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An FDI company's first-year audit differs from later years in one key respect: every balance is "built from zero", and many transactions take place before the company even has a seal or a bank account. If documents are missing for these early transactions, the auditor may issue a qualified opinion on the very first financial statements sent to the parent company. The checklist below is compiled by the accounting team at ACCA Consulting Vietnam from hands-on experience keeping the books for new FDI companies.
1. How is a first-year audit different from later years?
| Feature | Why the auditor cares | Key documents |
|---|---|---|
| Initial capital contribution | Confirming owner's equity and compliance with the contribution deadline | DICA statements, transfer documents, IRC, ERC |
| Pre-incorporation costs | Incurred before the legal entity existed; documents are often in the investor's name | Cost transfer agreement, invoices, payment documents |
| Initial assets | Imported machinery, in-kind capital contributions, determining historical cost | Customs declarations, contracts, valuation minutes, handover minutes |
| Accounting policies | Set up in the first year and affect every subsequent year | Decision on accounting regime, bookkeeping currency, depreciation method |
2. Capital contribution records and the 90-day deadline
A foreign investor's capital contribution must be transferred through the direct investment capital account (DICA – tài khoản vốn đầu tư trực tiếp) within 90 days of the Enterprise Registration Certificate (ERC – Giấy chứng nhận đăng ký doanh nghiệp) issue date. The auditor will compare each inflow against this deadline and against the capital stated on the ERC. The risks of late contribution are covered in capital contribution deadlines for foreign investors.
Illustration. Tranche 3 exceeds the 90-day deadline: the company must address this under current regulations, and the auditor may disclose it in the notes.
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| Tranche 1 (60% of capital) | 21 days |
| Tranche 2 (30% of capital) | 68 days |
| Tranche 3 (10% of capital) | 104 days |
| Contribution deadline | 90 days |
- DICA bank statements show the remitter's name matching the investor's name on the IRC, with the description clearly stating "capital contribution".
- Foreign currency contributions are recorded at the actual exchange rate on the date of receipt; keep the calculation.
- For in-kind contributions: valuation minutes, handover minutes and documents transferring ownership.
3. Pre-incorporation costs and imported assets
Market surveys, consultants' fees, flights, temporary office rental and similar costs are often paid by the parent company or the individual investor before the legal entity exists. To record them in the new company's books, you need a cost transfer agreement, a detailed list and the original documents. Without these, the auditor will struggle to accept the balances and the tax authority will struggle to accept them as deductible expenses.
For imported machinery, historical cost includes the purchase price, non-refundable taxes, transport, installation and testing costs. A common mistake is expensing installation costs in the period instead of capitalizing them, or lacking a handover minute putting the asset into use so that depreciation can begin.
4. Document checklist for the first-year audit
- IRC, ERC, charter, appointment decisions for the legal representative and the chief accountant/person in charge of accounting
- DICA and current account statements from the opening date to 31 December
- Agreement and schedule of pre-incorporation costs with original documents
- Customs declarations, invoices and handover minutes for imported assets
- Office/factory lease agreements, deposit documents and the schedule allocating prepaid rent
- Documents selecting the accounting regime, bookkeeping currency and depreciation policy
- Employment contracts, payroll and social insurance (BHXH) payment records for the 21.5% employer share
- Filed VAT and PIT returns and the schedule of quarterly provisional CIT payments
5. Mistakes that commonly lead to a qualified audit opinion
- 1No year-end stock count
The auditor cannot confirm inventory and assets at 31 December.
- 2Pre-incorporation costs without documents
It cannot be shown that the expenses belong to the company.
- 3Capital contributions that don't reconcile
Funds received into the wrong account, under the wrong remitter name, or late.
- 4Incorrect asset cost
Installation costs not capitalized, or no minute putting the asset into use.
- 5Intercompany balances that don't match
The amount payable to the parent company doesn't agree with the parent's confirmation.
Most of these errors can be corrected if they are caught before December. A mid-year review of the books in the first year usually saves far more effort than explaining issues to the auditor in February. For the full preparation timeline, see the 12-week financial statement audit schedule.
FAQ
Does an FDI company established late in the year need an audit for that year?
The first accounting period is determined under current regulations on accounting periods; where the first period is short, it may be combined with the following year. Clarify this early with your accountant and audit firm.
Can pre-incorporation costs paid by the parent company be recorded as expenses?
They can, if there is a cost transfer agreement, valid original documents, and the expenses serve the company's operations. Related-party transaction rules and the associated tax implications also need to be considered.
What is the impact of a qualified opinion in the first year?
The parent company and banks will read the financial statements together with this opinion; in addition, unresolved issues may carry over into the following year's opinion.
Clean books in year one, lighter work in the years after
ACCA Consulting Vietnam supports new FDI companies from the day they receive their ERC through to the first audited financial statements. Request a consultation on our accounting services.
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