Concept audit of financial statements It serves as a guiding principle for transparency in the financial systems of each enterprise and the entire national economy. In the context of Vietnam's deep integration into the global economy, compliance is crucial. Law on Independent Auditing No. 67/2011/QH12 It is not only a legal obligation but also a passport that helps businesses access loans and attract international investment.
According to data from the General Statistics Office, the rate foreign direct investment (FDI) enterprises Annual audits, achieving nearly 100% of the target, significantly contribute to protecting shareholder rights and market stability. A thorough understanding of financial statement auditing helps managers identify risks, optimize accounting processes, and ensure all data is presented truthfully and fairly according to Vietnamese Accounting Standards (VAS) and International Financial Reporting Standards (IFRS). Let's delve into the details to explore the practical value of this activity.
The concept of financial statement auditing and its legal basis.
Before delving into the technical details, we need to agree on the definition and the legal documents currently governing this activity in Vietnam.
Precise definition according to the Independent Auditing Act.
The concept of financial statement auditing is understood as the activity of professional auditors and auditing firms to examine and provide an opinion on the fairness and reasonableness in material respects of financial statements. financial reportsThis is the process of gathering and evaluating evidence to determine the degree of conformity between the information being examined and established standards.
The core objective is to enhance user confidence in financial reporting. This is particularly important for banks when evaluating loan applications or for investors when making investment decisions in a specific project.
The legal documents that directly govern
To properly understand the concept of financial statement auditing, businesses need to have a firm grasp of the following legal framework:
- Law on Independent Auditing No. 67/2011/QH12: General regulations on auditing activities, rights and obligations of the parties.
- Decree 17/2012/ND-CP: Detailed guidance on the implementation of certain provisions of the Law on Independent Auditing.
- Circular 214/2012/TT-BTC: The Vietnamese Auditing Standards (VSA) system of 47 standards forms the "backbone" for all data verification processes.
- Accounting Law No. 88/2015/QH13: Regulations regarding the preparation and presentation of financial statements before they are submitted to an audit.
Entities required to have their financial statements audited
Entities required to have their financial statements audited According to Vietnamese law, specific groups of organizations and businesses not only need to correctly understand the concept of financial statement auditing but are also required to conduct annual periodic audits as mandated by state management agencies.
Foreign direct investment (FDI) group of businesses
According to Article 15 of Decree 17/2012/ND-CP, foreign-invested enterprises are required to have their financial statements audited annually. This helps state agencies control transfer pricing and ensure compliance with tax obligations.
Credit institutions and public companies
Banks, financial institutions, and companies listed on the stock exchanges (HOSE, HNX) are subject to close supervision. For this group, the concept of financial statement auditing is not just about checking numbers, but also about assessing their internal control systems.
| No. | Business target | Legal basis | Frequency |
| 1 | FDI enterprises | Decree 17/2012/ND-CP | Yearly |
| 2 | Publicly listed company | Securities Law | Annually/Quarterly (review) |
| 3 | Credit institutions, banks | Law on Credit Institutions | Yearly |
| 4 | State-owned enterprises | Law on State Capital Management | Yearly |
| 5 | Projects using ODA funds | Regulations of the Ministry of Finance | According to project phase/completion |
Detailed content of the financial statement audit activity.
To clarify the concept of financial statement auditing, we need to analyze what auditors actually "do" with your accounting records.
Review the balance sheet (Statement of Financial Position).
Accountants will verify the existence and ownership of assets (cash, inventory, fixed assets). The concept of auditing financial statements here includes reconciling balances between the general ledger, subsidiary ledgers, and physical inventory records at the closing date of December 31st.
Review the business performance report.
The focus is on the matching principle between revenue and expenses. Auditors will check for period-correction (cut-off) to ensure the business is not recording fictitious revenue or concealing expenses to artificially inflate profits.
Review of the cash flow statement and explanatory notes.
The concept of auditing financial statements also extends to explaining changes in cash flow. The disclosures must detail depreciation methods, tax policies, and potential liabilities that the business may face in the future.
The VSA standard audit procedure
Understanding the concept of financial statement auditing means understanding a logical process consisting of four rigorous stages to ensure that no material misstatements are overlooked.
Audit planning phase
At this stage, auditors learn about the client's business and internal control systems. Determining materiality helps focus resources on the areas with the highest risk, ensuring the most effective implementation of the financial statement audit concept.
Audit execution phase (Fieldwork)
This is where accounting techniques such as confirmation letters, inventory checks, recalculations, and trend analysis are implemented. Any discrepancies detected will be discussed directly with the chief accountant and the company's board of directors.
Final stage and report release
Based on the evidence gathered, the auditor forms an audit opinion. The concept of auditing financial statements concludes with the signing and issuance of the official audit report, which serves as the basis for submission to the Tax Authority and the Department of Planning and Investment.
Common types of audit opinions
- Full acceptance opinion: The report reflects the facts accurately and fairly.
- Exceptional opinions: There are some inconsistencies, but these do not have a pervasive impact on the overall report.
- Opposing opinion: The errors are too significant; the data cannot be trusted.
- Refusing to comment: It was not possible to gather sufficient evidence due to limitations in the audit scope.
Why do businesses need to hire professional auditing services?
Although not mandatory for businesses, mastering the concept of financial statement auditing and proactively conducting audits can still yield groundbreaking benefits.
Optimize tax obligations and avoid penalties.
Many accounting errors lead to heavy tax arrears during tax settlement. The concept of financial statement auditing helps to review non-deductible expenses and errors in invoices and supporting documents before inspection by regulatory authorities.
Strengthening trust with partners and banks.
A financial report audited by a reputable firm like MAN – Master Accountant Network – will guarantee the financial health of the business. This helps reduce borrowing costs and increase the success rate when bidding on large projects.
Improve internal governance systems.
Through the Management Letter, experts will identify gaps in inventory management processes, advance payment procedures, or expense approval processes. The concept of financial statement auditing then acts as a comprehensive "health check" for the entire operational system.
Common mistakes that lead to financial report rejection
During the process of practicing the concept of financial statement auditing, we have observed that Vietnamese businesses often make the following mistakes:
- Error in accounting for the wrong fiscal year: Revenue from this year is recorded in the accounting books for next year to avoid taxes.
- Invalid documents: Missing delivery receipts, economic contracts, or invoices that have been altered or erased.
- Incorrect provision for bad debts: No provision for doubtful receivables or provision for inventory devaluation is required according to Circular 48/2019/TT-BTC.
- Exchange rate discrepancies: Foreign currency balances at the end of the year are not revalued according to the buying/selling exchange rates of commercial banks.
Conclude
The concept of financial statement auditing is not simply a rigid procedure of checking data, but a strategic solution that helps businesses achieve financial transparency and build credibility in the market. Understanding and correctly implementing the auditing process allows managers to focus on core business activities, minimizing legal and accounting risks related to taxes and accounting.
MAN – Master Accountant Network is a reputable provider of financial statement auditing services, with a team of experienced professionals deeply knowledgeable in Vietnamese law and international standards. MAN not only ensures accurate data but also provides consulting services to improve internal control systems, optimize taxes, and prepare professional loan applications. If your business is looking for a reliable partner to implement effective financial statement audits, contact MAN for advice on the most suitable and optimal solutions.
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
Other services
- Auditing: Auditing Services, Construction Auditing Services, Financial statement audit services
- Accounting and Taxation: Tax accounting services, Tax report, Transfer Pricing Advisory. Tax Accounting Services, Tax reporting services, Transfer Pricing Service, Affiliate Trading Service
- Legal aspects: Work permit services, Business registration certification services, Investment Certificate
- Other: Transfer Pricing Service, Affiliate Trading Service, Business Operations Consulting Services
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 the Concept of Financial Statement Auditing
What is the deadline for submitting the audit report?
Typically, for businesses with FDI capital, the deadline is no later than 90 days from the end of the fiscal year (usually March 31st annually).
Do newly established businesses need to be audited?
If it is a foreign direct investment (FDI) enterprise, it is mandatory to have an audit from the first year of operation, even if no revenue has been generated yet.
What criteria are used to calculate audit fees?
Service fees are based on asset size, revenue, number of transactions, and the complexity of the business.
