Project
A STUDY OF THE FACTORS AFFECTING THE AUDIT QUALITY OF FINANCIAL STATEMENTS IN VIETNAMESE LISTED COMPANIES
Establishing and developing an independent audit industry plays a significantly important part in a market economy, especially for developing countries, in the international integration process. In countries with highly developed market mechanisms, independent audit activities have been long familiar to all enterprises. All financial reports, mainly financial statements, are audited by auditors from audit companies before informing the general public. In Vietnam, the independent audit industry is still quite new after a period of twenty years in practice. There are approximately 200 Vietnamese independent audit firms doing business nowadays with different kinds of ownership such as limited, partnership, join venture.
It is figured that revenue from financial statement auditing service in an audit firm usually makes up more than 70% of its total revenue. After conducting necessary audit procedures, auditors also give their opinion on the enterprises financial positions, operational results, cash flows, and so on. It is very important for the users when making their economic and financial decisions such as capital investment, securities acquisition, and joint-venture. Because of its importance, users require audit firms to conduct audit works with a high audit quality. The bankruptcy of the Enron Group in 2001 and the collapse of the leading audit company Arthur Andersen in 2002, have raised concerns about auditing quality. In 2008, a similar situation to the Enron Group happened in Vietnam. Bach Tuyet, a cotton company, was bankrupted even though its audited financial statements indicated a high profit and a healthy financial situation. This has resulted in an unprecedented moral crisis to the audit industry. Since then, numerous investors and stock market managers have notably paid attentions on the auditing quality of the listed companies financial reports, as well as the credibility of the audit companies in Vietnam. Auditors, shareholders, directors and regulators may be in agreement on the desirability of audit quality but each may have a different meaning of the term. The definition or measurement of audit quality has been the subject of much research. The quality varies due to different factors such as the auditors ability (their knowledge, experience, adaptability, and technological proficiency), the professional conducts (including independence, objectivity, conflicts of interest), the economic incentives (fees, costs, efficiencies), and the market structure (competition, industry concentration, economies of scales, and regulatory mechanisms), etc. In order to solve these problems, it is necessary to conduct the research about the factors affecting the audit quality of financial statements in Vietnamese listed companies. This issue has never been investigated before. The purpose of the research is to find out whether or not there are the factors, which influence on the audit quality of the financial statements. In addition, it also discovers the elements which cause the most major impacts. Finally, based on the results of this study, some suggestions for the regulatory bodies in making regulations for auditors and independent auditing companies in Vietnam will be proposed.