Luận văn Doctor of Accounting: Tác động của kiểm soát nội bộ đến hiệu quả hoạt động của doanh nghiệp chế biến thực phẩm niêm yết trên thị trường chứng khoán Việt Nam

CONCLUSION

Vietnam has been more and more intensively integrating into the

international economy since free trade agreement (FTA) becomes more

beneficial. Food processing firms listed on the stock exchanges both

compete with domestic counterparts and confront challenges of export to

international market.

In order to assure their achievement of firms’ objectives, especially

those of business performance, they should improve management

competence, and complete internal control. This thesis carried out study on

reality of the researched firms to idenfity current limits related to fove

components namely control environment, risk assessment, control

activities, information and communication, monitoring activities. The thesis

also considered impacts of these components on business performance so

that it could propose useful recommendations for the firms in the current

context of integration.

Basically, this study solved questions related to evaluation and

completion of internal control in food processing firms listed on Vietnam’s

stock exchanges. However, due to limited research conditions in terms of

time, cost and author’s knowledge about food processing industry in

general and operation of firms in this areas in particular, the research

findings might be incomprehensive. It is expected that there would be

contributive opinions of scientists and managers so that the research can be

further completed and supplemented in future study.

CHAPTER 1

INTRODUCTION

1.1. Rationales

In the context of increasing and more complex risks, internal control

has become a concerning issue within managers and auditors. Based on its

well-linked components aiming at responding to risks, internal control can

support organizations to achieve their objectives. In Vietnam, there have

been studies on reality of internal control of enterprises in specific areas

with quanlitative methods. There have been academics carrying out

quantitative researches related to influences of internal control on the

quality of financial accounting information, those of internal control over

manufacturing costs on financial effectiveness, those of internal control

quality on profitability of enterprises and those of internal control on the

effectiveness of internal control. However, there have been no complete

studies concentrating on internal control under the direction of risk control,

aiming at enterprises’ performance.

In fact, Vietnam’s food precessing industry is regarded as an

extremely important area, which helps in improving economic efficiency of

agricultural production and promoting export. However, under the context

of Vietnam’s economic strong intergration, food enterprises have been

confronting various risks in terms of materials, manufacturing technology

and product quality, consumption market and comsumers’ taste. Due to

those risks and challenges, managers are in need of effective internal

control and timely adjusting methods to improve their competences, then,

business performance can satisfy development enterprises’ and sector’s

strategies. Therefore, the author proposed this study on influences of

internal control on business performance of listed firms on Vietnam’s stock

exchange. It is believed that this research direction can make theoretical and

practical contributions to internal control in food processing firms listed on

stock exchange in particular and Vietnam’s food processing sector in

general so that business performance of these firms can be improved in the

context if international economic integration.

1.2. Research objectives

• Characteristics of Vietnam’s food processing sector under the

influences of international economic integration on internal control.

• Reality of internal control of food processing firms listed on

Vietnam’s stock exchange.

• Impacts of internal control’s components on business performance of

processing food firms listed on Vietnam’s stock exchange.

• Recommendations/solutions to complete internal control, helping

food processing firms listed on Vietnam’s stock exchange to

impove their performance.

1.3. Research questions

• Question 1: What are key features of food processing infustry in

Vietnam?

• Question 2: What are possible risks for food processing firms in

Vietnam under the context of economic integration?

• Question 3: How is current internal control of food processing firms

listed on Vietnam’s stock exchange?

• Question 4: Do internal control’s components of food processing

firms listed on Vietnam’s stock exchange put positive impacts on

their ROA?

• Question 5: Do internal control’s components of food processing

firms listed on Vietnam’s stock exchange put positive impacts on

their ROE?

• Question 6: Do internal control’s components of food processing

• Innovating internal and external communication: these firms

should pay more attention to internal communication network. At the same

time, they should commit with customers through products’ quality, and

show community responsibility by their control over environmental

pollucation. They should also enhance public communication to introduce

products and expand their trademark.

5.2.5. Completing monitoring activities

According to requirements by the Government (Decree 05/2019/NĐ-

CP) arising from management demand, these firms have to carry out

internal audit. They should issue related regulations by official documents

and make a specific plan for suitable audit strategy in appropriate with their

own context. The most concerning issues should be human resource for

internal audit and operating approach, report of internal audit.

5.3. Limitations of the theisis and future direction

Research scope was limited withing food processing firms listed on

Vietnam’s stock exchanges (HNX and HoSE), so, the author excluded other

firms in the same field

Also, from the aspect of business performance, in this study, the

author only analyzed indicators namely ROA, ROE and non-financial ones

so-called economy and competitiveness. Future research direction can continue

the evaluation on business performance from other aspects so that it can be

more comprehensive (for example: the aspect of customers).

In the exploration of independent variables – components of internal

control in enterprises, the author conducted survey based on interviewees’

knowledge about contents of internal control within the framework of COSO

(2013). In fact, the thesis would have had more values if the author had carried

out quantitative study based on real information about internal control in the

researched firms.

• Completing risk analyzing and assessing measures: these firms can

apply risk management models like ERM – Enterprise Risk Management

with COSO (2004) or ISO 31000:2009.

5.2.3. Completing control activities

• Completing control over environmental pollution: these firms

should direct to applying ISO 14001 with standards related to aspects of

environment.

• Completing control over supply: these firms should notice purchase

procedure; research the application of supply chain management to ensure

stable materials for input.

• Completing control over consumption-payment: - Solutions to export

prices and export trademark development aim at the establishment of national

trademark. – Raising awareness and knowledge about activities of related

authorities and new regulations on imported products in EU, USA, etc – Paying

more attention to the assignment of human resource and periodical report to

managers on payment with customers.

5.2.4. Completing information system and communication

• Completing accounting information system: completing the

establishment and standardization the financial report system based on

international standards (IFRS), training expertise, dynamic and energetic

human resource, assuring clear and transparent accounting data as required

by international standard. In addition, these firms should research the

implementation of project “Green accounting” which helps indentifying and

reflecting arising costs related to the environment.

• Enhancing the application of information technology during the

manufacturing process: these firms should consider investing in ERP –

Enterprise resource planning. They should make plan for suitable budget and

standardize procedure for all business activities to apply that system

• Improving product traceability: these firms should enhace applying

information technology and electronic devices to carry out internal

retrieval, update information, manage data and assure traceability.

firms listed on Vietnam’s stock exchange put positive impacts on

their business performance– in terms of their competitiveness?

• Question 7: What are possible solutions for internal control to

improve business performance of listed firms on Vietnam’s stock

exchange in the context of internal economic integration?

1.4. Research subject and research scope

1.4.1. Research subject

This study works on influences of internal control’s components on

business performance of food processing firms listed on Vietnam’s stock

exchange

1.4.2. Research scope

The author worked on internal control and information about

business performance of food processing firms listed on 2 stock exchanges:

Hanoi Stock Exchange (HNX) and Ho Chi Minh Stock Exchange (HOSE)

in the period of 2016 - 2018. The content of internal control in enterprises is

attached with objectives of business performance, which is explored based

on financial indicators like ROA, ROE and non-financial ones from the

competitive aspect.

CHAPTER 2

LITERATURE REVIEW AND THEORETICAL BASIS FOR

IMPACTS OF INTERNAL CONTROL ON

BUSINESS PERFORMANCE

2.1. Literature review on previous related studies

2.1.1. Studies on impacts of internal control on business performance

refected by financial indicators.

The relationship between internal control and business performance

has been a common research issue, in which the latter is often reflected by

financial indicators like profit, liquidity and profitability, etc. In regard of

public sector, there have been studies by Mawanda, 2008; Muraleetharan

P., 2011; Sahabi Ibrahim et, al., 2017; Rafiqa Irahayu Rosman, 2018. In

regard of banking sector, there have been researches by Muhammad Hanif,

2015, Lukmon Lawal, 2018. In regard of private sector, there have been

works by Mwakimasinde Mary et. al, 2014; Nyakundi et. al, 2014. In

regard of joint stock companies, there have studies by Al – Thuneibat, Ali

A, 2015. In regard of listed firms, there have been studies by Florio and

Leoni, 2017, Jiayi Chenm, 2018.

In Vietnam, previous researches on reality of internal control has

been carried out in certain areas like commercial banks in Vietnam,

Vietnam Post, Vietnam National Chemical Group, garment firms, etc.

There have been authors discovering the relationship between internal

control of the cost and financial efficiency (Chu Thị Thu Thuỷ, 2014),

internal control and business performance (Võ Thu Phụng, 2016; Lai, Syoy-

Ching & cộng sự, 2017; Nguyễn Tuân, 2018), internal control quality and

profitability (Đặng Thuý Anh, 2017); or those considering internal control

components having impacts on the effectiveness of internal control (Phạm

Thị Bích Thu, 2018), internal control and business performance, and

CHAPTER 5

RECOMMENDATIONS TO COMPLETE INTERNAL CONTROL

FOR THE IMPROVEMENT OF BUSINESS PERFORMANCE IN

FOOD PROCESSING FIRMS LISTED ON

VIETNAM’S STOCK EXCHANGES

5.1. Development tendency of food processing firms listed on Vietnam’s

stock exchange in the context of international economic integration.

The author presented the development trend and requirements for

food processing firms listed on Vietnam’s stock exchanges in the context of

international economic integration, as well as the necessity to complete

internal control based on the thesis’s findings.

5.2. Recommendations to complete internal control to improve business

performance of food processing firms losted on Vietnam’s stock

exchanges

5.2.1. Completing environment control

• Improving integrity and moral values: these firms should consider

issuing regulations on codes of ethic and expand them within the

organizations for both senior mamagers and staff

• Completing the decentralization of management and assuring co-

operation between board of supervisors and board of management in

operating the firms.

• Completing human resource policy: these firms should supplement

their own regulations and policies on human resource, which assure their

compliance with Law on labor and other related legislative documents, and

linkage with benefits of labor

5.2.2. Completing risk assessment

• Improving managers’ awareness about identifying, assessing and

analyzing risks.

ineffective, lack of specialized ones. Common approaches were website,

annual report, email and cell phone.

• In terms of monitoring: evaluation on the validity of control

activities, utilization of resources and efficiency of management was not

comprehensive. Responsibilities of board of supervisors on financial reports

were not strong. Most of their reports gave general comments like

incompatibale data, rather than showing evaluation on internal control and

recommendations for improvement.

compliance to regulations (Nguyễn Thị Kim Anh, 2019). In these studies,

all researchers looked into influences of internal control on financial

effectiveness of enterprises in different areas and with different kinds of

business. It was concluded that effective internal control would help in

improving business performance. On the other hand, poor internal control

would have negative impacts ton business performance (Boritz, 2008, Stoel,

2011, Salehi et. al, 2013, Q. Cheng, 2013, Lai, Syoy-Ching et. al, 2017,

Nancy L. Harp & Beau Grant Barnes, 2018).

2.1.2. Studies on impacts of internal control on business performance

reflected by non-financial indicators.

Studies on impacts of internal control on business performance

measured by non-financial indicators include works by Sabina

Dineshkumar, Priya Kogulacumar, 2012; Abraham Ayom Ayom, 2013,....

In Vietnam, research into the relationship between internal control and

business performance reflected by non-financial indicators has been really

limited with few studies like Chu Thị Thu Thủy, 2014.

2.1.3 Research gap and research direction

Previous studies applied quantitative methods and figured out

the interactive impacts between internal control and business

performance in different areas and business like small and medium

organizations, private companies, banks and public sector. This study

works on internal control from financial asepct rather than non-financial

one, especially, the relationship between internal control and business

performance linked with competitiveness is hardly covered. Moreover,

measurement scales for financial effectiveness are various. The insight

into internal control’s impacts on business performance based on ROA

is more common, by contrast, the utilization of ROE combined with

non-financial scales is limited. In addition, previous studies on internal

control were carried out based on a specific component or paricular

measurement scales of COSO framework. In fact, there have been few

ones providing an complete evaluation on five components of internal

control based on COSO. Also, the research scope has been limited to

certain companies and organizations.

Moreover, it is apparent that food processing industry is a typical

area, in which the manufacturing process covers numerous stages with

high risks in terms of materials, technology, products’ quality, etc.

Business performance is a big concern for information users. Especially,

in ther context of international economic integration, the requirements for

innovation and control completion are more and more essential. However,

based on the above literature, it can be concluded that there has been no

complete research into impacts of internal control on business

performance in exterprises lited on Vietnam’s stock exchange.

It is believed that the achievement of this research’s objectives

would result in new contributions in terms of both theory and practice. This

is a new study with the scope of all food processing firms listed in

Vietnam stock exchange. Therefore, the thesis findings would supply

evidences for impacts of internal control on business performance, in

which, internal control would be explored based on 5 factors of COSO

framework and business performance would be measured by financial

tools like ROA, ROE and non-financial ones. This research is also the

foundation for further information and recommendations for managers of

food processing firms so that they can complete internal control and

improve their business performance.

2.2. Theoretical basis

The author applied 3 theories namely agency theory, contingency

theory and stakeholder theory. Agency theory was employed to explain that

noticed mored because the human resource was unstable with majority of

manual workers and poor skilled ones.

• In terms of risk assessment: most of the firms were weak in

completing procedure and tools to analyze and assess risks; they were also

in need of staff with expertise in risk assessment

• In terms of control activities: Control over environmental

pollution: the application of standards for quality control on environment,

and energy control was really poor. There were firms violating

administrative rules on environmental protection. Control over supply

chain: most materials supplied for these firms were imported and largely

depended on market variances, the supply chain was limited and quality

of input was unstable. All of these seriously affected the quality of

products. Control over storage: preserving methods and conditions were

evaluated at “normal” level. Control over consumption-payment:

Domestic market of food processing firms was under pressure and

competition with imported products. At the same time, the export market

had strict requirements. Most firms were not timely in updating their

knowledge about new regulations and authorities for food safety in

importing countries as well as having solutions to effectively respond to

fluctuations of prices and trade barriers as well as regulations in EU, USA

markets.

• In terms of information and communication: Accounting

information system: All firms neither paid attention to nor had adequate

resource for preparing financial reports based on international regulations.

In addition, activities and financial reports related to control over pollution

were not fully provided. Application of information technology, the

implementation of modern tools for food traceability and quality assurance

was limited. Communication: current communication channels were

• In terms of risk assessment: Listed food processing firms basically

identified their operating objectives, reporting ones as well as complying

ones. They also clarified huge risks having influence on manufacturing

activity like those of input, technology, product quality, finance,

consumption-payment, etc. Then, they analyzed the possible risks to find

out solutions to respond to those problems.

• Control activities: all firms effectively implemented control

activities related to quality assurance, environmental pollution, finance,

storage, supply and consumption-payment. Control activities had been

continuously and effectively operated.

• Information and communication: Accoutning information system in

those firms was compatiable with current accounting mechanism. In

addition, they applied information technology into their management and

control over business activities, especially food traceability.

• Monitoring activities: In listed food processing firms, the

monitoring activities was mainly conducted periodically by board of

supervisors. The findings were reported to managers in meetings for

consolidations.

• 4.4.2. Disadvantages of internal control in food processing firms

listed on Vietnam’s stock exchanges

• In terms of control environment: In certain firms, opinions and

notices of managers about possible risks were incomplete. Their

understanding was unclear enough to access to and apply modern system of

quality assurance attached with environement and social responsibility. In

addition, the co-operation between board of supervisors and board of

management in operating activities was still limited; report by the board of

supervisors was lack of contributions to amend, supplement and advance

current managing system. Policies on human resource should have been

the establishment and maintainance of appropriate internal control would

help in resolving the conflicts between authorized representatives and

authority, which would put positive impact on business performance.

Contingency theory was used to predict that the performance goal of the

business depends on the appropriate variables; explain the diversity of

internal control in reality because research and establishment of internal

control in different enterprises should be different. Stakeholder theory used

to study the relationship between internal control and business performance,

focusing on the role of managers and employees as influential stakeholders

to help the company optimize resources and improve performance.

2.3. General theories on internal control and business performance

2.3.1. Background on internal control

There are different ideas and definitions about internal control,

among those, the most commonly recognized one was given in the report by

COSO (Committee of Sponsoring Organizations of the Treadway

Commission), which demonstrated that “Internal control is a process

decentralized by Board of Management, managers and staff of an

organization, which is established to provide a reasonable assurance for the

achievement of operating, reporting and complying objectives”.

According to report by COSO (2013), internal control should be

comprised of 5 closely-linked components, namely control environment,

risk assessment, control, communication information and monitoring

activities. Attached with these 5 components are 17 principles related to the

operation of internal control.

2.3.2. Business performance and indicators for the analysis into business

performance

Business performance is evaluated from different perspectives.

Concerning the aspect of objectives, business performance is approached

from financial or non-financial effectiveness. In the case of enterprises with

target of maximizing their profit, business performance is measured by

financial indicators like return on asset (ROA), return on equity (ROE),

return on investment (ROI), and market indicators. Business performance is

also measured by non-financial indicators like management effectiveness

and social effectiveness. Concerning the aspect of system, business

performance is measured by the effectiveness of all departments in an

enterprise. Some moldes to measure business performance should include

balance sheet by Kaplan and Norton (1992), performance measurement

framework by Kennerly and Neely (2001), performance pyramid SMART

by Lynch and Cross (1991), results and determinants framework by

Fitzgerald et, al. (1991), input-process-output-outcome model by Brown

(1996),….Business performance is also explored from other aspects like

those of economuy, customers and competitiveness.

2.3.3 The relationship between internal control and business performance

Based on objectives of internal control, it is apparent that is internal

control is well designed and operated, it would put positive impact on

business performance. Literature review reveals that there are impacts of

internal control on business performance, also, if internal control is weak, it

would have huge influences on business performance. Components of

internal control are comprised of control environment, risk assessment,

control activities, information and communication, and monitoring

activities; all of these pay an important role in contributing to the business’s

achievement of its goals, including the improvement of business

performance.

2.4. Food processing enterprises’ typical features with influences on

internal control.

Food processing industry belongs to the group of manufacturing

According to the above results, 3 contributors of internal control

namely control environment, risk assessment and control activities having

positive impact with statistical significance on business performance in all 3

models. 2 contributors namely information and communication and

monitoring activities had no statisitical significane on business performance

control in food processing firms listed on Vietnam’s stock exchanges.

Control variable of total assets had negaitve impact on ROA and

ROE, variable return on equity had positive impact on ROA and ROE. In

all 3 models, operating years had no statistical significance.

4.4. Evaluation on advantages and disadvantages of internal control in food

processing firms listed on Vietnam’s stock exchanges

• Advantages of internal control in food processing firms listed on

Vietnam’s stock exchanges

• In terms of control environment: Integrity and moral values: All

firms notified and had their own perspectives to represent their business

philosophy and objectives. Managers in most of these units expressed their

attitude of complicance with regulations. Involvement of board of

management: most listed food processing firms showed participation of

board of management and board of supervisor. Organization and

assignment of responsibilities and rights: listed food processing firms were

joint stock companies with appropriate organization, the division of

responsibilities and rights assured independence and clarity among

departments, which brought about favorable conditions for smooth

information flow and implementation of business activities within the firms.

Commitment to use the human resource: all firms established and

implemented policies on the workforce as regulated by Law on business,

social insurance, law on labor. They also noticed training activity to

improve expertise of their staff.

Table 4.1: Results of quantifying impacts of internal control’s components

on business performance of food processing firms listed on Vietnam’s stock

exchanges

Regression results with dependent variable business performance (ROA)

Model

Adjusted

Error of

estimation

.818

.669

.581

5.838670

ệ số hồi quy chuẩn hóa

Beta

MTKS

.290

DGRR

.247

HDKS

.379

***

TTTT

.167

.085

LnTongTS

.254

No_VCSH

.203

Operating years

.176

Regression results with dependent variable business performance (ROE)

.758

.575

.461

13.148142

ệ số hồi quy chuẩn hóa

Beta

MTKS

.232

DGRR

.266

HDKS

.263

TTTT

.212

.027

LnTongTS

.240

No_VCSH

.273

Operating years

.215

Regression results with dependent variable business performance

_competitiveness

.802

.643

.547

.62488

ệ số hồi quy chuẩn hóa

Beta

MTKS

.279

DGRR

.314

HDKS

.432

***

TTTT

.160

LnTongTS

.125

No_VCSH

.030

Operating years

.101

(

Source:

Processed data with

SPSS

)

industry, which is so-called agricultural product processing or agricultural

product industry. One of the outstanding features of this sector is its

diversified and complicated processing activities with three stages: input,

manufacturing and output. All of these are closely linked with external

subjects, resulting in the establishment of typical activities of the sector,

which have impacts on internal control. In particular, those subjects are

relevant to the input materials, manufacturing process and technology as

well as the output-consumption.

CHAPTER 3

RESEARCH METHODS

3.1. Research procedure

The thesis was carried out based on the following procedure: first, the

author identified the theoretical basis related to the research subject and

introduced the research model. Then, the author conducted a survey with

questionnaire to collect and analyze data from enterprises and evaluate

reality of internal control. At the same time, thanks to qualitative methods,

the author assessed impacts of internal control on business performance.

3.2. Data source

Primary data was collected from the survey with questionnaire sent

to the researched enterprises. Secondary data was collected from

exploration into materials and reports by The General Statistics Office,

associations of agencies related to food processing and documents of

enterprises.

3.3. Qualitative research

3.3.1. Documentary analysis

This method meant: analyzing and synthesizing secondary

information from domestic and international references, which were realted

to the research issue. Thanks to its inheritance from previous studies, this

research introduced the research model and identified variables, hypotheses

as well as measurement scales for each research subject.

Dependent variables was business performance, measured by

traditional financial measurement scale: return on asset (ROA), return on

equity (ROE), as well as non-financial measurement scales with indocators

for competitiveness (market share increase, market expanse and achievement

of better position compared with the counterpart as well as stability under

pressure from the counterpart).

Cronbach Alpha varying between 0.795 and 0.932. In addition, all variables

received total correlation above 0.30. So, measurement scales were reliable.

 Correlation analysis

Between dependent variables “ROA”, “ROE” and independent ones,

there was correlation with statistical significance at 5%; the correlation

between those varaibles was positive. So, they could be inserted into the

research model to explain “ROA” and “ROE”.

However, between the dependent variable business performance

_competitveness - “HQCT” and independent ones “monitoring activities”,

there was no correlation with statistical significance, whereas variables of

control environment; risk assessment; control activities; information and

communication had correlation with statistical significane of 5% and the

correlation value among these variables and dependent ones was positive,

so, they could be inserted into the model to explain variable “HQCT”.

 Regression results

The author used SPSS for the regression: dependent variables were

ROA, ROE and non-financial measurement scale for business performance

_competitiveness; independent variables were 5 components of internal

control; control variable was operating years of enterprises, return on

equity, total assets. The results of regression are presented in the following

table:

Doctor of Accounting thesis summary: Impacts of internal control on the performance of food processing enterprises listed on Vietnam's stock market

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