An audit contract serves as the most important legal foundation establishing the relationship between the entity being audited and the entity being audited. audit and an independent auditing firm. In the context of increasingly stringent governance regulations in Vietnam, a thorough understanding of the nature and terms of this contract helps the Chief Accountant and management effectively control financial risks.
An audit contract is not simply an administrative procedure to meet the requirements of a state management agency. It is a tool to protect the legitimate rights of businesses when errors occur, and also serves as a basis for evaluating the quality of services provided by the auditing firm throughout the process.
Quick information for managers about audit contracts
- An audit contract is A written agreement between an auditing firm and its client regarding the performance of audit, review, or other assurance services.
- Used for: Define the scope of work, service fees, responsibilities of the Board of Directors, and responsibilities of the auditor.
- Applies to: All businesses that require voluntary auditing or are subject to mandatory auditing under legal regulations.
- When is it needed? This agreement must be signed before the audit is conducted to provide a legal basis and a work plan.
Definition and legal nature of audit contracts
According to the regulations at Law on Independent Auditing No. 67/2011/QH12An audit contract is a written agreement between an auditing firm, a branch of a foreign auditing firm in Vietnam, and the audited entity regarding the performance of audit services. This is a specific type of service contract, in which the subject matter is an opinion on the fairness and reasonableness of financial statements or settlement reports.
The nature of this type of contract is specified in Vietnamese Auditing Standard No. 210 (VSA 210). This standard stipulates that before commencing an audit, the auditor and the client must agree on the terms of the contract. This is to avoid misunderstandings regarding the objectives and scope of the audit, as well as the responsibilities of each party during the process.
This contract is legally binding in writing. Any oral agreements or memoranda that do not contain all the required information shall not replace the formal audit contract in the event of legal disputes or specialized inspections.
The crucial role of audit contracts for Vietnamese businesses.
In modern corporate governance, audit contracts are not just an expense but an investment in transparency. For small and medium-sized enterprises (SMEs), signing a well-defined contract provides the accounting department with a basis to request professional support from experienced auditors.
For large corporations or foreign direct investment (FDI) enterprisesThis contract serves as a tool for explaining matters to shareholders and tax authorities. When a business possesses a detailed contract, the risks of material misstatement are clearly defined and responsibilities are clearly assigned. If auditors fail to detect discrepancies resulting from breaches of professional standards, the contract serves as evidence for the business to claim damages.
The value of the contract also lies in establishing internal control procedures. Through the Management Letter clauses, the business has the right to request the auditing firm to provide recommendations for improving its accounting system. This is an added value that many businesses often overlook when focusing only on the cheapest audit fee.
Detailed sample audit contract (Standard Circular 67)
Below is a sample contract for auditing the final project settlement report, detailed according to standard procedures:
SOCIALIST REPUBLIC OF VIETNAM
Independence – Freedom – Happiness
Number: …/HĐKT [Place name], date … month … year …
AUDIT CONTRACT
(Subject: Audit of the final settlement report for the completed project: ...)
- Based on the Civil Code, the Commercial Law, the Construction Law, the Independent Auditing Law, and other specialized laws;
- Based on Vietnamese Auditing Standard No. 210 – Audit Contracts and Vietnamese Auditing Standard No. 1000 – Auditing of Final Project Accounts;
- Based on the needs and capabilities of both parties.
This contract is made by and between the parties:
Party A (Customer): Representative: ………………………………… Position: …………………… Address: ……………………………………………………………………………….. Tax ID: ……………………………………. Phone: …………………… Account Number: ………………………………….. Bank: ……………
Party B (Auditing firm): Representative: ………………………………… Position: …………………… Address: ……………………………………………………………………………….. Tax ID: ……………………………………. Phone: …………………… Account Number: ………………………………….. Bank: ……………
ARTICLE 1: CONTRACT CONTENTS
Party B provides audit services for the final project settlement report of the project: [Project Name]. The objective is to provide an audit opinion on material aspects regarding fairness, reasonableness, and compliance with investment management regulations. The audit content includes:
- Review legal documents; sources of investment capital; investment costs.
- The cost of investment losses is not included in the value of the acquired asset.
- Verify the value of assets created through investment; liabilities and outstanding inventory.
- Verify compliance with the conclusions of the Inspectorate and the State Audit Office (if any).
ARTICLE 2: RESPONSIBILITIES OF THE PARTIES
2.1. Responsibilities of Party A:
(a) Comply with investment management regulations; Prepare and present a truthful and reasonable final project settlement report.
(b) Maintain the necessary internal controls to ensure that the report is free from material misstatements due to fraud or error.
(c) Provide complete documentation, accounting records, tender documents, AB settlements, and other supplementary documents in a timely manner.
(d) Ensure unrestricted access to the personnel of the audited entity.
(e) Provide Party B with a written “Employer’s Commitment”.
(f) Facilitate field surveys and make timely payments of fees in accordance with Article 5.
2.2. Responsibilities of Party B:
(a) Conduct the audit in accordance with Vietnamese auditing standards, relevant laws and professional ethics.
(b) Ensure the deployment of competent personnel and maintain regular communication with Party A to resolve any issues.
(c) Ensure the principles of independence, objectivity, and confidentiality of information (do not disclose to third parties unless required by law).
(d) Written notification of any significant deficiencies in internal controls that have been discovered.
(e) There is an unavoidable risk that material misstatements may not be detected despite proper planning.
ARTICLE 3: AUDIT REPORT
Upon completion, Party B will provide:
- … an independent audit report in Vietnamese/English, along with the audited final accounts report.
- …the Management Letter (if any) addresses shortcomings and proposes improvements to the accounting and internal control systems.
ARTICLE 4: LOCATION AND TIME OF IMPLEMENTATION
4.1. Location: At Party A's office or the project site.
4.2. Timeframe: Expected completion within … days from the date Party A delivers all necessary documents and the contract comes into effect.
ARTICLE 5: SERVICE FEES AND PAYMENT TERMS
5.1. Total service fee: …………….. VND (In words: ……………..).
5.2. VAT: [10% or as per regulations]. Fee includes/does not include travel expenses. 5.3. Payment method:
- Advance payment of % immediately after signing the contract.
- The remaining payment of % will be made after the official report is released.
ARTICLE 6: COMMITMENT TO IMPLEMENTATION AND DISPUTE RESOLUTION
Both parties commit to fulfilling these terms. Any changes must be notified in writing. Any disputes that arise will be resolved through negotiation; if negotiation fails, the case will be brought before the Economic Court of mutual agreement.
ARTICLE 7: CONTRACT VALIDITY
This contract consists of … copies, with each party retaining … copies of equal legal validity. It is effective from the date of signing until both parties draw up a termination agreement or automatically terminate the contract upon fulfillment of their obligations.
REPRESENTATIVE OF PARTY A REPRESENTATIVE OF PARTY B
(Signed and stamped) (Signed and stamped)
In-depth analysis of the terms in the audit contract.
In audit contracts, there are clauses considered the "backbone" because they directly determine legal liability and the quality of the audit. Without clear understanding, businesses are at high risk of disputes or misunderstandings regarding the auditor's role. Three crucial aspects—defining responsibilities, scope of inspection, and audit limits—will help businesses understand the true nature of the service and proactively manage risks.
Delineation of responsibilities (Article 2)
This is the most important part to avoid litigation later. The company's board of directors needs to understand that they are responsible for integrity of records, and the auditor is responsible for expert opinionIf a business intentionally provides false documents, the auditor will be exempt from legal liability.
Scope of inspection (Article 1)
In project auditing (VSA 1000), the scope extends beyond accounting figures to include... inspect the sceneBusinesses should request auditors to verify the actual quantities to ensure that investment costs are not inflated compared to the actual construction.
Limits of the audit (Clause 2.2-d)
The detailed contract always states: "The auditor provides reasonable, not absolute, assurance." This means the audit is based on a risk-based sampling approach. If a business has sophisticated fraud concealed at multiple levels, the auditor may not detect it even if they follow the correct procedures.
The following parties are required to sign an audit contract.
Based on the Law on Independent Auditing and its guiding documents, the following groups of entities are required to sign periodic audit contracts:
- Foreign-invested enterprises (FDI): Regardless of revenue size.
- Credit institutions and financial institutions: Banks, credit unions.
- Public companies and securities issuers.
- State-owned enterprises: Retain at least 50% of charter capital and key public investment projects.
Optimal timing and process for signing audit contracts.
The ideal time for businesses to select a contractor and sign an audit contract is usually in the third or early fourth quarter of the fiscal year. Signing early allows the audit firm sufficient time to perform inventory and fixed asset verification procedures at the end of the year.
The signing process typically includes the following steps:
- Conduct customer information surveys and assess systemic risks.
- Send the Quotation Letter and the Proposal Letter.
- Negotiate the details of the terms of responsibility and scope of inspection.
- Officially signed by the legal representative.
The current legal framework governing audit contracts.
- Law on Independent Auditing No. 67/2011/QH12: The highest legal basis.
- Circular 214/2012/TT-BTC: National auditing standards system.
- Circular 10/2020/TT-BTC: Regulations on the final settlement of completed projects using state funds.
- Decree 41/2018/ND-CP: Administrative sanctions in the field of auditing.
Case study: Risks arising from inadequate liability clauses in audit contracts.
A real-life case occurred at a construction company in Binh Duong in 2024. The company contracted an audit firm with low fees and vague terms regarding the scope of work. When the tax authorities conducted an audit, they discovered tens of billions of dong in invalid expenses that had been "overlooked" by the auditors.
The company demanded that the auditing firm be held accountable. However, upon reviewing the contract, the "Responsibilities of Party B" section was vaguely stated as "complying with current standards" without specifying detailed audit procedures for the project's legal documentation. As a result, the company had to bear the entire cost of fines and back taxes because there was no legal basis to claim compensation from the auditing firm.
Comparing the characteristics of mandatory and voluntary audits.
Financial statement audit Auditing is not only a legal requirement but also an important tool for businesses to enhance transparency and credibility. Depending on regulations and needs, businesses may be subject to mandatory audits or may choose to conduct voluntary audits. Each form has its own characteristics in terms of purpose, timing, and legal binding nature. The table below will help you clearly compare the differences between these two types to choose the most suitable option.
| Criteria | Mandatory audit | Voluntary audit |
| Legal basis | Specialized Laws and Decrees | Internal management needs |
| Contract signing period | Before the end of the fiscal year | Flexible to meet your needs. |
| Main purpose | Comply with the law. | Raising capital, borrowing from banks |
| Risks of violation | Subject to administrative penalties | Loss of credibility with investors. |
Expert opinion: 3 common mistakes when signing audit contracts in Vietnam
With over 30 years of experience, MAN has identified three common "blind spots" in businesses:
- First of all "Buy the report, not the service."Many businesses only need a single sheet of paper to submit to the authorities, so they choose the cheapest option. This leads to poor quality reviews, and when tax inspectors come, this audit report is completely worthless in protecting the business.
- Secondly "Misconceptions about the responsibility to detect fraud"Auditors only provide reasonable assurance, not absolute assurance. If a business actively conceals documents, the auditor may be exempt from liability. Therefore, the information disclosure clause in the contract needs to be carefully reviewed.
- Thirdly "Ignore the authority regarding Management Letters"This is a valuable document that helps businesses "fix errors" in their control systems. If the contract does not explicitly require the issuance of a Management Letter, the business has wasted an opportunity to improve its accounting system.
Conclude
Establishing and signing a standardized audit contract is the first and most crucial step in protecting a business from financial fluctuations. Don't view this as a mere procedural document; consider it a commitment to quality and responsibility between two professional entities. With clearly defined terms, businesses can confidently focus on their core operations, allowing numbers and transparency to become sustainable competitive strengths.
If your business is looking for a reliable partner to conduct these tasks... audit With expertise and quality, MAN – Master Accountant Network is always ready to support you. We provide complete peace of mind through transparent workflows and a team of leading experts.
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.
Frequently Asked Questions about Audit Contracts
What does the audit fee include?
This typically includes expert fees, travel expenses, and other surcharges. Businesses should clarify whether these fees include VAT to avoid disputes during payment.
Is it permissible to change auditors during the audit process?
Businesses have the right to request a review if they can prove that the auditor lacked competence or violated ethical standards. This should be agreed upon in writing as a supplementary measure.
Why is it necessary to specify the VSA 1000 standard in a project contract?
VSA 1000 is a specialized standard for project settlement. Without its application, the audit may lack procedures for verifying construction norms and unit prices.
How long is the contract valid?
Typically, confidentiality agreements last from the signing of the contract to the completion of the report and payment. However, the confidentiality obligations of the auditing firm often extend indefinitely or for a period agreed upon separately.
What happens if a business is slow to provide the documents?
Contracts often include clauses allowing for extensions of the report release deadline to compensate for any delays by the company, in order to ensure objectivity.
