If an enterprise with 100% foreign investment capital submits an audit report 20 days late, what will be the penalty?

Who needs an audit report?

Pursuant to Clause 1, Article 15 of Decree 17/2012/ND-CP, regulations on annual financial reports must be audited by auditing firms and branches of foreign auditing firms in Vietnam, including:

– Enterprises and organizations whose annual financial statements are required by law to be audited by auditing firms or branches of foreign auditing firms in Vietnam, including:

+ Foreign invested enterprises;

+ Credit institutions established and operating under the Law on Credit Institutions, including foreign bank branches in Vietnam;

+ Financial institutions, insurance enterprises, reinsurance enterprises, insurance brokerage enterprises, branches of foreign non-life insurance enterprises.

+ Public companies, issuing organizations and securities trading organizations.

– Other businesses and organizations are required to be audited according to relevant laws.

– Enterprises and organizations must be audited by auditing firms and branches of foreign auditing firms in Vietnam, including:

+ State-owned enterprises, except state-owned enterprises operating in the field of state secrets as prescribed by law, must have their annual financial statements audited;

+ Enterprises and organizations implementing important national projects and group A projects using state capital, except for projects in the field of state secrets as prescribed by law, must be audited for the final settlement report of completed projects;

+ Enterprises and organizations in which state-owned corporations and corporations hold 20% or more of voting rights at the end of the fiscal year must have their annual financial statements audited;

+ Enterprises in which listed organizations, issuing organizations and securities trading organizations hold 20% or more of voting rights at the end of the fiscal year must have their annual financial statements audited;

+ Auditing firms and branches of foreign auditing firms in Vietnam must be audited for their annual financial statements.

– Enterprises and organizations subject to annual financial statements audit specified in Clause 1 and Clause 2 of this Article, if required by law to prepare consolidated financial statements or general financial reports, must audit the consolidated financial statements or general financial statements.

– The audit of financial statements and project settlement reports completed for enterprises and organizations specified in Points a and b, Clause 2 of this Article does not replace the audit by the State Audit.

– Enterprises and other organizations voluntarily be audited.

In addition, Official Dispatch 1339/BTC-CDKT dated January 24, 2014 of the Ministry of Finance stipulates that the following subjects are required to have their annual financial statements audited, including: Enterprises with foreign investment capital; Credit institutions established and operating under the Law on Credit Institutions, including foreign bank branches in Vietnam; Financial institutions, insurance enterprises, reinsurance enterprises, insurance brokerage enterprises, branches of foreign non-life insurance enterprises; Public companies, issuing organizations and securities trading organizations; Other businesses and organizations are required to be audited according to relevant laws and businesses and organizations must be audited by auditing firms and branches of foreign auditing firms in Vietnam.

What agencies submit audited financial statements?

Pursuant to Article 110 of Circular 200/2014/TT-BTC, regulations on where to submit financial reports are as follows:

– For state-owned enterprises located in provinces and centrally run cities, they must prepare and submit financial reports to the Department of Finance of the province and centrally run city. For central state-owned enterprises, they must also submit financial reports to the Ministry of Finance (Department of Enterprise Finance).

– For types of state-owned enterprises such as commercial banks, lottery companies, credit institutions, insurance businesses, and securities trading companies, they must submit financial reports to the Ministry of Finance (Department of Banking and Finance or Insurance Supervision Administration).

– Securities trading companies and public companies must submit financial reports to the State Securities Commission and the Stock Exchange.

– Enterprises must send financial reports to the tax authority directly managing local taxes. For State Corporations, they must also submit financial reports to the Ministry of Finance (General Department of Taxation).

– Enterprises with superior accounting units must submit financial reports to the superior accounting unit according to the regulations of the superior accounting unit.

– For enterprises whose financial statements are required by law to have their financial statements audited, they must be audited before submitting the financial statements according to regulations. Financial statements of audited enterprises must have the audit report attached to the financial statements when submitted to state management agencies and superior enterprises.

– The financial agency to which foreign direct investment (FDI) enterprises must submit financial reports is the Department of Finance of the provinces and centrally run cities where the enterprise registered its main business headquarters.

– For state-owned enterprises with 100% charter capital, in addition to the agencies where the enterprise must submit financial reports according to the above regulations, the enterprise must also submit financial reports to the agencies and organizations assigned and decentralized to exercise the rights of the owner according to Decree 99/2012/ND-CP and the documents amending, supplementing, and replacing.

– Enterprises (including domestic enterprises and foreign-invested enterprises) whose headquarters are located in export processing zones, industrial parks, and high-tech zones must also submit annual financial reports to the Management Board of export processing zones, industrial parks, and high-tech zones if requested.

What is the penalty for an enterprise with 100% foreign investment that submits its audit report 20 days late?

Pursuant to Clause 4, Article 110 of Circular 200/2014/TT-BTC, it is stipulated that enterprises whose financial statements are required by law to have their financial statements audited must be audited before submitting their financial statements according to regulations. Financial statements of audited enterprises must have the audit report attached to the financial statements when submitted to state management agencies and superior enterprises.

Thus, the submission of the audit report will be at the same time as the submission of the financial report, the deadline for submitting the financial report is specified in Article 109 of Circular 200/2014/TT-BTC.

Regarding handling of violations of late submission of audit reports, the law stipulates as follows:

Clause 1, Article 60 of the 2011 Law on Independent Auditing, regulations on handling violations of independent auditing in Article 59 of this Law, specifically:

“Article 60. Handling of violations of the law on independent auditing

1. Organizations and individuals violating the provisions of Article 59 of this Law shall be handled in the following forms:

a) Warning;

b) Fines money;

c) In addition to the handling measures specified in Points a and b of this Clause, violating organizations and individuals may have their Certificate of eligibility to conduct business in auditing services, auditor’s certificate, Certificate of audit practice registration, suspension of practice registration or ban from participating in independent audit activities.

…”

Thus, businesses that violate auditing regulations, specifically late submission of audit reports, may be subject to warnings, fines, revocation of Certificate of eligibility to conduct business in auditing services, auditor’s certificate, Certificate of registration to practice auditing, suspension of practice registration or ban from participating in independent audit activities.

In addition, according to the provisions of Article 7 of Decree 95/2016/ND-CP the following:

3. Fines from 3,000,000 VND to 5,000,000 VND for late submission of reports compared to the prescribed regime:

a) From 10 days to 15 days for monthly statistical reports;

b) From 15 days to less than 20 days for statistical reports, quarterly and 6-month financial reports, 9 months;

c) From 20 days to less than 30 days for statistical reports and annual financial reports.

4. Fine from 5,000,000 VND to 10,000,000 VND for submitting reports late compared to the prescribed regime:

a) From 20 days to 30 days for statistical reports, quarterly, 6-month, 9-month financial reports;

b) From 30 days to 45 days for statistical reports, annual financial reports.”

Thus, enterprises with 100% foreign capital that submit audit reports 20 days late will be fined in the following cases:

– For statistical reports and annual financial reports, the fine will be from 3,000,000 VND to 5,000,000 VND.

– For statistical reports, quarterly, 6-month, and 9-month financial reports, fines range from 5,000,000 VND to 10,000,000 VND.