Decree 84/2016/ND-CP dated July 1, 2016 stipulating standards and conditions for practicing auditors and auditing organizations approved to audit for entities of public interest
DECREE
ON ELIGIBILITY REQUIREMENTS FOR PRACTICING AUDITORS AND AUDITING FIRMS ACCREDITED TO PROVIDE AUDIT SERVICES FOR PUBLIC INTEREST ENTITIES
Pursuant to Law on Organization of the Government dated June 19, 2015;
Pursuant to the Law on Independent Audit dated March 29, 2011;
Pursuant to the Law on Securities dated June 29, 2006; Law on amendments to the Law on Securities dated November 24, 2010;
Pursuant to the Law on investment dated November 26, 2014;
At the request of the Minister of Finance;
The Government promulgates a Decree on eligibility requirements for practicing auditors and auditing firms accredited to provide audit services for public interest entities.
Chapter I
GENERAL PROVISIONS
Article 1. Scope
This Decree deals with eligibility requirements for practicing auditors and auditing firms permitted to provide audit services for public interest entities.
Article 2. Regulated entities
1. Practicing auditors and auditing firms accredited to provide audit services for public interest entities.
2. Public interest entities, excluding credit institutions not being public companies, unlisted credit institutions.
3. Other organizations and individuals involving the evaluation of eligibility requirements for practicing auditors and auditing firms approved to provide audit services for public interest entities.
Article 3. Interpretation of terms
For the purposes of this Decree, these terms below shall be construed as follows:
1. “Auditing firms" means auditing firms and branches of foreign auditing firms lawfully operating in Vietnam.
2. “Accredited auditing firm” means an auditing firm accredited to provide audit services for public interest entities approved by competent authorities.
3. “Accredited practicing auditor” means an auditor accredited to provide audit services for public interest entities approved by competent authorities.
4. “Accreditation period” means a period of time over which an auditing firm or a practicing auditor is approved to provide audit services for public interest entities and expressed as a calendar year from January 1 to December 31.
Article 4. Public interest entities
1. Public interest entities are entities specified in the Article 53 of the Law on Independent Audit.
2. Public interest entities in the securities sector include: Large-scale public companies in accordance with securities law, listed organizations, public companies, securities companies, securities investment companies, funds and asset management companies.
3. Other public interest entities include:
a) Public companies, excluding large-scale public companies prescribed in Clause 2 of this Article;
b) Insurance enterprises, reinsurance enterprises, insurance brokerage enterprises, branches of foreign non-life insurance enterprises (excluding insurance enterprises prescribed in Clause 2 of this Article);
c) Other enterprises and organizations in connection with public interests due to their operation nature and scope as prescribed by law.
Chapter II
SPECIFIC PROVISIONS
Article 5. Eligibility requirements for Accredited auditing firms
1. An accredited auditing firm shall satisfy all of the following requirements:
a) It obtains a certificate of eligibility for audit services issued by the Ministry of Finance that remains valid;
b) A charter capital or financed capital (for a branch of foreign auditing firm in Vietnam) of at least VND 6 billion is provided and the owner’s equity of at least VND 6 billion is maintained on the balance sheet;
c) At least 10 practicing auditors employed, including Director or General Director, satisfy requirements prescribed in Article 6 of this Decree;
d) It has operated in Vietnam for at least 24 months from the date on which the initial list of practicing auditors is approved by a competent authority or an initial certificate of eligibility for audit services is issued to the submission date of application for registration of audit services provision (hereinafter referred to as application);
dd) At least 200 entities receive audit reports for their annual financial statements issued by the auditing firm from October 1 of the previous year to September 30 of the year in which the application for registration is submitted.
If the auditing firm is approved in the year of submission, it shall also satisfy another requirement that at least 10 public interest entities receive audit reports for their annual financial statements (or examined reports for their financial statements) issued by the auditing firm from October 1 of the previous year to September 30 of the year in which the application for registration is submitted.
e) A quality control system is established in accordance with Vietnam’s Audit Standard;
g) Professional liability insurance has been obtained or a professional-risk reserve fund has been established as prescribed by the Ministry of Finance;
h) It does not fall to any of cases ineligible for consideration and approval prescribed in Article 7 of this Decree;
i) Sufficient application of audit services is submitted on schedule as prescribed in Articles 9 and 10 of this Decree.
2. An auditing firm accredited to provide audit services for public interests entities in securities sector (hereinafter referred to as Accredited auditing firm in securities sector) shall satisfy both requirements prescribed in Points a, b, e, g, h and i Clause 1 of this Article and the following requirements:
a) At least 15 practicing auditors employed, including Director or General Director, satisfy requirements prescribed in Article 6 of this Decree;
b) It has operated in Vietnam for at least 36 months from the date on which the initial list of practicing auditors is approved by a competent authority or an initial certificate of eligibility for audit services is issued to the submission date of application;
c) At least 250 entities receive audit reports for their annual financial statements issued by the auditing firm from October 1 of the previous year to September 30 of the year in which the application for registration is submitted.
If the auditing firm is approved in the year of submission, it shall also satisfy another requirement that at least 20 public interest entities in securities sector receive audit reports for their annual financial statements (or examined reports for their financial statements) issued by the auditing firm from October 1 of the previous year to September 30 of the year in which the application for registration is submitted.
Article 6. Eligibility requirements for Accredited practicing auditors
Apart from requirements prescribed in the Law on Independent audit, an accredited practicing auditor shall satisfy the following requirements:
1. He/she has his/her name included in a list of Accredited practicing auditors in an Accreditation period that is published by the Ministry of Finance at the submission time of application.
2. He/she has practiced audit services in Vietnam for at least 24 months from the date on which a competent authority certified that he/she is accredited for audit practices to the date on which the application is submitted.
Article 7. Unaccredited auditing firms or practicing auditors
1. The following auditing firms or practicing auditors shall be considered unaccredited:
a) An auditing firm incurs mandatory suspension from provision of audit services as prescribed in law on independent audit;
b) An auditing firm fails to remedy its violations at the request of competent authorities;
c) An auditing firm has audit report(s) filed for a lawsuit and competent authorities gives a conclusion of existence of the violation committed by such auditing firm;
d) An auditing firm that is considered unaccredited for according to inspection or findings of competent authorities in the year in which the application is processed (hereinafter referred to as concerned year);
dd) A practicing auditor in charge of audit documents that are considered unaccredited according to inspection or findings of competent authorities in the concerned year;
e) An auditing firm or a practicing auditor commits an administrative violation of law on audit practices that is liable to a penalty imposed by competent authorities as prescribed in the concerned year;
g) An auditing firm or a practicing auditor falsifies or provides inaccurate declaration in the application;
h) An auditing firm or a practicing auditor fails to provide explanation, or provide unaccredited explanation or fails to provide information and figures in connection with audit services at the request of competent authorities;
i) An auditing firm or a practicing auditor has its/his/her accredited status terminated in the period of less than 24 months from the termination date;
k) An auditing firm or a practicing auditor fails to comply with reporting regulations as prescribed in law on independent audit.
2. An auditing firm or a practicing auditor who does not fall to any of the cases prescribed in Points d, dd, g and h Clause 1 of this Article shall be considered approved only after 12 months from the date on which a conclusion/decision is issued by the competent authority.
Article 8. Handling audit contracts concluded in case of unaccredited auditing firms or practicing auditors
1. When an auditing firm or a practicing auditor is unaccredited in a period, it/he/she may not continue executing audit contracts and other guarantee services that are concluded and concluding any new audit contracts with public interest entities in such period, excluding regulations in Clause 2 of this Article.
2. When an auditing firm or a practicing auditor is accredited in an Accreditation period but is unaccredited in the consecutive period, it may continue executing audit contracts of annual financial statements that are concluded with public interest entities in the consecutive period only if the following requirements are satisfied:
a) It/he/she has examined a biannual financial statement, in the Accreditation period, for a public interest entity that is obliged to has such biannual financial statement examined;
b) It/he/she has issued an audit report on financial statement within 90 days, from the end of the fiscal year of the public interest entity.
Article 9. Applications
1. An application form (using the form in Appendix issued herewith).
2. A copy of certificate of eligibility for audit services provision.
3. A list of requested practicing auditors requested for approval, which clarify numbers of months over which they actually practice audit services in Vietnam from the date on which they obtain certificates of eligible for audit practices issued by competent authorities.
4. A financial and operational statement of the auditing firm in the previous year, including:
a) An audited financial statement;
b) A list of audit reports prescribed in Point dd Clause 1 or Point c Clause 2 Article 5 of this Decree;
c) Organization, operation and experience in auditing of practicing auditors and the auditing firm;
d) Administrative violations committed by the auditing firm that are liable to penalties (if any);
dd) Major movements in the fiscal year that affect to organizational structure, operation and financial performance of the auditing firm (such as increase or decrease in number of capital contributors; increase or decrease in charter capital);
e) Major movements in the year in connection with practicing auditors (such as increase or decrease in number of practicing auditors, professional ethics violations committed by practicing auditors);
g) A description of formulation and maintenance of quality control system in accordance with audit standards.
5. A certified true copy of contract or a certificate of professional liability insurance that remains valid in case where the auditing firm fails to make a professional-risk reserve fund.
6. If there is no change in the second application and subsequent applications in comparison with the initial application, the auditing firm is not required to submit documents prescribed in Clause 2, Points c and g Clause 4, Clause 5 of this Article.
Article 10. Considering, approving and publishing list of auditing firms and practicing auditors
1. From October 1 to October 20 of every year, each auditing firm wishing to provide audit services for public interest entities shall submit an application as prescribed in Article 9 of this Decree to the Ministry of Finance for approval. If the auditing firm wishing to provide audit services for public interest entities in securities sector, it shall also submit an application to State Securities Commission.
2. During the consideration, if the application is unsatisfactory, the competent authority shall, within 10 working days from the date on which the application is received, request the auditing firm to complete the application. The auditing firm must complete the application before November 5. In case of unsatisfactory application as prescribed, the competent authority shall notify the auditing firm of rejection.
3. The Ministry of Finance shall consider approving applications, and then publish a list of Accredited auditing firms and a list of Accredited practicing auditors before November 15 of the year on its website. Auditing firms and practicing auditors having their names included in the list are entitled to provide audit services for public interest entities as prescribed in Clause 3 Article 4 of this Decree.
State Securities Commission shall consider approving applications, and then publish a list of Accredited auditing firms and a list of Accredited practicing auditors in securities sector before November 20 of the year on its website. Auditing firms and practicing auditors having their names included in the list are entitled to provide audit services for public interest entities as prescribed in Clause 2 Article 4 of this Decree.
4. According to the list of Accredited auditing firms and practicing auditors, public interest entities may select appropriate auditing firm(s) and practicing auditor(s) to enter into contracts of audit services. The list of Accredited auditing firms and practicing auditors and the list of Accredited auditing firms and practicing auditors in securities sector shall be updated upon any of changes made by competent authorities.
Chapter III
IMPLEMENTATION
Article 11. Entry into force and implementation
1. This Decree comes into force on July 1 2016.
2. The Minister of Finance shall provide guidelines for this Decree. Ministers, Heads of ministerial-level agencies, Heads of Governmental agencies, the Presidents of the People’s Committees of central-affiliated cities and provinces and relevant organizations or individuals shall implement this Decree./.
