OVERVIEW OF RESEARCH STUDIES ON THE FACTORS AFFECTING AUDIT OPINION ON FINANCIAL STATEMENT OF LISTED COMPANIES45455

OVERVIEW OF RESEARCH STUDIES ON THE FACTORS AFFECTING AUDIT OPINION ON FINANCIAL STATEMENT OF LISTED COMPANIES 1 Vietnam National University, 2 National Economics University ABSTRACT A

OVERVIEW OF RESEARCH STUDIES ON THE FACTORS AFFECTING AUDIT OPINION ON FINANCIAL STATEMENT OF LISTED COMPANIES

1 Vietnam National University,

2 National Economics University

ABSTRACT

Audit opinion is significantly important information and affects decision making

of investors and various stakeholders Based on literature review, this paper summarizes the results of foreign and Vietnamese studies on the factors affecting external audit opinion on financial statements of listed companies These factors can be classified into three categories including auditor related factors such as audit firm size, audit term and independence of auditors; firm related factors such as financial ratios, audited firm size, growth of firms, time listed, quality of corporate governance; and other factors such as change of accounting standards, previous year audit opinion, audit report delay, etc Future research studies in Vietnam can be conducted by examining the relationship between these factors and audit opinion of external auditors on financial statements of listed firms on the Vietnamese stock market

Keywords: Audit opinion, influential factors, listed firms

1 INTRODUCTION

The chapter number may be introduced if the authors prefer it The references are cited as follows:

Financial statement is an important product of business Yuh (2013) identified five target groups using information from financial statements including investors, governments, employees, customers and the public Companies can use credibility auditors to assure external users about the reliability of the information presented in

*Corresponding author.

Email address: chidoquynh@yahoo.com

the financial statements (Anderson, Kadous and Koonce, 2004) Audit reports as

a powerful monitor tool is used by auditors to disclose the truth and fairness of the information presented in the financial statements According International Federation

of Accountants (IFAC), “auditing is the independent auditors” examination and presentation of their opinions on financial statements", therefore, it is understandable that an auditor's opinion is an independent auditor's statement in the auditor's report

on the financial position of the customer through the auditing process The target groups that use information from the financial statements will rely on the independent auditor’s opinion in the audit report to make decisions.

For employees, a number of studies have found that auditing is very helpful in improving the compliance procedures of companies while improving internal control systems (Knechel, Niemi and Sundgren, 2008) The type of audit opinion issued by the auditor

in an audit report not only indicates whether the organization compliances accounting standards and is concerned about financial management, but is also an important factor to determine or prevent fraudulent activities (Bell and Zimmerman, 2007) For the investors and the public, independent auditors play an important role in the capital market by giving an objective opinion about the truth and fair of financial statements Accurate and reliable financial reports are very important for companies

to raise capital and are the basis for investors to make informed decisions Supreme Court of the United States and Arthur Young (Big 8's auditing company) described the auditor's role as a “public supervision function”, that is “always independent of the customer and requires must be completely loyal to the trust of the public " This means that the auditor must work on behalf of investors and the public interest (Steven B Harris, Board Member, 2016).

For the government and the customer, the information presented in the audit report

is an evidence to evaluate the credibility of the company (Libby, 1979) Especially, according to Zimmermann and Watts (1983), the information in the audit report helps prevent tax evasion and tax fraud in a country's economy.

With such importance, it is possible that the audit opinion as a powerful monitor tool can influence the decisions of investors and other stakeholders (Bo & Wu, 2011) However, most studies look at only one aspect of the audit opinion, such as the market's response to poor quality comments (Feldmann & Read, 2013) and the influential financial ratios to audit opinion (Bao & Chen, 1998; Habib, 2013; Tahinakis

& Samarinas, 2016).

This article implements an overview of related studies This is the basis for future researchers to continue to inherit, develop and fill the gap The article is divided into

2 parts:

Part 1: Overview of research results on factors influencing audit opinion;

Part 2: Pointing out gaps and future research directions.

2 OBJECTIVES - METHODOLOGY

This article implements an overview of related studies This is the basis for future researchers to continue to inherit, develop and fill the gap The article is divided into

2 parts: Part 1: Overview of research results on factors influencing audit opinion, Part 2: Pointing out gaps and future research directions.

3 RESULTS AND DISCUSSION

Studies of factors influencing audit opinion may come from different sides (audit firm, audited company, market, other factors ) and from different types (financial and non-financial) However, factors discovered that have an important influence on the auditor's opinion can be grouped in two ways:

Firstly, the factors that influence the audit opinion are grouped based on the characteristics of the variables, whereby:

(i) Financial variables include financial ratios, firm size;

(ii) Non-financial variables include: time listed, size of audit firms, % of non-executive members of the Board of Directors, subsidiaries or not?, non-audit service charges;

(iii) Market variables: Beta coefficients, market response, etc.

Secondly, the factors that influence the audit opinion are grouped based on the audit subject:

(i) Firm-related factors: audit firm size, audit term, etc;

(ii) Audited company-related factors: financial ratios, firm size audited, profit management;

(iii) Other factors: delay of audit reports, audit opinions previous year, beta.

The factors and dimensions is summarized through the table below:

Summary, there are several factors affecting audit opinion:

The audited companies-related factors: size of company, number of listed year and financial ratios.

The firm-related factors: firm size

The other factors: audit opinion for the previous year

Through research overview, the researcher realizes that there are a number of gaps that were limited in previous foreign studies as well as Vietnam, such as:

(i) The foreign studies mostly focus on developed countries such as Greece, Turkey, etc, while in developing countries or in Vietnam, research or empirical evidence about the topic is still limited The audit opinion is determined to be

an important component affecting both capital and debt markets In Vietnam, the factors discovered to influence are still very small and the sample size is still limited Therefore, the addition of empirical evidence on the factors affecting the audit opinion is essential.

(ii)The foreign studies produce a mixed result and do not accurately identify the factors and dimensions that influence the opinion of the auditor, further studies are needed to identify the dimensions affect audit opinion Especially with such

a mixed result, the inspection in Vietnam is very necessary to determine which factors are affecting the audit opinion as well as having positive or negative effect.

Table 1- SUMMA

Audit firm size or audit quality Big 4, big 8 and going concern audit opinion

Muchler (1986), Defond at el (2002)

Spathis (2006), DeFond at el (2002), Geiger at el (2006), Masyitoh at el (2010), Habib (2013), Qasim Mohammad Zureigat (2014

-Petro (2007), Uyar and Çelik (2009)

Audit term Audit term and going concern audit opinion

The independence of auditors Non-audit services and unqualified opinion

Liquidity

Debt ratios Leverage and qualified opinion

Profitabilities ratios Loss for current year and qualified opinion

-Pinches at el (1973), Spathis at el (2003), Gaganis

Performance ratios ROA

Audited company size Size and qualified opinion

(2001), Ireland (2003), Qasim Mohammad Zureigat (2014

Growth Growth and low profitability with qualified opinion

Time listed Time listed and unqualified opinion

Quality of corporate governance The number

Management Profitability Management Profitability and qualified opinion

Profits change and industry average Profits

The company changes accounting

Audit opinion of the previous year Qualified opinion previous year in current year

Equity and number of employees Equity

Litigation Litigation and qualified opinion

Delay of audit report Delay of audit report and qualified opinion

Disclose relevant information Actively disclose relevant information and going concern audit opinion

Evidence of mitigation Mitigation

-Saeid Jabbarzadeh Kangarlouei at el (2013)

Good and bad information Good information and going

In Vietnam, although there are a few studies, there are still many limitations in these studies such as:

restrictions on direct relevance to the audit opinion (Bui Thi Thuy, 2014),

the number of variables tested: only study financial variables (Nguyen Thien Tu, 2012), some variables have not been studied (Pham Anh Thu, 2017), some variables only involve the unqualified opinion, going concern audit opinion(Pham Anh Thu, 2017), research scope: Pham Anh Thu (2017) only researches companies listed on HOSE, Ha Thi Thuy at el (2016) only researches the accepted audit opinion the part with captioning ability to work continuously

limited in terms of research time: Pham Anh Thu (2017) only studied the period from 2014-2016, Ha Thi Thuy at el (2016) only studied from 2011-2014

In order to gain better empirical evidence, it is necessary to study a sample expansion, addition of variables, further development of the model, and an increase in testing time.

5 CONCLUSIONS

Audit opinion is significantly important information and affects many kind of markets and stakeholders This article summarizes the results of the foreign studies and Vietnamese studies associated with audit opinion The Vietnamese studies can follow the international step and focus on the Vietnamese context.

Audit opinion ensures the truth and fairness of the financial statements Different stakeholders have different expectations from the auditor's opinion (Litt et al, 2014) The public companies, or capital mobilized from the public need the third party, or independent auditor to give opinion on whether firm’s financial statements are fairly presented and contain no material misstatements The public companies have an incentive to achieve unqualified audit opinion even if they cannot present true and fair financial statements to the market Therefore, for auditors, they must comply with auditing standards and other relevant regulations In addition, they should strive to improve the quality and professional skills Policymakers are responsible for ensuring the fairness in market operations They are willing to find issues in the auditing process to ensure the audit opinion is fair Therefore, they can use the research results to improve the quality of audit opinion by making policies related to the audit Future research in Vietnam may continue to conduct the test of the influence of factors on the audit opinion and add several variables that can be measured by survey questionnaires and expanding the sample in the period of economic recession or growth On the other hand, the impact of the audit opinion on the market still needs

to be examined in depth using the appropriate sample size within specific periods.

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