THE IMPACT OF ACCOUNTING COMPETENCY AND LEADERSHIP ON FINANCIAL REPORTING QUALITY, ACCOUNTABILITY AND PERFORMANCE IN PUBLIC ORGANIZATIONS IN VIETNAM

TRAN THI YEN THE IMPACT OF ACCOUNTING COMPETENCY AND LEADERSHIP ON FINANCIAL REPORTING QUALITY, ACCOUNTABILITY AND PERFORMANCE IN PUBLIC ORGANIZATIONS IN VIETNAM Major : Accounting Code

TRAN THI YEN

THE IMPACT OF ACCOUNTING COMPETENCY AND LEADERSHIP ON FINANCIAL REPORTING QUALITY, ACCOUNTABILITY AND PERFORMANCE IN PUBLIC

ORGANIZATIONS IN VIETNAM

Major : Accounting Code : 9340301

SUMMARY OF THE THESIS

HO CHI MINH CITY – 2021

The thesis will be presented to the Thesis Board at the University

of Economics Ho Chi Minh City

At…….hours…… day…….month………year………

This Thesis can be found at the library of University of Economics

Ho Chi Minh City

1 Yen Thi Tran & Nguyen Phong Nguyen (2020) The impact

of the performance measurement system on the organizationalperformance of the public sector in a transition economy: Is public

accountability a missing link? Cogent Business & Management, 7(1), 1792669 Doi:10.1080/23311975.2020.1792669 (ESCI,

Scopus Q2)

2 Yen Thi Tran, Nguyen P Nguyen & Lam Dang Nguyen(2020) Results-oriented Culture and Organizational Performance:The Mediating Role of Financial Accountability in Public Sector

Organizations in Vietnam International Journal of Public Administration Doi: 10.1080/01900692.2020.1841227 (ESCI,

Scopus Q2)

3 Yen Thi Tran, Nguyen Phong Nguyen & Trang Cam Hoang(2021) Effects of leadership and accounting capacity onaccountability through the quality of financial reporting by public

organisations in Vietnam Journal of Asia Business Studies Doi:

10.1108/JABS-02-2020-0077 (ESCI, Scopus Q2)

4 Yen Thi Tran, Nguyen Phong Nguyen & Trang Cam Hoang(2021) The role of accountability in determining the relationshipbetween financial reporting quality and the performance of public

organizations: Evidence from Vietnam Journal of Accounting and

10.1016/j.jaccpubpol.2020.106801 (SSCI, Scopus Q1)

1 The necessity of the topic

Public sector organizations have always played a rather importantrole in all economies but are often perceived as ineffective Thus, therecent phenomenon of public sector development in developingcountries has been a stronger demand for accountability by publicinstitutions, both at the central and local levels (Ohemeng et al the,2018) Van Helden and Ouda (2016) argue that in response topressure from international donors, public entities in emergingeconomies have increasingly started to use accounting tools fordecision-making, control and accountability assessment Theultimate goal of accountability is the legitimacy and efficiency of theuse of public assets (Wang, 2002) Patton (1992) also emphasizedthat accounting information is an important tool for achievingaccountability And to meet this purpose, the public sector's financialstatements must ensure quality, which is a necessary and aprerequisite (Cohen, S and Karatzimas, 2017) Since then, manypressures have been placed on the need to introduce new accountingpractices to improve public sector performance in order to providebetter public services (Nuhu and Appuhami, 2016) In developingcountries, it can be seen that the transition from cash to accrualaccounting is a pervasive trend and an important part of the overallpublic finance reform (Tallaki, 2019) However, the application ofaccrual accounting also requires the use of more accountingestimates and this is likely to affect the quality of financialstatements provided by public entities (Azmi and Mohamed, 2014)

In particular, barriers to conversion to accrual accounting such aslimited accounting capacity or lack of manager support have a

negative impact on the performance of accrual accounting as well asthe quality of accounting information and accountability(Nakmahachalasint and Narktabtee, 2019).

The majority of previous studies have provided evidence of theeffects of contingency factors on financial statement quality andaccountability (Dewi et al., 2019; Mardinan et al., 2018; Nirwanaand Haliah, 2018) Factors related to human resources are concerned

by many researchers Because human resources are a specialresource and play a decisive role in the success or failure of anorganization (Brown, 2004) Also according to Brown (2004),human resources include the whole potential of people in anorganization, from employees to senior leaders Considering to theextent that human resources factors have a direct impact on thequality of financial statements and accountability, accountingcompetency and leadership are considered the most important andkey factors (Nakmahachalasint and Narktabtee, 2019) Furthermore,for the leaders in organizations, achieving high performance isconsidered the most important goal (Andersen et al., 2016).According to the agency theory, the provision of quality financialreports and good accountability role as the operational controlmechanism of public institutions to enhance performance (Bruscaand Montesinos, 2016) Therefore, the study on the impact offinancial statements quality and accountability on the performance ofpublic entities is to be supplemented with more empirical evidence.Therefore, the author believes that the study of the impact ofaccounting competency and leadership on financial reporting qualityand accountability; as well as the impact of the quality of financialstatements and accountability on the performance of publicorganizations in Vietnam in the same research model are necessary

and new Recognizing this urgency, the author chose the topic “The impact of accounting competency and leadership on financial reporting quality, accountability and performance in public organizations in Vietnam” is a research topic.

2 Research objective

Overall goal: This thesis aims to build and test a model of theeffect of accounting competency and leadership on financialreporting quality and accountability; at the same time, explore andtest the impact of financial reporting quality and accountability onperformance in public organizations in Vietnam

3 Research questions

Question 1: Do accounting competency and leadership affect thefinancial reporting quality of public orfanizations in Vietnam? How

is their impact on financial reporting quality shown?

Question 2: Do accounting competency and leadership affect theaccountability of public orfanizations in Vietnam? How is theirimpact on accountability shown?

Question 3: Does the quality of financial statements affect theaccountability of public organizations in Vietnam? How is theimpact of financial reporting quality on accountability shown?Question 4: Does the quality of financial statements affect theperformance of public organizations in Vietnam? How is the impact

of financial reporting quality on performance shown?

Question 5: Does accountability impact the performance of publicentities in Vietnam? How is the impact of accountability onperformance shown?

Question 6: Does the quality of financial statements have anindirect impact on performance through the mediating role ofaccountability in public organizations in Vietnam? How is this level

of indirect impact shown?

4 Subjects and scope of the research

4.1 Research subjects

The research object of the thesis includes: accountingcompetency, leadership, financial reporting quality, accountabilityand performance in public organizations in Vietnam

4.2 The scope of research

Scope of research space: Topic is limited in the public sector inVietnam However, due to the limitations of funding and time, themain scope of the thesis survey is the administrative agencies at thelocal level: provincial, district, city, and commune level and publicservice units in Vietnam The author does not study in state-ownedenterprises and business units

Scope of research period: The thesis is studied from January 2018

to January 2021 Quantitative data survey officially takes place fromSeptember 2019 to August 2020

5 Research methodology

The qualitative research method was used with the expertinterview technique The results of the qualitative research phaseprovide additional scientific basis for: (1) Confirming and explainingrelationships between research variables in the theoretical modelwhen linked with the public sector context in Vietnam; (2) Confirmand adjust the scale of research concepts in the model to match thepublic sector context in Vietnam Because the scales in the model areinherited by the author from the previous research, the translationinto Vietnamese may still contain semantic errors and may not befully consistent with the Vietnamese context

The quantitative research step is carried out by the author toaddress the objectives of testing as well as measuring the levelrelated to: (1) the impact of accounting competency and leadership

on financial reporting quality; (2) the effect of accountingcompetency and leadership on accountability; (3) the impact offinancial reporting quality on accountability; (4) the impact of

financial reporting quality on performance; (5) the impact ofaccountability on performance; (6) the indirect impact of financialreporting quality on performance through accountability

6 The thesis’ contribution

6.1 Theoretical contributions

First of all, the thesis has contributed to building a research model

on the effect of accounting competency and leadership on financialreporting quality and accountability, as well as studying the impact

of financial reporting quality and accountability to performance inpublic units in Vietnam

Next, the thesis has contributed to clarify the concepts and scales

of accounting competency, leadership, financial reporting quality,accountability and performance in public sector in Vietnam on thebasis of inheriting previous researches in the world

Besides, the thesis will provide additional empirical evidence tosupport the progressive theoretical foundation of New publicmanagement (NPM) theory applied in a developing economy such asVietnam is that enhancing financial reporting quality andaccountability will help public organizations improve theirperformance Accordingly, the thesis has provided a new empiricalevidence on the mediating role of accountability in the indirectimpact of the quality of financial statements on performance in thepublic sector in Vietnam From there, these results will be of usefulreference value for other developing countries

6.2 Practical contributions

For state management agencies: The results of the thesis haveprovided solid scientific foundations for policy-issuing agencies forreference from which to propose suitable solutions to improvefinancial reporting quality, improve accountability, contribute toimproving the performance of public units From there, reducing the

burden on the state budget, as well as reducing public debt, makingthe Vietnamese economy develop better in the future.

For public organizations: The results of the thesis have provided ascientific basis to help leaders in the organizations recognize theimportance of accounting competency and leadership in improvefinancial reporting quality and accountability In particular, the thesiswas also a useful source of documents to help leaders in public unitsknow how to improve and increase the performance of theirorganizations Public organizations, in particular, need to providegood quality financial reports and effectively exercise accountability.For researchers on accounting: This study has added to a limitedunderstanding of: (1) the role of leaders in strengthening financialreporting quality and accountability; (2) the role of financialreporting quality in enhancing accountability and performance; (3)the role of accountability in strengthening performance; (4) themediating role of accountability on the indirect impact of financialreporting quality on performance in public organizations in Vietnam

7 Structure of the thesis

Chapter 1: Research overview

Chapter 2: Theoretical basis

Chapter 3: Research methodology

Chapter 4: Research results

Chapter 5: Conclusion and implications

CHAPTER 1: RESEARCH OVERVIEW

1.1 Introduction

Chapter 1 presents previous studies in the world and Vietnam inthree main research directions, including: factors affecting financialreporting quality, factors affecting accountability and factors

affecting the performance of public sector On that basis, the authoranalyzes and clarifies the studies, pointing out research gaps.

1.2 Overview of foreign studies

1.2.1 Study the factors affecting the quality of financial statements

in the public sector

1.2.2 Study the factors affecting accountability in the public sector 1.2.3 Research on factors affecting performance in public sector

1.3 Overview of national research

1.3.1 Study the factors affecting the quality of financial statements

in the public sector

1.3.2 Study the factors affecting accountability in the public sector 1.3.3 Research on factors affecting performance in public sector

1.4 Reviews of research overview

1.4.1 For foreign studies

In short, previous studies around the world have shown thatfactors in the public organization context have an importantinfluence on the implementation of accounting reforms, therebyaffecting the quality of financial statements and accountability.Accordingly, human resource capacity is of great concern because ithas a direct impact on the quality of financial statements andaccountability However, the research on the impact of accountingcapacity and leadership on financial reporting quality andaccountability has not been conducted by previous studies

Moreover, most of the previous studies stopped at discussing eachtopic individually about the effects of factors on financial reportingquality, accountability or performance Some recent studies haveconsidered (1) the impact of financial reporting quality onaccountability (Dewi et al., 2019; Indriasih and Koeswayo, 2014);(2) the impact of financial reporting quality on performance(Bukenya, 2014; Nirwana and Haliah, 2018) and (3) the impact of

accountability on performance (Christensen & Lægreid, 2014;Halim, 2019, Han, 2019) That is, previous studies have notconsidered the impact between financial reporting quality,accountability and performance in the same research model.Moreover, previous studies were conducted in each country withdifferent legal, political, economic systems and human resourcequalifications in each country Thereby, the author sees the study ofsimultaneous effects of accounting competency and leadership onfinancial reporting quality and accountability; the impact of financialreporting quality on accountability; The impact of financial reportingquality and accountability on performance in the same researchmodel is almost not found from the review process of foreignstudies And this is also a research gap that the author wants to do forthe public sector in Vietnam.

1.4.2 For domestic research

Previous studies in Vietnam only consider the factors that affectfinancial reporting quality, accountability or performance of publicentities However, previous studies have not considered thesimultaneous effects of accounting competency and leadership onfinancial reporting quality and accountability And a second researchgap is that researchers have not yet paid attention to the relationshipbetween financial reporting quality, accountability and performance.Specifically, the study of the direct and indirect effects of the quality

of financial statements on performance through accountability inpublic entities in Vietnam

1.5 Identify research gaps

Through a review of previous studies, the author found that inVietnam, there are currently no studies that discuss both the impact

of accounting competency and leadership on financial reportingquality and accountability; the impact of financial reporting quality

on accountability; as well as the impact of financial reporting quality

and accountability on performance in public organizations and in thesame research model.

Moreover, most domestic researchers believe that the currentquality of financial statements information in the public sector inVietnam is too low, has not ensured transparency and has notensured the reliability of information according to regulations ofIPSAS (Dau Thi Kim Thoa, 2019) At the same time, publicorganizations in Vietnam have not performed well theiraccountability under Decree 90 (Pham Quang Huy, 2018) Therefore,

it is necessary to conduct research using a combination of bothqualitative and quantitative methods to identify and measure theimpact of accounting competency and leadership on financialreporting quality and accountability; explore and measure the impact

of the financial reporting quality on accountability; And it isnecessary to clearly understand the impact of the financial reportingquality and accountability on performance in public units in order togive appropriate implications to improve the quality of financialstatements, improve accountability as well as effective decision-making to improve public sector performance in Vietnam

administrative and public service units account for the highestproportion in the number of public units in Vietnam (Nguyen ThiThu Hien, 2015; General Statistics Office, 2018) According to thefinancial management decentralization, the public units are organizedvertically corresponding to each budget level, usually divided intothree budgeting levels: unit level 1, unit level 2 and unit level 3.Based on the degree of autonomy, administrative agencies areclassified into two categories: units assigned with autonomy infunding and units not assigned with autonomy (Government, 2005,2013b) According to Decree 16/2015/ND-CP, public service unitsare divided into 4 groups: autonomous recurrent expenditure andinvestment expenditure, autonomous recurrent expenditure, partialautonomy of recurrent expenditure and guaranteed state budget theentire recurrent expenditure Up to the present time, the public sector

in Vietnam has many different accounting regimes In particular, animportant part of public accounting in Vietnam is the administrativeand public service accounting system with the most applicationscope among the remaining accounting regimes (Nguyen Thi ThuHien, 2015) The Ministry of Finance has revised it to be moresuitable with the international trend of applying IPSAS

2.3 Foundation Concepts

2.3.1 Accounting competency

By analyzing research papers on accounting competency of manyprofessional accountancy organizations, Palmer et al (2004) agreethat accounting knowledge, general business knowledge, technologyknowledge, communication skill, problem solving skill, computerskill, interaction skill, positive personal attitudes and qualities areimportant basic criteria that a good qualified accountant will showout when working

2.3.2 Leadership