Circular No. 51/2024/TT-NHNN dated November 29, 2024 on prescribing independent audit of commercial banks, non-bank credit institutions, microfinance institutions, and foreign bank branches
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THE STATE BANK
OF VIETNAM |
THE SOCIALIST
REPUBLIC OF VIET NAM |
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No. 51/2024/TT-NHNN |
Hanoi, November 29, 2024 |
CIRCULAR
PRESCRIBING INDEPENDENT AUDIT OF COMMERCIAL BANKS, NON-BANK CREDIT INSTITUTIONS, MICROFINANCE INSTITUTIONS, AND FOREIGN BANK BRANCHES
Pursuant to the Law on the State Bank of Vietnam dated June 16, 2010;
Pursuant to the Law on Credit Institutions dated January 18, 2024;
Pursuant to the Law on Independent Audit dated March 29, 2011;
Pursuant to the Government’s Decree No. 102/2022/ND-CP dated December 12, 2022 defining functions, tasks, powers and organizational structure of the State Bank of Vietnam; the Government’s Decree No. 146/2024/ND-CP dated November 06, 2024 providing amendments to the Government’s Decree No. 102/2022/ND-CP dated December 12, 2022 defining functions, tasks, powers and organizational structure of the State Bank of Vietnam and the Government’s Decree No. 26/2014/ND-CP dated April 07, 2014 prescribing organization and operation of banking inspection and supervision authorities, as amended in the Government’s Decree No. 43/2019/ND-CP dated May 17, 2019;
At the request of the Head of the SBV Banking Supervision Agency;
The Governor of the State Bank of Vietnam promulgates a Circular prescribing independent audit of commercial banks, non-bank credit institutions, microfinance institutions, and foreign bank branches.
Chapter I
GENERAL PROVISIONS
Article 1. Scope
1. This Circular provides regulations on independent audit of financial statements of commercial banks, non-bank credit institutions, microfinance institutions, and foreign bank branches, and provision of assurance about their internal control systems over formulation and presentation of financial statements.
2. Commercial banks, non-bank credit institutions, microfinance institutions, and foreign bank branches shall carry out independent audits in accordance with regulations of relevant laws and provisions of Articles 11, 12, 13, 14 hereof when:
a) hiring independent audit organizations to carry out partial or entire evaluation of their internal control systems at the request of the State Bank of Vietnam (hereinafter referred to as “SBV”) as prescribed in clause 3 Article 57 of the Law on Credit Institutions;
b) hiring independent audit organizations to conduct audit of their financial statements and evaluation of their financial health as the basis for developing remedial plans at the SBV’s request as prescribed in clause 4 Article 156 of the Law on Credit Institutions;
c) hiring independent audit organizations to conduct audit of their financial statements as prescribed in clause 1 Article 167 of the Law on Credit Institutions;
d) hiring independent audit organizations to conduct independent audits which aim to serve performance of banking inspection and supervision tasks according to the Government’s regulations on organization and operation of banking inspection and supervision authorities.
Article 2. Regulated entities
This Circular applies to:
1. Commercial banks, non-bank credit institutions, microfinance institutions, and foreign bank branches (hereinafter referred to as “credit institutions and FBBs").
2. Independent audit organizations, audit practitioners, auditors and other organizations and individuals involved in independent audit of credit institutions and FBBs.
Article 3. Definitions
For the purposes of this Circular, the terms used herein are construed as follows:
1. “independent audit” of a credit institution or FBB means an audit practitioner or independent audit organization’s act of auditing financial statements of that credit institution or FBB and provision of assurance about its internal control system over formulation and presentation of financial statements under an audit engagement.
2. “independent audit organizations” include audit firms and branches of foreign audit firms operating in Vietnam.
Article 4. Scope of audit
1. Credit institutions and FBBs must select independent audit organizations as prescribed in this Circular to:
a) carry out audit of their financial statements; and
b) provide assurance about their internal control systems over formulation and presentation of their financial statements.
2. Review of half-yearly financial statements, audit of final statements of finished projects and other auditing tasks of credit institutions and FBBs (if any) shall be subject to relevant laws.
Article 5. Encouragement of audit
For the purpose of ensuring their safe operation, SBV encourages credit institutions and FBBs to conduct audit of restrictions using independent audit services.
Chapter II
SPECIFIC PROVISIONS
Article 6. Schedule for selecting independent audit organizations
Before the end of a fiscal year, credit institutions and FBBs must complete selection of independent audit organizations as prescribed in this Circular to conduct audit of their financial statements, and provide assurance about their internal control systems over formulation and presentation of financial statements for the next fiscal year.
Article 7. Power to select independent audit organizations
1. The power to select independent audit organizations for credit institutions that are limited liability companies is granted to their Boards of Members.
2. The power to select independent audit organizations for credit institutions that are joint-stock companies is granted to their General Meetings of Shareholders (GMMs), except the case prescribed in clause 3 of this Article.
3. The power to select independent audit organizations for credit institutions that are joint-stock companies and are placed under special control is granted to their Boards of Directors.
4. The power to select independent audit organizations for FBBs is granted to their General Directors (or Directors).
Article 8. Subject matters of independent audit
Subject matters of an independent audit of a credit institution or FBB include:
1. Independent audit of its financial statements, including:
a) Audit of financial status report;
b) Audit of income statement;
c) Audit of cash flow statement;
d) Audit of notes to financial statements.
2. Provision of assurance about its internal control system over formulation and presentation of financial statements.
Article 9. Independent audit opinions
Based on audit outcomes, audit practitioners and independent audit organizations must give their opinions according to clause 1 Article 48 of the Law on Independent Audit.
Article 10. Independent audit outcomes
1. Outcomes of an independent audit of a credit institution or FBB include:
a) Report on audit of its financial statements;
b) Report on provision of assurance about its internal control system over formulation and presentation of financial statements;
c) Management letter and relevant documents and evidences.
2. Report on audit of financial statements of a credit institution or FBB and report on provision of assurance about its internal control system over formulation and presentation of financial statements shall be made in accordance with regulations of law on independent audit, Vietnam’s accounting and auditing standards, and other relevant laws.
3. The management letter reflects specific issues and events identified during the audit, including actual status, potential risks, auditor's recommendations and opinions given by the credit institution or FBB’s executive or manager about such events. A management letter shall, inter alia, include the following main contents:
a) General approach and scope of the audit, and additional requirements;
b) Evaluation of changes in any significant policies and practices that have effects on financial statements of the credit institution or FBB and/or its internal control system over formulation and presentation of financial statements;
c) Risks which may produce material effects on financial statements of the credit institution or FBB and/or its internal control system over formulation and presentation of financial statements;
d) Adjustments proposed by the independent audit organization and audit practitioners to the issues and events which have or could have material effects on financial statements of the credit institution or FBB and/or its internal control system over formulation and presentation of financial statements;
dd) Disagreements with the credit institution or FBB’s manager or executive about matters that could have material effects on its financial statements and/or its internal control system over formulation and presentation of financial statements or the opinions given by the audit practitioner and independent audit organization; The opinions given by the audit practitioner and independent audit organization must clearly include consideration of whether such disagreements have, or have not, been resolved and the significance of the matter;
e) Any other matters agreed upon in the terms of the audit engagement.
Article 11. Requirements to be satisfied by independent audit organizations conducting audit of commercial banks, non-bank credit institutions, and foreign bank branches
An independent audit organization taking charge of
auditing a commercial bank, non-bank credit institution or FBB shall be
required to meet the following requirements:
1. It has been duly established and operating in audit sector in Vietnam for at
least 03 years.
2. Its owner's equity or allocated capital is VND 10 billion or higher.
3. There are at least 05 audit practitioners engaging in the audit of a commercial bank, non-bank credit institution or FBB, including at least 03 audit practitioners having 02 or more years’ experience in engaging in audits in finance and banking sectors.
4. Any of its audit practitioners and representatives engaging in audit of the commercial bank, non-bank credit institution or FBB must meet the standards set out in Article 13 of this Circular.
5. It does not have any relationship, such as purchase of bonds, assets or shares, capital contribution, or establishment of joint venture, with the audited commercial bank, non-bank credit institution or FBB.
6. It is not a client to which (unsecured) line of credit is extended or other services are rendered with preferential treatment by the audited commercial bank, non-bank credit institution or FBB.
7. It has not engaged to perform any audit of the subject commercial bank, non-bank credit institution or FBB in the past 05 years preceding the year of audit.
8. It has not faced any penalties for violations against regulations of law on independent audit in the past 02 years preceding the year of audit.
9. The audit organization and audit practitioners in charge of conducting audit of a commercial bank, non-bank credit institution or FBB are included in the list of audit organizations and the list of audit practitioners approved for engagement in audit of public interest entities as announced by the Ministry of Finance of Vietnam in the audit period.
The audit organization and audit practitioners in charge of conducting audit of a commercial bank or non-bank credit institution that is a public interest entity in securities sector must be included in the list of audit organizations and the list of audit practitioners approved for engagement in audit of public interest entities in securities sector as announced by the State Securities Commission of Vietnam (SSC) in the audit period.
10. It does not fall in any of the cases of disqualification for engagement in audit as prescribed in Article 30 of the Law on Independent Audit.
11. It meets other independent audit requirements laid down in the Law on Independent Audit and its instructional documents.
Article 12. Requirements to be satisfied by independent audit organizations conducting audit of microfinance institutions
An independent audit organization taking charge of auditing a microfinance institution shall be required to meet the following requirements:
1. Any of its audit practitioners and representatives engaging in audit of the microfinance institution must meet the standards set out in Article 13 of this Circular.
2. The audit organization and audit practitioners in charge of conducting audit of a microfinance institution are included in the list of audit organizations and the list of audit practitioners approved for engagement in audit of public interest entities as announced by the Ministry of Finance of Vietnam in the audit period.
3. It has not engaged to perform any audit of the subject microfinance institution in the past 05 years preceding the year of audit.
4. It does not fall in any of the cases of disqualification for engagement in audit as prescribed in Article 30 of the Law on Independent Audit.
5. It meets other independent audit requirements laid down in the Law on Independent Audit and its instructional documents.
Article 13. Standards of audit practitioners and representatives of independent audit organizations engaging in audit of credit institutions and FBBs
An audit practitioner or representative of an
independent audit organization engaging in audit of a credit institution or FBB
must have the following standards:
1. He/she is not a client to whom (unsecured) line of credit is extended or
other services are rendered with preferential treatment by the audited
commercial bank or FBB.
2. He/she has not faced any penalties for violations against regulations of law on independent audit in the past 02 years preceding the year of audit.
3. He/she does not fall in any of the cases of disqualification for engagement in audit as prescribed in Article 19 of the Law on Independent Audit.
4. He/she meets other independent audit requirements laid down in the Law on Independent Audit and its instructional documents.
Article 14. Responsibilities of independent audit organizations and audit practitioners engaging in audit of credit institutions and FBBs
1. Fully comply with provisions of Articles 18, 29 of the Law on Independent Audit and other regulations of law on independent audit.
2. Assume responsibility for the adequacy, accuracy and timeliness of information provided for credit institutions and FBBs during their selection of independent audit organizations.
3. Comply with regulations of law on financial statements and operation of credit institutions and FBBs.
4. Provide explanation or information and data concerning auditing activities at the SBV’s request.
5. Notify and provide the audited credit institution or FBB that is found, during the audit, to have failed to comply with regulations of law on audit scope with recommendations on measures for remedying and dealing with its violation; include their opinions in audit report or management letter as prescribed in clauses 2 and 3 Article 10 of this Circular.
6. If, after an audit report has been issued, the audited credit institution or FBB is suspected of committing, or is found to have committed, any material errors as a result of their noncompliance with regulations of law regarding the audit scope, the independent audit organization shall follow procedures for giving notification thereof to the audited entity and third party in accordance with Vietnam’s auditing standards and also notify SBV of this circumstance.
Article 15. Responsibilities of credit institutions and FBBs
1. Select independent audit organizations in accordance with provisions of this Circular.
2. Within 30 days from their decision on selection of independent audit organization, send written notice of the selected independent audit organization to SBV according to the following provisions:
a) Credit institutions and FBBs shall send their notices to SBV (via the SBV Banking Supervision Agency), except the case in point b of this clause;
b) An FBB that is subject to microprudential supervision of a SBV’s branch in province or central-affiliated city where it is located (hereinafter referred to as “SBV’s provincial branch”) shall send its notice to that SBV’s provincial branch.
3. Fulfill the obligations specified in Article 39 of the Law on Independent Audit and other regulations of law on independent audit.
4. Within 90 days from the end of a fiscal year, send independent audit outcomes to SBV according to points a and b clause 2 of this Article.
5. Send written notification to SBV of any dispute about independent audit outcomes, in which description, explanation and proposed solutions for settling the dispute must be included in accordance with relevant laws.
6. Carry out public disclosure of financial information in accordance with regulations of law in force.
Article 16. Responsibilities of SBV’s branches in provinces or central-affiliated cities where credit institutions or FBBs are headquartered
1. Analyze, assess and respond to received independent audit outcomes according to clause 4 Article 15 of this Circular.
If any audit practitioner or audit organization is found to have committed violations against law during their engagement to perform independent audit of a credit institution or FBB, the SBV’s provincial branch shall promptly submit a report on such case, in which proposed remedial actions must be also indicated, to the SBV’s Governor (via the SBV Banking Supervision Agency).
2. Submit reports to the SBV’s Governor (via the SBV Banking Supervision Agency) upon receipt of written notification from credit institutions and FBBs as prescribed in clause 5 Article 15 of this Circular.
3. Inspect the implementation of this Circular and take actions within their jurisdiction or request the SBV’s Governor (via the SBV Banking Supervision Agency) to take actions against credit institutions and FBBs that commit violations against this Circular and other regulations of law on independent audit.
4. Give professional opinions about the issues in banking and money sectors in audit reports and management letters released to the audited FBBs that are located in their responsible provinces or cities and subject to their microprudential supervision at the request of competent authorities.
Article 17. Responsibilities of SBV Banking Supervision Agency
1. Consolidate and submit reports received from SBV’s provincial branches as prescribed in clause 2 Article 16 of this Circular to the SBV’s Governor.
2. Analyze, assess and give recommendations on response to outcomes of independent audit of credit institutions and FBBs.
3. Submit reports and proposals to the SBV’s Governor on the following contents:
a) The cases prescribed in Clause 5 Article 15 of this Circular;
c) Sending of notification to the Ministry of Finance of Vietnam upon detection or receipt of a report from a SBV’s provincial branch as prescribed in clause 1 Article 16 of this Circular on the case that an audit practitioner or audit organization has committed violations against law during their engagement to perform independent audit of credit institution or FBB.
4. Inspect the implementation of this Circular and take actions within its jurisdiction or request the SBV's Governor to take actions against credit institutions and FBBs that commit violations against this Circular and other regulations of law on independent audit.
Article 18. Responsibilities of SBV’s affiliated units
SBV’s affiliated units shall, within the ambit of their functions and duties assigned or delegated by the SBV’s Governor, give their professional opinions about the issues in banking and money sectors in audit reports and management letters released to the audited credit institutions and FBBs at the request of competent authorities, except the cases prescribed in clause 4 Article 16 of this Circular.
Article 19. Settlement of disputes about independent audit
Any disputes about independent audit of credit institutions and FBBs shall be considered and settled in accordance with provisions of the Law on Independent Audit and other relevant laws.
Chapter III
IMPLEMENTATION PROVISIONS
Article 20. Effect
1. This Circular comes into force from January 15, 2025.
2. Regulations on independent audit of commercial banks, non-bank credit institutions, microfinance institutions and FBBs in the Circular No. 39/2011/TT-NHNN dated December 15, 2011 of the SBV’s Governor, and the Circular No. 24/2021/TT-NHNN dated December 31, 2021 of the SBV’s Governor shall cease to have effect from the effective date of this Circular.
Article 21. Transition
Audit engagements which have been concluded before the effective date of this Circular shall still remain valid. Any modifications to such audit engagements which have been concluded before the effective date of this Circular must be conformable with provisions of this Circular and relevant laws.
Article 22. Responsibility for implementation
The Chief of Office, Head of SBV Banking Supervision Agency, heads of units affiliated to SBV, credit institutions, FBBs, independent audit organizations, audit practitioners, auditors and relevant organizations and individuals are responsible for the implementation of this Circular./.
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PP. GOVERNOR |
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