Haphazard financial reports have burnt many investors Interests

Quoc Cuong Gia Lai is one of the firms accused of misleading the market

Trinh Dinh Cuong, Ernst & Young Vietnam’s general director, told VIR that investors’ interests and confidence had been hurt through these firms’ actions.

Are there any wrongdoings or miscalculations in these firms’ unaudited and revised financial reports in your opinion?

It is hard to conclude if  these firms put the figures in their financial reports intentionally or unintentionally. Sometimes the differences in unaudited and revised financial reports are indeliberate.

However, for many reasons, the differences will negatively affect investors’ confidence in these enterprises’ transparency levels and their interests. If investors sell shares based on the announced earnings, which are lower than the revised ones, investors might have sold these shares at unfairly low prices. Investors want information to be transparent and accurate. Their confidence will be affected with less accurate and non-transparent information.

What are the reasons behind the huge differences in the unaudited and revised financial reports?

The reasons are numerous, but a popular one is that enterprises were not familiar to accounting regulations and rules, and their executives did not pay attention to them. This usually happens in newly-listed or family firms.

Normally, listed firms want to mobilise capital via the stock market. Therefore, few firms will report low earnings and hardly anyone will intentionally hide profits for their own interest.

The huge differences in unaudited and revised financial reports are also attributed to the fact that accounting regulations are not clear or specific, and not synchronously defined, causing difficulties for firms to apply.

On the other hand, firms did not understand some accounting regulations as well. There were also differences between accounting and taxation techniques when taxing officials calculated revenues on issued invoices, while accountants said revenues were calculated not only on issued invoices. The differences in un-audited and revised financial reports could also be unintentional mistakes by enterprises.

What should market regulators do to protect investors’ interests in this case?

In other markets, market regulators will not ignore these signs. For larger differences, enterprises have to explain themselves, while facing strict punishments, even being investigated, to clear up whether these enterprises intentionally or unintentionally mislead investors for their own interests. Vietnam should consider this to give suitable regulations to protect investors’ rights and interests.