Financial Crime World

What is the Sarbanes-Oxley Act in Vietnam?

The Korean government has taken steps to reform and regain public trust in response to a surge in accounting and corporate scandals. One such move was the development of Korea Sarbanes-oxley (K-SOX), based on the US’s Sarbanes-oxley Act signed into law in 2002.

Overview of K-SOX

K-SOX aims to protect investors from fraudulent financial information by mandating stringent requirements on Internal controls over Financial reporting (ICFR) and placing more responsibilities on:

  • The Board of Management
  • Audit committee
  • External auditors of companies

Scope and Effective Dates

K-SOX is applicable to both listed and unlisted entities operating in the Republic of Korea. The effective dates for K-SOX are:

  • K-SOX for separate financial statements: fiscal year 2019
  • K-SOX for consolidated financial statements:
    • Listed entities with total assets valued at over 2 trillion won: fiscal year 2023
    • Listed entities with total assets valued at over 500 billion won: fiscal year 2024
    • All listed entities: fiscal year 2025

Relevance to Vietnamese Subsidiaries of Korean Groups

As K-SOX for consolidated financial statements emphasizes ICFR at the consolidated level, considering parent companies and their subsidiaries as a single economic entity, Vietnamese subsidiaries of Korean groups should pay closer attention to this Act. Their participation will affect the group’s full compliance with K-SOX, making it essential for them to take action now and prepare accordingly.

Importance of Timely Preparation and Adaptation

The relevance of K-SOX to Vietnamese subsidiaries highlights the importance of timely preparation and adaptation to comply with the new regulations. With the increasing trend of Korean companies expanding their operations in Vietnam, it is crucial for these entities to familiarize themselves with K-SOX requirements to ensure compliance and maintain a strong reputation in the market.

Compliance Requirements

To comply with K-SOX, Vietnamese subsidiaries should:

  • Establish effective internal controls over financial reporting
  • Strengthen their audit committees
  • Enhance their relationships with external auditors

By doing so, they can not only comply with K-SOX but also improve their overall corporate governance and transparency.