Topic FDI-LC-2033 presented the ISA 600 framework from a standards perspective; this article covers the practical organisation of a group audit when the group has a subsidiary in Vietnam: who must audit what, on what conditions the Vietnamese work is “reused”, and which standards — regulatory conflicts must be settled in the group instructions rather than left to closing week.
Must the Vietnamese subsidiary be audited separately?
Yes — for two independent reasons. The Vietnamese legal reason: annual financial statements of an FDI enterprise are subject to mandatory audit under Article 37 of the Law on Independent Audit 67/2011/QH12, performed by an audit firm approved in Vietnam on the VAS financial statements, for filing with the tax authority, statistics, the investment registration authority and the parent. The group reason: under ISA 600 (Revised), the group auditor identifies components and determines the audit work required at each based on the component’s significance to the consolidated statements — a significant subsidiary will be required to have a full-scope audit of its reporting package, while a smaller unit may only need audit of specific line items or specified analytical procedures. The two audits can be performed by the same Vietnamese firm in one coordinated timetable (the VAS audit and the IFRS package audit), but they are two scopes of work and two products — with separate engagements and reports. If the subsidiary is not significant to the consolidation, the group auditor may require no component work, but the Vietnamese VAS audit obligation remains intact because it arises from Vietnamese law, not from the group’s requirements.
How does the group auditor reuse the Vietnamese work?
ISA 600 permits — and operations depend on — using the work of a component auditor, but under a strict protocol: the group auditor must evaluate the component auditor’s independence and professional competence, set component materiality (below group materiality), issue group instructions identifying the group’s significant risk areas to focus on (revenue recognition, related party transactions, accounting estimates), require two-way communication on a timetable, and, for significant components, participate in risk assessment — discussing with the component auditor and reviewing relevant working papers. One standards difference worth knowing: ISA 600 does not permit dividing responsibility for the opinion — the group auditor bears sole responsibility for the group audit opinion including work performed by components (unlike the “division of responsibility” option under US standard AU-C 600). The practical consequence in Vietnam: the component firm should belong to the group auditor’s network or have experience with ISA component audits, because working paper, deadline and reporting language requirements (usually English) exceed a routine VAS audit; and audit fees are charged on the specified scope of work and hours under the service contract — Vietnam has no statutory audit fee schedule; the convention is that the subsidiary bears the Vietnamese component fee (covering the VAS audit and the package) while the parent bears the group audit fee.
How are cross-border standards and regulatory conflicts handled?
Four conflicts recur in every group audit with a Vietnamese footprint. (1) The two-tier reporting framework: statutory statements are VAS but consolidation is IFRS — handled through a reporting package with a VAS — IFRS reconciliation and an audit of the package as a separate scope (linked to topic FDI-LC-2068), never by “translating” the statutory statements at the legal tier. (2) Different reporting dates: the subsidiary’s financial year may differ from the parent’s — IFRS 10 tolerates a reporting date difference of at most three months, adjusted for significant intervening transactions; the group auditor must specify the consolidation reporting date and the gap-period procedures in the group instructions. (3) Local professional rules: signing auditors in Vietnam are subject to Vietnamese rotation and practice conditions, and working papers and management letters serve Vietnamese regulators on request — the group audit timetable must respect these milestones instead of imposing a single global template. (4) Confidentiality and data transfer: working papers containing personal/financial data transferred to the group auditor abroad must comply with Vietnam’s personal data protection rules (Decree 356/2025/ND-CP replacing Decree 13/2023/ND-CP) and group policy — the sharing arrangement is signed before the audit season, not improvised when the group auditor requests files. The common principle for all four: conflicts are resolved in writing in the group instructions and audit plan at the start of the season, because discovering a conflict in the issuance week is the scenario that delays consolidation for the entire group.
Frequently asked questions
In a group audit, must the Vietnamese subsidiary be audited separately?
Yes, under two independent obligations: the mandatory VAS audit under Article 37 of the Law on Independent Audit (by a Vietnam-approved firm), and ISA 600 component work on the reporting package, scoped by the subsidiary’s significance to the group.
Does the group auditor reuse the Vietnamese audit results?
Yes, through the ISA 600 component auditor mechanism: the group evaluates the component’s independence and competence, sets component materiality, issues group instructions, requires communication and participates in risk assessment for significant components. But the group opinion is the group auditor’s sole responsibility — ISA 600 does not divide it.
How are group audit fees calculated?
By scope of work and hours under the service contract; Vietnam has no statutory fee schedule. Convention: the subsidiary bears the Vietnamese component fee (VAS audit + package), the parent bears the group-level consolidation audit fee.
How are standards conflicts between countries handled in a group audit?
Via a reporting package with VAS — IFRS reconciliation (two-tier framework), a specified consolidation date with at most a three-month gap under IFRS 10, respect for Vietnamese practice rules, and a data-sharing arrangement under Decree 356/2025/ND-CP — all written into the group instructions at the season’s start.
This article has been quality-reviewed by the FLAW AI Legal Council
