Auditing and Financial Consultancy Services: Cheapest is Dearest

Price competitiveness has deteriorated the quality of services provided by auditing and financial consultancy companies.

 

The Petroleum Technical Services Company (PTSC) received offers from three consultancy companies. BSC offered a VND 900 million service, while the second company offered VND 600 million and the third, VND 250 million. BSC was appointed as the company to provide consultancy services for PTSC with a fee equal to what had been offered by the third company.

 

Dang Van Thanh, deputy head of the National Assembly’s Economic and Budget Committee and vice chairman of the Vietnam Accounting and Auditing Association, said with customers focusing only on low prices, some auditing companies have improved their competitiveness by cutting fees. Thanh said that a cut in fees would certainly impact the quality of services.

 

Fierce competition in service prices of financial organisations has led to the fact that enterprises consider asking prices as a norm for their decisions to opt services, instead of quality of services or trademarks of organisations. Many experts say that increasing competitiveness by cutting service prices will not ensure the quality of the services for enterprise evaluation. Some financial organisations and auditing companies, due to their small budget, have to employ unqualified consultants on a seasonal basis. This is one of the reasons for a poor quality of enterprise evaluation consultancy services. In fact, evaluation results of many enterprises had not bee approved due to a lack of precision.

 

Poor evaluation services have constrained the success of share auctions of enterprises in securities trading centres. Prices asked at some auctions in securities trading centres were too high, much higher than prices expected by investors. As a result, no investors won the auctions. On the contrary, if enterprises are evaluated above their value, enterprises will suffer damage. According to experts, good preparations for enterprise evaluation will impact on the success of share auctions during their initial public offering.

 

Imprecise evaluation may cause post-equitisation consequences. Authorised agencies have to settle petitions related to imprecise evaluation of enterprises after their equitisation.

 

It is impossible to deny benefits brought by financial organisations and auditing companies in enterprise evaluation, which have helped boost equitisation of State-owned enterprises and the development of the local financial market. These organisations and companies, however, should improve the quality of their services. Making commitments for its accession to the World Trade Organisation (WTO), the Vietnamese Government agreed to permit international financial consultancy organisations to join the process of State-owned enterprise rearrangement and equitisation, and provide some other financial services. Therefore, if local enterprises fail to improve the quality of their services and build their trademarks up, it will be hard for them to compete with international organisations. Many State-owned enterprises have sought services from international financial consultancy organisations when they are equitised because they do not trust services of local organisations and companies.

 

Thanh said that the quality of auditing and consultancy services is pivotal for these auditing companies. Therefore, they should take measures to improve the quality of their activities and services to maintain their trademarks. At the same time, State agencies should quickly perfect legal framework on responsibilities of auditing companies for the quality of their services. At the same time, there should be clear and transparent regulations on financial consultancy services, so as to put the financial consultancy services onto the fast track. Vietnam has yet to have any authorised agency to evaluate the quality of independent auditing activities to identify credit ratings of each enterprise, as well as regulations on occupation insurance or code of ethics.

Vietnam now has around 100 independent auditing and financial consultancy companies in various forms, including State-owned, business co-operation contract, joint stock, limited or 100 per cent foreign-owned companies.