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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The topic’s focus is to identify factors affecting audit quality of financial reports of listed companies in the Vietnamese stock market by independent auditing firms. The research objects are joint stock firms with securities (stocks and bonds) listing on the Ho Chi Minh City and Hanoi Stock Exchanges.

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

1 2 INTRODUCTION 2. Literature review Review of Literature that have been conducted in oversea and 1. The necessity of the thesis Vietnam Auditing plays an important role in maintaining and issuing financial Applied research methodologies reports with high quality. However, the bankruptcy of Enron Corporation, one Research questions and findings of the leading energy corporations in the US in 2001, resulting in the downfall Research questions and findings focus on the main point, which is of Arthur Andersen, a world-class prestigious auditing firm in 2002, raised the evaluating perception of survey objects about the impact level of factors 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 Financial reports of listed companies in the Vietnamese stock market as the basis for proposing solutions. receive much attention from different groups. Among which, the most Research questions: In order to achieve the research objective, research popular and sensitive group is the group of investors. Financial statements questions are given accordingly and suitable in research framework. can be distorted for the sake of companies managers and financial report 4. Research objects and dimension 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 statements of listed companies in the Vietnamese Stock Market”, reflects in Vietnam to identify factors/criteria for factors affecting audit quality of the necessity of this issue and aims to clarify the issue of interest. financial statements.
3 4 - 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 Chapter 1: Theoretical framework on financial reports of listed companies in the Vietnamese stock market (via factors affecting audit quality evaluation criteria for factors). of financial statements of listed companies in the Vietnamese The author carries out direct interviews with a number of specialists as stock market Answering research question 1: representatives of managers and leaders in auditing firms, institutional Which factors and evaluation criteria for factors are identified as having investors to discuss about survey results and relies on observation of important impact on audit quality of secondary data to further clarify survey results, which serves as the basis for Chapter 2: financial reports of listed companies in the Vietnamese stock market? proposing solutions. Analyzing reality and identifying factors affecting - Data processing method: After getting survey results, the author audit quality of financial processes the data on SPSS 18 software to analyze the reliability of factors statements of listed companies in the Vietnamese stock and evaluation criteria for factors. The author also applies descriptive 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: Answering research question 2: companies in the Vietnamese stock market. Research results about Factors with the most important factors affecting audit quality impact as well as the order of Data resources are collected including primary and secondary data. of financial reports of listed impact level of each factor to the companies in the Vietnamese audit quality of financial reports of 6. New contribution of the thesis listed companies in the Vietnamese stock markets. stock market at present? In a theoretical view, the topic sums up theories with a deep view into systemizing factors (evaluation criteria of factors) affecting audit quality of financial reports of listed companies. Chapter 4: Answering research question 3: In a practical view, the topic evaluates influence of factors to audit Recommendations and Key solutions to improve audit proposals to improve audit quality of financial reports of quality of financial reports of listed companies in the Vietnamese stock quality of financial reports of listed companies in the Vietnamese market from auditors’ viewpoint and proposes key solutions in line with listed companies in the stock market? Vietnamese stock markets Vietnam’s real situation.
5 6 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 of information in financial reports, which contribute to stock market’s 1.1.1.5. Characteristic of the stock market 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 listed companies in the market are traded. It is a high form of financial 1.1.2.1. Definition of listed companies market where investors always need transparent financial information to A listed companies is a listed entity in the stock market, a joint stock 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).
7 8 1.1.2.2. Characteristics of listed companies of listed companies in the stock market is compulsory and is carried out Five basic characteristics of listed companies are analyzed from the by independent auditors. 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 1.1.3. Characteristics of financial reports of listed companies the stock market. This aims at protecting investors and other beneficiaries Firstly, financial reports require high level of reliability and of audit results, helping listed companies to improve their management sensitivity. capability and reputation as well as assisting authorized agencies in Secondly, financial reports monitor and reflect many distinctive issuing appropriate legal documents. 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, An independent audit of the financial report of a listed companies is and disclaimer of opinion). 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
9 10 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 from unreliable financial reports. Therefore, these users always want to Experience receive high quality financial statements from auditors, which serve as the Technical competence Group of factors related basis for their investment decision. They are entitled to sue auditors if to auditors/auditor Independence councils 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 researches about independent audit quality of financial reports, with Other factors 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 Group of factors related Audit approach simple at all because users of audit results can not directly observe audit to auditing firms 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 Group of external According to the diagram, research results show differences in factors impact levels of factors. They are categorized into three groups of factors Other external factors with the highest influence on audit quality of financial reports of listed companies. Details of factors/groups of factors are presented as follows: Diagram: Groups of factor affecting audit quality of financial report of listed companies
11 12 1.3.3.1. Groups of factors relating to auditors The fifth factor of Compliance of ethical standards: High level of The first factor of Level of an industry expertise: With the compliance of ethical standards from auditors/auditor councils means high distinctive role of audit in the stock market, the required level of industry audit quality because they are able to discover and report errors and unusual expertise is often higher. Industry expertise also have more important impact problem with little possibility of compromise during the audit process. on the audit quality of financial reports of listed companies because the The sixth factor of Due-care attitude: Due to widespread impact of complicated nature of these reports as well as the quantity and capability of audit quality of financial statements of listed companies, due-care attitude objects of interest in audited financial reports will increase the risks of audit. of auditors is considered an important factor, especially for audits of The second factor of Auditor/Council experience: Due to distinctive financial reports with many provisional items or when there are doubts characteristics of financial reports of listed companies in the stock market, about the continuous operational activities of listed companies. Due to audit risks for these reports are often higher than those of non-listed higher level of risk for audit of financial reports of listed companies, due companies. Therefore, similar to industry expertise, experience factors also care is even more required when determining material misstatements. have high influence in audit quality. Consequently, complicated and risky The seventh factor of field work conduct: Even though field work audit cases should be given to auditors/auditor councils with a lot of industry conduct is not considered the most important factor in researches, attention experience. is required on this factor for audit of financial reports of listed companies The third factor of Technical competence: It is considered the due to high pressure and industry expertise requirements. minimum requirement for auditors/auditor councils for an audit case of Other factors related to auditors. financial report for any customer in general and for listed companies in 1.3.3.2. Group of factors related to auditing firms particular. The first factor of Audit fee: The stock market requires higher audit The fourth factor of Independence: Researches all point out that quality TTCK, which goes in line with higher audit risks. Therefore, audit auditors’ independence from their customers means the possibility of an fee is an important factor affecting audit quality, especially for financial audit case with better quality. Especially for the assurance of audit quality reports of listed companies. of financial reports of public firms (including listed companies in the stock The second factor of Auditor’s size: Most researches show that size market), independence becomes more and more important. Otherwise, even of auditing firms is an factor affecting audit quality. Listed companies in the if major misinterpretations are discovered by auditors, they may not be stock market normally accept high audit fee for auditors in big auditing reported because auditors may join hands with customers or serve the firms to increase their own reputation. interest of certain groups of shareholders/individuals The third factor of Audit Approach: For audit of financial reports for listed companies, due to its higher risk, an effective audit approach is
13 14 required to assist auditors in carrying out their audit practices in a more CHAPTER 2: ANALYSIS OF REAL SITUATION IN RELATION WITH professional way and to better evaluate risks of listed companies. Therefore, IDENTIFYING FACTORS EFFECTING AUDIT QUALITY OF it is considered as an important factor affecting audit quality of financial FINANCIAL STATEMENTS OF LISTED COMPANIES IN VIETNAMESE reports in general and financial reports of listed companies in particular. STOCK MARKET 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 Conclusion of chapter 1 As stipulated in Decree No.58//2012/Nð-CP dated Sept 15, 2012 on Chapter 1 provides an overview of theoretical framework about the guiding the implementation of the Law on Securities. stock market, listed companies, characteristics of financial statements of 2.1.3. Characteristics of listed companies in the Vietnamese stock market listed companies affecting audit quality of financial reports. The outstanding affecting audit results of chapter 1 is deeply systemizing factors affecting audit quality of From the audit viewpoint, besides general characteristics, listed financial report of listed companies in the stock market. According to this, companies in the Vietnamese stock market also have distinctive features of a 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.
15 16 audit quality of financial statements of listed companies in the Vietnamese 2.2. Audit of financial reports of listed companies in Vietnamese stock market stock market. 2.2.1. Characteristics of independent auditors approved to audit listed 2.3.1. Group of external factors 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 in the Vietnamese stock market. Macroeconomic environment; (ii) Cultural environment, habits of audit 2.2.2. The role of auditing financial reports of listed companies service users; (iii) The role of external quality control of financial reports of Analysis about discrepancies in data of annual financial reports before and listed companies. 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 listed companies 2.3.2.2. Technical competence of auditors/auditor council: with 3 In Vietnam, evaluation of audit quality of financial reports of listed evaluation criteria. 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 Through analyzing the real situation in Vietnam, 16 factors (under 3 2.3.2.6. Field work conduct of auditors/auditor council: with 6 evaluation groups) and 62 criteria have been identified as having important impact on criteria.
17 18 2.3.2.7. Compliance to ethical standards: with 3 evaluation criteria. CHAPTER 3: RESEARCH RESULTS ABOUT FACTORS AFFECTING AUDIT QUALITY OF FINANCIAL STATEMENTS OF LISTED 2.3.2.8. Pressure of busy seasons on auditors/auditor council: with 4 COMPANIES IN THE VIETNAMESE STOCK MARKET evaluation criteria. 2.3.3. Group of factors related to auditing firms 3.1. Data collection and methodologies Five factors with eighteen evaluation criteria are identified as having 3.1.1. Design of questionnaires impact on audit quality of financial reports of listed companies in the 3.1.2. Selection of survey objects Vietnamese stock market as follows: 3.1.3. Research methods and collection of questionnaires 2.3.3.1. Size of auditing firms: with 4 evaluation criteria. 3.1.4. Description of questionnaires’ object 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 Conclusion of chapter 2 criteria affecting audit quality of financial reports of listed companies in the Basing on the above-discussed domestic and international literature, 16 Vietnamese stock market factors criteria under 3 groups are identified as having impact on audit Step 5: Statistical description (results are shown in 3.2) quality of financial reports of listed companies in the Vietnamese stock 3.2. Analyzing results of impact level of factors to audit quality of market: groups of external factors; groups of factors relating to auditors and financial reports of listed companies group of factor related to auditing firm. The research also clarifies the Table about impact level of 3 groups of factors affecting audit quality No of detailed contents of 16 factors via 62 evaluation criteria. These 62 criteria Group of factors Standard Code Symbol obser- Mean affecting audit quality deviation are identified from international researches coupled with analysis of current vation 1. Nhóm B NhomKTV Group of auditors 138 4.2375 0.63702 situation and they are considered to be in line with the real situation in 2.Nhóm A Nhombenngoai Group of external factors 138 3.9710 0.70978 3.Nhóm C NhomCTKT Group of auditing firms 138 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)
19 20 Below is detailed analysis of impact level of factors taken from research 3.2.3. Group of factors related to auditing firms results of 3 groups of factors (external, auditors, auditing firms). The following There are 5 factors in this group with 18 evaluation criteria. tables are arranged with average value in decreasing order of impact level. Table showing the influence of group of factors relating to auditing 3.2.1. Group of external factors firm on audit quality of financial reports of listed companies There are 3 factors in the group of external factors affecting audit No of Group of factors related to Standard quality with 12 evaluation criteria. No Code Symbol obser- Mean auditing firms deviation Table showing impact level of group of external factors to audit quality vation of financial reports of listed companies in the Vietnamese stock market Quality control system of 1 BC16 KiemsoatCL 138 4.2870 0,89343 No of obser- Standard auditing firms No Code Symbol External factor Mean vation deviation Working conditions of 2 BC14 DKLV 138 4.0145 0,85209 1 BC2 DNNY Listed companies 138 4.1401 0.81730 auditors/auditor council Legal environment for Audit fee and completion 2 BC1 MoitruongPL audit of financial report of 138 4.0628 0.96201 3 BC15 Phi 138 3.9420 1,18240 time for financial reports listed companies 4 BC13 Danhtieng Firm’s reputation 138 3.8309 1,10389 3 BC3 Ngoaikhac Other external factors 138 3.7101 1.00350 5 BC12 Quimo Firm’s size 138 3.6775 1,02131 Group A Nhombenngoai Group of external factors 138 3.9710 0.70978 Group of factors related to (Source: Research results on level of impact of factors affecting audit quality of Group C NhomCTKT 138 3,9504 0.70491 financial reports of listed companies auditing firms 3.2.2. Groups of factors related to auditors (Source: Research results on level of impact of factors affecting audit quality of financial reports of listed companies There are 6 factors in this group with 30 evaluation criteria. Table showing impact level of group of auditor factors to audit quality Conclusion of chapter 3 of financial reports of listed companies in the Vietnamese stock market No of After survey and collection/handling of survey results, it is shown from Standard No Code Symbol Factors in the group of auditor obser- Mean survey results which factor and group of factors have the most impact as deviation vation 1 BC6 Chuyensau Expertise of auditors/auditor council 138 4.4551 0.74550 well as order of impact for each factor (including 3 external factors, 6 factors Compliance and attitude of 2 BC10 Ythuc 138 4.4251 0.79001 relating to auditors and 5 factors related to auditing firms) and 60 evaluation auditors/auditor council 3 BC9 Chuyennghiep Conduct of auditors/auditor council 138 4.3768 0.86187 criteria to the audit quality of financial reports of listed companies in the Pressure of busy seasons for 4 BC11 Apluc 138 4.2754 1.05863 Vietnamese stock market. auditors/auditor council 5 BC4 Doclap Independence of auditors/auditor council 138 4.2065 0.88319 6 BC5 Trinhdo Competence of auditors/auditor council 138 3.6860 1.08948 Group B NhomKTV Group of auditors 138 4.2375 0.63702 (Source:Research results on level of impact of factors affecting audit quality of financial reports of listed companies)
21 22 CHAPTER 4: SOLUTIONS AND RECOMMENDATIONS TO IMPROVE 4.3.1. Improving management role of competent authority: State AUDIT QUALITY OF FINANCIAL STATEMENTS OF LISTED Securities Commission (SSC), VACPA, the Ministry of Finance COMPANIES IN THE VIETNAMESE STOCK MARKET of Finance Ministry VACPA SSC 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 Auditing auditors in the survey thinks audit quality of financial reports of listed firms 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 2.Working 1. Quality conditions control system companies in the Vietnamese stock market at present. Sufficiency, (audit approach, Compliance, 4.2. Solutions for improving audit quality of financial reports of listed tool) Sanction companies in the Vietnamese stock market The diagram below shows 3 groups of solution basing on research Listed results, observation and interview of specialist, including: Companies 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. 1. Experience, 4.2.2. Group of solutions to improve quality of auditing firms 3. Conduct 4. Pressure 2. 5. expertise Compliance Independence Firstly, improving quality control system of auditing firms; Secondly, improving working condition with the focus on designing professional audit approach and tools. Auditors/ - Compliance 4.2.3. Group of solutions to improve legal environment Auditor - Recruitment/training Firstly, continue to improve new audit standards; Secondly, 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
23 24 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 4.3.3. Notes of caution to investors while using audit reports of financial in the Vietnamese stock market. According to survey findings, 14 factors (with reports: Some notes of caution to investors are proposed regarding types of 60 criteria) affecting audit quality of financial statements of listed companies auditor comments about financial reports of listed companies. in the Vietnamese stock market are divided into 3 groups with different level 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. New contributions of the topic are as follows: Some recommendations are given to authority, listed companies and investors. - Collecting and developing theory with a deep view into factors affecting These solutions are useful for auditing firms and auditors, management audit quality of financial statements of listed companies in the Vietnamese agencies of audit quality of financial reports and especially for users of stock market. Through detailed analysis of domestic and international financial reports. They contribute to the sound development of the stock literature, a theoretical framework is established; 3 groups of factors affecting market and help investors to improve their understanding about risks as well as audit quality audit quality of financial statements of listed companies are benefits of using audited financial reports. systemized and classified. The topic of research will serve as important premise to identify - In analyzing reality in Vietnam, identifying 16 factors under 3 groups as evaluation attributes of audit quality of financial statements of listed having impact on audit quality of financial statements of listed companies in companies in the Vietnamese stock market. 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.