Independent auditors embroiled in a series of scandals.

Following a series of scandals involving major cases, the growing list of auditors whose licenses have been suspended has raised public concerns about the quality of the profession.

In the Saigon Dai Ninh case, an auditing firm was accused of issuing an audit report on the capital contributions of shareholders, determining the owner's capital contribution to Mr. Nguyen Cao Tri's company despite insufficient evidence - Photo: MV

Speaking to Tuoi Tre newspaper, a veteran auditing expert said that increasing penalties as proposed is necessary, but in the long term, consideration should be given to amending the Auditing Law to include stricter sanctions, strengthening supervision from management agencies, and enhancing the management and control of professional organizations.

A series of scandals, challenging trust.

Many major corruption cases tried recently have, to varying degrees, involved auditors and auditing firms. Typical examples include the case of Mr. Nguyen Cao Tri (related to Saigon Dai Ninh Company), and the cases of Tan Hoang Minh, FLC, and SCB, where audit irregularities were specifically identified, sparking public debate about accountability and audit quality.

Over the past month, a long list of auditors whose licenses to audit public interest entities in the securities sector have been suspended or are about to be suspended has been published, causing considerable concern among investors. The valuation of enterprises for the equitization of businesses at the Ministry of Transport has also recently been concluded, with findings related to the audit.

Mr. Dang Tran Phuc, chairman of AzFin, a company specializing in financial consulting and training, commented: "Like other professions, not all auditors have good professional competence. Meanwhile, the fraudulent practices of businesses are becoming increasingly sophisticated."

Not to mention that the working mechanisms of not all auditing firms are transparent and objective. Sometimes auditors even have to perform their duties under great pressure from their superiors."

As someone who has been involved in the auditing industry since the 1990s, Associate Professor Dr. Dang Van Thanh - former chairman of the Vietnam Association of Accountants and Auditors, and former deputy chairman of the National Assembly's Economic and Budget Committee - expressed his deep sadness about this situation.

"The auditing profession is highly professional and independent, requiring integrity, objectivity, and a strong emphasis on professional ethics. Therefore, regardless of personal or collective motives, incompetence, or any other reason... signing an audit report without sufficient reliable and appropriate evidence is unacceptable," Mr. Thanh reflected.

When auditing firms and auditors are named in major cases and face civil and criminal prosecution recently, Mr. Thanh said he is very worried about the phenomenon of "a few bad apples spoiling the bunch," which could erode public trust in the auditing profession.

In what direction should quality be improved?

When discussing solutions to address this "very regrettable" issue, Mr. Dang Van Thanh stated that countries around the world have very high demands for professionalism and independence in auditing. The International Federation of Accountants (IFAC) has issued a set of professional ethical standards and a code of conduct for accountants and auditors. Accordingly, the penalties for violations in auditing activities are very strict and rigorous.

In Vietnam, the Ministry of Finance has issued and implemented professional ethical standards for accountants and auditors. Simultaneously, mechanisms for controlling service quality and professional ethics are in place, and new regulations are currently being revised.

However, according to Mr. Thanh, increasing penalties is necessary but not a fundamental solution because while it may limit violations, there is also a trade-off between the gains and losses. What is most important remains professional honor and professional values.

Therefore, Mr. Thanh proposed a review of the regulations on auditing in general, including the Law on Independent Auditing. The amendments should aim to introduce stricter sanctions, strengthen supervision from management agencies, and enhance the management and control of professional organizations.

"To practice, auditors need to be members of a professional organization. The professional organization has the right to manage its members and penalize practicing members if they violate regulations," Mr. Thanh proposed.

Regarding the amendment of several articles of the Law on Independent Auditing, the Vietnam Association of Certified Public Accountants (VACPA) has also held numerous meetings with the Ministry of Finance, the State Securities Commission, and the Economic Committee of the National Assembly.

During these meetings, VACPA stated that it consistently emphasizes the need for the draft law to clearly define the roles and responsibilities of auditors and businesses/parties responsible for preparing financial statements, in order to establish appropriate administrative penalties for violations. Simultaneously, it aims to address fraud and errors at their root, ensure consistency between related regulations, and enhance the transparency of financial information in the market.

Mr. Nguyen The Minh, director of retail client analysis at Yuanta Vietnam Securities Company, believes that proposing a 20-fold increase in fines is necessary.

"However, attention should be paid to the quality control of the auditing firms themselves. If too many auditors violate regulations and are suspended, it is clear that the auditing firm has a problem," Mr. Minh said.

Which business is having problems?

Mr. Bui Van Huy, director of DSC Securities' Ho Chi Minh City branch, said that recently, the percentage of businesses wanting to "manipulate" their financial statements to make them look "better" has increased significantly. Mr. Huy believes that this raises suspicions about businesses that have discrepancies with auditors or those that are weak and suddenly use different accounting practices such as late expense recording or early revenue recognition, and these need to be carefully examined.

Faced with these businesses, the auditing firm will choose "yes" or "no." In reality, auditing firms are also businesses and they need revenue. "If they choose to overlook issues in order to generate revenue, it will lead to deviations from standards, and even violations of the law," Mr. Huy said, noting that not only in Vietnam, but also around the world, there have been many auditing scandals recently.

It is impossible to verify whether the "rehashed" document is genuine or fake.

Speaking to Tuổi Trẻ newspaper, a veteran auditor shared that fraudulent practices by businesses are becoming increasingly sophisticated. "We encounter many reports that have been 'manipulated,' while auditors can only audit the documents provided and cannot verify whether those documents are genuine or fake," this auditor explained.

In fact, following a series of scandals, many auditing firms have refused to audit businesses due to perceived risks. A recently listed company, after a long period without finding an auditing firm, has repeatedly sent urgent letters to the Securities Commission requesting permission to temporarily postpone the publication of its financial statements.

Because all 30 auditing firms approved to audit public interest entities in the securities sector in 2023 rejected them, as the auditors were suspended before signing the financial statements.

Source: https://tuoitre.vn/kiem-toan-doc-lap-be-boi-lien-tiep-20241128224230901.htm