What is an FDI Enterprise?
According to Vietnamese law, a Foreign Direct Investment (FDI) enterprise is defined as a business with foreign capital, which includes various forms such as joint ventures, wholly foreign-owned companies, or other investment forms as regulated by law.
Specifically, the Law on Investment in Vietnam stipulates that FDI enterprises must meet certain criteria regarding capital sources, investment forms, and business operations in Vietnam. These enterprises are required to register their investment activities, comply with relevant legal regulations, and may benefit from investment incentives depending on the sector and location of their operations.
Investment Process for FDI Enterprises
To establish an FDI enterprise in Vietnam, investors need to follow these steps:
Investment Registration: Foreign investors must submit an application for an Investment Registration Certificate to the relevant state authority.
Business Registration: After obtaining the Investment Registration Certificate, investors must proceed to register the business in accordance with the Law on Enterprises.
Additional Licenses: Depending on the sector of operation, the enterprise may need to obtain additional specialized permits.
Rights and Obligations
FDI enterprises can enjoy several benefits, including:
Access to investment incentives from the government, such as corporate income tax exemptions, support for site leasing, and workforce training.
Protection of their legal rights, ensuring investment safety.
In addition, FDI enterprises are required to fulfill certain obligations, such as:
Complying with Vietnamese laws in their business operations.
Paying taxes as prescribed by the state.
Ensuring product quality and environmental protection.
What is a Mandatory Audit?
According to Article 9 of the 2011 Independent Audit Law, a mandatory audit is defined as follows:
"A mandatory audit refers to the audit of annual financial statements, project completion settlement reports, and other financial information of the audited entity as stipulated in clauses 1 and 2 of Article 37 of this Law, as well as other relevant legal regulations.
The contract for auditing the annual financial statements of enterprises and organizations required to undergo an audit must be concluded no later than thirty days before the end of the fiscal year.
Enterprises and organizations subject to mandatory audits must submit their financial statements to the competent state authority, and when publicly disclosing financial statements, they must include an attached audit report. If a state authority receives financial statements from an enterprise or organization subject to mandatory audit without an attached audit report, it is responsible for notifying the relevant state authority for handling according to legal provisions."
Why Do Foreign Invested Companies Need to Conduct Mandatory Audits?
According to Clause 1 of Article 15 of Decree 17/2012/ND-CP, which provides guidance on the Independent Audit Law, the annual financial statements of foreign-invested enterprises must be audited by an auditing firm or a branch of a foreign auditing firm in Vietnam.
Conducting mandatory audits helps ensure that FDI enterprises comply with legal regulations, enhances transparency, protects the interests of stakeholders, and identifies errors and risks.
FDI enterprises have several obligations during the mandatory audit process, including:
Providing Complete Documentation: Enterprises must supply all relevant documents, accounting records, financial statements, and related evidence concerning their business operations to the auditing firm.
Cooperating with Auditors: Companies need to facilitate the audit process by cooperating during information collection and responding to auditors' inquiries.
Compliance with Legal Regulations: Enterprises must ensure that their accounting activities and financial reporting comply with Vietnamese laws as well as applicable international standards.
Timely Reporting: After the audit, enterprises are required to report and publish the audit results within the stipulated timeframe.
Responsibility for Accuracy: Enterprises must guarantee that the information and documents provided to the auditors are accurate and complete.
Rectifying Errors (if any): If errors are identified during the audit, the enterprise is obligated to rectify them and report on the corrective actions taken.
These obligations are designed to ensure transparency and accuracy in the financial operations of the enterprise, as well as to protect the interests of all stakeholders involved.
How RSM Vietnam Can Assist Foreign Invested Enterprises
With a team of knowledgeable and experienced professionals in auditing, accounting, tax, labor, finance, and consulting, RSM Vietnam has been providing auditing services to numerous businesses and organizations from various countries, including the United States, Japan, South Korea, China, Europe, Taiwan, Hong Kong, Australia, and Canada.
RSM Vietnam boasts experts with deep understanding of accounting standards and international financial reporting standards, domestic and international tax, customs, insurance, and labor regulations. Furthermore, our extensive experience collaborating with clients and partners across diverse sectors equips us with comprehensive and specialized knowledge to offer sound advice.
RSM Vietnam provides independent auditing services with a high level of reliability regarding the financial statements prepared by clients.
How We Can Help and Support Our Clients
Dedicated Experienced Teams: We assign a team of experienced auditors with deep industry knowledge to work closely with clients, ensuring they are quickly updated on changes in their business environment.
Value Addition: We provide added value for our clients with each audit contract we undertake.
Risk-Based Audit Approach: We implement the optimal risk-based audit methodology (RSM Orb), committed to principles of integrity, objectivity, independence, and adherence to professional ethical standards.
Data Analytics: We leverage big data to analyze and assess trends in industries that may impact the figures presented in financial statements.
Global Audit Framework: Our audit teams benefit from a global audit framework grounded in advanced technology, consistently applied across all member firms worldwide. This allows us to deliver high-quality and consistent services to our clients.
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