Exploring the Components of an Audited Financial Statement in Vietnam

Understanding the differences in financial reporting is crucial for businesses operating in Vietnam, particularly when it comes to audited financial statements. These documents serve as a cornerstone for financial transparency and accountability, offering a reliable snapshot of a company’s financial health to stakeholders. This article delves into the essential components of an audited financial statement in Vietnam, covering the independent auditor’s opinion, the specific requirements for various businesses, annual audit compliance for foreign-owned enterprises (FOEs), fiscal year guidelines for FOEs, and annual compliance expectations for representative offices.

Additionally, it highlights the benefits of audited financial statements, from enhancing credibility to ensuring regulatory compliance, and underscores the significance of annual reports in maintaining corporate transparency and accountability.

What does an audited financial statement in Vietnam entail?

An audited financial statement in Vietnam involves a comprehensive review of an organization’s financial records, performed by independent auditors. This thorough process ensures that financial statements are accurate and in full compliance with Vietnamese accounting standards and regulations. The audit aims to cover all aspects of the financial statements, including the balance sheet, income statement, cash flow statement, and notes to the accounts. Its primary aim is to provide a true and fair view of the financial position and overall performance of the company. The audit helps in maintaining transparency and fostering stakeholder confidence.

What views do independent auditors hold?

Unqualified opinion

An unqualified opinion is given when the auditor concludes that the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework. This indicates that the financial statements present a true and fair view of the entity’s financial position and performance.

Qualified opinion

A qualified opinion is issued when the auditor identifies misstatements that are material but not pervasive, or when sufficient evidence is not obtained, but the potential effects of undetected misstatements could be material but not pervasive. The auditor specifies the reasons for the qualification. 

Adverse opinion

An adverse opinion is issued when the auditor determines that the identified misstatements are both significant and widespread throughout the financial statements. This indicates that the financial statements do not present a true and fair view and need significant corrections.

Disclaimer opinion

A disclaimer of opinion is issued when the auditor cannot obtain sufficient evidence to form an opinion and concludes that the potential effects of undetected misstatements could be both material and pervasive. The auditor does not express an opinion due to the lack of sufficient evidence.

Which businesses are obligated to audit their financial statements in Vietnam?

In Vietnam, several types of businesses are required to have their financial statements audited. These include foreign-invested businesses, credit institutions (including foreign bank branches), financial institutions, insurance companies, public companies, and other entities subject to audits as per relevant laws. Additionally, audits can be conducted at the request of customers or partners in bidding and business cooperation. This regulatory information is crucial for those operating within Vietnam or studying international business law.

What are the annual audit requirements for foreign-owned companies?

Foreign-owned companies (also known as FOEs) are legally required to provide an annual audit report, which includes statements of income, financial position, changes in equity (if applicable), and balance sheets. These audited reports must be submitted within 90 days after the fiscal year ends to three government agencies: local tax authorities, the Department of Finance, and the statistics office. Compliance with these regulations ensures transparency and accountability for FOEs operating in the region.

What is the fiscal year for foreign-owned companies?

In Vietnam, the fiscal year typically aligns with the calendar year. Foreign-owned enterprises (FOEs) have the option to select from four fiscal periods, each spanning 12 months and commencing on the first day of a quarter after registration with the Tax Department. These financial reports are required to be submitted to local tax authorities, the Department of Finance, and the statistics office by the end of the fiscal year. The available fiscal periods are January 1 to December 31, April 1 to March 31, July 1 to June 30, or October 1 to September 30.

What are the annual compliance requirements for representative offices?

Representative offices (ROs) are among the simplest and quickest methods for setting up a legal entity in Vietnam. Compared to foreign-owned enterprises (FOEs), ROs benefit from simplified reporting requirements. However, ROs are prohibited from engaging in direct profit-generating activities. Their functions are restricted to conducting market research, developing trade contacts, and gathering information on local regulations and laws. This streamlined approach allows businesses to establish a presence in Vietnam with less administrative burden, focusing solely on non-commercial activities.

What are the upsides of having audited financial statements in Vietnam?

Audited financial statements play a crucial role in ensuring compliance with Vietnamese regulations. For companies under foreign ownership, it is compulsory to have their financial statements audited by an independent audit firm in Vietnam. These audits provide assurance that the company’s financial reporting adheres to legal requirements. By meeting these standards, businesses demonstrate their commitment to transparency and accountability.

Audits go beyond compliance as they instill confidence among various stakeholders. Tax authorities, banks, partners, and investors rely on audited reports to assess a company’s financial health. The thorough examination of financial records helps identify risks, weaknesses in internal controls, and potential inefficiencies. Armed with this information, companies can take corrective actions, improve risk management, and make informed decisions based on accurate financial data. In summary, audited financial statements enhance regulatory compliance, stakeholder trust, and overall financial management.

Where does annual reporting come into the picture?

Foreign-owned enterprises in Vietnam must have their financial statements audited by an independent firm following Vietnamese Accounting Standards (VAS). Each organization is required to appoint a Chief Accountant, who, along with the legal representative, must approve the annual financial statements.

Accounting records must be maintained in Vietnamese but can also include English, and transactions should be recorded in Vietnamese Dong, though foreign currencies can be used for accounting purposes. Representative Offices (ROs) must submit annual reports that include basic contact information, human resource details (including employee roles and benefits), and a summary of activities such as market research, advertising, and participation in trade fairs.

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At Premia TNC, we simplify the complexities of auditing services in Vietnam, ensuring that your business meets legal requirements with ease and precision. Leveraging our expertise, we provide top-notch auditing solutions that not only adhere to stringent legal standards but also enhance your operational efficiency. By choosing Premia TNC, you are partnering with a trusted organization committed to delivering exceptional service, making your business journey in Vietnam seamless and successful.