In business operations, financial statements play a crucial role in the economic and financial sectors, attracting significant attention from investors. Accordingly, financial statements may be regarded as a “mirror” reflecting the entire financial position and operational performance of an enterprise. However, not all financial statements accurately present the actual situation; they may contain errors whether unintentional or intentional, adversely affecting both investors and the enterprise itself.
I. Current situation regarding errors in financial statements
According to annual statistics from competent authorities, a considerable number of enterprises are required to adjust their financial statements due to errors. These errors may arise from subjective factors such as concealing liabilities, overstating profits, or inadequate professional capacity within accounting departments, as well as objective factors such as mergers or division that alter the structure of assets.
Such errors not only undermine the transparency of financial statements but also pose risks to investor decision-making and the stability of the securities market. From the enterprise’s perspective, the detection of errors in financial statements may lead to reputational damage, erosion of corporate image, and potentially serious legal consequences.
II. Legal provisions on errors in financial statements
1. What constitutes an error in financial statements?
Pursuant to Clause 1, Article 3 of the Law on Accounting 2015, financial statements are defined as a system of economic and financial information presented in accordance with accounting standards and accounting regimes.
Accordingly, errors in financial statements refer to inaccuracies or omissions in such economic and financial information that fail to truthfully and fully reflect the financial position and business performance in accordance with applicable accounting standards and regimes. These errors reduce transparency, affect investors’ decisions, and may expose enterprises to administrative sanctions or even criminal liability in cases involving fraudulent conduct.
2. Common causes of errors in financial statements
Errors in financial statements may arise from both subjective and objective causes. Common causes include:
- Concealment of liabilities and expenses with the intent of inflating profits;
- Weak corporate governance and unreliable financial reporting processes;
- Ineffective accounting departments lacking sufficient expertise in accounting standards and regulations;
- Occurrence of unusual business activities (e.g., mergers, division) leading to changes in capital or asset structures;
- Non-compliance with regulations issued by tax authorities.
Upon identifying these causes, enterprises should implement preventive measures such as strengthening internal control systems, enhancing the professional capacity of accounting personnel, and conducting periodic reviews.
3. Handling errors in financial statements
Where errors are detected before submission to competent authorities:
- Step 1: Assessing whether the error is material or immaterial;
- Step 2: Making direct adjustments to the financial statements;
- Step 3: Submitting the statements to competent authorities within the prescribed time.
Where errors are detected after submission:
- Step 1: Determining whether the error is material or immaterial;
- Step 2: Making adjustments and supplements in accordance with the Law on Tax Administration 2019 (as amended and supplemented in 2025), the Law on Accounting 2015, and relevant regulations;
- Step 3: Resubmitting the amended financial statements to the competent authority.
Accordingly, enterprises must properly identify and classify errors and determine whether the financial statements have been submitted, in order to adopt appropriate remedial measures.
4. Legal consequences of errors in financial statements
Where an enterprise proactively detects, corrects, and resubmits its financial statements prior to inspection by competent authorities, it is generally not subject to sanctions. However, in certain cases, errors may lead to legal consequences as prescribed by law.
Pursuant to Article 11 of Decree No. 41/2018/NĐ-CP on administrative sanctions for violations relating to the preparation and presentation of financial statements:
- Fines range from 5,000,000 VND to 50,000,000 VND.
Pursuant to Article 12 of Decree No. 41/2018/NĐ-CP on administrative sanctions for submission and disclosure of financial statements:
- Fines range from 5,000,000 VND to 50,000,000 VND.
Pursuant to Article 54 of Decree No. 41/2018/NĐ-CP on administrative sanctions for engagement of annual financial statement audit contracts:
- Warning;
- Fines ranging from 5,000,000 VND to 30,000,000 VND.
Pursuant to Article 200 of the Penal Code 2015 regarding tax evasion:
- Fines ranging from 100,000,000 VND to 500,000,000 VND;
- Imprisonment from 03 months to 01 year.
Pursuant to Article 221 of the Penal Code 2015 regarding falsification of accounting books or documents causing serious consequences:
- Non-custodial reform for up to 03 years;
- Imprisonment from 01 year to 20 years.
These sanctions serve as a deterrent to ensure compliance with financial reporting procedures and to protect investors, particularly small and foreign investors.
III. Questions on errors in financial statements
1. How should enterprises handle errors detected after submission to the tax authority?
Pursuant to Official Letter No. 5509/CTBGI-TTHT (2022):
- Where errors affect corporate income tax: The enterprise must submit a supplementary corporate income tax finalization return for the affected fiscal year, along with an explanatory statement and relevant documents, together with the amended financial statements;
- Where errors do not affect corporate income tax: The enterprise shall amend and resubmit the financial statements to the tax authority.
Thus, enterprises are responsible for correcting and resubmitting documents in accordance with the nature of the error.
2. Are enterprises subject to sanctions for errors in financial statements?
As outlined above, depending on the nature and severity of the error, enterprises may be subject to:
- Warnings;
- Administrative sanctions;
- Criminal liability in cases involving fraudulent conduct.
Compliance with accounting regulations and strict control over financial reporting processes not only mitigates legal risks but also enhances credibility and investor confidence.
3. Who takes primary responsibility for errors in financial statements?
Pursuant to Point d, Clause 2, Article 29 of the Law on Accounting 2015, the signatories of financial statements take responsibility for their content, including:
- The preparer;
- The chief accountant;
- The legal representative of the accounting entity.
Such individuals shall be held legally liable depending on the nature and consequences of the errors.
4. Is it necessary to resubmit financial statements after detecting errors?
If errors are identified after submission, enterprises must adjust and supplement the financial statements and may prepare an explanatory statement in accordance with Official Letter No. 5509/CTBGI-TTHT (2022). Resubmission ensures transparency and reliability.
5. What is the statutory time for correcting errors in financial statements?
Pursuant to Article 47 of the Law on Tax Administration 2019 (as amended and supplemented in 2025), errors in financial statements already submitted to the tax authority may be corrected within ten (10) years from the deadline for submission of the tax return for the relevant tax period. However, such correction must be completed prior to the issuance of an inspection or audit decision by the tax authority or other competent authority.
Accordingly, enterprises should rectify errors within this timeframe to minimize legal risks.
IV. Legal consulting services related to errors in financial statements
To safeguard lawful rights and mitigate legal risks arising from errors in financial statements, clients may consider legal services provided by Ngoc Phu Law Company Limited, a reputable law firm. With a team of experienced professionals and lawyers, we offer consultation, review, guidance on correction, and assistance in resubmitting financial statements in compliance with legal requirements.
