How much equity is required for a foreign audit firm to provide audit services in Vietnam?

How much equity is required for a foreign audit firm to provide audit services in Vietnam?

Pursuant to Clause 1, Article 11 of Decree 17/2012/ND-CP as amended by Clause 2, Article 3 of Decree 151/2018/ND-CP stipulating conditions of providing the auditing service across border as follows:

1. The foreign audit firm fully meeting the following conditions shall be registered of providing the auditing service across border:

a) Being entitled to provide independent auditing service in accordance with the law of the country where the head office of the foreign audit firm is located;

c) Having at least 5 (five) auditors who have obtained certificates of auditing practice from the Ministry of Finance, including the legal representative;

d) Having the equity in balance sheet equivalent to 500,000 (five hundred thousand) US dollars in the end of the fiscal year preceding the year when the audit firm provides auditing service across border in Vietnam;

e). Having a compulsory deposit equal to the legal capital as stipulated in clause 1, article 5 of this Decree in a commercial bank legally operating in Vietnam and having a letter of guarantee from this bank in which the bank undertakes to settle the payment in cases where liabilities incurred from contracts of providing auditing service across border in Vietnam exceed the amount of compulsory deposit;

Thus, one of the conditions that a foreign audit firm  providing the auditing service across border in Vietnam must have equity in balance sheet equivalent to 500,000 (five hundred thousand) US dollars in the end of the fiscal year preceding the year when the audit firm provides auditing service across border in Vietnam.

Can a foreign audit firm when provides auditing service across border in Vietnam provide the service by itself?

According to Article 12 of Decree 17/2012/ND-CP stipulating mode of providing auditing service across border as follows:

1. The foreign audit firm when provides auditing service across border in Vietnam must establish a partnership with a Vietnamese audit firm who is eligible to provide auditing service in accordance with provisions of law.

2. Only audit firms who satisfy all conditions for auditing business as stipulated in Article 21 of the Law on independent auditing and in this Decree, having obtained the Certificate of satisfaction of auditing business conditions, may be allowed to joint venture with the foreign audit firms to provide auditing service across border.

3. The foreign audit firm, Vietnamese audit firms who establish partnerships with foreign audit firms to provide auditing service across border and the audited entity must enter into an auditing contract in accordance with the law of Vietnam. The auditing contract must be fully signed by legal representatives of the foreign audit firm, Vietnamese audit firm and the audited entity.

4. The foreign audit firm and the Vietnamese audit firm must enter in a partnership contract on providing auditing service across border. The partnership contract must define clearly responsibilities of the foreign audit firm and the Vietnamese audit firm in providing auditing service across border.

5. The foreign audit firm and the Vietnamese audit firm which entering in an auditing partnership contract must appoint a practicing auditor to undertake the auditing work parts that belongs to the responsibility of each firm stated in the auditing contract.

6. The auditing report must be signed by legal representative of the foreign audit firm, the Vietnamese audit firm and practicing auditors who undertake the auditing work parts that belongs to the responsibility of each firm stated in the auditing contract.

7. The auditing contract, the partnership contract, auditing dossiers and auditing reports must be made in both Vietnamese and English.

8. All payment and transfer transactions related to providing auditing service across border must be carried out in bank transfer way via a licensed credit institution in compliance with Vietnamese regulations on foreign exchange control.

According to this Article, foreign auditing firms are not allowed to provide auditing service across border in Vietnam by themselves, but must form a partnership with Vietnamese audit firms that are eligible to provide auditing service in accordance with provisions of law.

What are responsibilities of foreign audit firms in providing of auditing service across border in Vietnam?

Article 13 of Decree 17/2012/ND-CP stipulates responsibilities of foreign audit firms in providing of auditing service across border as follows:

1. Arranging personnel with appropriate professional qualifications to ensure quality of auditing service. Complying with provisions on strictly prohibited acts, cases restricted performance of auditing service applicable to practicing auditors and audit firms and other relative provisions stated in Vietnamese Law on independent audit.

2. Complying with Vietnamese auditing standards upon carryng out providing auditing service across border in Vietnam.

3. Paying taxes and conducting other financial obligations related to providing auditing service across border in accordance with the current law on tax of Vietnam.

4. Report to the Ministry of Finance, every 6 months, on implementation situation of the contract of providing auditing service across border arising in the report period in Vietnam. The report form shall be provided by the Ministry of Finance.

5. Appoint a responsible person on behalf of the reporting firm to explain to Vietnamese functional agencies of auditing contracts, auditing dossiers, auditing reports and other issues related to providing of auditing service across border in Vietnam.

6. Submit the annual financial report to the Ministry of Finance which has been audited and attached audit report of an independent auditing organization and a written comment of the auditing practice management agency in the place where the head office of the firm is located on the firm’s implementation situation of provisions of law on auditing activities and other provisions of law in time limit of 120 days as from the ending date of the fiscal year.

7. Perform rights and obligations of the audit firm stipulated in Article 28 and Article 29 and comply with other provisions related to provisions of Vietnamese law on independent auditing.

Thus, foreign auditing firms providing cross-border auditing service across border in Vietnam have the responsibilities specified above.

Best Regards!