Many foreign groups run an internal audit function that visits subsidiaries worldwide on a cycle, and Vietnamese management often asks: with the group’s internal audit already covering us, do we still need an independent audit in Vietnam? The two mechanisms differ in legal basis, in who performs them, and in the legal value of their reports — and they cannot replace each other.
Where they differ: basis, performer, report value
An independent audit in Vietnam is a service performed by an eligible audit firm under the Law on Independent Audit 67/2011/QH12. For an FDI enterprise it is a mandatory duty: Article 37 of that law places foreign-invested enterprises and branches of foreign enterprises in the group whose annual financial statements must be audited. The independent audit report has legal value in relation to third parties — the tax authority, banks, counterparties — and is the basis in profit-repatriation files (see FDI-LC-2032). Internal audit is a self-organised examination and evaluation activity governed by Decree 05/2019/ND-CP on internal audit. The point many groups get wrong: under Article 10 of Decree 05/2019/ND-CP, the entities required to perform internal audit work are only: listed companies; enterprises in which the State owns over 50% of charter capital operating as parent companies under the parent–subsidiary model; and state enterprises that are parent companies under that model. A private FDI enterprise is not in the mandatory group — other entities are encouraged to adopt internal audit. In other words, the internal audit visit a Vietnamese FDI subsidiary hosts each year is a group governance requirement, not a duty under Vietnamese law; and its product is an internal report for the group’s board — it cannot substitute the independent audit report when filing with Vietnamese authorities.
Why group internal audit cannot “waive” the independent audit
Three reasons. First, an ineligible performer: the group’s internal audit department is not an audit organisation licensed to practise in Vietnam, and its signature does not create an “audit report” under the Law on Independent Audit; filing that report with the tax authority instead of an independent audit is equivalent to not being audited — with penalties in the FDI-LC-2055 to 2059 group (financial statements filed without the audit report fall under Clause 2, Article 12 of Decree 41/2018/ND-CP: VND 10–20 million, plus compulsory supplementary filing). Second, different objectives: group internal audit evaluates control effectiveness, compliance with group policies and operational risk under the group’s programme; the independent audit opines on whether financial statements under Vietnamese law are true and fair in all material respects — different questions cannot share one answer. Third, different reporting frameworks: the FDI subsidiary keeps statutory books under Vietnamese accounting law and a reporting package under group standards; internal audit works on the group layer, while the independent auditor is responsible for the Vietnamese statutory layer. None of this means the two must work in wasteful parallel: how the independent auditor uses the work of internal audit under Vietnamese Auditing Standard No. 610 — cutting real duplication — is the subject of FDI-LC-2035.
Frequently asked questions
How does group internal audit differ from an independent audit in Vietnam?
Internal audit is a self-organised activity under Decree 05/2019/ND-CP producing an internal report for management/the group. An independent audit is performed by an eligible audit firm under the Law on Independent Audit, produces a report with legal value to third parties — and is mandatory for FDI enterprises under Article 37.
Is a Vietnamese FDI subsidiary required to have internal audit?
Not under Vietnamese law: the mandatory group in Article 10 of Decree 05/2019/ND-CP covers listed companies and state parent companies under the parent–subsidiary model (including enterprises over 50% state-owned); other entities are encouraged. Internal audit at an FDI subsidiary comes from group policy.
Does group internal audit exempt the company from the independent audit?
No. A group’s internal audit function is not an audit organisation eligible to practise in Vietnam, and its report cannot replace the independent audit report in filings with state authorities; missing the independent report is treated as filing statements without the audit report (Clause 2, Article 12 of Decree 41/2018/ND-CP).
What is the legal basis for internal audit in Vietnam?
Decree 05/2019/ND-CP on internal audit: Article 10 (mandatory and encouraged entities), Article 11 (standards for internal audit personnel), Article 12 (internal audit charter and procedures). An entity may engage an eligible independent audit organisation to provide internal audit services instead of building its own function.
This article has been quality-reviewed by the FLAW AI Legal Council
