In the context of a rapidly developing digital economy and increasingly stringent capital markets, financial transparency is no longer an option but a vital requirement for all organizations. Independent auditing law acts as a gatekeeper for this transparency, helping stakeholders gain the most accurate view of a company's financial health.
However, in reality, many entities still frequently violate their auditing obligations. The main reasons stem from a lack of updating to the latest legal regulations or a misunderstanding of the mandatory scope of the law. The core legal framework governing this activity is Law No. 67/2011/QH12, along with a system of amending and supplementary documents that are continuously being refined to suit the management practices of 2025.
The role of independent auditing law in corporate governance and capital markets.
The Independent Auditing Law is not merely an administrative barrier, but a modern governance tool. When implemented correctly, businesses will receive the following valuable benefits:
- This helps to increase transparency in financial information, directly serving the internal governance of the Board of Directors and the interests of shareholders.
- Building strong trust with strategic investors, especially international financial institutions, is crucial when they consider investing capital.
- It plays a crucial role in the early detection and prevention of legal risks, corruption risks, or asset waste within businesses.
In this context, the law clearly defines the groups of entities that are subject to mandatory audit supervision.
Entities required to have their annual financial statements audited
According to current regulations, not all businesses are required to undergo auditing. However, the following groups of entities are subject to it. Annual financial statement audits are mandatory. To ensure public participation and protect the rights of all stakeholders:
- Foreign-invested enterprises (FDI) are those operating in Vietnam, regardless of their capital size or business sector.
- Credit institutions are established under the Law on Credit Institutions, financial institutions, and insurance businesses.
- State-owned enterprises (excluding units operating in areas of national security as stipulated by the Government).
- Public companies, securities issuers, and securities trading organizations.
- Businesses and organizations implementing nationally important projects or Group A projects using state capital.
An important point to note is that businesses need to closely monitor when audit obligations arise, especially when there is a change in scale from a small business to a large business or when converting to a public company.
Key changes and penalties under the new 2025 regulations.
2025 marks a turning point in tightening the management of auditing activities. According to the latest regulations, penalties have been adjusted to be more severe to ensure a deterrent effect.
Below is a summary table of basic administrative penalties to help businesses gain a clearer understanding:
| Violation | Expected penalty levels (Decree 228/2025/ND-CP) | Consequences |
|---|---|---|
| No mandatory audit will be conducted. | 40,000,000 VND – 50,000,000 VND | Mandatory additional audit |
| Submitting the audit report late. | 10,000,000 VND – 30,000,000 VND | Publicly disclose the list of violations on the information portal. |
| Falsifying data in financial reports. | They may face criminal prosecution depending on the severity. | Revocation of business license/suspension of operations |
Note that monetary penalties are only the tip of the iceberg. When violating the Independent Auditing Law, businesses also face other serious consequences such as:
- Loan applications were rejected or dismissed by banks and credit institutions due to inaccurate data.
- The company's credit rating has dropped significantly in the capital markets.
- Being blacklisted by the tax authorities leads to more in-depth and frequent inspections.
Scope and common types of independent audit services
Independent auditing activities are diverse, depending on the specific objectives of the entity. Key services typically include:
- Periodic financial statement audits: This is the most common service aimed at verifying the accuracy and fairness of the figures on the balance sheet and income statement.
- Auditing of completed project accounts: Focusing on capital construction investment projects, especially those using state budget funds.
- Compliance and operational audit: Assessing whether a business is complying with internal processes and industry-specific legal regulations.
- Review services: A form of inspection with a lower level of assurance than auditing, but very useful for mid-year reporting periods.
Choosing the right type of audit helps businesses optimize costs while still ensuring the legal validity of the report.
Regulations concerning auditors and the professional practice requirements of auditing firms.
To ensure quality, the Independent Auditing Law sets extremely stringent standards for practitioners. This aims to protect businesses from professional errors that could lead to significant losses.
- Auditors must meet all professional ethical standards, including absolute independence from the audited entity, objectivity in forming opinions, and a responsibility to maintain client confidentiality.
- Auditors must possess a valid Certified Public Accountant (CPA) and fulfill their obligation to update their professional knowledge (CPE) at least annually as required by the Ministry of Finance.
- Businesses need to be especially cautious and avoid signing contracts with "phantom" or unqualified auditing firms. This not only renders the reports legally invalid but also exposes the business to double legal risks.
System of professional guidelines and standards
Current auditing practices are based on a comprehensive legal framework. Businesses and auditors need to adhere to the following regulations:
- Decree 17/2012/ND-CP: The most detailed guiding document on the implementation of the provisions of the Law on Independent Auditing.
- The Vietnamese Auditing Standards System (VSA): This serves as a guideline for all technical operations performed by auditors during their work.
- IFRS adoption roadmap: Vietnam is undergoing a strong transformation towards adopting International Financial Reporting Standards, requiring large enterprises to be financially prepared.
Advice to help businesses effectively comply with the Independent Auditing Law.
To ensure the audit process runs smoothly and delivers real value, the following approaches can be considered:
- Choose an auditing firm based on its reputation and the list of qualified firms published annually by the Ministry of Finance. Don't just look for the lowest price.
- Complete the internal control system and rectify the accounting records before the auditors perform on-site procedures.
- Foster an open and collaborative spirit, and provide documents promptly to avoid delays in report issuance.
- In the event of a conflict arising that leads to a change of auditing firm mid-term, the business must follow the correct contract termination procedures and notify all relevant parties as required by law.
Frequently Asked Questions about the Independent Auditing Law
Do newly established FDI enterprises that have not yet generated revenue need to be audited?
The answer is Yes. According to Decree 17/2012/ND-CP, all FDI enterprises are subject to mandatory annual financial statement audits, even if they have not yet generated revenue or are in the investment phase.
How long is an audit report valid?
An audit report serves to confirm the figures for a specific financial period. Typically, banks or investors will request an audit report for the most recent financial year.
What happens if errors are discovered after the report has been released?
Businesses and auditors need to make retrospective adjusting entries or provide additional disclosures in subsequent financial statements in accordance with current accounting and auditing standards.
Summary of the Financial Transparency Roadmap to 2030
Looking to the future, the Law on Independent Auditing will continue to be refined towards deeper integration with international standards. Compliance with auditing laws should not be seen as a cost burden, but rather as an investment in the transparency and reputation of businesses. A transparent business environment not only protects investors but also serves as a springboard for Vietnamese businesses to reach global heights.
Contact information for 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
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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.
