Monitoring the stock market in recent times shows that many listed companies lack transparency in their financial reports, which auditing organizations do not accept, refuse to provide opinions, or have audit opinions except… leading to penalties and even mandatory delisting for businesses.

Financial reports and the timing of financial reporting

a. What is the financial report?

According to Article 3, Clause 1 of the Accounting Law 2015, the Financial report (FR) is an economic and financial information system of the accounting entity presented according to the forms prescribed by accounting standards and accounting regimes.

FR applies to all types of businesses established and operating under Vietnamese law. Businesses are obliged to prepare and submit truthful, accurate, and timely financial reports in accordance with legal regulations on accounting and statistics.

b. Purpose of the Financial report

According to the provisions of Article 7 of the Independent Audit Law, the audit report is valuable: evaluating the truthfulness and reasonableness of the FR, complying with accounting standards and accounting regimes issued by authorized agencies and organizations; evaluating compliance with laws, regulations, and rules in the management, use of funds, assets, and other resources of the audited entity; evaluating the economic, efficiency, and effectiveness in the management, use of funds, assets, and other resources of the audited entity.

The audit report is used for: Shareholders, investors, joint venture participants, affiliates, customers, and other organizations and individuals with direct or related rights and obligations to handle the rights and interests of the parties involved; State management agencies in charge of their assigned functions and tasks; The audited entity detects, handles, and promptly prevents errors and deficiencies in its operations.

In addition to the above information, businesses are also required to provide other information in the “Explanatory Notes to the Financial report” to further explain the indicators reflected in the consolidated FR and the accounting policies applied to recognize economic transactions, prepare and present the FR.

c. Applicable subjects

The subjects applying to prepare FR include:

+ Subjects preparing annual FR: The annual FR system is applicable to all types of businesses in various industries and economic components. The annual FR must be prepared in a complete form.

+ Subjects preparing interim FR (quarterly and semi-annual FR) include:

+ Businesses with 100% State-owned capital or controlling shares held by the State and public-interest entities must prepare interim FR;

+ Other businesses not included in the above subjects are encouraged to prepare interim FR (but not mandatory). Interim FR can be prepared in a complete or summary form. 


+ Superior-level businesses with dependent units without legal personality must prepare their own FR and consolidated FR.

+ Dependent units without legal personality must prepare their own FR in accordance with the reporting period of the higher-level unit to serve the consolidation of the higher-level unit’s FR and inspection by state management agencies.

A sharp decline in profits after auditing

Hoabinh Construction Group Joint Stock Company (code HBC) recently announced its semi-annual review report for 2023 with a loss of up to 713.21 billion dong, increasing the total accumulated loss of the company to nearly 2,813 billion dong at the end of June. Previously, the company’s independent financial report showed a positive business picture with a profit of 101.52 billion dong. The auditor also emphasized “the existence of a significant material uncertainty that may cast substantial doubt on the continuity of Hoabinh Construction’s operations.”

Hoang Anh Gia Lai Joint Stock Company (code HAG) was audited and adjusted a 5% decrease in after-tax profit for the first 6 months compared to the independent report, down to 285.2 billion dong. The auditing also emphasized that HAG’s accumulated loss was more than 2,959.4 billion dong at the end of June 2023, short-term debt of the enterprise also exceeded short-term assets by the amount of 2,004 billion dong. copper. “These indicate the existence of a material uncertainty that could cast significant doubt on HAG’s ability to continue as a going concern,” the report said.

(According to the Securities Investment Newspaper No. 06/09/2023)

Although the enterprise has explained that the reason for this is due to the change in the provisions of law related to the procedures for acceptance of construction works and put into use, many readers and investors still expressed their degree. Some investors said that the data of independent reports and audited reports of hundreds of billions of dong as above made them lose confidence in the stock investment of enterprises. 

Causes of deviation in value after performing audit

Enterprises tend to give quite spectacular plans at the beginning of the year, and at the end of the year, the index is very poor, possibly due to unpredictable fluctuations of the market. The style of the business is usually at the beginning of the year with all the difficulties, in the middle of the year recovering and at the end of the year with good results. This shows the culture of Vietnamese business people, as well as a better way to show it to investors.

However, the difference between self-made and audited data will also reduce investor confidence. Therefore, when preparing financial reports, businesses should closely follow accounting standards. Because business and auditing are two different schools of thought. With businesses, they are the only party, that is, they make their own financial statements, so they have the right to measure and measure at their discretion. They can book revenue earlier or “save” it, just as they can recognize expenses early or late. As for audits, they are independent and knowledgeable, updating new regulations on recording. Therefore, the auditing will follow the correct principles. This is also the reason for the difference between self-made reports and audit reports.

The consequences of creating a lack of transparency in the main report are valuable lessons for businesses

a. Cases are punished according to the provisions of Vietnamese law

It is worth noting that there are many instances where financial statements, after undergoing an audit, experience a reduction in profits. In some cases, enterprises even shift from profitability to loss. Additionally, the audit raises doubts about the enterprise’s ability to sustain operations, as seen in the case of JSCs. Saigon – Hanoi Securities (SHS). Specifically, after the review, the semi-annual financial statements of 2022 showed that SHS’s profit after tax (NPAT) in the first half of the year was negative 68.2 billion dong, down 649 billion dong compared to the same period of 580.8 billion dong, while Self-made financial statements have a profit of nearly 32.2 billion VND. Accordingly, the Hanoi Stock Exchange (HNX) removed SHS shares from the list of margin trading and cut margin from August 23.

In 2020, after discovering City Technical Infrastructure Investment Joint Stock Company. Ho Chi Minh City (CII code) has a deviation in the figures of revenue, expense and profit after tax targets compared to the audited, consolidated 2019 report, the Inspector of the State Securities Commission has issued a decision that imposed a fine of 85 million VND on this enterprise. In a similar vein, in 2022, state agencies imposed a fine of 150 million dong on VKC Holdings Joint Stock Company (code VKC) for publishing false information about profit after tax in the first 6 months of 2022. These fines demonstrate the proactive actions taken by state agencies to address significant discrepancies in financial statements.

However, through each publication of annual audit reports and semi-annual reviews, the number of enterprises with data differences is still very large, affecting the transparency of the market as well as investors’ confidence. 

(According to the Securities Investment Newspaper No. 06/09/2023)

b. Consequences of violation

If the auditing organization rejects the audit, expresses a conflicting opinion, refuses to provide an opinion, or grants an exception to the audit for three consecutive years, the Hanoi Stock Exchange (HNX), as a listed company, may face compelment to delist.

Recommendations for businesses to make financial statements

Businesses that lack transparency and have errors in their financial statements will face a challenging situation where they may encounter financial penalties and forced to delist. This can result in damage to the business itself, turmoil in the stock market, and potentially significant consequences if not addressed promptly. If resolved, it will lose investors’ confidence in the transparency of businesses, affecting the sustainable development of the stock market.

+ Raise awareness:

To limit errors in financial statements and avoid disadvantages for businesses, business managers need to further improve awareness of the role of financial statement information quality; understand and control the financial information of their units; build a cultural environment that focuses on integrity and professional ethics; accountants in businesses need to strictly comply with accounting regulations and auditing standards to apply them appropriately in actual accounting work at businesses.

Simultaneously, perfect the control environment, risk assessment, establish an information and communication system, and monitor and evaluate the quality of internal control in order to enhance the effectiveness of the internal control system in the enterprise. This ensures the deployment, adjustment, and continuous improvement of control, thereby contributing to an increase in the quality of financial reporting information.

+ Strengthening and perfecting the Vietnamese legal system:

Intentionally falsifying data on the report, such as for the purpose of issuing shares, raising capital, or committing fraud, can cause financial statement errors. Therefore, to prevent cases of intentional fraud, state management agencies need to strengthen and perfect the legal system of accounting, auditing, and information disclosure according to international standards and practices, as well as such as promoting audit and inspection activities to improve the quality of financial statements and effectively fight against fraudulent financial statements. In particular, it is necessary to improve the audit legal framework, strengthen management, and improve the efficiency and quality of independent audit. Businesses that disclose dishonest financial statement information and audit companies with dishonest financial statements face strict sanctions.


In conclusion, the discovery of enterprises falling from profit to loss after an audit can have significant repercussions for both the businesses involved and the overall market. The causes for such a dramatic shift can be varied, ranging from mismanagement and fraudulent activities to economic downturns and changes in market dynamics. So it is crucial for regulators to impose strict sanctions on businesses found in violation of financial regulations to deter misconduct and protect investors. Moreover, the cases highlight the importance of continuous auditing and robust internal controls within listed companies to prevent financial irregularities and maintain transparency and investor confidence. By learning from these legal lessons, businesses can strive for better financial governance and ensure sustainable growth in the long term.

HMLF is always available to offer assistance in understanding the procedures with authorities.

HMLF legal services

Harley Miller Law Firm “HMLF”
Head office: 14th floor, HM Town building, 412 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.
Phone number: +84 937215585
Website: Email:

Leave a reply