Continuing the story of the numbers after the audit

Reduced audited profit

Although the audited financial statement season has just begun, the Vietnamese stock market continues to witness many cases of businesses reporting further losses or sharply decreasing profits after audits.

The first name to mention is Thai Nguyen Iron and Steel Corporation (UPCoM: TIS) with a net loss of nearly VND 8.4 billion in 2024, an increase compared to the loss of nearly VND 5.4 billion before the audit. The main reason is due to the exclusion of expenses not included in the corporate income tax calculation expenses during the period.

In addition, TIS's 2024 consolidated financial statements continue to receive an unqualified audit opinion regarding the Thai Nguyen Iron and Steel Plant Phase 2 expansion project (Tisco 2). This project started in 2007 but has been suspended since 2013.

The auditor of the financial statements said that it was impossible to fully assess the impact of transactions related to the project on the financial statements, including the value of prepayments, construction in progress costs, payables to sellers, exchange rate differences and capitalized interest expenses.

In addition, TIS recorded a reversal of more than VND51 billion in excess mining rights fees at the Bac Lang Cam, Nam Lang Cam and Canh Tim - Phan Me mines into other income in 2024, but the company is still in the process of working with competent authorities on the re-issuance of the Nam Lang Cam mine license. Auditors have not been able to collect sufficient evidence on this matter.

Notably, the auditor also emphasized that TIS's short-term debt exceeded its short-term assets (more than VND3,455 billion), the stagnation of the Tisco 2 project affected its finances and operations, along with a number of overdue loans. These factors raised doubts about the company's ability to continue operating.

Another name is Saigon Port JSC (UPCoM: SGP) with consolidated profit after audit decreased by 8% compared to the self-reported report, down to VND158.3 billion. The main reason is that the cost of goods sold increased by VND1.66 billion compared to before the audit, leading to a corresponding decrease in gross profit. In addition, the increase in expenses such as business management expenses and other expenses also affected net profit.

Notably, there are also some cases where enterprises proactively adjusted data on their self-prepared financial statements. That is Vietnam Container Corporation (HoSE: VSC) with a notice of correction of financial statements for the fourth quarter of 2024 with net profit decreasing by nearly VND 127 billion. This adjustment also caused the company's full-year profit to decrease by 22%, from VND 561 billion to more than VND 434 billion.

VSC said the reason for this change was due to negligence in the data entry and checking process. Meanwhile, in the financial statements published before the correction, VSC explained that the sudden growth in profit in the fourth quarter of 2024 was thanks to the consolidation of business results of Nam Hai Dinh Vu Port Company Limited, while Viconship's subsidiaries also recorded strong growth.

Another name is Phat Dat Real Estate Development Corporation (HoSE: PDR) adjusted down 367 billion VND in net profit to 155 billion VND. PDR said this is based on principles and a cautious spirit in accordance with good practices and standards in auditing and risk management, ensuring optimal shareholder benefits.

PDR's Board of Directors also approved the adjustment of unrecognized revenue and profit in 2024, arising from the transfer of real estate of phase 1 of the Bac Ha Thanh residential area project combined with urban renovation, which will be completed and recorded by the company in 2025 according to good standards of auditing and risk management.

Vietnam's stock market continues to witness many cases of businesses making further losses or sharply decreasing profits after audits.

Transparency to welcome "upgraded" capital flows

Experts believe that the discrepancy between the financial statements prepared by the enterprise and those after auditing is understandable. The main reason is the difference in viewpoints between the enterprise and the auditors. The important thing here is whether the explanations are reasonable or not.

However, in the context of the stock market having many unpredictable developments due to impacts from the world, incorrect information on pre- and post-audit financial statements will more or less affect investors' psychology and shareholders' confidence.

In fact, the quality of financial statements in particular and governance issues in general always exist in the Vietnamese stock market. As evidenced by the fact that in 7 evaluation periods of the ASEAN Corporate Governance Scorecard (ACGS), Vietnam has continuously maintained a low ranking with an average score always below the ASEAN average. In 2024, Vietnam only had 69 enterprises selected for evaluation, lower than the previous evaluation period.

According to Mr. Phan Le Thanh Long - Board Member, General Director of the Vietnam Institute of Directors (VIOD), the main reason comes from the lack of consistency in implementing governance standards, especially in terms of information disclosure and reporting quality. Currently, only more than 70 enterprises in Vietnam provide reports in English, but the uneven quality leads to low average scores.

Vietnam's stock market is on the threshold of being upgraded to an emerging market, and the growth of the global stock market is also expected to bring opportunities to attract foreign investment into the domestic financial market.

However, the opportunity is not for everyone. When entering the domestic stock market, foreign funds will have the choice of good stocks and businesses. In which, transparency and quality of information disclosure, management reports, financial reports... are the prerequisites.

On the other hand, in the context that developing countries need to be cautious about risks from fluctuations in international capital flows, especially when investors tend to shift capital flows to more stable developed markets, enhancing transparency and improving corporate governance efficiency in the stock market is necessary to take advantage of opportunities and cope with challenges.