Summary: The Ministry of Finance proposes major changes to the Independent Audit Act to improve transparency and fairness in financial markets, particularly by strengthening audit requirements for large companies.

The Ministry of Finance has proposed major revisions to the Independent Audit Law and several related laws to improve transparency and fairness in financial markets.

HANOI – The Ministry of Finance has proposed major changes to the Independent Audit Law and several related laws, including the Securities Law and the Accounting Law.

The changes are intended to address shortcomings in the Independent Audit Act, which has been in place for 12 years.

The proposed revisions are aimed at improving transparency and fairness in financial markets, particularly by tightening audit requirements for large companies.

Since its implementation on January 1, 2012, the law has revealed several shortcomings. The Ministry of Finance pointed out that the existing regulatory framework for supervising auditors and audit services is not effective enough. Penalties for non-compliance are currently insufficient and fail to act as a strong deterrent.

“The regulator cannot impose fines and the penalty period for independent audits is only one year. Therefore, some violations cannot be punished because the penalty period has expired,” the finance ministry said in the proposal.

The Ministry of Finance also pointed out that another issue of concern is that the current law does not cover all entities that should be subject to mandatory audits. Large companies with complex financial transactions and huge economic impact are not always required to undergo annual financial audits.

The report said recent high-profile cases of corporate misconduct had highlighted the need for greater financial transparency and that expanding the scope of mandatory audits was clearly crucial, confirming that the change was intended to ensure all significant economic players were held accountable, thereby improving oversight and ensuring accurate tax contributions.

Fines increased 30 times

The proposed amendments focus on three main areas.

First, there is a need to push for more effective and more extensive penalties for audit irregularities. The Ministry of Finance has proposed extending the statute of limitations from one year to ten years. This change is intended to ensure that irregularities can be dealt with even if they are discovered long after they occurred.

The draft amendment also proposes higher fines of up to VND3 billion ($118,110) for organizations and VND1.5 billion for individuals, 30 times the current limits. In addition to fines, violators may also face other serious consequences, including the revocation of business licenses and auditor certificates.

The second key policy recommendation is to improve the quality of audit services.

These include updating regulations on auditor rotation and imposing new requirements on the number of practicing auditors for local and foreign audit firms operating in Vietnam.

For example, auditors who have served a client for five consecutive years must stop serving that client for the next five years, a measure designed to prevent conflicts of interest and ensure that new perspectives are kept in the audit practice.

The third policy is to increase transparency of financial information.

The Treasury Department proposed expanding the list of entities subject to mandatory audits to include larger companies and organizations that play a major role in the economy.

The expansion is intended to align with the government’s accounting and auditing strategic objectives for 2023 and beyond. The new regulations will require the government to establish specific criteria and procedures for approving or revoking the status of audit firms and individual auditors, particularly those working with public interest entities.

Article Summary

Amendments to the Independent Audit Act: The Ministry of Finance proposes major amendments to the Independent Audit Act and related laws to improve transparency and fairness in financial markets, particularly by strengthening audit requirements for large companies.

Penalties increased:The amendment proposes to extend the statute of limitations for audit violations from one year to ten years and significantly increase the amount of fines, with a maximum fine of VND3 billion for organizations and a maximum fine of VND1.5 billion for individuals, which is 30 times the current limit.

Improve the quality of audit services:The proposed revisions include updating auditor rotation regulations and imposing new professional requirements on audit firms and individuals to prevent conflicts of interest and ensure objectivity and fresh perspectives in audit services.

Expanding the scope of mandatory audits:The Treasury Department proposes to expand the list of entities that must undergo mandatory audits to include large companies and organizations that play an important role in the economy, in order to ensure the accountability and financial transparency of all important economic players.

In conclusion

This article details the Ministry of Finance’s proposed changes to the Independent Audit Law and related laws, which are intended to improve transparency and fairness in financial markets, especially audit requirements for large companies. The new policy proposals strengthen penalties for violations, improve the quality of audit services, and expand the scope of mandatory audits. These changes are intended to strengthen supervision, prevent misconduct, and ensure accurate tax contributions. If you have any questions or need further explanation, please feel free to contact Jaycy.