Who will watch the watchers?

Auditors earn big money by manipulating company accounts, professionals reveal.

Turning losses into gains is no big deal, an auditor said.

A Hanoi-based firm, NH., with interests in precious stone exports, supermarket management, plastic manufacture, and others, delivered a very poor performance a few years ago.

In 2006 it hired an independent auditing firm, P., to advice on its IPO. The firm recommended it to declare bankruptcy.

A new company, AP., was set up on the basis of the old one, specializing in real estate, banking, and some other businesses.

An IPO was made in 2008 and shares were issued at VND 40,000. The auditing firm pushed NH. to make an offer of shares to its employees at VND 20,000 and spread the news that the stocks were being snapped up quickly.

This bait worked and investors rushed to buy the company’s shares. Shortly after, NH. went bankrupt again.

The auditing firm made a small matter of VND300 million (then around US$19,000) from this deal.

Another auditing firm helped a state-owned enterprise, K., conceal a loss of VND100 billion (now around $5 million) and show profits by asking its client to set up another company and forge transactions.

Exclusion of transactions without proper documents or information is a legally sanctioned ploy that auditors use to fudge accounts.

A prestigious auditing firm normally provides explanations about what have been excluded and issues warnings, Dang Van Thanh, chairman of the Vietnam Association of Accountants and Auditors, said.

Vietnam has yet to adopt international auditing standards, he admitted.

Fierce competition is also a contributing factor to auditing firms lowering their standards or acting unethically.

Regulations on an independent auditing firm compensating for its distorted records or damages to the audited company should be more consistently implemented, Dang Van Thanh, chairman of Vietnam Association of Accountants and Auditors, suggested. Rights and scopes when it comes to exclusion in auditing should be considered too,” he added.