If your company faces its first statutory audit, the pressure is real. You know the auditors are coming, but you are not sure what they need or how to avoid a slow, painful process. This guide gives you a concrete preparation plan: what to organize, in what order, and where first-time companies usually get stuck. Follow it and your audit becomes a review, not a scramble.
Who Must Be Audited and Why It Matters
In Vietnam, independent audit of annual financial statements is mandatory for several groups, including foreign-invested enterprises (FDI), credit institutions, insurers, and public-interest entities. This is set out in the Law on Independent Audit and related decrees. For a Japanese-invested subsidiary, the audited statements are not just a compliance box. Your parent company, your bank, and the tax authority all rely on them. A clean, on-time audit protects your credibility with all three.
Build Your Preparation Around Three Buckets
1. Accounting records that tie together
The audit starts from your trial balance. Auditors will trace balances back to source documents. So the first job is internal: make sure your ledger, sub-ledgers, and financial statements agree. Reconcile the bank, fixed asset register, inventory, receivables, and payables before the auditors arrive. If your sub-ledger of receivables does not match the control account, fix it now, not during fieldwork.
2. Supporting documents, organized by cycle
Prepare files by transaction cycle: revenue, purchases, payroll, fixed assets, cash, and loans. Each material balance needs evidence: contracts, invoices, bank statements, payment vouchers, and approvals. Keep them in a shared folder structure that mirrors the account. When an auditor asks for the support behind a machine purchase, you should find it in under a minute.
3. Judgment areas with a written basis
Some numbers are estimates: depreciation rates, provisions for doubtful debts, inventory write-downs, and accruals. Write a short memo for each explaining your method and assumptions. This shows the auditor you applied a consistent, defensible policy rather than a guess.
A Realistic Timeline
| When | Action |
| Before year-end | Agree scope and timing with your audit firm; confirm accounting policies |
| First 2 weeks after year-end | Close the books, run reconciliations, count inventory and cash |
| Weeks 3-4 | Deliver the requested document list (PBC); respond to first queries |
| Fieldwork | Answer questions daily; provide adjustments support quickly |
| After fieldwork | Review draft statements and audit adjustments; sign off |
A Real Scenario
A trading company underwent its first audit after two years of operation. The books looked fine internally, but the fixed asset register had never been reconciled to the ledger. Several small tools bought in year one were expensed, while similar items in year two were capitalized. The inconsistency forced a reclassification and delayed sign-off by a week. The fix was simple but late: a written capitalization policy with a clear threshold. Had they set that policy on day one, the issue would never have surfaced.
Common Mistakes and How to Fix Them
- Waiting for the auditor to tell you what to do. Ask for the prepared-by-client (PBC) list early and start gathering before fieldwork.
- Unreconciled control accounts. Reconcile every sub-ledger to the general ledger before the auditors start; differences found late cost the most time.
- No inventory or cash count at year-end. Count on or near the balance sheet date and keep signed count sheets. A later count weakens your evidence.
- Related-party transactions with no documentation. List all transactions with the parent and affiliates, with contracts and pricing basis, since these draw extra scrutiny.
- Treating audit adjustments as an attack. Adjustments are normal. Understand the reason, agree or challenge with evidence, and update your process.
Action Checklist
- Confirm you are legally required to be audited and engage a firm early
- Close the books and reconcile all sub-ledgers to the general ledger
- Perform year-end inventory and cash counts with signed records
- Organize documents by transaction cycle in a shared folder
- Write short memos for every estimate and accounting policy
- Compile a complete related-party transaction schedule
- Assign one internal owner to coordinate all auditor requests
Conclusion and Next Step
A smooth first audit comes from preparation, not luck. The next step is concrete: request the PBC list from your audit firm today and start reconciling your control accounts this week. Everything else builds on those two moves.
Frequently Asked Questions
How long does a first statutory audit take?
Fieldwork for a small or mid-size company often runs one to two weeks, but total time depends heavily on how ready your records are. Well-organized files can cut the process significantly.
What is a PBC list?
PBC stands for prepared-by-client. It is the list of documents and schedules the auditor asks you to provide, such as reconciliations, contracts, and balance confirmations. Getting it early is the single best way to save time.
Will the auditor prepare my financial statements?
To protect independence, the auditor should not both prepare and audit the same statements. You prepare the statements; the auditor examines them. Many firms offer separate bookkeeping teams if you need help closing the books.
What happens if we find errors during preparation?
Correct them before fieldwork and keep the supporting explanation. Self-corrected, well-documented errors are far less disruptive than issues the auditor uncovers first.
References
- Law on Independent Audit (Vietnam), and its guiding decrees on entities subject to mandatory audit
- Circular 200/2014/TT-BTC on the Vietnamese enterprise accounting system