Financial statement audit services Foreign direct investment (FDI) enterprises are not only required to undergo audits under the 2011 Independent Auditing Law, but this also serves as a "shield" protecting the rights of foreign investors in Vietnam. According to Decree 17/2012/ND-CP, foreign-invested enterprises must have their annual financial statements audited before submitting them to state management agencies.
The surge in FDI into Vietnam in recent years, with total registered capital reaching nearly US$36.6 billion in 2023 (according to the General Statistics Office), has led to stricter requirements for tax and financial transparency. Utilizing high-quality financial statement audit services for FDI enterprises helps them thoroughly address errors related to transfer pricing, unreasonable expense recording, and ensure accurate data before tax audits. Let's explore the legal and practical aspects in detail in the article below.
Mandatory legal framework for auditing FDI enterprises.
Before delving into the process, businesses need to understand the core legal basis governing auditing obligations. In Vietnam, foreign-invested enterprises (FDI) are subject to strict regulations under specialized laws to ensure national financial security.
Based on the Law on Independent Auditing and Decree 17/2012/ND-CP
According to Article 37 Law on Independent Auditing No. 67/2011/QH12, financial reports annual of foreign-invested enterprises It is mandatory to be audited by an independent auditing organization. This applies to all types of companies, from limited liability companies and joint-stock companies to joint ventures operating in Vietnam.
Failure to comply with this regulation may result in serious administrative penalties. Specifically, according to Decree 41/2018/ND-CPFailure to conduct a mandatory audit may result in a fine of VND 40,000,000 to VND 50,000,000, and the offending entity will be required to conduct a re-audit in accordance with regulations.
Deadline for submitting audited financial statements
FDI enterprises need to pay special attention to the deadline for submitting financial statements. Typically, this deadline is 90 days from the end of the fiscal year (usually March 31st of the following year for fiscal years ending December 31st).
After being certified by the financial statement auditing service provider for FDI enterprises, the financial statements must be submitted to:
- The Tax Authority is in direct management.
- Local Statistics Agency.
- The agency issuing the Investment Certificate (Department of Planning and Investment or Industrial Park/Export Processing Zone Management Board).
Why are financial statement audits for FDI companies the top choice?
Utilizing professional financial statement audit services for FDI enterprises offers value far exceeding that of a standard compliance report. For multinational corporations, the differences between Vietnamese Accounting Standards (VAS) and International Financial Reporting Standards (IFRS) always present a significant challenge in consolidating global financial statements.
Ensuring honesty and objectivity.
Professional auditors will review the documentation system, verify the existence of assets and the completeness of liabilities. This helps foreign investors feel secure about the operational status of their branch or subsidiary in Vietnam, where they do not directly manage the business on a daily basis.
Optimizing tax obligations and managing risks.
In the context of tax authorities tightening management of transfer pricing under Decree 132/2020/ND-CP, the financial statement audit service for FDI enterprises plays a crucial role in closely reviewing related-party transactions. Auditors will provide timely adjustment recommendations to avoid the risk of being assessed taxes or facing large late payment penalties.
Assistance with loan applications and bidding processes.
Banks and credit institutions in Vietnam typically require financial statements to be audited by reputable firms before disbursing medium and long-term loans. A clean financial statement (Clean Opinion) is the best evidence of the financial capacity and credibility of FDI enterprises in the market.
Table of data: Comparison of risks with and without independent audit
To better understand the importance of auditing the financial statements of FDI enterprises, let's consider the risk comparison table below:
| Comparison criteria | Unaudited/Weakly Audited Businesses | Businesses use reputable auditing services. |
| Compliance with the law | The risk of administrative fines ranging from 40 to 50 million VND. | Ensure that reports are submitted on time and in accordance with regulations. |
| Tax risk | Expenses are easily disallowed, and taxes are misassessed due to VAS errors. | Tax risks are identified and addressed in advance. |
| Related party transactions | Lack of supporting documentation makes one vulnerable to transfer pricing audits. | Receive advice on a sound and transparent trading structure. |
| Investor confidence | Doubts about the accuracy of profit figures. | Have complete confidence in the internal control system. |
| Capital raising capacity | Difficulties when working with international banks. | Transparent financial records, easy access to capital. |
The process for providing professional financial statement audit services for FDI enterprises.
A standardized process helps ensure the quality of the audit and avoids disrupting the company's daily operations. Typically, professional service providers will follow these steps:
Pre-audit phase (Planning)
At this stage, the financial statement audit service provider for FDI enterprises will understand the specific industry characteristics of the client. For example, an FDI enterprise in the garment industry will have different risks than one in the software industry. The auditor will assess the risk of material misstatement and develop a detailed audit plan.
Conduct on-site audits (Fieldwork)
This is the most crucial stage of the financial statement audit service for FDI enterprises. The audit team will directly visit the company's office to conduct a physical inventory of cash and assets, send debt confirmation letters, and review and select original accounting documents to ensure the validity of all transactions.
Compiling and publishing reports.
After gathering sufficient evidence, the auditor will discuss the discovered errors with the board of directors. The financial statement audit service for FDI enterprises will conclude with the issuance of the official audit report and a Management Letter to alert the management to any system deficiencies.
Reference price list for financial statement audit services for FDI enterprises.
Below is a table of estimated service fees based on the total assets and revenue of the business. These fees may vary depending on the complexity of the financial transactions.
| Business size (Total assets/Revenue) | Estimated audit service fee (VND) | Execution time (Estimated) |
| Under 20 billion VND | 15.000.000 – 25.000.000 | 5-7 business days |
| From 20 billion to 50 billion VND | 25.000.000 – 45.000.000 | 7-10 business days |
| From 50 billion to 100 billion VND | 45.000.000 – 70.000.000 | 10-15 business days |
| From 100 billion to 500 billion VND | 70.000.000 – 150.000.000 | 15-20 business days |
| Over 500 billion VND | Direct agreement | Depending on the workload |
Note: The above price list is for reference only. Actual fees will depend on the specific location, number of services, and reporting requirements of each corporation. Please contact us directly to receive a detailed and optimal quote for your business.
See the detailed article here: Price list for financial statement audit services
Common irregularities in the financial reporting of FDI enterprises.
Based on practical experience in auditing the financial statements of FDI enterprises, experts have identified common types of errors that businesses need to pay special attention to in order to avoid tax arrears.
Errors in recording revenue and cost of goods sold.
Many FDI enterprises record revenue incorrectly or inconsistently with Incoterms terms in import and export contracts. This leads to serious discrepancies between financial statements and VAT and corporate income tax returns when authorities conduct audits.
Violation of regulations regarding deductible expenses.
Interest expenses exceeding the 30% EBITDA ceiling under Decree 132 are often overlooked by entities when preparing their own reports. Additionally, management expenses allocated from the parent company but lacking valid documentation are a top target for tax inspectors today.
Fixed asset management and depreciation
Incorrect application of depreciation timeframes according to Circular 45/2013/TT-BTC or failure to carry out asset liquidation according to legal procedures frequently occurs at large-scale FDI factories. Financial statement auditing services for FDI enterprises help review and accurately adjust these issues.
Optimal solution: Combining independent audit and internal control.
Although financial statement audits for FDI enterprises address year-end issues, building a strong internal control system is crucial for sustainable business operation.
The role of internal auditing in FDI enterprises
Internal auditing helps detect fraud and errors early, as soon as they arise. This minimizes the workload and audit costs for the year-end independent audit. For large FDI corporations, this is an indispensable department for maintaining compliance with global policies.
Applying technology in financial management
Using ERP software (such as SAP, Oracle) helps standardize input data according to VAS and IFRS standards. When data is systematized, the financial statement audit service for FDI enterprises will be faster and more accurate, while minimizing errors caused by human factors.
Things to consider when choosing a financial statement audit service provider for FDI enterprises.
Not all auditing firms have the capacity to conduct audits for foreign entities. The following criteria will help you choose the right partner:
- Operating license: They must be on the list of qualified professionals published by the Ministry of Finance.
- Practical experience: Priority will be given to units that have worked with businesses of the same nationality or in the same industry.
- Team of experts: Thorough understanding of both VAS and IFRS, and the ability to communicate in a foreign language to explain things to the investor.
- Reputation: A report from a reputable source will be more valuable to tax authorities and banks.
Conclude
Auditing the financial statements of FDI enterprises plays a crucial role in affirming enterprise value and ensuring legal safety. Proactive auditing is not only about compliance with obligations but also an opportunity to optimize the financial system, creating a solid foundation for expansion plans in Vietnam.
Understanding the challenges faced by foreign direct investment (FDI) businesses, MAN – Master Accountant Network provides comprehensive solutions ranging from independent audits to in-depth financial statement audits. We help FDI businesses build robust control systems, prevent risks at their source, and optimize operational efficiency. Contact MAN today for professional advice to help your business achieve sustainable breakthroughs.
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 Financial Statement Auditing Services for FDI Enterprises
Do newly established FDI businesses that have not yet generated revenue need to be audited?
Yes. According to Vietnamese law, all FDI enterprises are required to have their annual financial statements audited, regardless of whether they are making a profit or a loss, or whether they have yet to generate revenue.
How are the costs of auditing financial statements for FDI enterprises calculated?
Service fees are typically based on the total asset size, revenue, number of transactions, and complexity of the accounting system. Businesses should contact us to receive a detailed quote tailored to their specific needs.
Is it possible to use an audit report from the parent company overseas for submission in Vietnam?
No. Businesses must use reports prepared by an auditing firm legally operating in Vietnam and complying with the current Vietnamese Auditing Standards (VSA).
