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Financial reports by enterprises require more consistent scrutiny   2009-03-04 - Viet Nam News

 

The secretary general of the Association of Certified Public Accountants (VACPA), Bui Van Mai, spoke to Thoi bao Kinh te (Viet Nam Economic Times) newspaper about the accuracy of financial reports.

Last November, a number of Vietnamese listed companies declared profits, but only a month later the public found out they had in fact suffered huge losses. Where is the truth in this case?

Normally, quarterly financial reports are applied for enterprise management purposes only. They are not official reports for year-end business summation.

The stock market requires that businesses release quarterly financial reports. However, these reports are not completely accurate, since some formalities such as stock inventory or debt review are not compulsory. Additionally, enterprises always want their stocks to fetch higher prices on the market, so sometimes they do not announce their losses.

In addition, the economic crises in 2008 led to huge losses for almost all businesses at the end of the year.

But, investors and managing agencies are playing a more active role in supervising and checking enterprises’ business activities; therefore enterprises are no longer able to cover up their business results. Auditing companies also have more responsibilities in terms of examining enterprises, as they want to avoid high risk.

Are the quarterly financial reports trustworthy in your opinion?

In six petitions, which have been proposed to the Ministry of Finance (MoF) by the Viet Nam Association of Financial Investors and the VACPA, we have emphasised the importance and necessity of mid-term auditing in which quarterly financial reports will be examined and controlled.

Procedures for auditors to examine quarterly financial reports are clearly stipulated in the auditing standards promulgated by the MoF. By accurately adopting these standards, auditors can minimise the errors in quarterly financial reports.

Is this too challenging a job when only a few auditing companies are allowed to examine listed companies?

It is surely not easy. However, auditing companies should check every six months if they are unable to examine companies every quarter. By doing so, the risk for enterprises will be cut in half.

In the future, we need to develop more auditing companies who can work in this area to meet the increasing demand.

What is your advice for investors researching financial reports?

First, investors need to have a working knowledge and understanding about economics, finance, accounting and auditing.

Second, investors need to examine a business’ operations at different times, not just at the time they are considering buying that company’s stock.

Last, it is necessary for investors to carefully examine auditors’ opinions. Investors should not do business with any enterprises, which have warnings from auditors.



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