Conditions for establishing an auditing company in Vietnam

Auditing company is a type of business that has developed strongly in recent times stemming from the desire to have an independent unit providing audit services to transparency of financial information and data. However, in order to establish and provide audit services, enterprises need to meet the conditions prescribed by law. So what are the conditions for establishing an auditing company? What is the procedure for establishing an audit company? In the article below, Viet An Law Company will provide you with specific information related to the above issues.

Legal bases

• Vietnam’s WTO commitments;
• Enterprise Law 2020;
• Law on Independent Audit 2011;
• Decree 17/2012/ND-CP.

The concept of audit services and audit company in Vietnam

Audit services are understood as the process of assessing the reliability of financial information provided by a certain organization. Auditing helps ensure transparency and accuracy of financial statements, increasing the trust of stakeholders in the business such as shareholders, banks or partners.

Pursuant to the provisions of Clause 5, Article 5 of the Law on Independent Auditing 2011, an auditing company is a company that fully meets the conditions to be able to provide audit services in accordance with the Law on Independent Auditing 2011 and other relevant laws.

Pursuant to the provisions of Article 20 of the Law on Independent Auditing 2011, when establishing an auditing company, only one of the types of enterprises may be selected:

• Limited liability company with two or more members
• Partnerships
• Sole proprietorship

Market access conditions for foreign investors providing audit services in Vietnam

Pursuant to the provisions of Clause 4, Article 21 of the 2011 Law on Independent Auditing, foreign investors who want to provide audit services in Vietnam need to meet the following conditions:

• Foreign auditing companys are permitted to provide independent audit services in accordance with the laws of the country where their head office is located
• There are at least 2 practicing auditors, including the Director or General Manager of the branch
• The director or general director of a branch of a foreign auditing company will not be allowed to hold positions in management or administration of other enterprises in Vietnam
• Foreign auditing companys will have to send a document to the Ministry of Finance to ensure their responsibility for all obligations and commitments of branches of foreign auditing companys in Vietnam
• Foreign auditing companys must ensure that the capital amount is not lower than the legal capital level as prescribed in Article 8 of Decree 17/2012/ND-CP, specifically:
• Branch establishment: maintain equity on the balance sheet at the end of the most recent fiscal year of US$500,000.
• The allocated capital of a branch of a foreign auditing company will not be lower than the legal capital for a limited liability company of VND 5 billion.
• In the course of operation, the foreign auditing company must maintain equity capital on the balance sheet and the granted capital of the branch in Vietnam and not lower than the capital specified in Clause 1 Article 8 of Decree 17/2012/ND-CP of 500,000 USD. Foreign auditing companys and branches of foreign auditing companys will have to replenish capital if the equity capital on the balance sheet of the foreign auditing company and of the branch of the foreign auditing company in Vietnam is less than 500,000 USD and lower than the legal capital level for this limited liability company in the period 03 months from the end of the fiscal year.

Conditions for establishing an auditing company in Vietnam

In Article 21 of the Law on Auditing 2011, there are specific regulations on conditions for establishing an auditing company for each specific type of enterprise as follows:

Conditions for limited liability company with two or more members:

• Must have a business registration certificate, enterprise registration certificate or investment certificate as prescribed by law
• There must be at least 5 practicing auditors, including at least 2 capital contributors. Pursuant to the provisions of Article 7 of Decree 17/2012/ND-CP, the capital contribution of practicing auditors is prescribed as follows:
• An auditing limited liability company must have at least 2 capital contributors who are auditors registered to practice at the company. The capital contribution of practicing auditors will have to account for more than 50% of the total charter capital of the company.
• Practicing auditors will not be concurrently capital contributing members of two or more auditing companys.
• The legal representative, Director or General Director of the Company will have to be a practicing auditor
• Ensure legal capital as prescribed in Article 5 of Decree 17/2012/ND-CP specifically:
• The legal capital of a limited liability company from 01/01/2015 is VND 5 billion.
• During operation, the limited liability company will always have to maintain equity on the balance sheet, which must not be lower than the legal capital of VND 5 billion mentioned above. The auditing company will have to replenish capital if the equity on the balance sheet is less than VND 5 billion within 3 months from the end of the fiscal year.
• The capital contribution of an organization member will not exceed the level specified in Article 6 of Decree 17/2012/ND-CP, the representative of the member being an organization will have to be a practicing auditor as follows:
• Members being organizations will be entitled to contribute up to 35% of the total charter capital of an auditing limited liability company with two or more members. In case there are many organizations contributing capital, the total contributed capital of the organizations will be equal to 35% of the total charter capital of the company.
• A member being an organization will have to appoint a person to represent the organization to the Members’ Council. The representative of the member being an organization will have to be an auditor and must register to practice at the auditing company to which the organization participates in contributing capital.
• A practicing auditor who is a representative of an organization shall not be allowed to contribute capital to that auditing company as an individual.

Conditions for a partnership:

• Must have a Business Registration Certificate, Business Registration Certificate or Investment Certificate as prescribed
• The pedigree has at least 5 practicing auditors, including at least 2 general partners
• The legal representative, director or general director must be a practicing auditor

Conditions for private enterprises:

• Must have a Business Registration Certificate, Business Registration Certificate or Investment Certificate as prescribed
• There must be at least 5 practicing auditors including the owner of a private business
• The owner of a sole proprietorship must concurrently be the director of the company.

Procedures for establishing a Vietnam capital auditing company

Step 1: Submit the application for establishment of an auditing company

The dossier of establishment of an auditing company will include:

• Application for business registration
• Company’s charter
• List of capital contributors for limited liability company with two or more members or list of general partners for partnerships
• Notarized/certified copy of ID/Citizen card or passport of an individual member, notarized/certified copy of the Certificate of Business Registration in case the member is an organization accompanied by a notarized/certified copy of ID/Citizen Card or passport of the legal representative of that organization
• Power of attorney for the person carrying out the company establishment procedures at the competent authority

After preparing 01 set of documents mentioned above, the enterprise proceeds to submit the dossier at the Department of Planning and Investment where the enterprise is headquartered. Pursuant to the provisions of Clause 1, Article 26 of the Enterprise Law 2020, enterprises can submit by one of the following methods:

• Submit directly at the business registration office which is the Department of Planning and Investment
• Filed through the postal service
• Submit electronically

Step 2: Resolve the case

Within 03 days from the date of receipt of the dossier, the Business Registration Agency will review the validity of the dossier and grant business registration. In case the dossier is incorrect or invalid, the agency must issue a written notice of the contents to be amended and supplemented to the enterprise founder.

If the business registration authority refuses to register an enterprise, it must issue a written notice clearly stating the reason.

Step 3: Submit an application for a certificate of eligibility for provision of audit services

Pursuant to the provisions of Article 22 of the Law on Independent Auditing 2011, a dossier of application for a certificate of eligibility for provision of audit services will include:

• An application for a Certificate of eligibility for provision of audit services
• Notarized/certified copy of Business Registration Certificate, Business Registration Certificate or Investment Certificate;
• Notarized/certified copies of the Certificate of registration for auditing practice of practicing auditors
• The employment contract is the full-time employment of the practicing auditor
• Documents proving the contributed capital in case of establishment of a limited liability company
• Other documents are regulated by the Ministry of Finance.

Enterprises shall submit 01 set of above dossiers to the Ministry of Finance.

Step 4: Review and process the application.

Within 30 days from the date of receipt of a valid dossier, the Ministry of Finance will issue the Certificate of eligibility for provision of audit services to the auditing company. In case of refusal, the Ministry of Finance will have to respond in writing and clearly state the reasons.

In case it is necessary to clarify relevant issues, the Ministry of Finance will have the right to request the enterprise to explain.

If you want to learn more about the conditions for establishing an auditing company or other types of businesses, please contact Viet An Law Firm for more details!