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[Type text] ACKNOWLEDGE The formation and development of audit in our country is derived from objective requirements of the transformation of economic model in our country Audit plays an important role to examine and control the financial situation as well as organize personnel in the corporations This requires auditing have to complete legal standards and professional ethics that is the fundamental of assurance of each audit Requirements about professional competence and due care is the decisive factor that determines the quality of audit program The increasing number of auditing services has led to the increasing use of audited financial information This requires the auditors to adhere to the ethical standards when conducting auditing financial statements Auditors adhering to professional ethics will help them to protect and enhance the reputation of the audit profession in society as well as ensure the high quality of services provided to customers If the auditor does not comply with ethical standards, public trust in audit services will decline Therefore, CPA firms have to pay more attention in recruiting and training employees to have qualified human resources Stemming from the urgency of that problem, I decide to choose the topic: “Research on the professional ethics of independent auditors in Vietnam” for the futher knowledge in my report The content of the report is presented in three parts: Chapter 1: General concept of Professional Ethics Chapter 2: The current practice of Rule of profession conduct in Vietnam Chapter 3: Solutions to improve professional ethics for independent auditors in Vietnam [Type text] During the completion of the report, I have received many helpful support from Dr.Tạ Thu Trang to complete this report I am extremely grateful for her help Student Bùi Nhung Anh [Type text] Chapter 1: General concept of Professional Ethics 1.1 1.1.1 Definition and role of Professional Ethics Ethics “ Ethics or moral philosophy is a branch of philosophy that involves systematizing, defending, and recommending concepts of right and wrong conduct The field of ethics, along with aesthetics, concern matters of value, and thus comprise the branch of philosophy called axiology Ethics seeks to resolve questions of human morality by defining concepts such as good and evil, right and wrong, virtue and vice, justice and crime As a field of intellectual inquiry, moral philosophy also is related to the fields of moral psychology, descriptive ethics, and value theory.” In general, Ethics is a system of social standards and norms by which human beings can self-regulate their behavior in line with the interests of the community and society “Ethics • • • • covers the following dilemmas: How to live a good life Our rights and responsibilities The language of right and wrong Moral decisions - what is good and bad?” In addition, ethics contributes to the formation of fundamental principles, norms, and ethical conduct in individuals to create their ability to choose and evaluate social phenomena On this basis, people, by themselves, review to assess and regulate their own behavior, consciousness and action to harmonize public interest with personal interests [Type text] 1.1.2 Codes of professional ethics “A code of ethics is a guide of principles designed to help professionals conduct business honestly and with integrity A code of ethics document may outline the mission and values of the business or organization, how professionals are supposed to approach problems, the ethical principles based on the organization's core values and the standards to which the professional is held.” Codes of professional ethics including guidelines, explanations of the basic principles that auditors may adopt in practice to measure and evaluate the quality of the audit work The codes of professional ethics of the auditors plays a very important role It is one of the basic principles of auditing An auditor should have ethics and an audit firm should be a community of ethical auditors In particular, in the market economy, the need for reliable and recognized auditing becomes ever greater In addition, those responsible for making financial statements without ethics can make the user's financial reporting information unreliable, resulting in distrust of the public The basis reason for code of ethics for any professional career is the requirement of public trust in the quality of the service they serve For auditors, it is important to make customers and users of financial reports rely on the quality of auditing and other related services If the users not trust the auditor, the efficiency of the auditing will diminish Therefore, the ethical requirements for auditors must be clearly defined and publicized so that the public knows where they can demand the ethical conduct of auditors as well as evaluate this sector's commitments In practice, both of internal and external users cannot evaluate the performance of the services because of its complex characteristic Like a patient cannot assess [Type text] whether the surgery is performed properly, a financial report user cannot evaluate the work of auditor Most of users have either the time or the knowledge to the assessments Public confidence in the quality of professional services is strengthened when the industry promotes high standards of conduct and ethical behavior for practitioners This requires each auditor to self-cultivate their professional competence and ethics in order to perform their work effectively 1.1.3 Fundamental principles: - Responsibilities: In carrying out their responsibilities as professionals, members should exercise sensitive professional and moral judgments in all - their activities The Public Interest: Members should accept the obligation to act in a way that will serve the public interest, honor the public trust, and demonstrate - commitment to professionalism Integrity: To maintain and broaden public confidence, members should - perform all professional responsibilities with the highest sense of integrity Objectivity and Independence: A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities A member in public practice should be independent in fact and appearance - when providing auditing and other attestation services Due Care: A member should observe the profession’s technical and ethical standards, strive continually to improve competence and quality of services, - and discharge professional responsibility to the best of the member’s ability Scope and Nature of Services A member in public practice should observe the principles of the Code of Professional Conduct in determining the scope 1.2 1.2.1 and nature of services to be provided Rule of profession conduct Independence [Type text] Independence in auditing means that auditors must have a neutral view when conducting audit services, evaluating results and publishing audit reports In the course of auditing, the auditors must not be influenced by any material or spiritual interests which affect their honesty, objectivity and integrity For instance, if the auditor is a lawyer of client or have spousal relationship with a member of Board of Director, he or she will not be considered independent All ethical principles and related guidelines are governed by the independence Without it, the audit function is not valid in society Therefore, Independence have to be considered one of the most essential qualities of the auditor in practice Independence depends on two factors: • • Independence of mind Independence of appearance Independence of mind reflects the ability to maintain a neutral attitude during the audit process It reflects a long-standing requirement that members be unbiased in fact It is possible that the nature of the auditor is not to allow any factor affecting his or her independence, even when the auditor is economically or emotionally involved with the entity audited However, only mind is not enough to justify the independence of the audit, it must conclude the terms of appearance Independence of appearance is the result of others’ interpretations of the independence If the auditors are truly independent, but the users believe that they are the advocates of the customer, the audit value will be lost So not only just auditors have to maintain their independence while executing their responsibilities, but also those who use financial reports must have confidence in that independence of them Independence is expressed in a number of specific cases as follow: [Type text] - Auditors have economic relations with the customer company: Auditors are not allowed to undertake audits of corporation in which they have economic relationship or economic interests such as contribute capital, borrow or lend money as well as have signed other contracts provide good and service for customer Although in the past some countries around the world had accepted for the auditors own a limited number of shares in the client company, these days it is considered to contain the latent adverse effect to the independence of the auditors Ownership of shares and similar investments is prohibited in some cases because it violates the independence There are three basis circumstances related to ownership of shares that violate the independence of the auditor: • An auditor of an audit firm may own shares in a client company and not violate this rule if he is not involved in the audit contract But as soon as he become a member of team perform the audit service for client company, he or she must transfer the stock immediately or the audit firm must disclaim the audit because it has violated the • independence of the auditor Client company and one of capital contributors of the audit firm have economic relationship with third party For example, client company holds a large share company where one of capital contributors of the audit firm also has a significant amount of • personal property invested, this will be a violation of independence If an auditor has spouse who has shares in client company, this would violate the independence of the auditor That result in the auditor will be prohibited from expressing his opinions on the - financial statements of this client company Leadership of the client company has personal relationship with the auditor: Auditor is not allowed to undertake audit in companies which they [Type text] have close relatives (such as parents, spouses or siblings) with those in the management team like Board of directors of the audited units Independence will also be violated when the relatives of the auditor has significant financial profit or business relationship with the client company - being audited by the auditor The auditor is also a member of the client company: An auditor is not permitted to undertake audits at company that he or she is an employee work for it If an auditor is a member of the Board of Directors or an officer of client company, the ability to carry out his independent assessments of the true and fair presentation of the financial statements will easily affected Even if this position does not affect the independence of the auditor, frequent contact with the Board of Director will result in the perspectives of - financial statements’ users on it The auditor and client company have relationship as the investor and the investment recipient For instance, a common shareholder of an audit firm owns shares in a client company that is not audited Company A Company B, an audited company, also owns shares in this company This may be a violation of independence Independence prohibits joint auditors from owning shares in company A or similar financial relations if the capital - investment in company A is very material Dispute between audit firm and client company: Auditors are not audited at the companies that are in dispute with the auditing firm When there is a lawsuit or the possibility of producing a lawsuit between the auditing firm and its clients, the objectivity of audit reports is no longer maintained For example, if Board of Director is suing an auditing firm about a mistake in the previous audit, the auditor of that auditing firm is not considered independent of the audit in the current year Similarly, if the auditing firm [Type text] sues the company for fraud or deception, the independence of the auditor is - also lost Self – review: Auditors are not allowed to perform accounting services (such as direct recording, keeping accounting books and making financial statements) and providing audit services to the same client If an auditor record the economic transactions in the journal then transfers it to the general ledger as well as adjust entries and conducts the audits, he cannot remains independent because the auditor has violated the principle ( nguyên tắc bất kiêm nhiệm) 2.2 Integrity and objectivity “Rule 102—Integrity and Objectivity In the performance of any professional service, a member shall maintain objectivity and integrity, shall be free of conflicts of interest, and shall not knowingly misrepresent facts or subordinate his or her judgment to others” Auditors must have clear opinions as well as be honest, fair, respect the truth and not biased The integrity and objectivity of the auditor requires: - The auditor must not reflect intentionally the erroneous situation and allow - his judgment to be depend on another When conduct the audit, the auditors shall only comply with laws, - standards and procedures of auditing They must have professional conscience, respect the interests of the state and people, their best for the health of the national financial system and 2.3 the company is audited They not let prejudices bias over objectivity They must have a neutral attitude and not be dominant by material interests and personal interests Technical Standard [Type text] Auditors must be adequately and reasonably trained to have extensive knowledge of accounting and auditing Professional expertise gained not only through formal training at institutes and universities, but also through the real experiences in practice of the auditor They must be sensitive to catch the trend of accounting, auditing and business, and always update the changes in that fields The auditor must perform the audit work with the professional competence, care and diligence Auditors are responsible for maintaining, updating and improving their knowledge in practice to meet the requirements of the job To ensure professional competence and prudence, the auditor have to follow these requirements: - They must be trained and fostered in the both terms of theoretical and practical of professional career that sympathize with the characteristic, - scope and complexity of the assigned audit tasks They have to learn constantly to keep themselves up to date with the development, the renewal of accounting and auditing in country as well as - in the world They must have the ability to inspect, evaluate, propose recommendations, - and coordinate while receiving assigned tasks They must be capable of adapting all assigned tasks and behaving in accordance with the diversity, abundance and complexity of the tasks as - well as the objects audited They must be fully equipped to use professional methods and modern - media in the audit proficiently Professional methods must be applied corresponding to the complexity of the audit They must perform tasks with high professional responsibility Be cautious of all situations Do not rush to make comments or judgments when not fully understand the problem as well as no credible evidence [Type text] - When working with experts as consultants or using the results of the former auditors, internal auditors, inspectors’ conclusions, auditors must consider, inspect and use selectively In addition, they have to take responsibility for the authenticity of the data, documents and evidences related to the audit - conclusions Before giving comments, the auditors shall have to examine the truthfulness, validity and legality of the working dossiers as well as the completeness, accuracy and appropriateness of the evidences and calculations Auditors must comply with Vietnamese auditing standards or international auditing standards accepted by Vietnam These auditing standards define the basic principles and procedures and guide the application of basic principles and procedures related to the audit of financial statements 2.4 Confidentiality Auditors must keep confidential information obtained during the auditing process and not disclose any information without the permission of the competent person, unless there is an obligation to disclose it as required by law or within the scope of their occupational rights - Confidentiality is not meant to: • Reduce the obligation of an auditor • Impacting in any form on the compliance of the auditor with the • summons of the Court Prohibiting the re-examine of the audit work according to professional practices as part of a voluntary quality audit as authorized by the audit firm [Type text] • Prevent the auditor from responding to any inquiries by the inspector of the auditing firm or by the investigative bodies of the State Audit - Office Demand for Confidentiality: During the audit process, auditors obtained a significant amount of confidential information, including officers' salaries, product pricing processes, advertising plans, and product cost data If the auditor discloses this information to outsiders or to employees of client who are prevented from accessing such information, their relationship with Board of Director will be stressful, which can cause harm to the client company Moreover, further access to the materials would give the company's employees an opportunity to change the information on such materials For these reasons, auditors should always be careful to preserve the materials Usually, auditor's materials can be provided to others only if it is authorized by the client company This is a condition in which an auditor sells his or her performance to another auditor or wishes to allow the auditor of the next fiscal year to review materials However, there is no need for permission if the materials are claimed by the Court or used as part of a voluntary quality review program with other auditing companies If the 2.5 material is claimed, the customer company must be notified immediately Contingent Fees Professional services are not sold or provided under any arrangement where no compensation is charged unless a specific finding or a specific result is obtained However, the remuneration of an auditor may vary according to the circumstances, for example, the complexity of the service provided Remunerations are not considered dependent if they are provided for by law or determined based on the results of lawsuits as well as findings of Government [Type text] In order to enable auditors to remain objective when conducting audits or when providing tax advisor, the calculation of remuneration based on the results of the service provided is strictly prohibited For instance, a contract auditing firm with a client is $ 5000 for the unmodified opinion or only $ 2,500 for the qualified opinion may cause the auditor to make a false report and be a violation of the principle of contingent fee Usually, the audit firm calculates payroll based on the number of hours worked Different rates over time are calculated for different levels of staff In recent years, however, auditing firms have begun to gradually increase contractual bids based on a fixed fee without considering the amount of time need to compete the audit 2.6 Discreditable Acts Discreditable is not explicitly defined in the guidelines or regulations However, in principle 501 states that a member must not commit an act of discrediting his or her career The guiding documents can be summarized as follows: - Retaining customers' records when an audit firm's or auditor's request is not satisfied is an act of discrediting For example, the management does not pay remuneration to the audit firm, so the general owners of the auditing firm refuse to return the books of the customer The owner of the audit firm - has violated the 501 rule An auditing firm must not discriminate between race, color, religion, sex, age or nationality To provide guidance on factors constitutes an act discreditable, AICPA legislation provides clear guidelines Laws state that a member of AICPA will be expelled without hearing verdict of any of the following four types of violations: [Type text] 2.7 - The offense may be sentenced to a term of imprisonment of one year or - more Deliberately forgot to fill in any income tax returns that the auditor, as an individual taxpayer, was required to fill out in accordance with the law - On behalf of the auditor or client, fulfill the fraudulent tax return document - Deliberately helping to make or present a fraudulent tax return document Advertising and Solicitation Auditors must not seek to attract customers through advertising or other forms of misleading or fraudulent conduct Attracting guests by coercion, deceit, or harassment is strictly prohibited Through various medias, the auditing firms or auditors actively introduces and contracts with new clients instead of waiting for them to come to the company For example, the organization offers prospective clients to explain the services of an auditing firm, opens seminars on changes to existing tax laws for prospective clients, and prints brochures in first pages of the telephone directory All these actions must be prohibited in order to make the audit service more efficient 2.8 Commission and referral fees Auditors are paid commissions neither to get customers nor to reveal the result of audit service This requirement does not prohibit payments for the purchase of an accounting service or the payment of pensions The reason for not allowing payment of commissions to attract more customers is to prevent excesses in this field by paying "searchers" who can help the firm expand its reputation This principle is also intended to prevent the auditor from taking over the major service For example, AICPA's Code of Ethics prohibits auditing firm from [Type text] increasing auditing fees for a retail company because the firm has arranged for others to purchase the product from that retailer 2.9 Form of Organization and Name An auditor may practice independent audit as an owner or an employee, only in the form of a private ownership, a partnership or a joint stock company that is consistent with the law stipulates An auditor must not choose the name of a company that is likely to cause confusion about its organizational form (sole proprietorship, partnership or joint stock company) The name of one or more common shareholders may be written in the name of the company Likewise, the remaining common shareholders after the death or termination of other may continue to practice under the name of the partnership company within two years after becoming a sole proprietorship company This principle allows auditors to establish sole proprietorship, partnerships, or professional joint stock companies There are some limitations on the name and ownership of the auditing firm For example, the name "Quality Auditing Company" is a violation of regulation that only human names are used The name “Hoang And Long Auditing Company” is acceptable only if both of them are qualified enough to practice as independent auditors at the time the partnership is formed [Type text] Chapter 2: The current practice of Rule of profession conduct in Vietnam 2.1 Analysis For a long time in the past, we had managed the country's economy without an auditing system so that companies, enterprises and accounting organizations not know who have the necessary expertise to examine accounting or contract to help to improve the work of accounting Recognizing the importance of auditing, Government has recently started to carry out audits in practice However, besides the advantages, the audit also shows the limitations that need to be overcome 2.1.1 Advantages Auditing is becoming more and more effective which result from the level of auditors as well as the quality of daily audits is improved Especially in the current period, the audit industry has been recognized and become more reliable than ever Therefore, the audit profession requires a certain legal framework with great power to control auditing activities Over the years of building and growing up, the staff of auditors has been entrusted with new but very heavy tasks The vast majority of auditors have shown solidity in their political character, regularly cultivating morality and lifestyle, collective democratic style and sense of discipline They are admired by colleagues and trusted by society Most of the auditors are very young, high - educated, enthusiastic Moreover, they also have a sense of responsibility to fulfill all assigned tasks 2.1.2 Disadvantages At present, the inadequacies of the state policies and regimes along with the constant change of laws as well as non-specific implementation guidelines result in [Type text] the confusion of the users However, young auditors, despite being smart, they lack not only practical experiences but also soft skills such as computer skills and foreign languages that can affect the quality of auditing For example, Auditors have to provide audit service for an import / export corporation that has all contracts and vouchers in foreign languages or use software in accounting If they not have enough knowledge about IT and that languages, they cannot handle the audit work It lead to the high risk of the audit In addition, some auditors come to the profession for mediocre purposes such as high salaries or attractive positions So it is hard for them to work with their enthusiasm for a long time It results in unhealthy thoughts, harassment, optimism, some poor working style They are reasons for unhealthy thoughts, harassment, optimism or poor working style of auditors At present, the auditing service has not been really carried out widely, systematically with the specific guidance by law To address this situation, the recruitment and training freshmen is considered one of the positive directions In order to build a training program, it is indispensable to clearly define the training objectives For auditing company, this require experts with high professional qualifications because It can be considered that this is a field that need strict quality standards On the other hand, in terms of quantity, quality and structure of auditing, there are many aspects that not meet the requirements of the development of auditing in the new era 2.2 The quantity of independent auditors compare to the demand of market 2.3 The efficiency of training auditors [Type text] Over the years, the auditors enthusiastically dedicated to the industry, have a sense of responsibility to overcome difficulties to accomplish the task assigned However, when performing audit tasks the auditors are still confused that make some mistakes On the other hand, the bureaucracy and corruption also affect auditors When dealing with customers, there are harassment and intimidation problems This is acts of violating the law and causing waste to the property of the State The professional quality of the young auditors is not commensurate with the requirements of the assignment, partly due to the fact that we are currently lacking knowledge about practical audit reports The process of training has not gone deeply to gained experiences from the results and the work done However, for effective activities must be guided by scientific knowledge and reality experience what the auditors perceive through long-term study and work On the other hand, the birth and rapid development of both the scale and type of operations of the auditing system, audit training and fostering became a concern of many universities and education organizations The State's earnest attention to the training of auditors is praiseworthy But the lack of consistency in training programs, training methods as today is worrying It is worth mentioning that there is a shortage of lecturers with audit expertise It lead to the urgent need for Vietnam is timely to promote the training of auditors by a key program in the development strategy of the audit industry in Vietnam 2.4 Programs and methods to enhance sense of auditor responsibility 2.5 Comparison in current audit situation between Vietnam and other countries [Type text] In all developed countries, audit has been held for a long time and was organized in a rigorous, thoughtful, systematic manner and clearly defined by ordinance Auditing is widely practiced every companies In most of the countries have market economy, especially developed countries such as England, France, US, Japan or even as ASEAN countries, audit is spent a special attention They consider it as an important and necessary tool in the management of the national economy Auditors must be graduates of high-level accounting universities They have to pass the very stressful exam and they must also sworn before the commercial court, economic court before having ability to perform the audit services Auditors must register their practice at the auditing offices that are similar to the law offices According to laws in developed countries stipulate that companies, enterprises, business organizations, in some circumstances such as dispute or work with tax authorities, report losses to banks and government agencies, the summaries must have a certified audit agency to be valid Enterprises which want to be economically secure, must contract with an auditing office so that they can regularly guide, monitor and help company in their accounting work to ensure it is accurate and reasonable [Type text] Chapter 3: Solutions to improve professional ethics for independent auditors in Vietnam Considering about the ethical profession of auditing, it is important to always grasp the Basic Principles of Marxism-Leninism, Ho Chi Minh Ideology and the Political Revolution Roadmap of the Communist Party of Vietnam about cadres’ work Therefore, it is necessary to train the auditors resource have widely knowledge, abilities as well as virtue and talents to ensure continuity, inheritance and development of auditing in the era of information explosion, the deeper into the market integration mechanism in the region and the world, the more important and urgent is training and development of the virtues of the auditors Professional ethics must also be practiced in the improvement of skills, participation in scientific research and in the settlement of relations in social life To achieve quality and effectiveness, an audit must be based on professional ethics of auditors Although the errors and frauds are small or not, auditors have responsibility collect all the authenticity and persuasiveness of evidences Feel free to discuss with colleagues to clarify the issue to make assessment and conclusions to ensure the objectivity, accuracy, truthfulness Participating in scientific research with the spirit of exploring, creating and discovering new things are indispensable measures to constantly improve the quality and effectiveness of the audit work The auditor cannot simply detect the errors and weaknesses of the client company in economic management, they have to analyze to shows loopholes and inadequacies of policy in financial management, the weaknesses of the company in professional Depend on that analysis, auditors find the trouble of the corporation in management as well as in production business to give suitable opinions and recommendations [Type text] In the audit activity, where the professional ethics of the auditor is shown in more detail, the auditors are ethical never have the bossy attitude and threatening speech for client Auditors who act in a polite manner can make the clients feel comfortable to express to the auditor professional and policy issues Instead of that, an impolite auditor will create bad reputation of company and clients may be not willing to co-ordinate with this company Therefore, the auditor must be very cautious in every word, action as well as audit results must be evidence-specific, honest and persuasive The most difficulties of the auditors are career orientation in the long run They should be enthusiastic with their career, company and their own goals Moreover, they have to clearly understand the role, functions and tasks of auditing to try their best to continuously learn and improve strong political as well as professional expertise [Type text] CONCLUSION In order to adapt to the requirements of the market economy and integrate into the international market, the auditing service in Vietnam has formed and developed, and partly asserted its position in the whole country In order to obtain that position as the present, in addition to the specific characteristics of the profession, the human contribution who are equipped with professional ethics in accordance with auditor standards as a guide for every action to auditing is also to be deserved praise Codes of professional ethics are general ways to help an auditor complete his or her professional responsibilities Professional ethical standards are important for the auditor so it is necessary to overcome the difficulties and use the advantages to improve the performance of the auditors While researching the project, due to the low level of education and the fact that it is limited in terms of materials, this project is inevitably lacking Therefore, I look forward to contributing and adding comments from teacher for my report to be more complete [Type text] Reference Ethics or moral philosophy is a branch of philosophy that involves systematizing, defending, and recommending concepts of right and wrong conduct The field of ethics, along with aesthetics, concern matters of value, and thus comprise the branch of philosophy called axiology Ethics seeks to resolve questions of human morality by defining concepts such as good and evil, right and wrong, virtue and vice, justice and crime As a field of intellectual inquiry, moral philosophy also is related to the fields of moral psychology, descriptive ethics, and value theory.” ... limitations on the name and ownership of the auditing firm For example, the name "Quality Auditing Company" is a violation of regulation that only human names are used The name “Hoang And Long... auditor must not choose the name of a company that is likely to cause confusion about its organizational form (sole proprietorship, partnership or joint stock company) The name of one or more common... shareholders may be written in the name of the company Likewise, the remaining common shareholders after the death or termination of other may continue to practice under the name of the partnership company
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