Auditing state-owned enterprises is a core activity aimed at monitoring the management and use of national financial resources and assets within economic entities. Law on State Audit 2015 And with the 2019 amendments to the Law on Financial Audits, this activity plays a crucial role in maintaining financial discipline and ensuring that corporations and state-owned enterprises operate in accordance with the law. Given the significant contribution of the state-owned sector to GDP, auditing helps minimize losses and enhance accountability of leaders.
Statistics from reports by the State Audit Office (SAO) show that every year this agency recommends financial handling of tens of trillions of VND at state-owned enterprises. In particular, according to Decision 22/QD-KTNNThe current focus is not only on compliance but also on evaluating economic efficiency and effectiveness (3E). This confirms that auditing state-owned enterprises is a sharp tool for the State to exercise its ownership rights and ensure transparency in the socialist-oriented market economy.
Legal framework governing the auditing of state-owned enterprises.
To fully understand the auditing of state-owned enterprises, accountants and managers need to have a thorough understanding of the current legal framework. This framework creates a strong legal foundation for audit teams to carry out their duties at the entity.
Fundamental laws and decrees
The foundation of state-owned enterprise auditing is based on regulations defining the authority and scope of auditing. Correctly identifying the scope helps to clearly distinguish between state auditing and independent auditing.
- Law on State Audit No. 81/2015/QH13: Regulations on the functions and tasks of the State Audit Office.
- Law amending and supplementing a number of articles of the Law on State Audit (2019): Expanding the right to access electronic data.
- Law on Management and Use of State Capital Invested in Production and Business at Enterprises (Law No. 69/2014/QH13).
Professional guidelines of the State Audit Office
In addition to the framework law, guidelines on evidence and risk in auditing state-owned enterprises are regularly updated to align with international ISSAI standards.
| Document | Main content |
| Decision 02/2020/QD-KTNN | General audit procedures of the State Audit Office |
| Decision 22/QD-KTNN | Guidelines for auditing state-owned enterprises |
| State Audit Standard 1500 | Regulations regarding audit evidence in the public sector. |
Subjects and scope of auditing state-owned enterprises.
Identifying the target entity is the first step in the audit process of state-owned enterprises. According to the new regulations, this scope is not limited to state-owned enterprises but also extends to units with lower ownership percentages.
Classification of businesses subject to auditing.
State-owned enterprise audits focus on three main areas to ensure no management gaps are overlooked:
- State-owned enterprises (Corporations, General Corporations) have 100% of charter capital.
- State-owned enterprises hold more than 50% of charter capital.
- State-owned enterprises with capital under 50% (Audits are conducted on a thematic basis or when specifically requested).
Scope of financial and compliance audit
When auditing state-owned enterprises, auditors review everything from financial statements and investment capital settlements to compliance with tax and social insurance policies. This helps the entity identify potential risks in internal governance.
The core purpose of auditing state-owned enterprises.
Why do agencies need to pay special attention to auditing state-owned enterprises? The purpose of this activity goes far beyond simply identifying errors; it aims at the sustainable development of the enterprise.
Providing reliable information to the National Assembly and the Government.
Through audit reports of state-owned enterprises, authorities have a basis for approving budget settlements and issuing macroeconomic policies. Transparency in audit reports is a measure of the health of the state-owned economic sector.
Detecting and preventing the misappropriation of public assets.
One of the key tasks of auditing state-owned enterprises is identifying irregularities in bidding, asset procurement, and off-sector investments. Strictly addressing audit recommendations plays a crucial role in combating corruption.
Consulting and improving internal management systems.
After each audit of state-owned enterprises, the unit will receive recommendations for amending financial regulations. This is an opportunity for enterprises to optimize operational processes and reduce unnecessary costs.
The role of consulting firms in supporting businesses before audits.
Before receiving audit teams from state-owned enterprises, many businesses opt for review services from professional accounting networks to minimize the risk of legal errors.
Review the accounting documentation system.
Thorough and well-organized documentation facilitates smooth collaboration with state-owned enterprise audit teams and avoids misunderstandings arising from insufficient evidence.
Consulting on resolving outstanding financial issues.
Experts knowledgeable in auditing state-owned enterprises will provide advice on how to account for complex items such as provisions for bad debts and how to handle assets awaiting liquidation in accordance with guiding circulars.
The process for auditing state-owned enterprises according to the 3E standards.
The 3E approach (Economy, Efficiency, Effectiveness) is an inevitable trend in modern state-owned enterprise auditing. This process requires close coordination between the audit team and the audited entity.
Audit preparation phase
This is the survey and information gathering phase regarding the business characteristics and internal control system. Auditors will assess risks to determine materiality in the audit of state-owned enterprises.
Conduct on-site audits.
During this phase, detailed verification, confirmation, and inspection procedures are implemented. The application of information technology in auditing state-owned enterprises helps shorten the time while still ensuring the accuracy of the evidence.
Prepare a report and announce the results.
Audit reports on state-owned enterprises must be truthful, objective, and supported by verifiable evidence. All conclusions in the report carry legal weight and require the entity to implement them seriously.
Key areas of focus in current state-owned enterprise audits.
The scope of state-owned enterprise audits is no longer scattered but focuses on "hot spots" with a high risk of capital loss. Audit topics are usually developed based on the direction of the National Assembly for each period.
Auditing the management and use of capital and assets.
Auditors will focus on safeguarding state capital, evaluating the effectiveness of project investments, and managing accounts receivable. This is the most important aspect of auditing state-owned enterprises to assess their financial capacity.
Auditing the fulfillment of obligations to the state budget.
The declaration and payment of taxes (VAT, corporate income tax, resource tax, etc.) by enterprises are thoroughly reviewed. Errors in this area often lead to large tax arrears after the completion of audits of state-owned enterprises.
Auditing of restructuring and equitization activities.
In the context of accelerating privatization, auditing state-owned enterprises plays a crucial role in determining enterprise value and preventing the undervaluation of land assets for personal gain.
Challenges and difficulties when auditing state-owned enterprises with capital holdings below 50% (TP3T).
Expanding the scope of state-owned enterprise audits to include entities holding capital below 50% is facing several obstacles related to coordination mechanisms and personnel.
Barriers to access to information
In joint-stock companies where the state does not hold controlling ownership, requests for documents from state-owned enterprise audit teams sometimes encounter resistance from private shareholders.
Limitations in professional resources
The number of state-owned enterprises is very large, while the State Audit Office's team responsible for auditing state-owned enterprises is limited. This creates pressure in terms of time and workload.
| Challenge | Proposed solution |
| The company is too large. | Applying risk-based auditing |
| Discrete data | Building a Big Data system for the auditing industry. |
| Lack of specialized expertise | Collaborating with reputable independent auditing organizations. |
Solutions to improve the quality of auditing activities in state-owned enterprises.
For the auditing of state-owned enterprises to be truly effective, a synchronized approach is needed, encompassing both institutional frameworks and implementation techniques.
Complete the system of standards and guidelines.
There is a need to continuously update the auditing procedures for state-owned enterprises to closely reflect the changing realities of the digital economy, especially the guidelines on IT auditing and environmental auditing.
Promoting the application of technology in auditing.
The use of data analysis software helps detect irregularities in accounting ledgers more quickly. This is a breakthrough in the methodology of auditing state-owned enterprises.
Conclude
Auditing state-owned enterprises is a rigorous process requiring thorough preparation in both data systems and management thinking. A proper understanding of the nature and legal regulations not only helps enterprises safely pass audits but also serves as a leverage to improve business efficiency. For entities facing these audits, having a professional partner is absolutely essential.
MAN – Master Accountant Network proudly stands as a leading provider of comprehensive accounting, tax, and pre-audit review solutions. With a team of experienced professionals in the field of auditing state-owned enterprises, we help you identify risks, optimize tax processes, and ensure all data strictly adheres to current standards. Don't let small mistakes affect your business's reputation and growth. Contact MAN today for the most professional auditing and tax accounting services!
Service contact information at MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
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- 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 Auditing State-Owned Enterprises
Does the state-owned enterprise 20% have to undergo an audit by the State Audit Office?
According to current regulations, the State Audit Office has the right to audit state-owned enterprises with respect to the state capital in these entities, usually through thematic audits or when there are signs of violations.
What is the timeframe for conducting an audit of a state-owned enterprise?
Typically, an audit does not exceed 60 days; in complex cases, it may be extended, but not by more than 30 days, as stipulated in the Law on State Audit.
Are the conclusions of the state-owned enterprise audit team legally binding?
Yes. Recommendations regarding financial management and mechanism improvement in state-owned enterprise audit reports are mandatory. Failure to comply may result in administrative penalties or legal prosecution.
