Brian Jeffrey
The Ministry of Finance is proposing a significant increase in penalties for auditing firms’ violations. The maximum fine could go up to 3 billion VND, marking a thirtyfold jump from the current 100 million VND, with the aim of strengthening deterrence.
Moreover, the timeframe for imposing these penalties may be extended from one year to ten years, according to the proposed amendments to the Law on Independent Auditing, which has been active since January 1, 2012.
The changes aim to address existing deficiencies in the regulations, especially the inadequacy of penalties and the limited statute of limitations that often allows violations to go unpunished if discovered late.
Under the current regulations, the penalties for violations in independent auditing are capped at 50 million VND for individuals and 100 million VND for organizations, a level criticized by the Ministry of Finance for being ineffective in deterring non-compliance.
The draft amendment seeks to harmonize Vietnam’s auditing penalties with international standards by proposing fines of 3 billion VND for organizations and 1.5 billion VND for individuals, among other measures like license revocation and business operation suspension for audit firms.
With around 2,400 licensed auditors in Vietnam operating across over 220 certified audit firms, past enforcement actions have seen 114 auditors suspended and licenses revoked from three audit firms since 2013.
Despite these efforts, recent cases like the Van Thinh Phat incident have brought attention to major flaws in the auditing process, notably concerning Saigon Commercial Bank (SCB).
Over a ten-year period, from 2012 to 2022, financial audits conducted by renowned firms such as Ernst & Young Vietnam, Deloitte Vietnam, and KPMG Vietnam failed to detect irregularities in SCB’s financial statements, resulting in significant financial losses.
Comparatively, the proposed changes in Vietnam’s penalties align with global practices. For instance, in 2017, the UK’s Financial Reporting Council (FRC) imposed fines on firms like PwC, Grant Thornton, and others for audit deficiencies, signaling the gravity of regulatory actions in the auditing industry.
