Internal audit, good governance, and helping Vietnam’s enterprises grow

Hung Hoang FCPA (Aust.)

Internal auditing is widely acknowledged as a critical pillar of robust corporate governance. Whether in the corporate, public, or non-profits sector, the internal audit process is a tool for independent monitoring in any organisation and assuring internal and external stakeholders.

Hung is exceptionally knowledgeable about the merits of internal audit and how organizations can best use them for regulatory compliance. He is a strong advocate for the enhanced utilisation of internal audit beyond compliance to risk-based and value-based improvements for organisations.

The merits of auditing

Qualified as a chartered accountant and certified internal auditor with 26+ years in professional services, he has experience in external audit, internal audit, finance/business transformation, and accounting advisory in Australia, Lao PDR, the US, and Vietnam. He was certified as an internal auditor in 2007 and attained his CPA Australia designation in 2014.

Currently, he is the founder and chairman of Corporate Governance Services (CGS Vietnam) and senior advisor at the Vietnam Institute of Directors (VIOD). Hung is also sitting on different boards in the role of independent director or corporate governance advisor.

"Auditing is an advanced tool in corporate governance, helping the board of directors to comply with laws and in the oversight of businesses," he says. "An essential aspect of auditing is auditors' independence, so they can objectively provide assessments or advice to the board and the executive team."

In 2014, the World Bank and the Ministry of Finance appointed him to analyse the internal audit environment and advise on drafting the regulations to implement internal audit protocols across enterprises and the public sector.

His work in this capacity eventually led to Decree 05/2019/ND-CP on Internal Audit (IA), which went into effect on April 1, 2019 with a two-year transitional period.

"Internal audit is quite a new concept in Vietnam," he says. "During that time, I analysed different economies, including the US, Singapore, and Indonesia, to understand how best to implement internal audit practices for Vietnam's economy."

The decree brings Vietnam in line with international auditing standards and is a further sign of Vietnam's maturing governance environment. It applies to central ministries, local governments, public service organisations, and state-owned and private listed companies.

Auditing and good governance

He says Vietnam's vibrant economy and the steady influx of foreign investment have sharpened how internal auditing can aid good governance and strengthen organisations.

"Investors welcome the internal audit as an essential part of corporate governance because it provides them with confidence about the transparencies and the capabilities of an enterprise. It protects their interests. At the same time, the authorities, such as the State Security Committee (SSC) and the stock exchanges, understand that solid corporate governance makes the market more attractive to both local and overseas investors."

There is a growing awareness among enterprise leaders and executive teams of internal auditing's capacity to detect problems and guide fast-growth organisations' correct structuring and strategy.

Hung says this is relevant to all types of businesses, not only those listed on the stock exchange but also startups, family-held businesses, and state-owned enterprises.

"For family businesses, I think they are moving towards internal auditing because they look at the capital markets to potentially unlock the value of their company and attract funds for growth in the future," he says.

"Many small- and medium-sized family businesses have grown rapidly over the last decades. They are at the size that they need to have more resources, finance, and management skills. They are bringing people from outside the family into the business. They are starting to learn about good corporate governance and the importance of internal audits, especially on the shareholder side."

How auditing helps Vietnam's businesses

He says organisations can look to CPA Australia programmes to provide their employees with the right tools and education to understand better governance through programmes such as Corporate Learning Solutions. In some cases, they will also need to draw upon specialised help.

He says internal auditing is good governance practice, particularly for enterprises undergoing equitisation.

"Equitised enterprises are attracting investment and they need to follow the same rules as other organisations. These organisations already have a structure in place but it can often be inflexible. They move into the capital market and they need to adapt a little bit. Internal audits identify where enterprises can make changes and how to go about it. They soon realise the gains to be made and apply them effectively.

"In the public sector, internal auditing is not only helping leaders and authorities in managing the organisation goals and mandates effectively but also providing citizens and stakeholders with more confidence in the public services and public finance management."

Hung says factors like digital transformation, international trade conditions, and COVID-19 will continue to present challenges to Vietnam's burgeoning enterprises. He believes adopting sound governance principles and practices will put organisations and businesses in a strong position to face such challenges.

How CPA Australia makes the difference

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