfulness, and reasonableness of the audit report and the financial and accounting information audited;

2. During the performance of duties, internal auditors must comply with laws, professional principles and standards of auditing, current policies, and systems of the State;

3. Auditors must be objective, uphold independence in auditing activities. Continuously enhance professional skills, update knowledge, maintain professional ethics;

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

Article 15: Rights of internal auditors

1. Professional independence. Not influenced or interfered with when performing audit activities and presenting opinions in the audit report;

2. Has the right to request departments, individuals subject to audit, and related departments to provide information and documents for the audit work.

3. Is entitled to sign confirmation on internal audit reports conducted by individuals, or to be responsible for performing tasks assigned under the audit mission.

4. Proposes recommendations, solutions, suggestions, and advisory opinions for improving and perfecting management and operational activities in production and business; preventing errors, frauds, and wrongful acts within the enterprise...

5. Is entitled to retain opinions presented in internal audit reports, and has the right to request competent state agencies to reconsider decisions by the (General) Director regarding the dismissal of auditors.

Chapter 4:
INTERNAL AUDIT ORGANIZATION

Article 16: Internal audit organization

1. Enterprises must establish an internal audit organization to carry out internal audit work within the enterprise. The internal audit organization of enterprises shall be organized into departments, divisions, or working groups directly subordinate to the (General) Director of the enterprise.

The internal audit organization includes: Head of the internal audit department, Deputy Head of the internal audit department (if any), internal audit team 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 the work, business management requirements, and the professional level and capacity of auditors.

In production conglomerates (State-owned corporations, associations of enterprises,...) must organize an internal audit department with sufficient manpower and capability to audit within the unit and its member units.

2. The internal audit department is organized independently from management and business operation departments within the enterprise (including the accounting-finance department); it is 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 contents or the entire audit.

Article 17: Head of the internal audit department

The head of the internal audit department is the head of the internal audit department (or division) of the enterprise.

The head of the internal audit department (or division) is appointed by the (General) Director after receiving written comments from the General Department, the State Capital and Asset Management Agency at the enterprise (Ministry of Finance).

The head of the internal audit department is responsible before the (General) Director and the law for signing internal audit reports.

The head of the internal audit department has duties and powers:

1. To proactively develop annual audit plans and programs.

2. To organize audits within the enterprise according to approved audit tasks and programs by the (General) Director.

3. To manage, allocate, and delegate work to auditors, and implement training measures to ensure continuous improvement in the professional level and capacity of auditors and the internal audit organization.

4. To propose to the (General) Director about the promotion, appointment, reward, and disciplinary action for internal auditors.

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

6. To recommend changes in policies and directions to enhance efficiency in management and business operation activities.

7. When discovering violations of laws or decisions contrary to policies, regulations, must report to competent authorities to promptly address the situation.

Article 18: The internal audit organization in enterprises with affiliated 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 conduct internal audits.

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

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

Chapter 5:
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 promptly reported to the Ministry of Finance for study and amendment.