Tax audit reports: key to financial transparency and tax compliance.

A tax audit report, typically presented as a financial statement audit report, is a crucial legal document issued by an independent auditing firm to verify the accuracy and fairness of financial statements. This report not only meets the requirements of shareholders, investors, and credit institutions, but is also a legally mandatory obligation for many businesses. Independent Auditing Law 2011Filing reports with the tax authorities helps assess compliance levels, identify risks, and mitigate significant tax violations.

In the context of increasingly stringent tax regulations, the role of tax audit reports is becoming more and more important. Audited financial statements serve as the basis for determining corporate income tax obligations according to tax authority guidelines, while also objectively reflecting complex transactions that are frequently subject to audit. A full unqualified audit opinion strengthens the reliability of financial information, enhances corporate reputation, supports risk management, and increases access to capital.

What is a tax audit report? Definition and legal nature.

In practice, the concept of reporting tax audit It is commonly used to refer to the audit report of financial statements, in which the auditor has performed the necessary procedures to ensure that the financial statements are free from material misstatements, including those that could affect the determination of tax obligations. The nature of a tax audit report is a dual compliance confirmation tool: compliance with Vietnamese Accounting Standards (VAS) and compliance with tax laws and regulations.

The concept according to Vietnamese Auditing Standards (VSA)

According to Vietnamese Auditing Standards (VSA), specifically VSA 700 (Formation of Opinions and Preparation of Audit Reports on Financial Statements), an audit report is a formal document expressing the opinion of an independent auditor on the fairness and reasonableness of the financial statements prepared by the audited entity, based on current accounting standards and accounting regulations.

A tax audit report is a version of the audit report that includes detailed appendices on corporate income tax, VAT, and accounting-tax adjustments, designed for tax declaration and audit purposes.

Distinguishing between financial statement audit reports and tax compliance audit reports.

This is an important distinction that managers and accountants need to make. A financial statement audit report, often referred to as a tax audit report, focuses on confirming the reasonableness of financial statements, with tax issues being only a part of the process. Meanwhile, a tax compliance audit is a specialized service that assesses in detail the risks and level of compliance with each tax and each transaction. Both are necessary, but a financial statement audit report is a mandatory document to be submitted to the tax authorities.

Legal basis for tax audit reports

The legal validity of tax audit reports is reinforced by several important documents:

• Law on Independent Auditing No. 67/2011/QH12: Regulations regarding entities required to undergo audits and ensuring the quality of audit activities.
• Law on Tax Administration No. 38/2019/QH14: Regulations regarding the responsibility of taxpayers to provide records and documents, including audited financial statements, to the tax authorities when requested or required by law.
• Decree 41/2018/ND-CP (on administrative penalties for violations in the field of accounting and independent auditing): The regulations stipulate penalties for businesses that fail to comply with mandatory audit obligations or fail to provide tax audit reports on time.

The importance and multifaceted role of tax audit reports.

A tax audit report is not just an administrative procedure; it is a strategic tool that offers significant benefits to businesses, regulatory bodies, and the financial market as a whole. Ensuring a high-quality tax audit report demonstrates the professionalism and transparency of the internal accounting and auditing team.

For businesses: increased credibility and support for decision-making.

Having a tax audit report with a full unqualified opinion offers several practical benefits:

Enhance credibility and access to capital.

Credit institutions and banks always consider tax audit reports as a key factor in assessing a company's solvency and actual financial situation.

A reputable tax audit report helps businesses achieve a higher credit rating, making it easier to obtain loans at preferential interest rates. This reputation also extends to business partners and suppliers, reinforcing confidence in the company's going concern ability.

Supporting management and investment decision-making.

Auditors will identify weaknesses in internal control systems and accounting processes, particularly in transactions with high tax risks. These recommendations help management adjust strategies, improve financial management efficiency, and manage risks. Tax audit reports provide an objective view, helping business owners make accurate investment, divestment, or merger/acquisition decisions based on independently verified data.

For tax authorities: risk assessment and compliance management tools.

Tax audit reports are crucial input data for the General Department of Taxation and local tax offices.

Identify risks and inspection priorities.

Tax authorities use information from tax audit reports (especially exceptions, notes on doubtful receivables, and provisions for inventory devaluation) to build a tax risk profile for businesses. This allows them to focus resources on businesses with a high potential for violations, rather than conducting widespread audits. If the tax audit report mentions complex issues such as related-party transactions (according to Decree 132/2020/ND-CP) but the auditors have completed all necessary procedures, the tax authorities may reduce the priority level for the audit.

Basis for comparing and verifying tax obligations

Although the tax audit report confirms the financial statements, the tax authorities still make adjustments according to current tax laws. This report serves as the starting point for the tax authorities to compare accounting profit (on the financial statements) with taxable income (on the corporate income tax return). Any significant discrepancies between the figures in the tax audit report and the declared tax figures signal a need for further investigation.

For investors and the stock market

For publicly listed companies, a tax audit report is a mandatory document to disclose. It ensures transparency and fairness of information, helping investors make decisions based on reliable financial data. If the tax audit report raises questions about the company's ability to continue as a going concern or contains material exceptions, the stock value and market confidence will be immediately affected.

The core content and types of auditor opinions in a tax audit report.

The structure of a tax audit report (financial statement audit report) is strictly regulated according to International Auditing Standards (ISA) and Vietnamese Auditing Standards (VSA), ensuring consistency and ease of understanding for users, including tax authorities.

Required structure of audit reports (VSA 700, 705)

A complete tax audit report should include the following main sections:

Introduction

This section introduces the audited entity (name of the company, which financial statements have been audited) and the scope of the audit. This section defines the responsibilities of the independent auditor.

Responsibilities of the board of directors and those responsible for administration

This section outlines the responsibilities of the board of directors in preparing and presenting fair and accurate financial statements, as well as in establishing internal control systems. The board of directors' responsibility for compliance with tax laws is also implicitly emphasized.

Responsibilities of the auditor

Auditors must clearly present the scope of work performed, compliance with VSAs, and describe how they obtained sufficient and appropriate audit evidence. This demonstrates the validity and reliability of the tax audit report.

Auditor's opinion

This is the most important part, where the auditor makes a conclusion about the fairness and reasonableness of the financial statements. This opinion determines how tax authorities and other stakeholders perceive the company's financial situation.

Four types of auditor opinions and their tax/financial implications.

Depending on the evidence gathered and the degree of material misstatement, the auditor will issue one of four types of opinions in the tax audit report:

Summary table of four types of auditor opinions and their tax/financial implications.

Type of opinion	The extent of impact on financial statements	Implications for the tax authorities (tax risk)	Financial/Reputational Significance
Full acceptance	The financial statements are fair and reasonable in all material respects.	Lowest risk. Financial statements are considered reliable for comparison.	Highest credibility, easy to raise capital.
Accept the exception.	The financial statements are fair and reasonable except for one specific and obvious issue.	Medium risk. The tax authorities will focus on the issue that was excluded.	The exceptions need to be clearly explained to the investors.
Refusing to comment	The auditor was unable to gather sufficient evidence to form an opinion.	The risk is very high. The tax authorities may have doubts about the transparency of the entire financial statement.	Seriously, the ability to operate continuously is called into question.
Opposing opinion	Financial statements are dishonest or unreasonable due to material and pervasive errors.	Extremely high risk. Financial statements cannot be used as a basis for determining tax liability.	Serious lack of credibility, violation of accounting standards.

Unqualified opinion

This is the goal of every business. A full unqualified opinion in a tax audit report confirms that the financial statements have been prepared and presented in accordance with Vietnamese accounting standards in all material respects. It signals a high level of compliance, creating the greatest confidence for the tax authorities.

Qualified opinion

This opinion arises when there is a material but non-pervasive error, or when the auditor's scope of audit is limited to a specific issue (e.g., inability to confirm inventory balances). In this case, the tax audit report is still submitted, but the tax authorities will pay particular attention to examining transactions related to the exclusion (e.g., excluded inventory-related expenses, which may affect corporate income tax).

Disclaimer of opinion

This is a serious warning. The auditor is unable to express an opinion due to insufficient and inappropriate evidence. Businesses submitting this type of tax audit report face extremely high risk scrutiny from tax authorities and stakeholders, often leading to a full audit.

Opposing opinion

This opinion asserts that the financial statements are dishonest and unreasonable due to material and pervasive errors. Essentially, these financial statements cannot be used to accurately determine tax obligations. The company needs to revise its financial statements and seek a new audit. A tax audit report with an adverse opinion is a sign of serious breaches in the accounting system.

Details on tax and accounting issues in the tax audit report.

A tax audit report is particularly valuable because it bridges two complex regulatory systems: accounting standards and tax law. The differences between accounting and taxation are the primary reason for adjustments in financial statements, and this is a key area that auditors must pay special attention to.

The impact of accounting standards on corporate income tax.

Differences in the principles of revenue and expense recognition under VAS and under corporate income tax law (especially Circular 78/2014/TT-BTC and Circular 96/2015/TT-BTC) create discrepancies. When auditing financial statements, auditors must carefully consider these adjustments to ensure that current and deferred corporate income tax are accurately reflected.

Distinguishing between accounting expenses and deductible expenses (tax vs accounting differences)

• Accounting fees: According to the matching principle, it is not necessary to have all the required invoices and supporting documents for tax purposes in certain cases (e.g., provisions).
• Deductible expenses: According to corporate income tax law, three conditions must be met: the transaction must be related to business operations, have legitimate invoices and supporting documents, and have non-cash payment documentation (for transactions exceeding 20 million VND).

Auditors will examine the validity of expenses from a tax perspective to assess the level of risk. If there are many expenses that are not tax-reasonable, the auditor may require the business to explicitly note these adjustments in the tax audit report.

Handling temporary and permanent differences (deferred tax)

The majority of corporate income tax risks stem from the handling of deferred tax (according to accounting standard No. 17 – corporate income tax).

• Permanent difference: This occurs when an expense is recorded in accounting but never deducted for tax purposes (e.g., administrative fines). This permanently increases or decreases the tax liability.
• Temporary difference: This arises from differences in the timing of revenue/expense recognition between accounting and tax authorities, leading to the formation of deferred tax assets or deferred tax liabilities.

Auditors must ensure that these differences are accurately calculated and presented in the financial statements, which is a crucial basis for the tax authorities to assess the accuracy of the corporate income tax return. The tax audit report must truthfully reflect this deferred corporate income tax.

The auditor's responsibility in detecting tax irregularities.

According to VSA 250 (Regarding compliance with laws and regulations in financial statement audits), auditors are responsible for obtaining sufficient and appropriate evidence regarding compliance with laws and regulations that materially affect the financial statements.

• Auditors must maintain a professional skeptical attitude, especially when examining complex transactions, items of a highly judgmental nature, or transactions that may be considered tax evasion.
• If material tax irregularities are discovered (e.g., failure to issue VAT invoices, underreporting of revenue), the auditor must assess the impact of these irregularities on the financial statements and consider whether a qualified opinion or an adverse opinion should be issued in the tax audit report.

Checking Value Added Tax (VAT) and Personal Income Tax (PIT)

Although the focus of a tax audit report is on financial statements and corporate income tax, auditors must still examine other types of taxes.

• VAT: Auditors check the validity of invoices, input/output documents, and the consistency between transactions recorded in accounting books and VAT declarations. VAT errors (e.g., incorrect deductions) can lead to tax arrears, penalties, and affect the reliability of financial statements.
• Personal Income Tax: Tax auditors examine the calculation, deduction, and payment of personal income tax by businesses, especially income from salaries, bonuses, and other benefits. Compliance with personal income tax regulations demonstrates a business's commitment to legal compliance.

Procedures and obligations for submitting tax audit reports to the tax authorities.

Submitting tax audit reports to the tax authorities is a mandatory legal obligation for many businesses. This process requires precise timing and adherence to the filing format as stipulated by the General Department of Taxation.

Entities required to have their financial statements audited

Not all businesses are required to have a tax audit report. The mandatory entities are specifically stipulated in Article 15 of the Law on Independent Auditing and Decree 17/2012/ND-CP (amended and supplemented), including:

• Credit institutions, financial institutions, insurance companies, and accounting and auditing service businesses.
• Public companies, organizations that issue and trade securities.
• State-owned enterprises (excluding small enterprises).
• Foreign direct investment (FDI) enterprises.
• Large-scale businesses across all sectors (defined by criteria such as capital, revenue, and workforce).

Businesses that are not required to undergo mandatory audits but voluntarily opt for them must still submit a tax audit report if their financial statements relate to external parties such as banks or partners.

Deadline and format for submitting tax audit reports.

The deadline for submitting audited tax reports (audited financial statements) along with corporate income tax final settlement documents is usually 90 days from the end of the calendar year or fiscal year.

• Duration: No later than the 90th day from the end of the fiscal year (e.g., March 31st for a year ending December 31st).
• Submission method: Currently, the submission of financial statements and related appendices is mainly done through the General Department of Taxation's electronic system: using the tax declaration support software (HTKK) to prepare financial statements and tax returns; and sending files via the General Department of Taxation's electronic portal (thuedientu.gdt.gov.vn). Businesses need to attach the tax audit report file (PDF) along with the tax settlement documents.

Detailed instructions on how to submit tax audit reports online.

The process of submitting tax audit reports online requires thorough preparation:

Data preparation steps

• Complete the financial statements and audit report: Ensure that the signatures and seals of the business and the auditing firm are complete and valid on the original tax audit report.
• Preparing corporate income tax return documents: Use the HTKK software to prepare the corporate income tax return (form 03/TNDN) and financial statements according to Circular 200/2014/TT-BTC or Circular 133/2016/TT-BTC.
• Create an attachment: Transfer tax audit report (including financial statements and all auditor opinions) should be converted to PDF format. This file must have a clear and easily identifiable name.

File submission and confirmation process

• Log in to the system: Access the electronic tax portal (thuedientu.gdt.gov.vn) and log in using your electronic tax account (using a digital signature).
• Select the function to submit the declaration: Select the corporate income tax return form that has been prepared.
• Attached is the tax audit report: In the document attachment interface, select the prepared tax audit report file (PDF). This attachment is mandatory for entities subject to auditing.
• Sign electronically and send: Use your digital signature to electronically sign and click submit. The system will return a confirmation message that the submission was successful. Please carefully check the confirmation message for the tax audit report submission.

Legal consequences for failing to submit or submitting audit reports late.

Failure to submit or late submission of tax audit reports to the tax authorities constitutes a violation of tax management and independent auditing laws and will be subject to administrative penalties under Decree 125/2020/ND-CP (on administrative penalties for tax and invoice violations) and Decree 41/2018/ND-CP.

• Penalty for late payment: The fines can range from a few million to tens of millions of VND, depending on the length of the delay and the severity of the offense.
• More serious consequences: Tax authorities may classify businesses as high-risk for tax purposes, leading to a higher likelihood of frequent audits and inspections. In serious cases, deliberate non-compliance can impact business operations and transactions with partners.

Tips for improving the quality of tax audit reports.

To ensure a tax audit report meets the highest standards, businesses need to focus on the following professional aspects.

Standardizing audit evidence

Every economic transaction, especially those with a significant impact on corporate income tax, must be supported by sufficient and appropriate audit evidence. Independent auditors will evaluate this evidence in accordance with VSA 500.

Complete the related party transaction (transfer pricing – TP) documentation.

According to Decree 132/2020/ND-CP, related-party transactions are a key focus of tax audits. Auditors will pay particular attention to whether the enterprise has prepared a related-party transaction file (TP file). If the enterprise has related-party transactions, the detail and accuracy of the TP file will determine the reliability of the tax audit report and the level of tax risk. Enterprises need to ensure that their TP file is readily available and conforms to international standards.

Assessing the reasonableness of the provision

Provisions (such as provisions for doubtful receivables and provisions for inventory devaluation) are often a point of contention between accountants and tax authorities. Accountants record them based on estimated losses, while tax authorities only allow provisions when there is clear evidence (as stipulated by the Ministry of Finance). Auditors will assess the basis for these calculations, ensuring that the handling of this discrepancy is transparently reflected in the tax audit report.

Mandatory and voluntary annotations in tax audit reports.

The explanatory notes to the financial statements are an indispensable part, helping to explain the transactions in detail.

• Explanation of Corporate Income Tax: It is mandatory to present a comparison between accounting profit before tax and current corporate income tax expense, clarifying temporary and permanent differences (according to VSA 706). This is the most important point that the tax authorities will consider when receiving the tax audit report.
• Explanation of events occurring after the end of the accounting period: If a major event occurs after the closing date but before the release date tax audit report (For example, if a major tax lawsuit arises), the auditor must make a note to ensure that users of the financial statements are not misled about the financial situation as of the reporting date.

Utilize auditing services from a professional network.

The reliability of a tax audit report depends heavily on the competence and reputation of the auditing firm. Choosing an auditing firm within a professional network with extensive experience in the tax field will ensure that your tax audit report not only complies with VSA but also anticipates potential tax audit risks from the General Department of Taxation.

Analyze real-world examples of the impact of tax audit reports.

To further clarify the impact of tax audit reports, let's consider an illustrative example of how a specific audit opinion can affect tax risk and business decisions.

Case study: exceptions regarding revenue recognition from construction contracts

A construction company (company A) recognizes revenue using the percentage-of-completion method (VAS 15), but the tax authorities require it to recognize revenue using the full-completion method for some contracts.

• Accounting problem: The auditor determined that the recording method according to VAS 15 was reasonable but could not simultaneously satisfy all tax regulations in the current year.
• Auditor's opinion: The auditor issued an unqualified opinion regarding the recognition of revenue and expenses for specific construction contracts.
• Impact on taxes: When this tax audit report is submitted, the tax authorities immediately identify the risks to revenue and corporate income tax. They will prioritize auditing the excluded contracts to reassess tax obligations.
• Financial impact: The bank may require company A to revise its assumed financial statements using the full completion method to assess its lending capacity, as the exception has reduced the reliability of the audited financial statements.

This example shows that a tax audit report is not just a confirmation document, but also a tool for conveying specific risk information.

Optimizing the process for preparing tax audit reports.

To shorten audit time and receive tax audit reports on time, businesses need to prepare their documentation systematically.

Summary of optimized procedures for preparing tax audit reports.

Stage	The main mission of the business	Objectives for a tax audit report
Phase 1: Preliminary	Provide legal documents and key accounting policies.	The auditor determines the scope and develops a preliminary audit plan.
Phase 2: In-site	Provide internal control systems, periodic accounting records, and records of major transactions.	Auditors assess risks, conduct control tests, and identify significant tax risks.
Phase 3: Final	Provide draft financial statements, accounts receivable/payable reconciliation statements, corporate income tax settlement documents, and explanatory documents.	The auditor completes the basic procedures, summarizes the errors, finalizes the opinion, and issues the tax audit report.

Close cooperation with auditors, especially in explaining accounting-tax discrepancies, will ensure that the tax audit report is issued within the 90-day deadline, avoiding late payment penalties.

Conclude

A tax audit report is a crucial document confirming the accuracy and transparency of a company's financial operations and tax obligations for the year. Submitting the report not only reduces the risk of tax audits and inspections but also strengthens the trust of stakeholders. A tax audit report with a fully unqualified opinion contributes to enhancing reputation, increasing competitiveness, and supporting sustainable development. Therefore, understanding the relevant parties, deadlines for submission, and how to handle accounting-tax discrepancies is essential for managers.

If a business needs to prepare a standardized tax audit report, ensuring compliance with Vietnamese law and international practices, support from a professional firm is key. MAN – Master Accountant Network provides in-depth financial statement auditing and tax consulting services, helping businesses obtain valid tax audit reports while optimizing issues related to corporate income tax, VAT, and related-party transactions. With MAN, a tax audit report is not just a compliance document but also a tool to support management and sustainable development.

 

Service contact information at MAN – Master Accountant Network

• Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
• Mobile/Zalo: 0903 963 163 – 0903 428 622
• Email: man@man.net.vn

Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.