The Hanoitimes - This is the first comprehensive legal framework that lays out how to organize and implement internal audit, as well as the roles and responsibilities of internal audit and related stakeholders.
Decree 05 on internal audit (IA), which will take effect on April 1, would help listed companies enhance information transparency and corporate governance, said experts.
"How to set up, enhance and standardize the IA function? This is the key question that listed companies have to ask themselves before the decree takes effect,” said Hoang Hung, partner and Vietnam Markets leader of PwC Vietnam at a workshop held in Ho Chi Minh City and Hanoi on March 14 and 15, 2019.
Overview of the workshop.
Themed "The updated regulatory requirements for internal audit & establishing an effective internal audit function for listed companies”, the workshop was organized by Smart Train in collaboration with the Asian Confederation of Institutes of Internal Auditors (ACIIA) and the Hanoi and Ho Chi Minh City stock exchanges.
According to experts at the event, the role and responsibility of IA in many Vietnamese organizations are currently misinterpreted or overlapping with internal controls or compliance functions, as a support to the senior management.
Meanwhile, as per international practices, IA is an independent supervising function and a third line of defense for businesses. This function regularly reviews and evaluates the internal controls, risk management and governance within the organization in an objective and independent manner. Thus, IA can bring many practical values, effectively helping the Board of Directors in governance and strategic decisions.
Hung said the contents of Decree 05 are in line with international practices on IA and aimed at enhancing information transparency and corporate governance. This is the first comprehensive legal framework that lays out how to organize and implement IA, as well as the roles and responsibilities of IA and related stakeholders.
Target groups (including listed companies) will have 24 months from this date to complete necessary preparations to implement IA in accordance with the decree. This is not considered a long period time, especially for organizations that have never had an IA function before.
This is because the establishment of a new internal audit function requires a detailed strategy and plan with complex steps. Therefore, the target groups of the decree will need to step up their efforts right now.
“In the process of preparation, businesses will need to focus on some decisive attributes,” Hung added. “These include the services and roles of IA, its people management, professional practices, performance management, organizational relationships, and governance structure, among others.”
Hung also advised that companies set up a detailed plan for the implementation of the IA function. With this in hand, the Board of Directors will be able to know whether they should hire external audit professional, partner with a professional service providers, or choose something in between depending on the current situation of the business.
Experts at the workshop also shared an expectation that in the coming time, the authorities will soon issue more specific guidelines for the implementation of Decree 05, helping IA to really become a part of many businesses.