State-owned Commercial Banks to Benefit from Improved Financial Data
In a move aimed at enhancing transparency and accountability, the government has introduced new regulations that will permit State-owned commercial banks (SOCBs) to make lending decisions based on more reliable financial data.
New Regulations for SOCBs
Under Decree 105 and Circular 64, SOCBs will be able to rely on audited financial statements from State-owned enterprises (SOEs) when making lending decisions. This is expected to have a positive impact on the financial statements of SOCBs, as better information will be available on the recoverability of their credits to SOEs.
Increased Drive for Efficiency
The introduction of independent auditing is expected to drive efficiency and effectiveness among SOE management teams, as they will be rewarded based on performance. The majority of SOE managements have not previously been subject to an independent audit, and may require briefing or training on the audit process.
Challenges Ahead
However, the implementation of these regulations presents a significant challenge to the auditing profession in Vietnam. With nearly 5,000 SOEs and only 61 audit companies currently operating in the country, there is a need for an expansion in the number of audit firms and a growth in the size of existing firms.
Training and Capacity Building
To meet this demand, the Ministry of Finance, audit firms, independent training providers, and other interested parties must work together to increase the quantity and improve the quality of accountancy and audit training available in Vietnam. Attracting smart, educated people into a career as an auditor is also crucial, and once they are in, the quality of training needs to progress.
Modernising the Audit Profession
Decree 105 has been drafted with international best practices in mind, including the requirements set out in the US Sarbanes-Oxley Act. The decree includes restrictions on non-audit work, auditor partner rotation, and rules aimed at maintaining auditor independence.
- Restrictions on non-audit work
- Auditor partner rotation
- Rules for maintaining auditor independence
The decree also requires auditors to participate in an annual programme of continuing professional education to develop their knowledge and skills. However, some have raised concerns about the requirement for auditors to pass an examination each year before they can register to practice the following year, which may introduce excessive regulation and practical issues.
Conclusion
Decree 105 represents a significant step forward in the modernisation of the audit profession in Vietnam. While it presents challenges, it also offers opportunities for growth and development. The objectives of this initiative are clear and laudable, and with effective implementation, it is expected to bring about positive changes in the financial sector.