Basic Auditing - 2

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From the history of the development of auditing, we cannot deny the need for

The necessity of auditing in today's society. Auditing activities provide businesses with honest and reasonable information to help managers make timely business decisions. Auditing activities can exist within the business through internal auditors. However, to ensure objectivity in the inspection process, auditing can be performed by organizations outside the business by auditors with appropriate qualifications.

Thus, auditing was born and developed as an objective necessity due to the need to independently check accounting data and financial status of enterprises. In the process of its development, auditing is no longer limited to the field of accounting and finance, but it has also expanded to other fields such as controlling and evaluating the entire management system of enterprises, not only in enterprises but also in public service units through evaluating the management performance of these units.

1.1.2. History of development of auditing in Vietnam

If in the world the term auditing appeared since ancient Rome in the 3rd century BC and began to develop into an independent science after the great financial crisis in the US in 1929-1934, then in Vietnam auditing was only mentioned and studied in the early 90s of the 20th century. The development of auditing in Vietnam is completely in line with the trend of the times, the cause of which is starting from inspection activities in general and accounting inspection in particular.

Auditing activities have been of interest since the early days of nation building. When the country developed under a centralized planning mechanism, the State, as a macro manager and owner of the economy, conducted inspection work through the role of the chief accountant, mainly in the form of self-inspection. State accounting inspection was carried out through the mechanism of approving settlements.

In 1989, in response to revolutionary demands in the management mechanism, economic mechanism, commodity production economy and market mechanism, the Government decided to issue an accounting regime for State-owned enterprises. However, this regime itself still has some shortcomings that are not in line with international practices and make it unable to keep up with the speed of market economic development in Vietnam.

Since the 90s, after the collapse of the Soviet Union and Eastern European countries, the centrally planned economy was no longer suitable. Integrating with the trend of the times

In the modern era, Vietnam also began to transform its mechanism from a centrally planned economy to a market economy, leading to a change in the inspection work. At this time, the inspection work required an independent organization to check financial information to ensure the rights of interested parties. Therefore, independent auditing was formed, and the State audit was also established.

In December 1995, the enterprise financial accounting system was issued. It can be said that this new accounting system has met the needs of the market economy and international accounting practices. Auditing ensures the State in macro-management of the economy in the specific conditions of our country.

In the context of integration, ensuring honest and reasonable financial information to create trust for information users is extremely necessary. For that reason, auditing was born and developed to this day in Vietnam as an inevitable need of society. Auditing is increasingly widespread, diverse and rich.

-For independent audit

When our country shifted from a subsidized economy to a market economy in the early 90s of the 20th century and opened up to integrate with the world economy, independent auditing appeared in our country. On May 13, 1991, with the approval of the Government, the Ministry of Finance signed a decision to establish two auditing companies: Vietnam Auditing Company (VACO) and Vietnam Accounting Services (ASC), later changed to Financial, Accounting and Auditing Consulting Services (AASC).

In addition, the Government issued Decree 105-2004/ND-CP on March 30, 2004, clearly stating the authority and responsibility of independent auditors in the economy. On October 31, 2005, Decree 133/2005/ND-CP was issued to supplement and amend a number of articles in Decree 105. And most recently, on March 30, 2009, the Government issued Decree 30/2009/ND-CP to continue to supplement and amend a number of articles in Decree 105-2004/ND-CP.

+Auditing has grown rapidly in number and size of independent auditing organizations.

In the early years of transition to a market economy, along with the policy of encouraging foreign investment in Vietnam, a series of demands for accounting and auditing services in all fields arose. In response to that demand, in 1991, the Ministry of Finance established two auditing enterprises as state-owned enterprises, officially marking the birth of independent auditing activities in Vietnam. In order to exploit the potential of the auditing market on the basis of competition in quality and fees in an equal legal environment, the State encouraged the development of diverse economic sectors and cooperation with foreign countries. Therefore, many auditing enterprises

belonging to various economic sectors, under various legal forms, have emerged one after another.

After the Enterprise Law of 1999 was enacted, the number of newly established auditing firms increased rapidly (2 companies were established at the end of 1999; 7 companies in 2000; 20 companies in 2001; 10 companies in 2002; 14 companies in 2003; 10 companies in 2004). However, after Decree No. 105 of 2004 was enacted, only allowing the establishment of new auditing firms as partnerships or private enterprises, the number of newly established auditing firms increased slowly compared to before. From April 2003 to October 2005 (18 months), only 8 companies were established. 3 companies ceased operations or stopped providing auditing services, and 1 foreign-invested company had its investment license terminated. However, since Decree No. 133 of 2005 allowing the continued establishment of limited liability companies, the number of auditing firms has increased rapidly. In 2005, there were 14 more companies, in 2006, 40 more companies, in 2007, 16 more companies, in 2008, 15 more companies, and in 2009, 16 more companies. In recent years, especially in 2009, a number of small companies have merged, so by June 2010, the whole country had 162 auditing firms with over 6,700 employees.

Regarding the conversion of ownership forms of auditing enterprises: according to Decree No. 105 and Decree No. 133, auditing enterprises are only allowed to operate under three forms: limited liability companies, partnerships and private enterprises. By the end of 2007, 15 joint stock companies and 5 state-owned enterprises had completed the conversion into limited liability companies with two or more members.

According to the audit industry development strategy, in 2001 it was expected that by 2010 there would be 100 companies, but by June 2010 there were 162 companies (over 60%) including 151 limited liability companies, 5 companies with 100% foreign investment, 2 companies with foreign investment, and 4 partnerships.

In 2001, only 3/34 companies were recognized as members of the international auditing firm, but by June 2006, there were 11/105 companies and by June 2010, there were 15 more companies, so now there are 26 companies that are members of the international auditing firm.

The companies were mainly established between 2000 and 2006 (130 companies). Up to now, 156 auditing companies have established 192 offices and branches, in addition to over 40 representative offices in provinces and cities nationwide, including foreign auditing companies, large Vietnamese auditing companies and medium-sized companies that have been established but have the advantage of being members of international auditing firms or the board of directors and auditors who have worked in foreign auditing companies or from large Vietnamese companies only account for about 20% of the number of companies but the revenue reaches 76% of the industry's revenue, because these companies always pay attention to the quality of governance and management.

and service quality control, the company's operations are quite stable, quality control is good, recruitment and training of employees are systematic, focusing on investment in facilities and equipment, creating good working conditions for employees according to international standards.

As of December 31, 2014, there were 141 auditing enterprises granted certificates of eligibility to provide auditing services by the Ministry of Finance, including 05 100% foreign-owned companies (EY, PwC, KPMG, Grant Thornton, HSK); 135 limited liability companies with 2 or more members, 01 partnership (CPA Vietnam); 43 auditing enterprises approved by the State Securities Commission to be eligible to audit issuing organizations, listed organizations and securities trading organizations in 2014; 39 auditing enterprises registered and approved by the Ministry of Finance to conduct audits for other public interest entities.

+About the audit team

The number of professional auditors has increased rapidly and accounts for a relatively high proportion of the total number of professional employees. Recruitment, training and labor structure policies of companies have been significantly upgraded and improved, but are still very different.

Since their establishment, auditing firms have paid great attention to the selection of auditors and the improvement of the quality of their staff. In October 1994, the Ministry of Finance organized the first examination and granted special certificates to 49 people who met the qualifications and standards of professional auditors. By June 2010, the Ministry of Finance had organized 15 examinations for Vietnamese auditors and 10 qualifying examinations for foreigners and had granted about 1,800 auditor certificates to those who passed the examinations. By June 2010, in 162 auditing firms, there were about 1,200 qualified auditors registered to practice, of which more than 1,200 were Vietnamese.

1,000 people are members of the Vietnam Association of Certified Public Accountants, accounting for 83% of registered auditors. By June 2010, there were 480 people in Vietnam with foreign auditor certificates. As of December 31, 2014, of the 3,112 people granted auditor certificates, 1,520 auditors were granted practice registration certificates by the Ministry of Finance.

-For State Audit

On July 11, 1994, the Government issued Decree No. 70/CP establishing the State Audit. Later, the Government issued Decree No. 93/2003/ND-CP replacing Decree 70/CP.