According to the regulations at Securities Law 2019 and Decree 155/2020/ND-CPSecurities trading organizations and public investment funds are required to conduct annual financial statement audits. Auditing investment funds and fund management companies not only helps detect accounting errors but also assesses the effectiveness of internal control systems, thereby maintaining stability and confidence in the financial market. Let's explore these in-depth aspects in detail below.
The nature and purpose of auditing investment funds and fund management companies.
Auditing investment funds and fund management companies plays a crucial role in protecting investor rights and ensuring asset transparency. By verifying the existence, ownership, and fair value of investments, audits help ensure that the Net Asset Value (NAV) is accurately reflected, limiting fraud and misrepresentation of information. Simultaneously, this activity must strictly comply with securities laws, supporting funds and fund management companies in meeting governance requirements and minimizing legal risks.
Protecting investor rights and asset transparency.
The essence of auditing investment funds and fund management companies is to verify the existence and ownership of assets in the investment portfolio. Investors rely on the auditor's opinion to be confident that their invested capital is being managed properly and accurately reflected in the NAV.
Misvaluation of assets can lead to serious legal and financial consequences. Therefore, the primary goal of auditing investment funds and fund management companies is to prevent fraud and profiteering, and to ensure that all information disclosed to the public is truthful and reasonable.
Strict adherence to the legal framework in Vietnam.
Auditing activities of investment funds and fund management companies must adhere closely to current legal regulations. This helps management entities avoid the risks of administrative penalties or suspension of operations from state management agencies.
| Legal documents | Content related to auditing |
| Securities Law No. 54/2019/QH14 | Regulations regarding the obligation to audit annual financial statements. |
| Decree 155/2020/ND-CP | Details on corporate governance of fund management companies and fund operations. |
| Circular 99/2020/TT-BTC | Guidelines for the management and operation of fund management companies. |
| Circular 98/2020/TT-BTC | Regulations on the management of securities investment funds. |
The main focus of audits on investment funds and fund management companies.
In auditing investment funds and fund management companies, correctly identifying the focus area determines the quality and reliability of the audit opinion. The scope is not limited to the financial statements of the fund management company but also includes the investment funds managed by the entity. The audit focus concentrates on capital, fee revenue, operating expenses, compliance with financial safety ratios, and especially the existence and value of the investment portfolio through comparison with the custodian bank and the securities depository system.
Auditing at Fund Management Companies (FMCs)
For asset management, auditors focus on: financial reports This includes examining both the individual and consolidated figures of the business itself. The content includes verifying the registered capital, revenue from fund management fees, bonus fees, and operating expenses.
In particular, if the fund management company is a public company, the auditing of investment funds and fund management companies will be more stringent in terms of governance. Auditors need to assess whether the company maintains financial safety ratios as prescribed by the State Securities Commission.
Auditing various types of securities investment funds.
Investment funds are entities without legal personality but possess independent assets. Auditing of investment funds and fund management companies currently focuses on fund types such as: open-ended funds, closed-end funds, member funds, ETFs, and real estate investment trusts (REITs).
The key aspect is the portfolio audit. Auditors must reconcile the securities balances at the Supervisory Bank and the Vietnam Securities Depository (VSDC) to ensure there are no discrepancies between the books and the actual balance.
Requirements regarding personnel capacity and control mechanisms.
Human resource capacity and control mechanisms are key factors in ensuring the effectiveness of audits of investment funds and fund management companies. Securities law imposes strict requirements on both internal audits at fund management companies and independent audit organizations. Meeting standards regarding expertise, professional certifications, and independence not only improves audit quality but also contributes to risk management, prevents conflicts of interest, and protects investor rights.
The role of internal audit in quality management.
By law, public fund management companies are required to have an internal audit department reporting directly to the Board of Directors. Personnel performing audits of investment funds and fund management companies in these companies need to have a deep understanding of financial analysis and risk management.
Typically, professionals holding a Chartered Financial Analyst (CFA) certification at Level II or higher are preferred. They act as the first line of defense in detecting conflicts of interest between fund managers and investors in the fund.
Standards for independent auditing organizations
Not all auditing firms are authorized to audit investment funds and fund management companies. The firm must be on the list of auditing firms approved by the State Securities Commission to audit entities with public interest in the securities sector.
Key areas of expertise in the audit process for investment funds and fund management companies.
In the auditing of investment funds and fund management companies, correctly identifying key transactions helps protect investor interests and ensure information transparency. Audits typically focus on asset valuation, NAV calculation, and compliance with investment limits as stipulated in the fund's charter and legal regulations. Strict control over these aspects helps to promptly detect discrepancies, mitigate the risk of inaccurate information disclosure, and ensure the fund operates within the legal framework.
Control the valuation process and calculate NAV.
Net asset value (NAV) is the most important metric of a fund. Auditors of investment funds and fund management companies must confirm that the valuation process for listed and unlisted securities complies with the fund's charter and relevant regulations.
Auditors will examine price data sources (such as closing prices from the HOSE, HNX exchanges, or quotes from financial institutions) to recalculate the NAV and compare it with the figures published daily or weekly by the fund management company.
Checking compliance with investment limits
Each fund has certain investment restrictions to diversify risk. Fund auditors and fund management companies will review whether the fund violates ratios such as: not investing more than 15% of the total asset value in securities of a single issuer (for open-ended funds).
| Compliance indicators | Common regulations (Open-ended fund) |
| Invest in an issuer. | Not exceeding 15% total asset value. |
| Investing in companies within the same group. | Not exceeding 30% of the total asset value. |
| Investing in derivatives | This is solely for risk prevention purposes. |
| Debt securities holding ratio | Depending on the strategy outlined in the regulations. |
Reasons to choose MAN for investment fund and fund management company auditing services.
Choosing the right auditing firm determines the reliability of reports and the fund's reputation in the market. MAN – Master Accountant Network's investment fund and fund management company auditing services are specifically designed for the securities sector, with a team of internationally certified experts, an audit process that applies data analysis, and a thorough understanding of Vietnamese securities law. MAN not only provides independent audit opinions but also partners with businesses to improve their long-term risk control and management systems.
Our team of experts holds prestigious international certifications.
At MAN – Master Accountant Network, we understand that auditing investment funds and fund management companies is a highly specialized field. Our core team not only holds CPA Vietnam certifications but also includes experts with CFA and ACCA qualifications. The combination of investment analysis thinking and standard accounting principles enables MAN to provide insightful assessments of portfolio risk, rather than simply examining superficial figures.
Modern auditing processes are based on technology (Data Analytics).
We utilize big data analytics tools to reconcile transactions and recalculate NAV for our clients. Auditing investment funds and fund management companies at MAN goes beyond manual probabilistic sampling. We have the capability to examine 100% transaction data during the period to detect even the smallest discrepancies in valuation or fee allocation, helping fund management companies maintain absolute credibility with investors.
In-depth understanding of the Vietnamese securities legal system.
With extensive experience working with numerous financial institutions, MAN always stays up-to-date with the latest drafts and circulars from the Ministry of Finance and the State Securities Commission. When choosing MAN for auditing investment funds and fund management companies, businesses not only receive audit reports but also advice on loopholes in their internal control systems, helping to prevent the risk of administrative penalties before routine inspections take place.
Specific challenges in auditing investment funds and fund management companies.
Auditing investment funds and fund management companies faces many unique challenges due to the increasing complexity of the financial market and its heavy reliance on technology. Besides traditional assets, the emergence of derivative financial instruments and structured products increases the demand for in-depth valuation capabilities. Simultaneously, risks arising from information technology systems necessitate close integration of auditing with IT auditing to ensure the integrity and security of financial data.
The complexity of new financial instruments
Nowadays, funds not only invest in stocks and bonds but also participate in futures contracts, options, or structured products. This requires personnel performing fund audits and fund management companies to have knowledge of valuing complex financial models.
Risks from information technology systems
The entire process, from order placement and execution to accounting, is carried out through software. If the IT system has vulnerabilities, financial data can be manipulated. Therefore, modern audits of investment funds and fund management companies always include information system audits (IT audits).
Conclude
Auditing investment funds and fund management companies acts as a filter, helping to make the financial market healthier and more transparent. Properly implementing auditing procedures is not only a legal responsibility but also a foundation for fund management companies to build credibility with domestic and international partners. In the digital age, as investment activities become increasingly diverse, the role of professional auditing firms is further enhanced.
To ensure compliance and optimize control systems, businesses need a partner with in-depth expertise in the finance and securities sector. MAN – Master Accountant Network provides specialized auditing, accounting, and tax consulting solutions for financial institutions. With a team of experienced professionals knowledgeable in Securities Law and market practices, MAN is committed to delivering tangible value in auditing investment funds and fund management companies, allowing partners to focus on sustainable growth strategies.
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 Auditing Investment Funds and Fund Management Companies
Why is NAV the focus of fund audits?
Net Asset Value (NAV) determines the buy/sell value for investors. If the NAV is incorrect, investors' interests will be directly affected, leading to legal risks for the fund management company.
Will a company that manages assets without an internal audit department be penalized?
Yes. According to the decrees on administrative penalties in the securities sector, the lack of an internal audit department for eligible companies will result in a fine and a requirement to rectify the situation.
Is the CFA certification required for fund auditors?
While not legally mandatory like the Certified Public Accountant (CPA) certification, the CFA is an extremely important measure of professional competence for effectively auditing investment funds and fund management companies.
