Summary of doctoral thesis: Research on factors affecting audit quality of financial statements of listed companies in the Vietnamese Stock Market

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2. Literature review INTRODUCTION

Review of Literature that have been conducted in oversea and 1. The necessity of the thesis Vietnam

Applied research methodologies Auditing plays an important role in maintaining and issuing financial

Research questions and findings reports with high quality. However, the bankruptcy of Enron Corporation, one Research questions and findings focus on the main point, which is of the leading energy corporations in the US in 2001, resulting in the downfall evaluating perception of survey objects about the impact level of factors of Arthur Andersen, a world-class prestigious auditing firm in 2002, raised the affecting audit quality; identifying important factors affecting audit quality by concerns about audit quality. A series of scandals about audit quality of using a scale of evaluation as from 1 to 5 or 7, from “very low” to “very high”. independent auditing firms was disclosed after that has involved incorrect Representative researches are from Schroeder et al (1986); Carcello et al opinions about financial reports like in the bankruptcy cases of Worldcom or (1992), Aldhizer et al (1995); Warming-Rasmussen & Jensen (1998); Chen et Kmart corporations. In Vietnam, the incident of Bach Tuyet Cotton al (2001); Augus Duff (2004); Kym Boon (2007), Kym Boon et al (2008). Corporation in 2008 became a focal point for Vietnamese stock market when 3. Research objectives and questions disputes arose concerning audited business results in its 2005 and 2006 The overall objective is to identify factors affecting audit quality and financial reports. Other cases relating to the reliability of information in evaluate the influence of each factor to audit quality of financial statements audited financial statements also caused financial loss to investors. of listed companies in the Vietnamese stock market at present, which serves

as the basis for proposing solutions. Financial reports of listed companies in the Vietnamese stock market Research questions: In order to achieve the research objective, research receive much attention from different groups. Among which, the most questions are given accordingly and suitable in research framework. popular and sensitive group is the group of investors. Financial statements 4. Research objects and dimension can be distorted for the sake of companies managers and financial report The topic’s focus is to identify factors affecting audit quality of preparers, not for the sake of investors. Auditors are responsible for ensuring financial reports of listed companies in the Vietnamese stock market by the reliability of financial reports, which displays audit quality. independent auditing firms. The research objects are joint stock firms with However, it is not easy to evaluate or recognize audit quality. securities (stocks and bonds) listing on the Ho Chi Minh City and Hanoi Evaluation criteria for audit quality can show audit quality but they do not Stock Exchanges. demonstrate which factors resulting in such quality and, more importantly, 5. Research methodology basing on what basic can audit quality be improved. Therefore, the thesis’s - Analytical and statistical methods: Basing on secondary of

topic, namely “Research on factors affecting audit quality of financial domestic and international resources available and analysis of real situation

in Vietnam to identify factors/criteria for factors affecting audit quality of statements of listed companies in the Vietnamese Stock Market”, reflects

financial statements. the necessity of this issue and aims to clarify the issue of interest.

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- Survey method (survey, interview & observation) 7. Research framework and structure

Basing on the system of factors determined in the theoretical In addition to Introduction and Conclusion, the thesis is designed

framework, the author designs the Questionnaire for auditors working for scientifically with 4 chapters as illustrated in the framework diagram below:

independent auditing firms which are approved to audit financial reports of

listed companies about the influence of factors affecting audit quality of

financial reports of listed companies in the Vietnamese stock market (via

evaluation criteria for factors).

The author carries out direct interviews with a number of specialists as

Chapter 1: Theoretical framework on factors affecting audit quality of financial statements of listed companies in the Vietnamese stock market

representatives of managers and leaders in auditing firms, institutional

investors to discuss about survey results and relies on observation of

secondary data to further clarify survey results, which serves as the basis for

Chapter 2:

Answering research question 1: Which factors and evaluation criteria for factors are identified as having important impact on audit quality of financial reports of listed companies in the Vietnamese stock market?

proposing solutions.

- Data processing method: After getting survey results, the author

processes the data on SPSS 18 software to analyze the reliability of factors

and evaluation criteria for factors. The author also applies descriptive

Analyzing reality and identifying factors affecting audit quality of financial statements of listed companies in the Vietnamese stock market

statistics for summing up and comparison with a view to quantifying the

impact level of factors affecting audit quality of financial reports of listed

Chapter 3:

companies in the Vietnamese stock market.

Data resources are collected including primary and secondary data.

6. New contribution of the thesis

Research results about factors affecting audit quality of financial reports of listed companies in the Vietnamese stock markets.

In a theoretical view, the topic sums up theories with a deep view into

Answering research question 2: Factors with the most important impact as well as the order of impact level of each factor to the audit quality of financial reports of listed companies in the Vietnamese stock market at present?

systemizing factors (evaluation criteria of factors) affecting audit quality of

financial reports of listed companies.

In a practical view, the topic evaluates influence of factors to audit

quality of financial reports of listed companies in the Vietnamese stock

market from auditors’ viewpoint and proposes key solutions in line with

Chapter 4: Recommendations and proposals to improve audit quality of financial reports of listed companies in the Vietnamese stock markets

Answering research question 3: Key solutions to improve audit quality of financial reports of listed companies in the Vietnamese stock market?

Vietnam’s real situation.

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CHAPTER 1: THEORETICAL FRAMEWORK FOR RESEARCH ON

1.1.1.3. Functions of the stock market

FACTORS AFFECTING AUDIT QUALITY OF FINANCIAL

Functions of the stock markets display its role in the economy,

STATEMENTS OF LISTED COMPANIES ON THE VIETNAMESE

specifically: Capital mobilization; encouragement of savings and

STOCK MARKET

investment; investment transferring tool; encouragement of competition;

reflection of economic health; and integration tool into global economy. 1.1. Stock market and listed companies on the stock market 1.1.1.4. Classification of stock market Characteristics of stock markets and listed companies influence The stock market is classified differently basing on different criteria: characteristics of their financial reports. From that, we can see the stock circulation process, transaction method and transaction period. necessity and important role of independent auditors with the reliability 1.1.1.5. Characteristic of the stock market of information in financial reports, which contribute to stock market’s

transparency and to investor’s protection. Contents presented below aim Three basic characteristics of the stock market help to create its

at clarifying theoretical framework about the stock market, listed attractiveness and draw interest of individual and institutional investors.

companies and financial statements of listed companies from the However, the transparency of information in the stock market, which auditors’ viewpoint. requires the role of auditors to ensure information reliability, is a matter

1.1.1. Stock market of crucial concern to protect investors.

1.1.1.1. Establishment history of the stock market 1.1.1.6. Participants in the stock market The history of stock market has a close connection with the The most popular participants that create the excitement for the stock commodity economy. In Europe, the stock market appeared in the market are joint stock companies and investors. Joint stock companies issue beginning of sixteenth century. Up to now, the stock market has become and list securities- the important source of commodity with overwhelming a high form of financial market with strong development and high trading volume while investors carry out trading transaction in the stock attractiveness for investors in developing and developed countries. market. 1.1.1.2. Definition of stock market 1.1.2. Listed companies in the stock market Stock market is viewed as an organized market where securities of 1.1.2.1. Definition of listed companies listed companies in the market are traded. It is a high form of financial

A listed companies is a listed entity in the stock market, a joint stock market where investors always need transparent financial information to

make their economic decisions and they can suffer heavy losses if firms eligible in terms of capital, business operation, financial capability,

financial information upon which they rely for decision making do not number of shareholders or owners to list shares in the stock market (on

ensure reliability. the stock exchange or securities trading center).

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1.1.2.2. Characteristics of listed companies of listed companies in the stock market is compulsory and is carried out

by independent auditors. Five basic characteristics of listed companies are analyzed from the

viewpoint of auditors and investors, which influence the characteristics 1.2.2. The role of independent audit of financial reports of listed

on financial statements of listed companies with distinctive features of companies

joint stock companies, owners/shareholders, business scope and fields Independent audit of financial reports of listed companies helps to

under strict legal regulations. enhance reliability of information in financial reports and transparency in

the stock market. This aims at protecting investors and other beneficiaries 1.1.3. Characteristics of financial reports of listed companies

of audit results, helping listed companies to improve their management Firstly, financial reports require high level of reliability and

capability and reputation as well as assisting authorized agencies in sensitivity.

issuing appropriate legal documents. Secondly, financial reports monitor and reflect many distinctive

features. 1.2.3. Types of audit reports for financial reports of listed companies

Thirdly, financial reports demonstrate a large volume of complicated 1.2.3.1. Audit process for financial reports of listed companies in the

transactions. stock market

Lastly, financial reports of listed companies comply strict Audit process for financial reports of listed companies in the stock requirements of the stock market, one of which is audit requirement. market ensure compliance to standard audit procedures.

1.2. Audit of financial reports of listed companies 1.2.3.2. Types of audit reports for financial reports of listed companies

1.2.1. Concept and classification of auditing Audit reports include the following types of opinions: unqualified

1.2.1.1. Definition of audit opinion & not unqualified opinion (qualified opinion, adverse opinion,

and disclaimer of opinion). An independent audit of the financial report of a listed companies is

where auditors from independent firms (eligible for auditing reports of Of all these opinions, unqualified opinion is the best result that listed

listed companies) attest and give their opinions about the true and fair companies and investors in the stock market expect.

view, in all material aspect, of the financial statements of the listed 1.3. Factors affecting audit quality of financial reports of listed companies companies. 1.3.1. Users of audit quality of financial statements of listed companies 1.2.1.2. Classification of audit Researches about audit quality show that audit quality attracts Audit is classified according to functions, objects and obligation with attention of many users, especially institutional investors (securities both pros and cons for each type. Independent audit for financial reports companies, investment funds & others) and individual investors (from

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different classes). This group of interest in audit quality displays the most

Industry expertise

distinctive features in the stock market. This group usually faces risks Experience from unreliable financial reports. Therefore, these users always want to

receive high quality financial statements from auditors, which serve as the

Technical competence

basis for their investment decision. They are entitled to sue auditors if

Group of factors related to auditors/auditor councils

Independence

audited financial reports still contain material misstatements that cause

financial losses to their investment decisions.

Perception of standard compliance

1.3.2. Viewpoints about audit quality of financial reports of listed

Due care

companies

Filed work conduct

Until now from literature review, two main viewpoints from

Other factors

researches about independent audit quality of financial reports, with

practical viewpoint about satisfying users of audit service and scientific

Audit fee

viewpoint about the ability to discover and report major

misinterpretations in audited financial statements.

Firm’s size

Evaluating audit quality according to satisfaction level of users is not

Audit approach

Group of factors related to auditing firms

simple at all because users of audit results can not directly observe audit

activities. Therefore, in evaluating audit quality, researchers normally

Quality control system

assess the ability to discover and report material misstatements of

Other factors

auditors via identifying and measuring influencing factors.

1.3.3. Factors affecting audit quality of financial reports of listed

Legal environment

companies

Auditees

According to the diagram, research results show differences in

Group of external factors

Other external factors

impact levels of factors. They are categorized into three groups of factors

with the highest influence on audit quality of financial reports of listed Diagram: Groups of factor affecting audit quality of financial report of companies. Details of factors/groups of factors are presented as follows: listed companies

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1.3.3.1. Groups of factors relating to auditors The fifth factor of Compliance of ethical standards: High level of

compliance of ethical standards from auditors/auditor councils means high The first factor of Level of an industry expertise: With the

audit quality because they are able to discover and report errors and unusual distinctive role of audit in the stock market, the required level of industry

problem with little possibility of compromise during the audit process. expertise is often higher. Industry expertise also have more important impact

The sixth factor of Due-care attitude: Due to widespread impact of on the audit quality of financial reports of listed companies because the

audit quality of financial statements of listed companies, due-care attitude complicated nature of these reports as well as the quantity and capability of

of auditors is considered an important factor, especially for audits of objects of interest in audited financial reports will increase the risks of audit.

financial reports with many provisional items or when there are doubts The second factor of Auditor/Council experience: Due to distinctive

about the continuous operational activities of listed companies. Due to characteristics of financial reports of listed companies in the stock market,

higher level of risk for audit of financial reports of listed companies, due audit risks for these reports are often higher than those of non-listed

care is even more required when determining material misstatements. companies. Therefore, similar to industry expertise, experience factors also

The seventh factor of field work conduct: Even though field work have high influence in audit quality. Consequently, complicated and risky

conduct is not considered the most important factor in researches, attention audit cases should be given to auditors/auditor councils with a lot of industry

is required on this factor for audit of financial reports of listed companies experience.

due to high pressure and industry expertise requirements. The third factor of Technical competence: It is considered the

Other factors related to auditors. minimum requirement for auditors/auditor councils for an audit case of

1.3.3.2. Group of factors related to auditing firms financial report for any customer in general and for listed companies in

The first factor of Audit fee: The stock market requires higher audit particular.

quality TTCK, which goes in line with higher audit risks. Therefore, audit The fourth factor of Independence: Researches all point out that

fee is an important factor affecting audit quality, especially for financial auditors’ independence from their customers means the possibility of an

reports of listed companies. audit case with better quality. Especially for the assurance of audit quality

The second factor of Auditor’s size: Most researches show that size of financial reports of public firms (including listed companies in the stock

of auditing firms is an factor affecting audit quality. Listed companies in the market), independence becomes more and more important. Otherwise, even

stock market normally accept high audit fee for auditors in big auditing if major misinterpretations are discovered by auditors, they may not be

firms to increase their own reputation. reported because auditors may join hands with customers or serve the

The third factor of Audit Approach: For audit of financial reports for interest of certain groups of shareholders/individuals

listed companies, due to its higher risk, an effective audit approach is

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CHAPTER 2: ANALYSIS OF REAL SITUATION IN RELATION WITH

required to assist auditors in carrying out their audit practices in a more

IDENTIFYING FACTORS EFFECTING AUDIT QUALITY OF

professional way and to better evaluate risks of listed companies. Therefore,

FINANCIAL STATEMENTS OF LISTED COMPANIES IN VIETNAMESE

it is considered as an important factor affecting audit quality of financial

STOCK MARKET

reports in general and financial reports of listed companies in particular.

The fourth factor of Internal quality control system: Highly 2.1. Overview of Vietnamese stock market and listed companies appreciated in most countries, this factor is considered compulsory according to The real situation of the Vietnamese stock market and listed audit standards and is treated as one of criteria to evaluate whether an auditing companies’ characteristics are clarified in relation with identifying factors firm is eligible for auditing listed companies in the stock market. affecting audit quality of financial statements of listed companies.

Other factors related to auditing firms 2.1.1. The development of Vietnamese stock market and listed companies 1.3.3.3. Group of external factors It is divided into two main periods: from 2000 to 2005 and from 2006 External factors have distinctive characteristics for each country, including: to now. legal environment, listed companies, external control and other factors. 2.1.2. Listing requirements for companies in the Vietnamese stock

market

As stipulated in Decree No.58//2012/Nð-CP dated Sept 15, 2012 on Conclusion of chapter 1

guiding the implementation of the Law on Securities. Chapter 1 provides an overview of theoretical framework about the

2.1.3. Characteristics of listed companies in the Vietnamese stock market stock market, listed companies, characteristics of financial statements of affecting audit listed companies affecting audit quality of financial reports. The outstanding

From the audit viewpoint, besides general characteristics, listed results of chapter 1 is deeply systemizing factors affecting audit quality of companies in the Vietnamese stock market also have distinctive features of a financial report of listed companies in the stock market. According to this, fledging stock market, which have an impact on the roles and factors affecting there are three groups of factors affecting audit quality of financial reports, audit quality of financial reports in the following points: Firstly, listed including group of factors relating to auditors, auditing firms and groups of companies are joint stock companies eligible for listing according to external factors. regulations; Secondly, listed companies have diversified business scopes with Theoretical framework and overview about these groups of factors will many complicated transactions arising; Thirdly, listed companies normally serve as an important premise for empirical surveys to identify influencing have big companies size and dispersed organization structure; Fourthly, a lot factors and evaluate their level of impact on audit quality of financial of shortcomings still exit in the internal control systems of listed companies; statements of listed companies in the Vietnamese stock market. Fifthly, listed companies must comply with requirements about disclosing

financial report information.

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audit quality of financial statements of listed companies in the Vietnamese 2.2. Audit of financial reports of listed companies in Vietnamese stock stock market. market 2.3.1. Group of external factors 2.2.1. Characteristics of independent auditors approved to audit listed

companies 2.3.1.1. Legal environment for audit activities of financial reports of listed

The real situation of the audit is analyzed pertaining to identifying companies (Legal environment): three evaluation criteria for the legal

factors affecting audit quality of financial statements of listed companies in environment includes: (1) sufficiency; (2) conformity; (3) sanctions. the Vietnamese stock market with the focus in the following aspects: The 2.3.1.2. Customer as listed companies: with 6 evaluation criteria for establishment and development of independent audit in Vietnam; legal basis customers as listed companies. for operation of independent audit of financial reports of listed companies 2.3.1.3. Others external factors: including three evaluation criteria: (i) and characteristics of auditing firms for financial reports of listed companies Macroeconomic environment; (ii) Cultural environment, habits of audit in the Vietnamese stock market. service users; (iii) The role of external quality control of financial reports of 2.2.2. The role of auditing financial reports of listed companies listed companies. Analysis about discrepancies in data of annual financial reports before and

after audit, in data of semi annual financial reports and analysis about types of 2.3.2. Group of factors relating to auditors

auditors’ opinions concerning financial reports of listed companies in Eight factors and thirty two evaluation criteria related to auditors are Vietnamese stock market show the direct role of audit, which helps to make identified as having impact on audit quality of financial reports of listed information in financial reports of listed companies more true and transparent companies in the Vietnamese stock market as follows: and help investors to trust as well as take caution with data in financial reports. 2.3.2.1. Ensuring independence: with 4 evaluation criteria. 2.2.3. The real situation of evaluating audit quality of financial reports of 2.3.2.2. Technical competence of auditors/auditor council: with 3 listed companies evaluation criteria. In Vietnam, evaluation of audit quality of financial reports of listed

companies is carried out by auditors themselves (through their internal quality 2.3.2.3. Industry expertise of auditors/auditor council: with 3 evaluation

control systems) and by authorized agencies ( mostly the Vietnam Association criteria. of Certified Public Accountants - VACPA) via external quality control 2.3.2.4. Audit experience of auditors/auditor council: with 2 evaluation activities. Investors are unable to evaluate by themselves; they can only trust criteria auditors’ opinion until there are consequences arising. 2.3.2.5 Work attitude (due care and skepticism) of auditors/auditor 2.3. Identifying factors affecting audit quality of financial reports of council: with 6 evaluation criteria. listed companies in the Vietnamese stock market 2.3.2.6. Field work conduct of auditors/auditor council: with 6 evaluation Through analyzing the real situation in Vietnam, 16 factors (under 3 criteria. groups) and 62 criteria have been identified as having important impact on

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2.3.2.7. Compliance to ethical standards: with 3 evaluation criteria.

2.3.2.8. Pressure of busy seasons on auditors/auditor council: with 4

CHAPTER 3: RESEARCH RESULTS ABOUT FACTORS AFFECTING AUDIT QUALITY OF FINANCIAL STATEMENTS OF LISTED COMPANIES IN THE VIETNAMESE STOCK MARKET

evaluation criteria.

2.3.3. Group of factors related to auditing firms

3.1. Data collection and methodologies 3.1.1. Design of questionnaires

Five factors with eighteen evaluation criteria are identified as having 3.1.2. Selection of survey objects impact on audit quality of financial reports of listed companies in the 3.1.3. Research methods and collection of questionnaires Vietnamese stock market as follows:

3.1.4. Description of questionnaires’ object 2.3.3.1. Size of auditing firms: with 4 evaluation criteria. 3.1.5. Data sources 2.3.3.2 Reputation of auditing firms: with 3 evaluation criteria. 3.1.6. Description of steps for producing research data 2.3.3.3 Working conditions of the firms for auditors/auditor council: with Step 1: Digitalizing and input data in SPSS. 5 evaluation criteria. Step 2: Re-digitalizing measurement index into 3 levels: 1. From Very 2.3.3.4. Audit fee/ completion time of audit report: with 2 evaluation low -> Low; 3. Normal; 5. High-> Very high. criteria. Step 3: Checking measurement index for suitable results of criteria 2.3.3.5. Internal quality control system of auditing firms: with 5 Step 4: Checking measurement index for each group of factors; evaluation criteria handling data in SPSS with the end result of 14 factors and 60 evaluation

criteria affecting audit quality of financial reports of listed companies in the Conclusion of chapter 2

Vietnamese stock market Basing on the above-discussed domestic and international literature, 16 Step 5: Statistical description (results are shown in 3.2) factors criteria under 3 groups are identified as having impact on audit 3.2. Analyzing results of impact level of factors to audit quality of quality of financial reports of listed companies in the Vietnamese stock financial reports of listed companies market: groups of external factors; groups of factors relating to auditors and Table about impact level of 3 groups of factors affecting audit quality group of factor related to auditing firm. The research also clarifies the

detailed contents of 16 factors via 62 evaluation criteria. These 62 criteria

Mean

Code

Symbol

Group of factors affecting audit quality

Standard deviation

are identified from international researches coupled with analysis of current

Group of auditors

situation and they are considered to be in line with the real situation in

1. Nhóm B NhomKTV 2.Nhóm A Nhombenngoai Group of external factors 3.Nhóm C NhomCTKT

Group of auditing firms

No of obser- vation 138 138 138

4.2375 0.63702 3.9710 0.70978 3.9504 0.70491

Vietnam.

(Source: Research results on level of impact of factors affecting audit quality of financial reports of listed companies in the Vietnamese stock market)

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3.2.3. Group of factors related to auditing firms

There are 5 factors in this group with 18 evaluation criteria. Below is detailed analysis of impact level of factors taken from research results of 3 groups of factors (external, auditors, auditing firms). The following tables are arranged with average value in decreasing order of impact level.

3.2.1. Group of external factors Table showing the influence of group of factors relating to auditing firm on audit quality of financial reports of listed companies There are 3 factors in the group of external factors affecting audit

quality with 12 evaluation criteria.

No Code

Symbol

Mean

Group of factors related to auditing firms

Standard deviation

No of obser- vation

Table showing impact level of group of external factors to audit quality of financial reports of listed companies in the Vietnamese stock market

1 BC16 KiemsoatCL

138

4.2870

0,89343

Quality control system of auditing firms

No Code Symbol External factor Mean

2 BC14

DKLV

138

4.0145

0,85209

1 BC2 DNNY No of obser- vation 138 4.1401 Standard deviation 0.81730

Working conditions of auditors/auditor council

3 BC15

Phi

138

3.9420

1,18240

2 BC1 MoitruongPL 138 4.0628 0.96201

Audit fee and completion time for financial reports

4 BC13 Danhtieng Firm’s reputation

138

3.8309

1,10389

Listed companies Legal environment for audit of financial report of listed companies Other external factors

5 BC12

Quimo

Firm’s size

138

3.6775

1,02131

3 BC3 Ngoaikhac Group A Nhombenngoai Group of external factors 138 138 3.7101 3.9710 1.00350 0.70978

Group C NhomCTKT

138

3,9504

0.70491

Group of factors related to auditing firms

(Source: Research results on level of impact of factors affecting audit quality of financial reports of listed companies

3.2.2. Groups of factors related to auditors

There are 6 factors in this group with 30 evaluation criteria.

(Source: Research results on level of impact of factors affecting audit quality of financial reports of listed companies

Conclusion of chapter 3 Table showing impact level of group of auditor factors to audit quality of financial reports of listed companies in the Vietnamese stock market After survey and collection/handling of survey results, it is shown from

No Code

Symbol

Factors in the group of auditor

Mean

survey results which factor and group of factors have the most impact as

Standard deviation

well as order of impact for each factor (including 3 external factors, 6 factors

1 BC6 Chuyensau

No of obser- vation 138

4.4551

0.74550

2 BC10 Ythuc

138

4.4251

0.79001

relating to auditors and 5 factors related to auditing firms) and 60 evaluation

Expertise of auditors/auditor council Compliance and attitude of auditors/auditor council

138

3 BC9 Chuyennghiep Conduct of auditors/auditor council

4.3768

0.86187

criteria to the audit quality of financial reports of listed companies in the

4 BC11

Apluc

138

4.2754

1.05863

Vietnamese stock market.

Pressure of busy seasons for auditors/auditor council Independence of auditors/auditor council Competence of auditors/auditor council

Doclap Trinhdo

5 BC4 6 BC5 Group B NhomKTV Group of auditors

138 138 138

4.2065 3.6860 4.2375

0.88319 1.08948 0.63702

(Source:Research results on level of impact of factors affecting audit quality of financial reports of listed companies)

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CHAPTER 4: SOLUTIONS AND RECOMMENDATIONS TO IMPROVE

4.3.1. Improving management role of competent authority: State Securities Commission (SSC), VACPA, the Ministry of Finance

AUDIT QUALITY OF FINANCIAL STATEMENTS OF LISTED

COMPANIES IN THE VIETNAMESE STOCK MARKET

C S S

A P C A V

y r t s i n i M

e c n a n i F f o

4.1 The necessity for improving audit quality of financial reports of listed companies in the Vietnamese stock market

From the viewpoint of auditors, survey results show that 65.9% of auditors in the survey thinks audit quality of financial reports of listed

Auditing firms

1. Quality control system

Sufficiency,

Compliance,

companies in the Vietnamese stock market is only average; while 26.1% thinks the quality is at low or very low level. Therefore, it is necessary to have solutions to improve audit quality of financial statements of listed companies in the Vietnamese stock market at present.

2.Working conditions (audit approach, tool)

Sanction

4.2. Solutions for improving audit quality of financial reports of listed companies in the Vietnamese stock market

The diagram below shows 3 groups of solution basing on research

Listed Companies

results, observation and interview of specialist, including:

Legal environment

4.2.1. Group of solution to improve quality of auditors

Improving industry expertise, compliance and attitude, field work

conduct of auditors; groups of solutions to reduce pressure and ensure independence of auditors.

3. Conduct

4. Pressure

4.2.2. Group of solutions to improve quality of auditing firms

1. Experience, expertise

2. Compliance

5. Independence

Firstly, improving quality control system of auditing firms; Secondly,

improving working condition with the focus on designing professional audit approach and tools.

- Compliance

4.2.3. Group of solutions to improve legal environment

- Recruitment/training

Firstly, continue to improve new audit standards; Secondly, Auditors/ Auditor council

- Encouragement/Sanction

continue to improve accounting standards and practices.

4.3. Some recommendations for improving the feasibility of solutions

Diagram: Recommendations to improve audit quality of financial reports of listed companies in the Vietnamese stock market

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4.3.2. For listed companies: Recommendations to reduce negative impacts - Basing on identified factors, the author carries out survey and collecting

for listed companies to audit quality. opinions of 138 auditors eligible to audit financial reports of listed companies

in the Vietnamese stock market. According to survey findings, 14 factors (with 4.3.3. Notes of caution to investors while using audit reports of financial

60 criteria) affecting audit quality of financial statements of listed companies reports: Some notes of caution to investors are proposed regarding types of

in the Vietnamese stock market are divided into 3 groups with different level auditor comments about financial reports of listed companies.

of impact, specifically: 6 factors in the group of auditors with decreasing Conclusion for Chapter 4 impact including: Experience and industry expertise; compliance, conduct, Chapter discussed about the real situation of factors affecting audit pressure, independence, competence; 3 factors in the group of external factors: quality of listed companies in the Vietnamese stock market from the Listed companies, legal environment and external control; 5 factors in the viewpoint of auditors; thus presenting 3 groups of solution. To improve group of auditing firm with decreasing impact including: Quality control feasibility of these solutions, the author gives some recommendations to system, working condition (mostly about method and process), audit fee, authority and listed companies. In addition, there are notes of caution to reputation and size of firms. investors about risks when using audited financial statements. - From survey results about impact level of these factors and interviews of

a number of specialists, the author presents 3 groups of solutions, including:

CONCLUSION enhancing the quality of auditors, auditing firms and legal environments.

Some recommendations are given to authority, listed companies and investors. New contributions of the topic are as follows:

These solutions are useful for auditing firms and auditors, management - Collecting and developing theory with a deep view into factors affecting

agencies of audit quality of financial reports and especially for users of audit quality of financial statements of listed companies in the Vietnamese

financial reports. They contribute to the sound development of the stock stock market. Through detailed analysis of domestic and international

market and help investors to improve their understanding about risks as well as literature, a theoretical framework is established; 3 groups of factors affecting

benefits of using audited financial reports. audit quality audit quality of financial statements of listed companies are

The topic of research will serve as important premise to identify systemized and classified.

evaluation attributes of audit quality of financial statements of listed - In analyzing reality in Vietnam, identifying 16 factors under 3 groups as

companies in the Vietnamese stock market. having impact on audit quality of financial statements of listed companies in

the Vietnamese stock market: group of external factors, group of factor related

to auditors and group of factor related to auditing firms. The research also

explains in details the content of these 16 factors via 62 evaluation criteria.