THE STATE BANK OF VIETNAM ------------	SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness ------------
No. 121/2005/QD-NHNN	Hanoi, February 2, 2005

 

DECISION

ON THE ISSUANCE OF THE REGULATION ON INDEPENDENT AUDIT APPLICABLE TO CREDIT INSTITUTIONS

THE GOVERNER OF THE STATE BANK

- Pursuant to the Law on the State Bank of Vietnam and the Law on Credit Institutions dated 12 December 1997;
- Pursuant to the Law on the amendment, supplement of several articles of the Law on the State Bank of Vietnam dated 17 June 2003; the Law on the amendment, supplement of several articles of the Law on Credit Institutions dated 15 June 2004;
- Pursuant to the Decree No. 86/2002/ND-CP dated 15 November 2002 of the Government providing for assignment, authority and responsibility for the State management of Ministries, Ministerial-level agencies;
- Pursuant to the Decree No. 105/2004/ND-CP dated 30 March 2004 of the Government on independent audit;
- Upon the proposal of the Director of Banks and Non-banking Credit institutions Department,

DECIDES:

Article 1. To issue in conjunction with this Decision "the Regulation on independent audit applicable to credit institutions".

Article 2. This Decision shall be effective after 15 days since its publication in the Official Gazette and replace following documents: the Decision No. 322/1999/QD-NHNN5 dated 14 September 1999 on the issuance of the Regulation on the implementation of independent audit by credit institutions; Decision No. 499/2000/NHNN5 dated 05 December 2000 on the amendment, supplement of several Articles of the Regulation on the implementation of independent audit by credit institutions issued in conjunction with the Decision No. 322/1999/QD-NHNN5 dated 14 September 1999 by the Governor of the State Bank.

Article 3. The Director of the Administrative Department, Director of Banks and Non-banking Credit institutions Department, the Chief Inspector of the State Bank, Heads of related units of the State Bank of Vietnam, General Managers of the State Bank branches in provinces, cities under the Central Government's management and credit institutions shall be responsible for the implementation of this Decision./.

 

FOR THE GOVERNOR OF THE STATE BANK DEPUTY GOVERNOR Tran Minh Tuan

 

REGULATION

ON INDEPENDENT AUDIT APPLICABLE TO CREDIT INSTITUTIONS
(issued in conjunction with the Decision No. 121/2005/QD-NHNN dated 2 February 2005 of the Governor of the State Bank)

Chapter I

GENERAL PROVISIONS

Article 1. Subject of application

This Regulation provides for the independent audit applicable to credit institutions, which are authorized to operate in Vietnam (hereinafter referred to as credit institutions), including:

1. State credit institutions (except for the Bank for Social Policy);

2. Joint stock credit institutions;

3. Joint venture credit institutions;

4. Central People's Credit Fund;

5. 100% foreign invested credit institutions;

6. Foreign bank branches.

Article 2. Scope of auditing

1. Annual financial statements of credit institutions provided for in Article 1 of this Regulation shall be audited by an independent auditing enterprise, which satisfies standards, conditions stipulated by the State Bank of Vietnam.

2. The State Bank of Vietnam requires credit institutions to use one or several audit services (performance audit, compliance audit) in following cases where:

a. Credit institutions are likely to fall in the state of special control

b. Credit institutions are considered for releasing from the state of special control

c. Before credit institutions make their listing and initial public offering of their shares on the Securities Transaction Center or the Stock Exchange.

d. Credit institutions are merged, acquired or integrated;

dd. Other cases decided upon by the State Bank of Vietnam.

Chapter II

SPECIFIC PROVISIONS

Article 3. The following annual financial statements of credit institutions must be independently audited:

1. The balance sheet;

2. Profit and Loss Statement;

3. The cash flow report;

4. Notes to Financial statements;

Article 4. Results of independent audit

1. The result of independent audit for credit institutions shall be expressed in the form of an audit report and management letter enclosed with related documents and evidences.

2. The audit report of credit institutions shall comply with provisions stated in the Decree No.105/2004/ND-CP dated 30 March 2004 of the Government on independent audit, Vietnamese audit standards (or international audit standards which are acknowledged in Vietnam) and provisions of current laws of Vietnam relating to the independent audit applicable to credit institutions.

3. The management letter shall be used by the practiced auditors and auditing firms to explain specific issues, events in the audit process such as: the actual performance, possibility of risk, the suggestions by auditors and the opinion of the manager of the audited credit institution relating to those events. The management letter shall consist of following contents:

a. The common approaching method, scope of audit and requirements to be supplemented;

b. Assessment on changes in important accounting policies and rules, which affect the financial statements of credit institutions.

c. Risks that may extensively affect the financial statements of credit institutions

d. Major shortcomings and weaknesses of the internal inspection and control system of credit institutions, suspicion about the truthfulness of managerial officers and cheating acts of officials, staffs of credit institutions.

dd. Suggestions on correction of auditing firms and auditors to the cases or events (which have or have not yet been accounted by the credit institutions) that have affected or may extensively affect the financial statements of credit institutions.

e. The different opinions with the management Board of credit institutions about the issues which might extensively affect the financial statements of credit institutions or the opinion of the auditors and the auditing firms. The auditors and auditing firms should clearly state the status of the resolution of those different opinions and the extent of the influence those issues can create.

g. Other issues which have already been agreed in the audit contract.

4. Documents, evidences relating to the comment, conclusion, suggestions of the practised auditors and the auditing firm stated in the audit report and the management letter on the faults, risks and opinions of the internal controllers of the audited credit institutions shall be enclosed with the audit report and the management letter.

Article 5. Standards, conditions for the selection of an auditing firm to perform the audit of credit institutions:

In addition to the compliance with provisions of the Decree No. 105/2004/ND-CP dated 30 March 2004 of the Government on the independent audit and the Circular No. 64/2004/TT-BTC dated 29 June 2004 of the Ministry of Finance guiding the implementation of several articles of the Decree No.105/2004/ND-CP dated 30 March 2004, auditing firms shall satisfy following conditions:

1. Having a charter capital or owner capital of VND 3 billion upwards in case of domestic auditing firms and of 300,000 USD at the minimum in case of foreign auditing firms.

2. Having at least 10 practised auditors. The audit of a credit institution should be performed by at least 03 practised auditors.

3. Practised auditors and the representative of the manager of an auditing firm participating in the audit of credit institutions must fully satisfy standards, conditions stated in Article 6 of this Regulation.

4. Having been established and engaged in the audit activity in Vietnam for at least 03 years.

5. Having no economic relations such as purchasing bonds or assets, making capital contribution, taking part in joint venture, share contribution with the audited credit institution or vice versa.

6. Not being a customer who is enjoying preferential conditions from the audited credit institution (for example enjoying credits, guarantee without security, credits with preferential conditions)

7. The auditing firm and the audited credit institution do not have the same owner who holds 5% or more of their capital.

8. They have not been performing or have performed the service of book-entry, financial statement drawal, internal audit service, assets valuation, management consultancy, financial consultancy for that credit institution in the preceding year.

9. They are not a subject mentioned in the list announced by the State Bank of Vietnam of the auditing firms which are not entitled to perform the audit for credit institutions according to provisions in Paragraph 2.c, Article 9 of this Regulation.

Article 6. Qualifications, conditions for practised auditors and the representative of the Manager of the auditing firm to take part in the audit of the credit institutions

In addition to the compliance with provisions of the Decree No. 105/2004/ND-CP dated 30 March 2004 of the Government on the independent audit and the Circular No. 64/2004/TT-BTC dated 29 June 2004 of the Ministry of Finance guiding the implementation of several articles of the Decree No.105/2004/ND-CP dated 30 March 2004, practised auditors and the representative of the Manager of an auditing firm must satisfy following conditions:

1. Their names are mentioned in the list of practiced auditors, which is confirmed by the Ministry of Finance.

2. Vietnamese practised auditors shall have at least 02 years of experience in performing audit work after the date where they have received the Auditor Certificate.

3. Foreign practised auditors shall have at least 02 years of experience in performing audit work in Vietnam.

4. They are not a shareholder or a legal representative of the shareholder of the audited credit institution who has the right to vote in the shareholders meeting.

5. They are not a member of Controllers Committee, the General Director (Director), a Deputy General Director (Deputy Director), the Chief Accountant of the audited credit institution.

6. They are not a customer who is enjoying preferential conditions from the audited credit institution such as enjoying credits, guarantee without security or credits with favored conditions

7. They are not being a relative with any member of the Board of Directors, Controller committee, the General Director (Director), any Deputy General Director (Deputy Director), the Chief Accountant of the audited credit institution (such as parents, spouse, children or siblings).

Article 7. Obligations, responsibilities of an auditing firm and a practised auditor

1. To have thorough knowledge about provisions of laws relating to financial statements of credit institutions.

2. To explain or supply information, data relating to auditing activity upon request of the State Bank of Vietnam in case of complaint.

3. During the audit process, if the audited credit institution is discovered as not to comply with laws and provisions relating to the financial statement being audited, to notify and make recommendation to the audited credit institution to take measures for the prevention, correction and dealing with shortcomings; to state their opinions in the Audit Report or Management Letter as required in Article 4, paragraph 2, 3 of this Regulation.

4. After the issuance of the audit report, if there is any doubt or any detection that the audited credit institution has made serious mistakes resulting from its incompliance with laws and provisions relating to the audited financial statement, the auditing firm shall give notice to the audited institution and a third person in accordance with provisions of audit standards and inform the State Bank of Vietnam thereof.

5. To keep the information secret in accordance with the provisions of applicable law on audit.

6. To perform other obligations and responsibilities as provided for by the laws.

Article 8. Obligations, responsibilities of the audited credit institution

1. To select an auditing firm and practised auditors who meet full standards and conditions according to this Regulation within 30 days before the end of the financial year. The selection of the auditing firm to perform the audit of the credit institution shall be made in accordance with provisions of applicable laws on bidding.

2. To supply accurately, adequately and timely necessary documents for the audit work upon the proposal of the audit enterprise and practised auditors.

3. To send the result of independent audit, including the audit report and management letter enclosed with related documents, evidences to the State Bank of Vietnam within a period of 120 days from the end of the financial year; specifically as follows:

a- To send 02 copies of the result of independent audit to the State Bank of Vietnam (The Inspector of the State Bank and the Department of Banks or Department of cooperative Credit Institutions in respect of the report of the Central Peoples Credit Fund).

b- In respect of joint stock credit institutions, a further copy of the independent audit result shall be sent to the State Bank branches in provinces, cities under the Central Government's management where the head office of the credit institution is located.

4. To timely report, explain and make recommendation to the State Bank of Vietnam for consideration and treatment in accordance with provisions of applicable laws for cases where

a- The time limit for sending the result of independent audit can not be ensured.

b- There are disagreements, disputes about the result of independent audit.

5. To comply with the time limit for sending the result of independent audit in accordance with the provisions of Paragraph 3 in this Article and publicly announce the financial information in conformity with the current provisions. The public announcement of the financial information by the credit institution in the event where the credit institution and the auditing firm have not finished the settlement of their disagreements, disputes relating to the result of independent audit, shall be decided upon by the State Bank of Vietnam.

Article 9. Responsibilities of State Bank branches in provinces, cities under the Central Government's management and the Inspector of the State Bank:

1. The State Bank branches in provinces, cities under the Central Government's management shall:

Within the period of 30 working days since the receipt of the result of independent audit or the written report of the joint stock credit institution, base on the audit standards, off-site supervision results, inspection and control results and other documents (if any) to consider and submit a written report to the State Bank of Vietnam (The State Banks Inspector and Department of Banks):

a- To report on the exploitation and treatment of results from the independent audit of the credit institution.

b- To recommend the treatment for the case stated in Article 8, Paragraph 4 of this Regulation.

c- To recommend to the State Bank of Vietnam the list of auditing firms which are not entitled to audit credit institutions in the following year; To require joint stock credit institutions which are to perform one or several audit services in accordance with provisions in Article 2 paragraph 2 of this Regulation or to perform the independent audit again if it is deemed necessary.

2. The State Bank Inspector

a- Based on the compliance with this Regulation, audit standards, result of off-site supervision, inspection and control results, other documents (if any) and the recommendations of State Bank branches in provinces, cities under the Central Governments management (in respect of joint stock credit institutions):

- To exploit and deal with the result from the independent audit of credit institution;

- To make report, recommend to the Governor of the State Bank for the consideration, and settlement of cases stated in Article 8, paragraph 4 of this Regulation;

- To impose the administrative punishment on credit institutions that have committed violations of provisions on independent audit in this Regulation and provisions of relevant laws;

- To submit the Governor of the State Bank for the approval of the list of auditing firms which are not entitled to audit credit institutions in the following year; To require credit institutions which are to perform one or several audit services in accordance with provisions in Article 2 paragraph 2 of this Regulation, or to perform the independent audit again if it is deemed necessary.

b- To make comments on specialized operations in the monetary, banking area in the audit report and management letter of credit institution and when required by legislative agencies

c- To send the written notice of the list of auditing firms, which are not entitled to perform the audit of credit institutions in the following year as has been approved by the Governor of the State Bank to those credit institutions and auditing firms, prior to the 30th September monthly, for their knowledge and implementation (if any).

Article 10. The settlement of conflict or dispute on the result of independent audit between the audited credit institution and the auditing firm shall be implemented in accordance with provisions in Article 35 of Decree No. 105/2004/ND-CP dated 30 March 2004 of the Government on the independent audit and relevant legal documents.