Low fees cause auditing firms’ losses

Three of the largest accounting firms take a loss of 96 billion dong. The news has shocked auditors and people. Questions have been raised about the reasons behind the big loss and about the auditing quality.

The auditing industry can be divided into three segments. The main clients of international accounting firms are multi-national groups and corporations operating in Vietnam, including foreign invested enterprises and successful Vietnamese enterprises that have ability to attract foreign investment or list on international stock exchanges. The clients of foreign auditing firms could also be Vietnamese conglomerates which have large operation and finance scale.

Meanwhile, Vietnamese accounting firms mainly serve Vietnamese companies. Big auditing firms serve big Vietnamese corporations, while smaller firms serve smaller companies which do not intend to attract foreign investment.

When asked how the largest firms have taken a loss Bui Van Mai, Secretary General of the Vietnam Association of Certified Public Accountants (VACPA) said simply, “Auditing fee reduction, it is the answer.”

Mai said that the current auditing fees are not high enough for accounting firms to cover their administrative expenses and operation costs. “Low fee and fee reduction do not encourage the development,” he said. “I had discussions with the State Securities Commission and the Ministry of Finance and I told them that the quality must be compatible with the fee”.

Nguyen Thanh Nam, Director of Vietnam National Auditing Company also said that auditing firms have been slashing auditing fees in order to stay competitive.

“It is true that foreign auditing firms sometimes require very high fee. However, they only do that when they fulfill the contracts signed with multinational groups,” he said.

Nam went on to explain that, in general, multinational groups make sure to include in their contracts with international accounting firms that their subsidiaries in Vietnam will also be audited by those same auditing firms. “The foreign auditing firms are competing fiercely with domestic auditing firms by offering low fees.”

Nam frankly said that slashing fees to lure more customers is one of the most important factors in the three auditing firms taking a loss.

Nam thinks that the Ministry of Finance needs to set up the floor auditing fee in order to help make the market healthier.

Questions have been raised about the auditing quality and about the operation of auditing firms. Will the auditing firms be able to compensate for mistakes in auditing reports? Some people have raised a question on whether the Ministry of Finance should allow the unprofitable auditing firms to continue to operate.

Experts have called on the state watchdog agencies to strictly control the quality of auditing reports. They said that there are many factors that influence the quality of auditing reports, including the quality of auditors.

Under the current regulations, auditing firms are allowed to audit listed companies if the firms have been in operation for at least three years and they have seven auditors who have at least three years experience. While the number of listed companies has been increasing rapidly, the number of public certified accountants has not.

Saigon tiep thi

Tags: Vietnam auditing, Vietnam finance, Vietnam financial