Business

No. 60-TC-CDKT

Hanoi, 1 September 1997
 

CIRCULAR PROVIDING GUIDELINES FOR IMPLEMENTATION OF ACCOUNTING AND AUDITING IN RESPECT OF FOREIGN INVESTED ENTERPRISES AND ORGANIZATIONS IN VIETNAM
 

Pursuant to the Ordinance on Accounting and Statistics promulgated by Order 6-

LCT-HDNN-8 dated 20 May 1988 of the State Council of the Socialist Republic of

Vietnam;

Pursuant to the Regulations on State Accounting Organizations issued with Decree

25-HDBT dated 18 March 1989 of the Council of Ministers (now the Government);

Pursuant to article 37 of the Law on Foreign Investment in Vietnam approved by the

National Assembly on 12 Novemb er 1996 (hereinafter referred to as the Law on

Foreign Investment) and articles 65, 66, 67, 68, and 69 in Chapter VIII of Decree 12-CP

of the Government dated 18 February 1997 of the Government providing detailed

regulations on the implementation of the Law on Foreign Investment in Vietnam

(hereinafter referred to as Decree 12-CP);

Pursuant to article 23 in Chapter III of Decree 42-CP dated 8 July 1995 of the

Government providing Regulations on Legal Consultancy Practices of Foreign Law

Firms in Vietnam (hereinafter referred to as the Regulations on Consultancy

Practices);

Pursuant to Part V on Labour for Foreign Organizations and Individuals Operating in

Vietnam, Foreigners Working in Vietnam, and Working Overseas [of Chapter XI*] of

* Inserted by Phillips Fox to aid comprehension.

31 December 1997

? Ministry of Planning and Investment

and

Phillips Fox

Subscription 22

VIII-152

the Labour Code of the Socialist Republic of Vietnam promulgated by Order 35-LCTN

dated 5 July 1994 (hereinafter referred to as the Labour Code);

The Ministry of Finance hereby stipulates and provides guidelines for the

implementation of accounting and auditing in respect of foreign invested enterprises

and branches of foreign law firms in Vietnam as follows:

I. APPLICABILITY

1. In this Circular, the term foreign invested enterprise shall be deemed to

include:

1.1 Foreign invested enterprises; industrial zone enterprises; export

processing zone enterprises; parties to business co-operation contracts,

Build-Operate-Transfer (BOT) contracts, Build-Transfer-Operate (BTO)

contracts, and Build-Transfer (BT) contracts where investment is

implemented in one of three forms, namely business co-operation on the

basis of a business co-operation contract, joint venture enterprise or

enterprise with one hundred (100) per cent foreign owned capital.

Foreign invested enterprises operating in all fields, including insurance

enterprises, banking enterprises and credit institutions.

1.2 Branches of foreign law firms in Vietnam operating under the Regulations

on Legal Consultancy Practices of Foreign Law Firms in Vietnam

(hereinafter referred to as law firm branches).

II. GENERAL PROVISIONS

1. Foreign invested enterprises must comply with accounting and statistics

systems in accordance with the Ordinance on Accounting and Statistics,

Regulations of State Accounting Organizations, current legislation on

accounting and auditing, article 37 of the Law on Foreign Investment, articles

65, 66, 67, 68, and 69 in Chapter VIII of Decree 12-CP, article 23 in Chapter III

of the Regulations on Consultancy Practices, and the provisions stated in

this Circular.

2. Foreign invested enterprises shall implement accounting work under the

supervision and examination of the financial authorities and other relevant

managing authorities.

31 December 1997

? Ministry of Planning and Investment

and

Phillips Fox

Subscription 22

VIII-153

3. All foreign invested enterprises shall register the accounting system applied

in the enterprises and must obtain approval from the Ministry of Finance prior

to adoption of the system.

4. Foreign invested enterprises shall implement accounting work in accordance

with the Vietnamese accounting system. Where foreign invested enterprises

have plausible reasons for the application of another common accounting

system, approval thereof must be obtained from the Ministry of Finance.

5. Foreign invested enterprises shall comply with the registered accounting

system which has been approved by the Ministry of Finance to be applied in

enterprises (including amendments of and additions to the approved

accounting system).

6. Where amendments of or additions to the registered and approved

accounting system are necessary, foreign invested enterprises must explain

clearly the reasons therefor and must obtain the written approval of the

Ministry of Finance prior to making such amendments or additions.

7. Where joint venture enterprises hire managing organizations to manage their

business operations, the joint venture enterprises shall, in all cases, be

responsible before the law for the activities of the managing organizations in

performance of contracts as well as for data in financial statements. Managing

organizations shall comply with the provisions of this Circular as one of the

applicable subjects stipulated in clause 1.1 in Part I - Applicability.

8. The fiscal year of foreign invested enterprises shall be in accordance with the

tax calculation year, which may be the calendar year or a year of twelve (12)

consecutive months, as registered by enterprises.

9. Annual financial statements of foreign invested enterprises must be audited

by independent auditors operating legally in Vietnam.

10. Foreign invested enterprises shall publicly announce their annual financial

statements, information on the business operations of the enterprises and the

results thereof to information users as stipulated.

11. Requirements of accounting work:

Accounting work of foreign invested enterprises must be truthful, complete,

accurate, timely, continuous and systematic with respect to the current

balance of and changes to assets, capital sources, expenditure, costs of

products, services and labour, turnover, profits earned from business

operations; and must comply with the laws on taxation and performance of

31 December 1997

? Ministry of Planning and Investment

and

Phillips Fox

Subscription 22

VIII-154

other obligations to the State of Vietnam in accordance with the investment

licences (for enterprises with foreign direct invested capital) or operating

licences (for law firm branches).

12. Upon termination of operation of foreign invested enterprises for any reason,

the enterprises must notify in writing and send a financial report as at the time

of termination of operation to the Ministry of Finance.

III. SPECIFIC PROVISIONS

A. Provisions on Implementation of Accounting Systems

1. All foreign invested enterprises adopting the Vietnamese accounting system

or other common accounting systems must comply with the following

provisions:

1.1 Foreign invested enterprises must adopt an accounting system which is

suited to their line of business or field of operation.

1.2 The currency unit used in accounting is the Vietnamese dong. Foreign

invested enterprises may use a foreign currency for account-keeping and

preparing accounting reports but mu st register it in the accounting

system applied to be adopted and must obtain the written approval of the

Ministry of Finance prior to implementation thereof.

Currency units other than the approved official currency must be stated

in the value of the original currency and converted to the official currency

at the transaction exchange rate for each specific economic transaction or

at the exchange rate published by the State Bank of Vietnam at the time

when the economic transaction takes place.

1.3 The units of measurement (in kind and time) applied in accounting shall

be the official units of measurement of Vietnam. Other units of

measurement (if any) must be converted to the official units of

measurement of Vietnam. Foreign invested enterprises may use additional

measurements in accounting.

1.4 Accounting shall be recorded in Arabic numerals and in Vietnamese or in

both Vietnamese and another common foreign language; this must be

stated in the charter of the foreign invested enterprise and in the

registration of the accounting system.

31 December 1997

? Ministry of Planning and Investment

and

Phillips Fox

Subscription 22

VIII-155

2. Fiscal year:

2.1 The fiscal year of foreign invested enterprises must be in accordance with

the tax calculation year stipulated in article 60 of Decree 12-CP. The fiscal

year may be the calendar year or a year of twelve (12) consecutive months

commencing from the beginning of a quarter and shall be registered in the

accounting system applied to be adopted.

2.2 The first fiscal year shall be calculated from the date of issuance of the

investment licence (or the licence for establishment of a law firm branch)

to the end of the approved fiscal year.

2.3 The accounting periods in the fiscal year shall be:

- Month: from the first day to the last day of the month.

- Quarter: from the first day to the last day of the last month in the

quarter.

3. Time-limit for submission and announcement of financial statements:

- Quarterly statements: no later than fifteen (15) days from the last day of

the quarter.

- Annual statements: within three months from the last day of the fiscal

year of the foreign invested enterprise.

4. Bodies receiving financial statements:

Financial statements of foreign invested enterprises shall be submitted to the

Ministry of Planning and Investment, the Ministry of Finance, the General

Department of Statistics, the local tax authorities (where the head office of the

enterprise is located), and to the parties contributing capital to the joint

ventures.

5. Auditing of financial statements:

Annual financial statements of foreign invested enterprises mu st, prior to

being submitted and publicly announced, be audited by an independent

auditing company of Vietnam or other independent auditing company

permitted to operate legally in Vietnam. Audit reports attached to annual

financial statements must bear the signatures of an auditor possessing an

auditor�s certificate by the Ministry of Vietnam or a national auditor�s

certificate issued by the home country which is recognized by the Ministry of

31 December 1997

? Ministry of Planning and Investment

and

Phillips Fox

Subscription 22

VIII-156

Finance of Vietnam as having registered in the list of auditors with the

Ministry of Finance, the signature of the director of the auditing company

and the seal of the auditing company. Under the signature of the auditor, the

full name and number of the auditor�s certificate (national certificate) must be

clearly stated.

6. Organization of accounting work:

6.1 Foreign invested enterprises shall carry out the following accounting

work: accounting voucher system, accounting account system,

accounting book system, financial statement system and accounting

filing system.

6.2 In order to carry out accounting work, foreign invested enterprises may

employ full-time accounting staff or hire an accounting service

organization operating independently and legally in Vietnam.

6.2.1 In respect of foreign invested enterprises with full-time accounting

staff:

(a) Sufficient accounting staff must be employed in accordance

with the titles and qualifications stipulated for accounting staff. Professional and technical independence shall be

ensured in order for accounting staff to carry out their tasks.

Accounting staff must not concurrently be responsible forprotecting assets and working as an accountant.

(b) The head of the accounting staff shall be the chiefaccountant or the head of the accounting department. The

chief accountant (or head of the accounting department)shall assist the general director or director of the foreign

invested enterprise in directing all work related toaccounting, statistics and economic information within the

enterprise.

- The chief accountant of a foreign invested enterprise shall be selected and appointed in writing by the

board of management (in respect of a joint ventureenterprise) or the general director or authorized

representative residing permanently in Vietnam (inrespect of an enterprise with one hundred (100) per

cent foreign owned capital). Foreign investedenterprises must give official notice in writing to the

31 December 1997

? Ministry of Planning and Investment

and

Phillips Fox

Subscription 22

VIII-157

Ministry of Finance on any changes to the positionof chief accountant (within twenty (20) days).

- Chief accountants must have qualifications (graduation certificates) in accounting and finance at

the vocational secondary or higher level; have completed a chief accountant training course (for

Vietnamese); have necessary economic, technical and financial knowledge; be capable of organizing,

directing, providing guidelines, examining and analysing financial, accounting, and statistical work

as well as economic information and cost accounting. A chief accountant must have work

experience in accounting for at least three years (in respect of university graduates) and for at least five

years (in respect of vocational secondary school graduates).

- Chief accountants shall be under technical and professional supervision and examination with

respect to finance and accounting by financial authorities of Vietnam.

(c) Accounting staff (including chief accountants) being Vietnamese selected by and entering into labour contracts

with foreign invested enterprises must be trained in the profession of finance and accounting and be recommended

by an employment service agency established under the laws of Vietnam (as stipulated in article 132 of the Labour

Code).

Accounting staff (including chief accountants) in foreign invested enterprises must enter into labour contracts with

the enterprises and comply with articles 131, 132 and 133 in Part V [of Chapter XI*]of the Labour Code; and must be

able to prove their professional capacity in accordance with clauses 6.2.1(b) and 6.2.1(c) before the relevant State

authorities.

* Inserted by Phillips Fox to aid comprehension.

31 December 1997

? Ministry of Planning and Investment

and

Phillips Fox

Subscription 22

VIII-158

(d) Foreign invested enterprises must have plans to train their accounting staff to satisfy the requirements of accounting

work in their enterprises in accordance with the Vietnamese accounting system and other common accounting systems

approved by the Ministry of Finance.

6.2.2 In cases where an independent accounting service organization operating legally in Vietnam is hired to carry out accounting work

on the basis of an economic contract, the accounting services provided must be in compliance with the provisions on accounting

work as in the case of enterprises doing their own accounting work in accordance with the provisions of the accounting system of the

enterprise and the provisions of this Circular.

7. Implementation of accounting work:

7.1 Initial records:

All economic activities arising in the business operations of foreign

invested enterprises must be recorded in accounting documents in

accordance with registered forms.

Accounting documents originating outside Vietnam must be registered

and the main contents thereof must be translated into Vietnamese.

Accounting documents must be original; photocopied or faxed copies are

invalid.

7.2 Foreign invested enterprises shall have only one official system of

accounting books adopted in accordance with the registered accounting

system. Accounting documents are the basis for records in accounting

books. Records in accounting books must be kept clearly, continuously,

systematically and without any erasure.

7.3 Foreign invested enterprises must register two types of accounting books

to be used with the local tax authorities (where they register to pay tax):

ledgers and journals or register of entry vouchers (the number of pages

should be registered and a seal should be stamped between pages to

prove the integrity of the books).

Any ledger, journal or register of entry vouchers of enterprises which is

not certified by the local tax authority shall not be recognized as legally

valid.

31 December 1997

? Ministry of Planning and Investment

and

Phillips Fox

Subscription 22

VIII-159

7.4 Foreign invested enterprises which use ready-printed accounting books

must affix a seal between pages to prove the integrity of the books and

must inscribe the signatures of the bookkeepers and the person having

legal responsibility within the enterprise on all accounting books used in

a fiscal year.

7.5 Where accounting books are recorded in computers:

- Enterprises must record manually the fiscal year-end account balance

of consolidated accounts on the ledgers registered with the local tax

authority.

- At the end of an accounting period and an accounting year (upon

completion of records of accounting books and preparation of

financial statements), foreign invested enterprises must print

accounting books, bind them into volumes, affix a seal between pages

to prove the integrity of the books and inscribe the signatures of the

bookkeepers and the person having full legal responsibility on all

accounting books used in a fiscal year. At the end of each month,

after recording all accounting transactions carried out, accountants

shall copy all pages of accounting books onto a floppy disc (at least

two copies) and seal them in accordance with the provisions on the

sealing of records.

8. Financial statements:

- Financial statements of foreign invested enterprises must be prepared in

full and submitted on time to the authorities specified in clause 4 of

Section A of Part III.

- Financial statements of foreign invested enterprises must be prepared on

the basis of data in accounting books recorded from accounting records

which are reasonable, legal and valid.

- Financial statements must be complete, truthful, accurate, comparative

and comprehensible and must bear the signature of the person having

legal responsibility for the enterprise (general director or director and

chief accountant).

9. Inventory of assets:

- At least once in an accounting year, foreign invested enterprises must

carry out an inventory of their assets and the entire existing assets of the

enterprises are required to be inventoried at the end of a fiscal year.

31 December 1997

? Ministry of Planning and Investment

and

Phillips Fox

Subscription 22

VIII-160

- Results of inventories of assets must be reflected in minutes of inventory

and consolidated reports on inventory of assets.

- Consolidated reports on inventory of assets must be attached to financial

statements.

- Foreign invested enterprises are liable to warrant the consistency of the

actual value of assets (inventory data) with the data recorded in the

accounting books, accounting statements and financial statements.

10. Foreign invested enterprises are prohibited from:

- fabricating accounting records and recording and preparing incorrectly

financial statements;

- destroying accounting records, accounting books and accounting

statements prior to expiry of time-limits for preservation and filing in

accordance with the provisions related thereto currently in force;

- declaring fraudulent data, reporting incorrectly or forcing other people to

declare fraudulent data; using types of vouchers and samples which are

illegal and inconsistent with the registered and approved accounting

system;

- omitting in any form from accounting books assets, materials, sales

revenue, other earnings, and so forth.

B. Registration of and Procedures for Registration of Accounting Systems

1. Foreign invested enterprises must register with the Ministry of Finance the

accounting system to be applied by the enterprises and must obtain approval

in writing from the Ministry of Finance prior to its application.

1.1 Prior to registration of the accounting system, foreign invested

enterprises must select and determine clearly the accounting system

applicable to its industry sector and business line in accordance with the

classification of economic sectors of the national economy.

1.2 Foreign invested enterprises must register their accounting systems

within the time-limit commencing from the time of issuance of an

investment licence or operating licence. As from the time when the

investment licence or operating licence becomes effective, any economic

31 December 1997

? Ministry of Planning and Investment

and

Phillips Fox

Subscription 22

VIII-161

activities arising in the foreign invested enterprise must be recorded in its

accounting books.

1.3 When any changes to the registered contents of the approved

accounting system are necessary, foreign invested enterprises must make

a written proposal to the Ministry of Finance and shall not effect such

changes until approval in writing is obtained from the Ministry of

Finance.

2. Time-limit for registration and approval of accounting systems:

2.1 Time-limit for registration and application for extension:

2.1.1 Within ninety (90) days from the date on which an investment

licence or operating licence is granted to a foreign invested

enterprise, it is required to register the accounting system which it

applies to adopt with the Ministry of Finance.

2.1.2 Where a foreign invested enterprise fails, due to any reason, to

register the accounting system with the Ministry of Finance within

the stipulated time-limit, it must send to the latter a written

application for extension of registration of its accounting system

providing reasons therefor and must obtain approval in writing of

the Ministry of Finance.

The foreign invested enterprise must promptly fulfil the procedures

for registration of its accounting system within the extended timelimit.

2.2 Time-limit for handling application files for registration:

2.2.1 Within twenty (20) days of receipt in full of an application file for

registration of an accounting system lodged by a foreign invested

enterprise, the Ministry of Finance shall give an official reply on the

registration of the accounting system of the enterprise.

2.2.2 Where documentation included in the application file for

registration of an accounting system by a foreign invested

enterprise is inadequate or unclear in accordance with the prevailing

provisions, the Ministry of Finance shall request the foreign

invested enterprise to explain the reasons therefor and to provide

additional documents. The time taken by the foreign invested

enterprise to make such explanations and additions shall not be

31 December 1997

? Ministry of Planning and Investment

and

Phillips Fox

Subscription 22

VIII-162

included in the time-limit for response stated in clause 2.2.1 of

Section B.

3. Application files for registration:

3.1 For registration of an accounting system with the Ministry of Finance,

foreign invested enterprises shall submit an application file for

registration comprising the following:

3.1.1 Application for registration of accounting system (in the form

attached in Appendix 1).

3.1.2 Investment licence (notarized copy or copy certified by the Ministry

of Planning and Investment).

3.1.3 Letter of appointment of the chief accountant from the board of

management or the general director; labour contract entered into

between the chief accountant and the general director or director of

the enterprise.

3.1.4 Professional certificates (graduation certificates) in accounting and

finance; certificate certifying that the chief accountant has

completed a chief accountant training course (notarized copy).

Professional qualifications written in foreign languages must be certified

by a notary public.

3.1.5 Explanatory documentation in relation to the applicable accounting

system (in cases of additions to, abridgements or amendments of

the Vietnamese accounting system or application for adoption of

another common accounting system).

- Where any additions to or amendments or detailing of the

Vietnamese accounting system applicable at a foreign

invested enterprise is necessary for the purpose of

conformity with the characteristics of the production and

business activities, detailed documents in relation to the

contents requested for addition or amendment must be

enclosed (accounting voucher system, accounting account

system, accounting book system, accounting method

system and financial statement system). These documents

must include a list classifying the contents of the

accounting system requested for addition or amendment

and must enclose samples and explanations.

31 December 1997

? Ministry of Planning and Investment

and

Phillips Fox

Subscription 22

VIII-163

- Where another common accounting system is adopted,

upon registration thereof, the foreign invested enterprise

must explain clearly the reasons for the selection of the

common accounting system and, at the same time, enclose

all documentation relating to the accounting system applied

to be adopted by the foreign invested enterprise, comprising

those documents listed in clause 3 of Section D -

Application of Other Common Accounting Systems.

3.2 Application files to be sent to the Ministry of Finance shall include four

sets (bound):

- 1 set: to be filed at the Ministry of Finance;

- 1 set: to be lodged with the local tax authority;

- 2 sets: to be filed at the enterprise.

Application files for registration of approved accounting systems shall be

affixed with a "Registered" seal prior to circulation.

C. Application of Vietnamese Accounting System

1. Foreign invested enterprises which apply to adopt the enterprise accounting

system of Vietnam must abide by and comply with the current accounting

voucher system, accounting account system, accounting book system,

financial statement system and accounting filing system in accordance with

provisions.

2. Where any addition to or abridgement or amendment of the contents and the

accounting methods is necessary for the purpose of conformity with the

characteristics of the production and business activities, enterprises must

apply to the Ministry of Finance for consideration and approval. Any such

addition, abridgement or amendment mu st follow and respect the general

principles of the Vietnamese accounting system. Foreign invested

enterprises may only effect the amended or abridged accounting system upon

obtaining approval in writing from the Ministry of Finance.

Documentation submitted to the Ministry of Finance in relation to any

addition to or abridgement or amendment of the Vietnamese accounting

system shall be in accordance with clause 3.1.5 of Section B of Part III.

31 December 1997

? Ministry of Planning and Investment

and

Phillips Fox

Subscription 22

VIII-164

3. Foreign invested enterprises which register the adoption of the Vietnamese

accounting system shall be assisted and instructed in the course of

registering and organizing implementation.

D. Application of Other Common Accounting Systems

1. The Ministry of Finance shall only consider and approve the application of

other common accounting systems (other than the Vietnamese accounting

system) in the following cases:

- A foreign invested enterprise successfully demonstrates that it is

impossible and inconvenient to manage the enterprise using the

Vietnamese accounting system and that it has no other choice but the

application of another common accounting system.

- A foreign invested enterprise is doing business in a special field in

relation to which the Vietnamese provisions and guidelines on

accounting are silent.

2. Foreign invested enterprises applying for adoption of other common

accounting systems must comply with the following principles:

2.1 Other common accounting systems shall only apply with respect to the

four following items: samples of the accounting voucher system; samples

of the list, contents and accounting method of the account system and

recording method of the accounting book system; samples, norms and

methods to formulate financial statements.

2.2 The general principles of the Vietnamese accounting system with respect

to the accounting voucher system and the accounting book system shall

be complied with.

3. Documents relating to the accounting system which is the subject of

application for adoption (attached to the application file for regis tration of the

accounting system as stipulated in clause 3.1.5 of Section B of Part III) shall

include the following:

- Accounting policies, principles and standards applicable at the foreign

invested enterprise.

- List of applicable accounting vouchers classified according to six criteria:

paid employees, goods in stock, sales consumption, currency, fixed

31 December 1997

? Ministry of Planning and Investment

and

Phillips Fox

Subscription 22

VIII-165

assets, production and business; this list shall be accompanied by

samples of vouchers to be officially adopted.

With respect to self-printed receipts, the enterprise must, in addition to

explaining them in the application file for registration of the accounting

system, send them to the General Department of Taxation for registration

and approval.

- List of accounting account system (code, name and nature) classified in

accordance with the principles of classifying accounts, enclosing

explanatory documents regarding the nature and method of cost

accounting of accounts; regarding the relationship between the accounts

and the general accounting diagram on the use of the accounting system

(and the accounts reflecting major economic transactions in relation to

assets, business capital sources and reports on results of production and

business operation).

- List of applicable accounting book system (classified in accordance with

general and detailed accounting books systems), enclosing samples of

books which are the subject of application for official adoption; diagram

to explain recording from the original documents to the general and

detailed accounting book and formulation of financial statements;

explanation of the method of recording and the relationship between the

general accounting book system and the detailed accounting book

system.

With respect to the applicable accounting book system, only one of the

four common accounting forms is allowed to be adopted in Vietnam at

present (Ledger, Entry Voucher, General Journal, Journal).

- List of financial statements system, enclosing samples and explanations

of the method for calculation and formulation of targets in financial

statements.

The financial statements system shall include the accounting balance

sheet, the report on business results, the report on cash flow and the

explanation of financial statements.

31 December 1997

? Ministry of Planning and Investment

and

Phillips Fox

Subscription 22

VIII-166

E. Auditing of Foreign Invested Enterprises

1. With respect to foreign invested enterprises:

1.1 Auditing must be implemented in all foreign invested enterprises

including compliance with the provisions on accounting and financial

statements.

1.2 Annual financial statements of foreign invested enterprises must be

audited by an independent auditing company of Vietnam or another

independent company permitted to operate in Vietnam in accordance with

the laws on auditing prior to submission to the relevant authorities and

public announcement.

1.3 Auditing reports must be attached to the annual financial statements of

foreign invested enterprises when submitted to the relevant authorities

and announced publicly.

1.4 Auditing reports shall include the following major contents:

1.4.1 Certification of objectivity, truthfulness and reasonableness of

financial statements and accounting data.

1.4.2 Evaluation and assessment of implementation of accounting;

compliance of the accounting system registered and approved by

the Ministry of Finance; compliance of accounting regulations,

systems and laws.

1.4.3 Recommendations.

1.5 The auditing report must bear the signatures of the auditor with his or her

surname, name and number (of auditor?s certificate) clearly stated and of

the director and must be affixed with the seal of the independent auditing

company.

2. When auditing the annual financial statements of foreign invested

enterprises, independent auditing companies shall:

2.1 only be permitted to carry out an audit of the accounting documents of

foreign invested enterprises which are implemented in accordance with

the accounting system registered and approved for application by the

Ministry of Finance;

31 December 1997

? Ministry of Planning and Investment

and

Phillips Fox

Subscription 22

VIII-167

2.2 not be permitted to carry out the audit of financial statements which they

have prepared themselves or where they have provided accounting

services for the formulation of the financial statements of the foreign

invested enterprise;

2.3 have the juridical status of an independent legal entity and shall ensure

truthfulness and objectivity when auditing a foreign invested enterprise

subject to an audit;

2.4 be responsible before the law for the independence, objectivity and

truthfulness of the audit results.

IV. REGULATIONS ON CONVERSION OF

APPLICABLE ACCOUNTING SYSTEMS

1. Foreign invested enterprises which have registered application of the

Vietnamese accounting system prior to 1 January 1996 must implement the

conversion to strict compliance with the enterprise accounting system

currently in force under Decision 1141-TC-QD-CDKT of the Ministry of

Finance dated 1 November 1995.

2. Foreign invested enterprises which have applied for registration and obtained

approval of another common accounting system and which do not fall under

the objects of Section D of Part III must, after one year (as from the date on

which this Circular takes effect) convert to the application of the Vietnamese

accounting system and must re-register the accounting system applicable at

the enterprise with the Ministry of Finance as stipulated in this Circular.

3. Foreign invested enterprises which have been granted an investment licence

or operating licence but have failed to register the accounting system with the

Ministry of Finance up to now must quickly complete the required procedures

and register the applicable accounting system in accordance with the

provisions of this Circular.

V. ORGANIZATION OF IMPLEMENTATION

AND EFFECTIVENESS

This Circular shall replace Circular 84-TC-CDKT of the Ministry of Finance dated 23

October 1993 and take effect as of the date of its signing.

31 December 1997

? Ministry of Planning and Investment

and

Phillips Fox

Subscription 22

VIII-168

The subjects in clauses 1.1 and 1.2 of Part I - Applicability - must seriously and fully

comply with the provisions of this Circular. Any breach of the provisions of this

Circular shall be dealt with in accordance with the Ordinance on Accounting and

Statistics dated 10 May 1988 and the regime for administrative penalty of the Socialist

Republic of Vietnam.

Relevant State authorities shall be responsible for instructing, directing and

inspecting enterprises under their control in accordance with the provisions of this

Circular.

In the process of implementing this Circular, any difficulties or obstacles should be

reported to the Ministry of Finance for timely resolution.

For the Minister of Finance

Vice Minister

VU MONG GIAO

31 December 1997

? Ministry of Planning and Investment

and

Phillips Fox

Subscription 22

VIII-169

Appendix 1

Form of Official Letter for Registration of Accounting System

Unit name: SOCIALIST REPUBLIC OF VIETNAM

Official address: Independence - Freedom - Happiness

Official Letter no.:

Tel: ; Fax:

Re: Registration of Accounting System .........., day/month/year

To: Ministry of Finance

(Accounting Systems Department)

- Pursuant to the Law on Foreign Investment in Vietnam passed by the National

Assembly on 12 November 1996;

- Pursuant to Decree 12-CP of the Government dated 18 February 1997 providing

detailed regulations on the implementation of the Law on Foreign Investment in

Vietnam;

- Pursuant to Circular No. ......... TC-CDKT of the Ministry of Finance dated .........

1997 providing guidelines for implementation of accounting and auditing in

respect of foreign invested enterprises and organizations in Vietnam.

Name of company: ...............................................................................

Line of business: ...................................................................................

Investment Licence (Operating Licence) no.: ......., dated ........ issued by the Ministry

of Planning and Investment (Ministry of Justice);

hereby applies for registration of adoption of the accounting system with the

following contents:

1. - Applicable accounting system: Vietnamese (or foreign) for business line:

....... (industry, construction, agriculture, services, .............)

- Initial documents system: ....................................

- Account system: .................................................

31 December 1997

? Ministry of Planning and Investment

and

Phillips Fox

Subscription 22

VIII-170

- Accounting book system: (selecting one of the four accounting forms:

General Journal, Entry Voucher, Journal, Ledger)

- Financial statement system: Accounting Balance Sheet, Business and

Production Result Report, Cash Flow Report, Financial Report

Explanation.

2. Languages used in accounting: Vietnamese and ...........

3. Currency used in accounting: ........................................

Other currencies arising must be converted to ......... at the exchange rate at

which each economic transaction was carried out or the exchange rate

published by the State Bank of Vietnam at the time the economic transaction

was carried out.

Unit of measurement used in accounting: Following the official measurement

system applicable in Vietnam.

4. Applicable accounting year:

First accounting year: From ......... to ..........

Following accounting year: From ...... to ...... annually.

5. Depreciation: ...................................................................................

We kindly request consideration and approval by the Ministry of Finance.

Director

(Signature and seal)