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to a considerable waste of capital. Through this work, KTNN showed that the central bank used the TCV interest rate which is much lower than the market rate, many refinancing loans saw their values decreasing, and the long-term backlog was not settled. KTNN also found shortcomings in lending regulations in special cases where there is no specific provision on the limit of loan amounts and interest rates. In addition, KTNN also showed a stagnation in information processing at the central bank, in particular, due to the typical document dispatch: in the first 8 months of 2018, it took 62 days at the latest from the date of notification to the day that commercial banks repay debt, which shows that the NHNN's operation of capital market and money market management is not on time, causing instability in the financial system.

Auditing compulsory reserve: The State Audit has contributed by specifying that the central bank use the required reserve ratio for a number of banks to support loans for rural development is unreasonable, which will cause instability in the as well as lack of safety for financial system in the field of commercial banks.

Auditing state management of DTNH: KTNN has clarified that the state budget revenue of the State Bank has not reached the prescribed rate (in the period of 2014- 2016), but by the period of 2017-2018, the central bank had a relatively stable state budget approximately equal to the IMF’s recommended one, contributing to stabilizing the national financial system.

The audit activities of KTNN have contributed to the monitoring and operation of the interbank market of the Central Bank: In the period of 2015-2018, based on the implementation of resolutions and directives of the Government on the organization of implementation of monetary policy and safe and efficient banking operations, the audit results of KTNN showed that the central bank has contributed to controlling inflation according to the set target. Specifically, the central bank guaranteed the average annual inflation of 1.41% in 2017 and 1.48% in 2018; credit in the economy in 2017 increased by 18.24% and total means of payment increased by 14.97%, compared to 2016; The average inflation was controlled at 3.53% in the period of 2017-2018, contributing to supporting economic growth of 6.81% in 2017 and 7.08% in 2018 respectively. The audit results of the State Audit shows that the management of exchange rate policy in some months of the central bank was still unreasonable.

In addition, during this period, KTNN had recommendations which were promptly adopted by the audited entity, aiding in the reorganization of the management and operation of the central bank, thus contributing significantly to the stability of the financial system of Vietnam.

2.2.2 For banks with dominant state capital (NHNo, NHCT, NHNT, NHCSXH)

2.4.2.1 For Bank of Agriculture and Rural Development in Vietnam

According to the audit results of KTNN, the mobilized capital of NHNo has increased significantly over 2012, 2015 and 2017, meeting the capital needs for business expansion for the corporate clients in general, and the businesses operating in Agro-forestry-fishery in particular, achieving the set growth target. However, the NHNo’s audit showed the instability in the loan payback. Also the assessment of the safety level by KTNN suggested that NHNo's business activities still violated the regulations on minimum capital safety. KTNN has highlighted the problem of violating the minimum capital adequacy ratio and solvency ratio of NHNo in 2012 due to many reasons such as: the outstanding balance of risky assets was large. NHNo has large outstanding loans for real estate businesses.

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KTNN also clarifies the economics, effectiveness and efficiency in managing and using state capital, money and assets, and the implementation of government's decisions on rural credit, and showed that NHNo had made credit restructuring following the Restructuring Scheme, focusing on lending to agriculture, and rural areas and fields. According to the audit of NHNo in 2012, 2015 and 2017, KTNN contributed to the recovery and remittance of more than VND 163 billion to the State Budget. Specifically, the amount of increase in revenue from taxes identified by KTNN was over VND 19 billion. Also, KTNN recovered the amount of inappropriate settlements for construction works at branches of over VND 31 billion, the interest amount from interest rate support scheme under Resolution 30a / 2008 / NQ-CP of the Government at branches of over VND 16 billion, the interest from lending to HTLS that were not in accordance with the regulation with the total amount of more than VND 3 billion, the amount of more than VND 61 billion for the Enterprise Reorganization Assistance Fund at the Ministry of Finance, and collected outstanding debts of Group 2 with the amount of over VND 30 billion, recovered written-off debts according to Circular 03/1997 / TTLT-NHNN-BTC with the amount of nearly VND 3 billion. The activities of recovery and handling have brought back a large amount of capital to the State Budget, contributing to the transparency of the State Bank's financial activities and use of State budget capital, and stabilization of the national financial system.

2.4.2.2 For VietinBank (NHCT), Vietcombank (NHNT)

The audits by KTNN have contributed to effective control in management, use of capital, money and state assets and the implementation of government policies to balance bank capital, conduct review of the compliance of the regulations of the Central Bank to ensure competitiveness, especially in the segment of customers with large and stable deposits.

NHCT and NHNT have implemented preferential credit programs of the State Bank for a number of sectors and fields: serving agriculture and rural development; serving production and business of exports; serving the production and business of small and

medium enterprises, lending for the purchases of social houses with interest rates lower than ordinary loans at the same term and the same level of risk (5% / year according to the Decision No. 21 / QD-NHNN dated January 2, 2014)

With respect to credit activities at NHCT and NHNT, KTNN has contributed to perfect the internal control processes in credit provision, helping NHCT and NHNT become more and more efficient in providing credit and making loans in a transparent, timely, safe and appropriate manner to contribute to stabilizing the financial system. Issues in a number of stages are detected and corrected as follows:

Prior to credit-granting stages: KTNN showed that NHCT and NHNT are weak and have errors in the management of legal documents at branches: some documents and the appraisal are still sketchy, superficial, the basis and content of appraisal are not sufficient and accurate as the inputs and outputs of the project; debt repayment plan; documents proving the equity capital involved in the project; loan maturity date; credit relationship status; the financial situation of customers, etc. These altogether lead to inaccurate determination of capital needs, loan terms as well as the feasibility of loan plans; ...

Disbursement implementation: The disbursement file does not contain any documents proving the purpose of loan use, or only contain non-legal documents such as a written contract of real estate purchase without notarization; or an economic contract that does not specify the quantity of goods or the value of the contract with only retail invoices and lists of items, i.e. no financial invoices as regulated; The loan term on the Loan Acknowledgment form is not in accordance with the credit contract; Disbursement for some customers in cash or transfer to customers' accounts, making it difficult to control the loan use of customers but the bank does not have additional measures such as inventory notes; cash balance note...;

Verifying the loan use: Minutes of the verification of loan use are sketchy, not going into depth to analyze the financial situation, inventory goods, production and business plan as well as fluctuations in the receivables and payables of customers for timely adjustments according to potential risks, remedial measures and inspection measures to prevent the transfer of capital between the parent company and subsidiaries which may lead to the use of capital for wrong purposes; failing to store sufficient documents proving the purpose of loan use;

KTNN clarifies the economics, effectiveness and efficiency in managing and using state capital, money and assets by NHCT and NHNT. Over the years, NHCT and NHNT all reported business results and made public financial information according to the provisions of Circular No. 200/2015 / TT-BTC. Based on the business results and the observance of the provisions of law, NHCT and NHNT are classified as class

A. Both banks maintain the minimum capital adequacy ratio greater than 9% annually; The daily quick ratio is larger than 15%; The 7-day solvency ratio for

VND, GBP, EUR, USD and other foreign currencies converted into USD during the year is greater than 1; Credit limit granted to a customer or a group of customers, as prescribed by the NHNN does not exceed 15% of the equity capital of the bank. The total outstanding credit granted to a customer and a related person must not exceed 25% of the equity. At NHCT and NHNT, in case of lending in excess of their own capital, there is a permission from the State Bank; The ratio of capital to purchase shares in accordance with regulations does not exceed 11% of the charter capital of NHCT.

Through the audit at NHCT and NHNT, the State Auditor pinpointed the observance of laws, policies, financial regimes, accounting and management and use of state capital and assets by NHNT and NHCT, and highlighted the economics, effectiveness and efficiency in the management and use of state capital and assets regarding the safety criteria of banking activities; The implementation of the regulation on financial supervision, evaluation of operational efficiency of financial information disclosure, especially the responsibility of the representative of the State capital at the Bank. The audit results by KTNN have detected errors and contributed to timely rectification of these errors to ensure the stable operation of the Bank, improving the stability of Vietnam's financial system.

2.3.3. For Vietnam Social Policy Bank (NHCSXH)

According to the audit results, NHCSXH basically complies with the regulations on the mechanism of management and administration of the national fund for employment creation, lending to poor households, students, and interest subsidy operations and management costs. Also through the results of the audit at NHCSXH, it is clear that NHCSXH has completed financial and credit plans, contributing to stabilizing the credit segment for social policy beneficiaries, helping to stabilize the financial system as follows:

+ Results of revenue and expenditure gap after the audit: KTNN has contributed to the correct adjustment of revenue and expenditure differences over the years. This leads to the state budget increase of VND 188.8 billion compared to 2013. In 2015, the difference between revenue and expenditure was VND 390 billion, an increase of VND 25 billion compared to 2014 and the difference between 2017 revenues and expenditures was VND 275.31 billion.

+ Regarding the implementation of the capital plan: KTNN showed that NHCSXH in 2014, 2015 and 2017 achieved the capital plan.

+ Regarding the outstanding loan plan: NHCSXH has completed 100% the target of credit growth assigned by the Prime Minister.

+ The results of the implementation of government's social policies: KTNN showed that NHCSXH and related socio-political organizations have strictly implemented the

preferential credit policy to ensure the preferential policy of the State actually benefits people's social life and only targets the right subjects that need preferential treatment according to the State's regulations. Specifically, in 2014 NHCSXH made loans to 17 programs, in 2015 and 2017 NHCSXH made loans to 15 programs, all of which are under preferential credit policies to ensure timely funding for the beneficiaries eligible for a loan when they need it. The average capital use ratio of the whole system is always more than 97% (the Ministry of Finance's regulations prescribed a rate of 93%). At the same time, NHCSXH ensures regular balance between capital sources and capital utilization and timely transfer of capital to branches for lending as planned.

The audit results by KTNN reflected the main features of the operations of NHCSXH in 2014, 2015 and 2017. KTNN also showed that NHCSXH has performed quite well and effectively in managing, using capital and finance, ensuring the effectiveness of the State's legal documents, NHCSXH's executive and guiding documents, thus promoting stability of life, employment, and learning for social policy beneficiaries. Indeed, this is a branch of financial stage in the financial system, which plays a significant role in social stability, especially in the current economic conditions of our country where the number of social policy beneficiaries is not small. It is also through the audit by KTNN that reveals some localities have not paid adequate attention to social policy credit activities, and have not allocated entrusted funds corresponding to their potentials. There are no specific and positive measures to improve the quality of social policy credit ... leading to uneven credit quality in some regions and some localities. It is necessary to reorganize NHCSXH’s activities in these localities in order to bring the credit work to social policy beneficiaries in a more and more substantive and effective manner. Clearly, KTNN at VBSP has clarified the limitations and need to improve in the credit management for social policy beneficiaries, contributing significantly to stabilizing the national financial system.

2.4. ASSESSMENT ON THE QUALITY OF STATE AUDIT ACTIVITIES

2.4.1. Research results

The audit results have helped managers; The National Assembly, the Government and relevant agencies see the achievements, shortcomings and limitations in management and administration of state financial resources, state assets in the field of banking and money management. The research findings could help build solutions to overcome difficulties, shortcomings and limitations in order to improve the efficiency and effectiveness in the process of managing and operating the monetary and banking market.

In addition, the audit conclusions and recommendations show that the Party's

guidelines and policies, the State's policies and laws in management and use of state resources at audited organizations have actually been enforced and brought about changes in socio-economic life. Also, KTNN identified the positive effects that the policy has brought about as well as the negative consequences of not complying with the management and administration regulations of management agencies; and the impact of those policies through the financial indicators pointed out by KTNN.

The audit results also show that: The determination of audit objectives, audit content is generally in accordance with the current capacity of KTNN and basically meets the needs of management practices which are to evaluate the management and use of state financial resources. The content of audit is determined relatively comprehensively: evaluating the activities of commercial banks in all aspects, clearly demonstrating the renewal of audit implementations, audit methods, administrative reforms in the audit work; appreciate and spend a lot of time to go into general audit, expanding the audit sample.

2.4.2. Limitations and causes of restrictions

2.4.2.1 Limitations

The status of the implementation of auditing commercial banks in recent years as well as the results of expert opinion survey show that although there have been many results achieved, there are still many shortcomings, limitations and inadequacies. Specifically :

+ Limitations during the audit planning stage

+ Organizing surveys, collecting information

+ Planning the audit

+ Limitations during the phase of organizing the audit

+ Limitations in the stage of synthesis, conclusion and audit report compilation

2.4.2.2 Causes

+ Subjective reasons

Firstly, the tasks of surveying and gathering information have not been properly focused; KTNN has not focused on collecting information from other sources, e.g. from third parties (in addition to reports of the audited entities such as newspapers, previous audits, ...);

Secondly, the level of professional competency of KTNN is not equal, the ability to

do general audit is still limited; General and detailed audit planning skills and preparation of audit report skill are still weak and limited;

Thirdly, the application of information technology in audit activities is very limited; the softwares supporting the auditing and preparation of the audit report have not yet met the practical requirements of auditing activities; A regular database of audited entities has not been established (which ensures full updates of all information about the audited entities);

Fourthly, the organization of human resources and time at each audit is not scientific and effective in all three stages of the audit process of KTNN (Information survey and technical planning; conducting the audit; and Prepare audit reports);

Fifth, the quality control of auditing did not meet the requirements; Quality control reports have not been able to provide advice to the audit leaders in conducting audit activities; Human resources for quality control, professional experience and skills are weak and inadequate.

Sixthly, the fact that the rate of commmercial banks implementing KTNN's recommendations in the past few years is still low, has many reasons: The audit conclusions themselves are not really accurate, objective and even do not have agreement with the audited entity; Some suggestions have not guaranteed the legality. The arrangement of manpower and time for the inspection of whether the audited entity has implemented the conclusions and recommendations is still limited and inappropriate due to the priority of KTNN to participate in the audit.

Seventh, the internal coordinations among audit teams, and the collaboration between audit teams and audited entities are still limited.

Objective reasons

Firstly, the system of legal regulations related to the activities of KTNN and the office of KTNN has not been consistent and synchronous but not timely amended.

Secondly, the perception of all levels, sectors, the public and the society in general about the position, roles, functions and duties of the KTNN has not been adequate and comprehensive.

Thirdly, in the recent years, KTNN has issued regulations to guide and direct the audit activities such as the KTNN’s System of standards; audit processes; The system of audit documents, forms, etc. However, the implementation and application of the above provisions into practical operation is limited due to the inadequate detailed guidelines (systematic instructions related to standards of KTNN; regulatory guidelines on the selection of audit samples; provisions on gathering audit evidence;

provisions on determination of materiality and audit risk ...);

CONCLUSION OF CHAPTER 2

By analyzing and evaluating the results achieved, the limitations and inadequacies of KTNN’s activities, the audit quality, the thesis has explained the causes and limitations of the operational quality related to auditing activities at commercial banks. This is a practical basis to propose feasible solutions to improve the quality of audit activities at commercial banks of KTNN to meet the requirements of construction and development of our country today.

CHAPTER 3: SOLUTIONS TO IMPROVE THE QUALITY OF BANKING AUDIT ACTIVITIES OF THE STATE AUDIT OF VIETNAM

3.1. ORIENTATION OF BANKING AUDIT OF VIETNAM’S STATE AUDIT

3.1.1. General directions for the period 2020-2030 with a vision to 2030

The implementation of KTNN’s development strategy until 2020-2025 with a visionto 2030 is to ensure that KTNN develops comprehensively and substantially, meeting requirements and tasks assigned. KTNN should be an auditing agency with responsibility, competence and reputation for examining and supervising the management and use of state finance and state assets.

3.1.2. Orientation to improve the quality of audits at banks of the Vietnamese State Audit

Focus on improving the quality of comprehensive audit of capacity, effectiveness and efficiency, in which: Prioritizing the strengthening and promoting the independence of KTNN, ensuring open, transparent and professional activities, formal, step-by-step modernization; expand the scope, scale and promote in-depth types of operation audits, information technology audits, focusing on issues of special public opinion, topical issues in order to make warning suggestions and recommendations, prevent future risks for related parties; pay attention to developing pre-auditing processes and procedures, especially in the submission of comments of KTNN to the National Assembly for consideration and decision of the state budget estimates, the decision to allocate the central budget ...

3.2. SOLUTIONS TO IMPROVE THE QUALITY OF BANKING AUDIT ACTIVITIES OF VIETNAM STATE AUDIT

3.2.1. Macro solutions

 Completing the legal system: Studying and revising Laws on KTNN and legal documents: To clearly define the position and functions of KTNN with other State-

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