Auditing financial statements brings many beneficial values to businesses; however, recognizing and maximizing the benefits of financial statement audits is sometimes not a top priority in the development strategies of business leaders.
1. Why are businesses required to have their financial statements audited?
Because the enterprise falls under one of the entities required to be audited as stipulated in Article 37 of the Law on Independent Auditing dated March 29, 2011 and Article 15 of Decree No. 17 dated February 13, 2012 guiding the Law on Independent Auditing, as follows:
- Foreign-invested enterprises;
- Credit institutions are established and operate in accordance with the Law on Credit Institutions, including branches of foreign banks in Vietnam;
- Financial institutions, insurance companies, reinsurance companies, insurance brokerage companies, branches of foreign non-life insurance companies;
- Public companies, securities issuers and securities trading organizations;
- State-owned enterprises, except those operating in fields subject to state secrets as stipulated by law, must have their annual financial statements audited.
- Enterprises and organizations implementing nationally important projects and Group A projects using state capital, except for projects in fields classified as state secrets according to the law, must have their final project settlement reports audited.
- Businesses and organizations in which state-owned corporations and conglomerates hold 20% or more of the voting rights at the end of the fiscal year must have their annual financial statements audited.
- Businesses in which listed companies, issuers, and securities trading organizations hold 20% or more of the voting rights at the end of the fiscal year must have their annual financial statements audited.
- Audit firms and branches of foreign audit firms in Vietnam must have their annual financial statements audited.
2. When should a business get an audit?
With the trend of mergers and business collaborations without borders, along with a strong wave of investment, having audited financial reports that accurately reflect the "health" of a business has become extremely necessary.
More and more businesses understand that having an effective financial and accounting management system, with appropriately presented and transparent financial reports, is essential. Not only do business leaders need this information to base their strategic decisions, but investors also consistently demand audited financial reports.
Therefore, even if a business is not subject to mandatory auditing, its management may still decide to conduct an audit of its financial statements to meet management and risk control requirements.
3. Current trends in businesses
Whether an audit is necessary or advisable is no longer limited to legally mandated entities, but now depends primarily on the vision and development direction of the company's leadership.
Auditing helps company leaders visualize the overall picture of the business's performance at each period, keeping them in a strong position and ready to seize future investment opportunities. Simultaneously, revising Vietnamese Accounting Standards to align them with International Accounting Standards, and amending tax regulations, helps eliminate many discrepancies in financial reporting between domestic and international markets, opening up more opportunities for both domestic and foreign investors.
The significant changes in integration, economic development orientation in the current situation, and the benefits that auditing brings have strongly impacted and changed businesses' perceptions of the necessity of auditing, transforming it from something "should be done" to something "must be done".