Independent Auditing Law: For Healthy Corporate Finance

Lawmakers plan to discuss the draft Law on Independent Auditing, prepared by the Finance Ministry, at the eighth plenary meeting of the 12^th National Assembly in the capital city of Hanoi. According to the working agenda of the lawmaking body, this bill will be approved in 2011 and take effect on January 1, 2012. The draft law is highly appreciated by economic specialists and auditors.

 

To learn more about the advantages of the new draft law, ViB Forum has an exclusive interview with Mr Bui Van Mai, Vice President and Secretary General of the Vietnam Association of Certified Public Accountants.

In the spirit of inheriting, upholding and learning, the draft Law on Independent Accounting compiled by the Ministry of Finance will overcome the limitations of Decree 105/2004/ND-CP on independent auditing and facilitate auditing services to develop in both scale and quality.

 

First, the draft Law on Independent Accounting has more detailed regulations on conditions for practising auditing, and for establishing and operating auditing companies. This regulation helps certified auditors and licensed auditing companies to substantiate their qualifications and competence, and limits the formation of poor-quality auditing companies or the inactivity of certified auditors. This regulation will generally enhance the quality of independent auditing services.

 

Second, the draft Law on Independent Accounting also provides detailed regulations on auditing processes, auditing reports, auditing records, auditing financial statements, auditing of public utility companies, violations of independent auditing, inspections, violator sanctions, dispute settlement, complaints, denunciations and compensation. These are essential to regulate the work of auditors and auditing companies. These criteria also improve the ability of state management agencies to monitor the quality of this industry.

 

Third, the draft Law on Independent Accounting places special emphasis on strengthening state management over auditing. Accordingly, the Ministry of Finance is responsible to the Government for exercising state management over independent auditing; compiling legal documents on independent auditing; granting business establishment certificates to companies, revoking certifications from auditors and issuing auditing standards; exercising inspection, quality control and auditing registration; reviewing and assessing operating situations, managing international cooperation, and settling complaints and denunciations. Moreover, the draft law also mentions the transfer of some functions and professional management to accounting - auditing associations. This is directly in line with international practices, and boosts the independence and objectivity of independent auditing.

 

Especially since the stock market was set up, the transparency of financial information is essential for development. Vietnamese companies must attain a much higher degree of transparency to list on international stock exchanges.

Therefore, the draft law is oriented to support international integration; international conditions and practices applicable to Vietnam now and in the coming years will be added to the law. Particularly, standards for practicing auditing will be raised. For example, to become certified, independent auditors must have worked at least three years in auditing companies and must be members of professional auditing organizations of Vietnam. Independent auditing is highly practical; therefore, practical experience is a basic requirement.

 

Independent auditors only offer their opinions, while audited companies have the right to hear or correct. When an investor reads an audited financial statement, he normally thinks that figures are accurate. However, this may not be the case. In auditing reports, auditor's notes are important. In short, investors should understand what auditors say in audited reports. Better auditing reports will lead to deeper knowledge and a broader perspective among investors.