How much equity must audit firms being limited liability companies in Vietnam maintain?

How much legal capital must audit firms being limited liability companies in Vietnam maintain?

Pursuant to Article 5 of Decree 17/2012/ND-CP stipulating legal capital for the Limited Liability Company is as follows:

1. Legal capital for the Limited liability company shall be 3 (three) billion Vietnamese dong; as from January 01, 2015, the legal capital shall be 5 (five) billion Vietnamese dong.

2. During its operation, the limited liability company must keep the equity in balance sheet not less than the legal capital as stipulated in Clause 1 of this Article. The audit firm must supplement its capital if the equity in balance sheet is less than the legal capital as stipulated in Clause 1 of this Article in the period of 03 (three) months as from the end date of the fiscal year.

Thus, after establishing an audit firm as a limited liability company with two or more members, the company must maintain its equity on the balance sheet not less than the legal capital of 5 (five) billion Vietnamese dong.

What is maximum amount of capital for member being an organization of an audit limited liability company in Vietnam?

According to Article 6 of Decree 17/2012/ND-CP as amended by Clause 1, Article 3 of Decree 151/2018/ND-CP, the member of limited liability company with two or more members in case such member is an organization as follows:

1. The member being an organization are entitled to contribute at maximum 35% of the charter capital of the audit limit liability company with two or more members. In case there are many organizations contributing in capital, the total capital contributed by these organizations shall be at maximum 35% of the charter capital of the limited liability company with two or more members.

3. A practicing auditor who is representative of member being an organization shall not permitted to contribute capital to such audit firm with individual status.

According to this Article, if a member is an organization contributing capital to an audited limited liability company with two or more members, that organization may only contribute at maximum 35% of the charter capital. In case there are many organizations contributing in capital, the total capital contributed by these organizations shall not exceed 35% of the charter capital of the company in Vietnam.

Which are cases where the audit firms being limited liability companies in Vietnam are not entitled to audit?

Article 9 of Decree 17/2012/ND-CP stipulates the following cases where the audit firms and branches of foreign audit firms in Vietnam are not entitled to audit:

Cases where audit firms and branches of foreign audit firms in Vietnam are not entitled to perform audit as stipulated in Article 30 of the Law on independent audit shall be guided in detail as follows:

1. Audit firms, branches of foreign audit firms in Vietnam who are performing or performed in the preceding year one of the following services for audited entities:

a) Recording in Accounting Book, making financial statements;

b) Performance of internal audit service;

c) Designing and implementation procedures of internal control;

d) Other services which affect the independence of practicing auditors and audit firms, branches of foreign audit firms in Vietnam in accordance with provisions of professional ethics standards of accounting and auditing.

2. Members participating in the audit, persons in charge of management and administration, members of the Control Board, chief accountants (or person in charge of accounting) of the audit firms and branches of the foreign audit firms in Vietnam are members, founding shareholders or holding shares, contributing capital into the audited entities or having other economic, financial relations with the audited entities in accordance with provisions of professional ethical standards of accounting and auditing.

3. Persons in charge of management and administration, members of the Control Board, chief accountants (or person in charge of accounting) of the audit firm, branches of the foreign audit firm in Vietnam have parents, spouse, children, siblings being members, founding shareholders or holding shares, contributing capital and holding from 20% or more of voting rights of the audited entity or being persons in charge of management, administration, members of the Control Board, inspectors, chief accounts (or person in charge of accounting) in the audited unit.

4. Persons in charge of management, administration, members of the Control Board, inspectors, chief accounts (or person in charge of accounting) of the audited entity are also persons who contribute capital and hold from 20% or more of voting rights toward the audit firms, branches of the foreign audit firms in Vietnam.

5. The audit firms, branches of the foreign audit firms in Vietnam and audited entities have the following relationships:

a) Having the same an individual or enterprise, organization, who are founding members or involve in the foundation;

b) Together being directly or indirectly administered, controlled, contributed capital in all forms by a third party;

c) Being administered or controlled personnel, finance and business activities by by the individuals belong to the following relationships: husband and wife, parents and children (regardless of natural or adopted children, daughter-in-law or son-in-law); brothers and sisters of the same father and mother (regardless of natural or adoptive father or mother); paternal grandparents and grandchildren; maternal grandparents and grandchildren; natural uncle, aunt and nephew or niece;

d) Having contractual business cooperation agreement;

e) Being companies or legal entities in the same network in accordance with provisions of auditing standards.

6. The audited entity performed in the preceding year or is performing audit of financial statements or other auditing services for the audit firms, branches of the foreign audit firms in Vietnam.

7. The audited entity is organization contributing capital to the audit firm; the audited entity is the parent company, subsidiary company, associated company, joint venture company, superior unit, subordinate unit, company in the same conglomerate of organization contributing capital to the audit firm.

8. The audit firm directly or indirectly participates in management, control and capital contribution in all forms into the audited entity.

9. Other cases in accordance with provisions of professional ethics standards of accounting and auditing and provisions of law.

Thus, the auditing firm being a limited liability company is not allowed to audit in the above cases in Vietnam.

Best Regards!