Vietnam accounting system transitioned from one serving centrally planned economy to accommodate commodity economy and presently socialist-based market. Its history traces back when the country gained independence in 1945 to trigger reforms commensurate with the stages of economic development(Bui, 2011, p. 51). Efforts to reform the Vietnamese accounting feature a three-fold process: 1964 to 1986, 1986 to 1995 and 1995 to present as the country targets harmonization with the international financial reporting standards. Vietnam accounting reflected the rules and regulations provided by finance ministry regarding disclosure documents, books, accounting chart, and reporting system.
1954 to 1986 Period
1954 to 1986 featured infrastructure recovery and reinforcement of socialism. Vietnam operated under centrally planned economy with the state imposing comprehensive management to assign production to all enterprises. The circumstances yielded state-owned sector where the government held a dominant position with no place left for private commercial activities(Hung, 2015, p. 261). The absence of free trade influenced the accounting system activities to primarily comply with regulations issued by the finance ministry. The finance ministry acted as the highest authority tasked to manage the asset. The accounting applied reflected an instrument to manage operations, guide the allocation of the state capital and business operations.
The promulgation of Decree 157-CP in 1961 introduced the State Accountancy Organization charter. The charter influenced unified planning and reporting on national economy operations aligned to the ongoing development towards the socialist-based financial economy. It ratified the unified accounting charts formulated in 1957(Hung, 2015, p. 262). In 1970, improvement in enterprise development prompted the formation of the new chart of accounts targeting to harmonize all businesses in Vietnam. The introduction of unified account system helped businesses classify, record and monitor their economic transactions. Besides, it eased the provision of systematic information while ensuring comprehensive planning for production. However, the accounting system still faced challenges in bookkeeping as each industrial sector held its unique recording and accounting documents(Dung, et al., 2012, p. 631). It denied the Vietnamese accounting uniformity with the preparation featuring cumbersome and time intensive processes.
The absence of uniformity in Vietnamese accounting stimulated the need to harmonize principles that would guide the preparation of accounting documents. It became necessary for the finance ministry to issue circular 07-TC-CDKT in 1964. Again, the presence of cumbersosme process led the issuance of decree 200/TCK-T-PPCP by the General Statistics Office in 1983(Dung, et al., 2012, p. 631). It provided for detailed disclosure of information, production plan and utilization of state capital. The new system would still face challenges when complying with the detailed disclosure demanded by the state. However, the accounting system matched the requirements of detailed and precise information for the centrally planned economy to operate(Dung, et al., 2012, p. 632). The switch from bureaucratic and centralized-based mechanisms to market economy exposed defect in the accounting system. It made reforms to the Vietnamese accounting system inevitable.
1986 to 1995 Phase
The onset of the 1980s saw Vietnam experience economic difficulties, rising external debt and increased macroeconomic unbalances. The challenges led to the 'doi moi' proposal by Communist Party in Sixth Congress to replace centrally planned economy with market-based blend with socialist orientation(Dinh, 2014, p. 25). It stimulated private sector expansion and ownership under the indirect intervention of the state. The accounting system would change upon the issuance of decision 217/HDBT by the Council of Minister on land reforms and private ownership. The introduction of Company Law and Private Enterprise Law in 1990 and 1991 affected the accounting system with a focus on removing the bureaucratic mechanism to manage the economy. The reform agenda coincided with the course that began in 1984 during the first national-wide accounting conference (Dung, et al., 2012, p. 632). The conference recommended enactment of a legal framework to support the Vietnamese accounting system.
The promulgation of Ordinance on Accounting and Statistic in 1989 legitimized the renewal journey of Vietnamese accounting. It absorbed the decision 229/QD/CDKT of 1988 targeting harmonization in private sectors and the non-state owned enterprises. The Vietnamese accounting would derive vitality from decision 598/QD/CDKT issued in 1990 alongside the amendment of the chart of accounts by decision 212/QD/CDKT of 1989 enriched by decision 224/QD/CDKT on accounting reports (Dung, et al., 2012, p. 632). The decisions defined the intermediate stage during the transition to a market economy with the new accounting system overcoming shortages associated with the centralized bureaucratic mechanism. The stabilization of market economy exposed the weakness in the accounting system. It failed to capture financial leasing, intangible and leasing fixed asset alongside long-term investment. Similarly, it exhibited inconsistency with international accounting practice for violating accrual, consistency, and prudence principals (Dung, et al., 2012, p. 632). It limited the disclosure of economic management related information, hence need for further reforms.
1995 to Present
The renewed economic policies in the early 1990s stimulated rapid economic growth with an open-door policy sparking mass reforms. Vietnam liberalized foreign trade in 1995 and re-established formal diplomatic relations and trade with the US in 1996. The state-led reforms to embrace accounting system that would suit the country's economic development and harmonize international accounting standards. The 1995 decision 1141/TC/QD/CDKT introduced new accounting reports and chart of accounts reinforcing the mandate of Vietnam Accounting Association (VAA) established in 1994 under decree 12/TTg (Dung, et al., 2012, p. 633). VAA would gain membership in International Federation of Accountants in 1997 and ASEAN Federation of Accountants in 1998 after organizing the international conference held annually on accounting and auditing.
Further changes were effected in the promulgation of Accounting Law in 2003 to lay the legal foundation. It ended the Ordinance on Accounting and Statistic with the statute providing for reliable financial information on decision making, accounts transparency. In 2006 the finance ministry updated the chart of accounts through decision 15/2006 to replace decision 1141(Dung, et al., 2012, p. 633). The issuance of decision 53/2006/TT-BTC in June 2006 introduced management accounting. Vietnam devotion to conform to international accounting practice led to the formation of Vietnamese Accounting Standards (VAS).
The finance ministry formulated 26 VAS between 2001 and 2006 seeking compatibility with IFRS. Recently, Vietnam's government issued circular 200/2014/TT-BC and 202/2014/TT-BTC to enhance comparability between IFRS and VAS. It followed earlier decisions 15/2006/QD-BTC and 48/2006/QD-BTC on small and medium enterprises accounting(Dung, et al., 2012, p. 634). The progress realized in Vietnamese accounting system made 2006-2010 a consolidation phase while 2010 onwards became the dynamic integration phase towards comprehensive integration with IFRS by 2025.
Regulatory Bodies and Organizations Responsible for the Accounting and Auditing Standards and Practices in Vietnam
Vietnam Ministry of Finance
The Ministry of Finance is the constitutional agency tasked with the implementation of management of accounting and independent audit. It has oversight on accounting and auditing standards and practices as outlined in the Decree 123/2016/ND-CP through the Department of Management and Supervision of Accounting and Auditing. The Ministry of Finance (MoF) has supreme power over the accounting standards and practices in Vietnam as the country prepares to accomplish comprehensive integration with IFRS (Diu & Loan, 2017, p. 2). It oversees the transition of responsibilities regarding accounting and auditing practice and standards to Vietnam Association of Accountants and Auditors (VAA) (Uchenna, et al., 2016, p. 33). Its department of accounting and auditing administers examinations and issuance of career certificates for individuals attaining the mandatory theoretical and practical experience.
The MoF is tasked with sole responsibility and authority by Vietnam Law to undertake the promulgation of continuous professional development (CPD) regulations. It administers CPD to current holders of CPA VN certificates. It is the legal body tasked with setting the accounting and auditing standards through Vietnam Accounting Standards Board (VASB)(Vettoretti, 2016, p. 6). In doing so, MoF researches aims to establish the base to update the VAS. It targets harmonizing VAS with international standards on content, evaluation basis, recognition, and presentation. It modifies the Vietnamese professional ethical to align them to the IESBA Code. Such involves sending exposure drafts to the audit firms and VAA to allow their commentaries and organize seminars as means to raise awareness to members of IESBA ethics.MoF has powers and authority to manage public accounting sector and promulgates applicable standards alongside the implementation of Vietnam convergence with the IPSAS (Oulasvirta, 2012, p. 19).
Vietnam Association of Accountants and Auditors (VAA)
The formation of Vietnam Association of Accountants and Auditors in 1994 targeted infusing professionalism into its members. VAA operates as a voluntary organization drawing membership from accountants and auditors in Vietnam. Since 2005, VAA began assuming responsibilities previously tasked with the Department of Accounting and Audit in the MoF. The transition gave VAA mandate to conduct registration and management on matters relating to accounting and auditing (Narayan & Godden, 2000, p. 27). It registers all accountants and auditors in Vietnam. Secondly, VAA offers professional training and oversee the development of auditors, chief accountants and certified practical accountants in the country. VAA organizes the issuance of certificates to participants upon completion of chief accountant development course (Springer International, 2000, p. 128). It monitors the conduct of members in the discharge of their duties.
The VAA has the responsibility to monitor regularly the adherence to procedures by the certified auditors and accountants annually. The role includes the publication of the list of firms and individuals capable of undertaking the accounting and auditing work. VAA attains central management through the Accounting Practice Management Unit. The unit handles the registration and regular monitoring of practicing members and firms(Gillespie & Chen, 2010, p. 68). It garners support and cooperation from learning institutions, MoF, and firms to review and edit the existing professional process and realize harmony with the Independent Audit Law of 2011. Although VAA lacks right to promulgate education regulations, it participates directly in the council in marking and holding examinations.
Additionally, VAA offers training classes to individuals seeking Certified Practical Auditors and Certified Practical Accountants. VAA lends expertise to the MoF committee tasked with preparing standards and holds conferences on accounting and auditing standards. It oversees the issuance of instructive documents to its members on the application of VAS...
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