Recurring "evaporation" of profits after audit

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The differences of figures after the audit, whether accidentally or intentionally, is also adversely affecting the overall image of the stock market. Photo: ST

Notably, in a few businesses that have published audited financial statements, the situation of increasing losses and reducing profits after the audit still occurred.

The fluctuation of profits

According to the 2019 audited financial statements, Camimex Joint Stock Company's after-tax profit decreased by nearly VND63 billion compared to the after-tax profit in the company’s self-prepared report.

Mr. Bui Duc Cuong, Deputy General Director of Camimex stated the gross profit dropped by VND13.7 billion because of the provision for devaluation of inventories. Besides, the financial results also dropped by VND47 billion because of the changes in assets contributed to subsidiaries in 2013. Thesehave affected the profit on the consolidated financial statements.

In addition, a number of other adjustments on management costs and the increase in selling expenses also reduced profits by nearly VND2.6 billion.

Similarly, the net profit after auditing in 2019 of Vietnam Airport Corporation (ACV) also decreased by VND129 billion compared to the previous announcement, reaching VND8,214 billion. The audited financial statements of CFS Import Export and Trading Investment Joint Stock Company also recorded a net profit of only VND1.4 billion, a sharp decrease of 88 percent compared to VND12 billion in the company’s self-prepared report.

Some other businesses also saw a drop in their net profit after auditing. For example, Transimex Joint Stock Company dropped from VND150 billion to VND142 billion, equivalent to more than five percent; FLC Stone Mining and Investment JSC dropped from VND53 billion to VND49 billion, equivalent to 7.6 percent.

More and more losses

In some other businesses, the loss even increased many times after the audit. Lilama 5 Joint Stock Company, an enterprise operating in the field of manufacturing equipment and machinery, a member of Lilama, is one example. The company’s 2019 audited financial statements recorded its profit after tax lost nearly VND29 billion, more than four times higher than the loss of less than seven billion in the self-prepared financial statements published by the company earlier.

Corresponding to this increase, the accumulated loss of Lilama 5 at the end of 2019 also jumped from VND12 billion to nearly VND34 billion.The main reason for this difference was the increase in the cost of goods sold. Specifically, in the self-prepared financial statements, the cost of goods sold was nearly VND137 billion, while the audited financial statements recorded the cost of up to VND159 billion. This made the gross profit on goods and services reduced from more thanVND29 billion to VND7.3 billion.

The audited financial statements for the fiscal year 2018-2019 of Hung Vuong Joint Stock Company also showed targets ranging from a few tens to hundreds of billions of VND. Specifically, the after-tax loss of Hung Vuong Company increased by VND627 billion, reaching VND1,123 billion.

According to the explanation of Mr. Duong Ngoc Minh, General Director of Hung Vuong Company, the cost price increased by VND236 billion because the cost of capital from intra-corporate transactions had not been properly reflected in theirself-prepared financial statements.

In addition, the company stated the increase in cost of goods was also influenced by the handling of inventories. Moreover, a series of expenses increased. For example,the financial expenses increased by nearly VND54 billion because of the additional provision of interest expenses; the losses from joint ventures and associates increased by nearly VND23 billion; the selling expenses increased by VND83 billion due to additional costs of transporting and unloading exports; and the administration expenses increased by VND82 billion mainly due to additional provision of domestic and foreign bad debts and additional provision for advances.

The Ernst & Young Vietnam (E&Y) Auditing Companysaid the after-tax loss of the parent company in the financial year endingSeptember 30, 2019, was VND1,075 billion, the accumulated losses of VND1,488.6 billion and total short-term liabilities exceeded short-term assets of VND1,170 billion.These conditions led to significant doubts about the continuous operability of the company.

Notably, at the previous publication of audited financial statements, Hung Vuong Company hadchanging from profit to loss, increasing losses after auditing.

Financial statements are a tool for investors to understand the situation of businesses, thereby making investment decisions.

According to analysts, the unintentional differences will show the lack of professionalism in the businesses’ financial and accounting activities. Typically, explaining the difference in data after the audit of FLC Stone Company, this company stated the reason was that the accountant had negligently accounted for a number of expenses in the accounting period, and then the auditorshad reviewed and adjusted, resulting in a decrease in pre-tax profit.This has created a big minus point for businesses in the eyes of investors.

Meanwhile, enterprises’ intentional mistakes are more harmful, which willlose the investors’ confidence. Enterprises can be sanctioned according to the regulations on sanctioning administrative violations in the field of accounting and auditing.

In fact, the deviation of financial data after auditing in listed companies still occurs, showing the outstanding problems in the quality of financial statements and transparency in the accounting data published by the listed companies themselves. Some businesses even repeat this situation many times, adversely affecting the image of the stock market as well as raising capital of enterprises in particular and the stock market in general. Therefore, there should bestricter policies to control the obligation to publish financial statements to prevent fraud and improve the effectiveness of the State's management.