The maximum fine for such violations is proposed to be raised from 100 million VND to 3 billion VND - a thirtyfold increase designed to significantly enhance the deterrent effect of these penalties.

Furthermore, the statute of limitations for imposing these penalties would be extended from the current one year to ten years.

This proposal is part of broader efforts to amend the Law on Independent Auditing, which has been in effect since January 1, 2012.

The Ministry of Finance has identified several shortcomings in the current regulations, particularly regarding the inadequacy of penalties and the short statute of limitations, which often allows violations to go unpunished if discovered late.

Currently, under Article 60 of the Law on Independent Auditing and Decree No. 41/2018/ND-CP, administrative penalties for violations in independent auditing are capped at 50 million VND for individuals and 100 million VND for organizations.

The Ministry of Finance has pointed out that such low fines fail to act as effective deterrents, leading to a lax attitude among audit firms and violators towards compliance with the law.

In response, the draft amendment proposes aligning Vietnam's auditing penalties with international standards and practices. For instance, fines would be increased to 3 billion VND for organizations and 1.5 billion VND for individuals.

Additional measures in the draft include revoking licenses to provide auditing services, withdrawing auditors' certificates, suspending audit practices, and even suspending the business operations of audit firms.

Currently, there are approximately 2,400 licensed auditors in Vietnam, working across more than 220 certified audit firms. Since 2013, enforcement actions have led to the suspension of 114 auditors and the revocation of licenses from three audit firms.

Despite these measures, recent incidents, such as the Van Thinh Phat case, have highlighted significant lapses in the auditing process, particularly concerning Saigon Commercial Bank (SCB).

Over a decade, from 2012 to 2022, SCB's financial statements, audited by major firms such as Ernst & Young Vietnam, Deloitte Vietnam, and KPMG Vietnam, failed to reveal any irregularities, leading to substantial financial losses.

International comparisons underscore the severity of Vietnam's proposed changes. In 2017, the UK's Financial Reporting Council (FRC) imposed fines of 5.1 million GBP on PwC, and the responsible auditor was fined 115,000 GBP for deficiencies in the audit of RSM Tenon.

Similarly, Grant Thornton was fined 4 million GBP for audit violations involving Nichols and the University of Salford from 2013 to 2018.

Binh Minh