Luận văn the factors affect the quality of financial statements audit in vietnam businesses

“Lhe test results showed thal factors: H4 - Gccupatiowal Qualificalion is au important Caclor affecting audit quatity of enterprise financial statements, and HI - Legal Fnvironment, H2 -

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

al 2008), Sundgren and Svanstramn (2011), Simumic el al (2011), Moeinnadin et al (2013)

Research of Sundgren and Svanstrom (2011) about the rclationship between the audit quality and the scalc of audit fismns in Sweden showed thal the audit quality was significantly improved in the targe-scale adil cornpany (including big fom, Grant Thornton and BDO - two big audit firms ranked 5th and Gth in Sweden) The authors also explain the differences in the quality between the audit firms with different scale dus to the basic qualities of auditors (experience, qualifications, ability to work in groups) and the way how to periodically train of the audit firms,

Sinunic et al (2011) conducted experimental shadies to assess the impact of andit fim’s scale on the audit quality in the United States Researching the andit results of the audit firms belonging the Big fomr and remaining audit furns in the the 2002-2005 period showed that the audit quality of the Big four is different from

he audil quahty of ie rommaicong audil firms group, This difference relating Lo the investinent slralegies in audit teclmology: the audit Sims belonging the Big four have had greater invesunent in developing audi lechnology This is a different strategy to raise their relative valne through the audit quality Im an audit, technology is an important factor in combination with the efforts of auditors and willingness to the appropriate fee for the nccessary procedures of the audit has crcated the grat succcss of the Big four comparcd with other audit fim

‘Moeinnadin et al, (2013) used FANP and FTOPSIS methods for identifying and ranking the factors that affect

he audil quality in Iran, including the scale of audil finns stand at No 9 of lotal 1S Paclors belonging to audit entities affecting the audit quality

Research of Madar Abullatif (2013) found thet the factors that lead to sisks of frand come from the characteristics and altitudes of managers, while factors of financial situation difficulty of the customers are not

important

2 Sundy Model

Directiy researching on factors that aifect quality of business financial audit helps determine the direction to improve auditing quality and ensure auditors” ability to detect and report the material misstatements, since it iz the most important concern of nol only companies providing auditing services, bul investors and managers in any stocks markets as well From the perspective on auditing, quality in general, and chavactetistics of business financial in particular, and an overview of international and domestic studies, these Yactors are systematized in igure 1 below

+ Dependent variable: Financial statement audit quality of business

+ Independent, variables: Tegal environment, Factors belonging to business, Tndependence, Occupational qualifications, Quality control yetem of audit finn, others

Assumptions:

* IIL: Legal environment factor affects financial statement quality of business

www.cesenclorg/ass

* Hi: Factors belonging (o business affecls fazancial statement audit

Asian Suciul Science ‘VoL LL, No 27, 2015

ily of business

+ _ HB: Independence factor affects financial statement audit quality of business

© HA: Occupational qualifications fuelor affects finmncial vtaleanent audil qualily of business

© HS: Quality control syatem of audit firm factor affects financial statement audit quality of

‘business

© HG: Others factor affeets financial statement audit qualily of business

‘The detailed content of factors / groups of factors as follows:

Factor Sign ‘Composition (Observed variables obtained from interview questions)

MIFL_1 1 The complete eystem of standards and auditing regime

itt; MENLR.—12-Toecompttyareevutl sree

MIFI3 1.3, Siriclness of sanctions and responsbilities of lhe sakehalders

21 The mudedanding of business leaders abou laws, dandwds and cureal PNT esistation related ,

Đụ „ —_ 22: The integily df Đuáess Leaders on responsibility of publishing the financial

= statements honestly and reasonably Factors telonging -«sdDN_3-———2.3 The scale and institutions of companies (subsidiasies, organizational structure.)

to business py 24 The complesily in the business line Jidd of enleprise (such ax basic

c construction, real estate, inance-bonking, ) pws 2% The complexity af the items { iamsactions an the financial stalements of

= enterprise (eg, inventory, accounts receivalte, financial investments.) DN_§ _2.8, Quality of internal control systems in enterprises

DL1I 3, Independence on social sslationships with enterprises DL2 3.2, Independence on economic relationships with enterprises Tudependence of auditors group DL3 3.3 Independance in pathering and evaluating andit evidence obtained

pea Me vn of invlependent corrmilment before conducting the audit in

41 Knowledge are basically tained (degree) in major of accounting, auditing,

Ovcupational TDCM_2 4.2, Have international practicing certificate

qualifications TDCM_3 4.3, Have ipracticing ecrtificate in Vietnam

TOCM 4 4.4, Annually update knowledge HTES1 §.1, Commit ensure the quality before cach audit Qualiy contrat = BTRS2 $3.Psy altention Lo the customer acceptance

qpitem of audit — HTKS 3 — 53.TherdlcoftieindepcndentmeniterinthesudiLlimsfsr caehsudlL

Tim TITKS 4 5.4, The sole of supervision departments on audit quality in genetal

HIKS 5 5% The process of quality control WIKI 6.1, Macroeconomic situation others NIK 2 6.2 Cullural cavironment, lsbits wnd rontines

werk 3 63 Thetole of quality contra of business msdit financial statements trom the State

3, Methodology

umagemenl agencies

Prinmry data in this sludy was collected by using a survey questionaire for 200 auditors with convenience

sampling method,

Directly: Questionnaires were directly sent to auditors of auditing companies (Deloitte, AAT, KPMG, “ACO

‘Time of sending and collecting direct questionnaires were implemented contimuously for over a year from 2013

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

By email, using Google doc to ereate questionnaire and coliccting questionnaires through an automatic summary

of Google dor (for cases lo which are unable to send direclly) This fon was implemented fiom June 2014 to

December 2014

The result is that, there are only 150 valid questionnaire sheets among collected ones, in which the number of sheets collected trom direct form is 97 (accounts for 64.6%) and from indirect form through Google doc is 53 (aecounts for 35.4%) ‘The responses arc highly retiable, showing that auditors have scriously answered and have deep understanding of the questions, in accordance with data analysis using SPSS and AMOS Scales using in this study are in S-point Likest scale with 1 — totally disagree and 2 — totally agree Measures of Exploratory

Factor Analysis (TTA) and Cronbach’s Alpha coefficient test are used for the construction and testing, af scales Finally, the Confirmatory Factor Analysis (CKA) and Structural cquation modeling (SEM) arc used to test the

reliubibty, differential values, converged values, and the unitarily of concepts in this stady, while assessing effeel level of such factors ag legal environments, factors helouging to business, independence, occupational

qualifications, quality control system of audit firm, and others over the financial audit quality of the business

Observed Scale average if ‘Seale variance if ‘Correlation coefiicient ‘Cronbach alpha if variables variable deleted variable deleted variable— sama ‘variable deleted

Cronbach sipha values are used to leat ihe cfferlivcnsss oÏ each group of factor, Cronbach siylm alysis result

af each factor is presented us follows: Financial statement audil yxalily of business is measured with 6 aspects

Tn general, Cronbach Alpha coefficients of these aspects reached over 0.6, and correlation coefficients between

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

variable and sum were over 0.3, 90 the reliability of scale of cach aspcet is enzurod the specifie Cronbach Alpha coefficient is: Legal enviroment (MIPL) 0.891; Facturs belonging to business (DN} 0.853; Independeace (DL) = 0.836, Occupational qualifications (TCM) = 0,656, Quality control system af the firm (HTKS} = 0.819 and Others (NTK) = 0.798

4.2 Factor Anabusis

‘To assese whether the ETA meazure is suitable to analyze in thie case, the author used KMO and Bartlett's tests

An exploratory factor analysis, KMO (Kaiscr-Meycr-Olkin) index is uscd Lo lest lhe appropriateness of factor

analysis This analysis is appropriate when KMO value ranges from 0.5 to 1 If this value is lower than 0.5 factor analysis is possibly inappropriate to dara

KMO and Bartlett's tests iu factor analysis using, 25 observed variables af the scale shows that KMO index

is high (0.853) with significance equal to 0 (sig = 0.000) Thus, KM index of aver than 0.5 indicates that the application of exploratory FacLor analysis is appropriate

For factor analysis, the author used cigenvalucs to determine number of factors Eigenvalues represents the amount of variation explained by the factors Only Factors Uhat ave eigeuvalue of higher than 1 were reluined in the model

The results provided data on eigenvalue analyzed from 25 observed variables There are 25 factors with

calculated eigenvalues corresponding, to 25 observed variables Ilowever, there are only 6 factors that have

cigonvaluc of higher than 1, while the cigenvaluc of the remaining factors is lower than 1 Rotation Sums of Squared Loadmgs hil a high Lo approximalely 66.02%%, winch means hal lhe use of 6 fatlor representing 25 observed vatiables can explain 66.09% of data variation In analysis, the Rotation Sums of Squated Loadings” reaching 50% is

acceptable Tence, we can conclude that six factors can he used to reflect the information provided by 25 cheerved

variables

Factor analysis is done with extraction method of Principal Component Analysis using Varimax rotation based

‘on suck criteria of Communality >= 0,5 and Factor loading >= 0.3 Facimrcs in table Rotated Component

Mautrix called Fnetor londings shall be selevlied if salisfying the above crileria, On a certain row, observed variable with highest factor loading lies in any colnmn, then observed variable shall belong to factor in that

column After rotation, 25 observed variables all satistied the criteria for factar loading of higher than 0.5 These

observed variables were divided into 6 groups of factor The specific factor loading of cach observed factor iz presented in Rotated Component Matrix Table (Table 2)

Table 2 Rotated Component Matrix*

079L 0.743 0.736 1.696

08 0.654

0484 B316 0.875

0.776

9401

0666 sae

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

for unplementing frauds (if any} of the board of enterprise directors, Poiicics and management procedures are an

đmporlant systeun in management and control of cornpanies; if crucial transaclions / businesses in organizations

do not have specific regulations on how to organize and conduct or are not strictly complied creating opportunitics for individuals to perform non-coutrolled frauds,

‘Management information systems are not enough details and not reported regularly If report systems of company management (especially financial management reports) are not reviewed periodically (uonthly quarterly) aud nol enough details 1o analyze and evaluale actual stales of enterprise activities, fraud actions (if any) are difficult to be discovered and prevented in time Besides control environments, policy

systemsicontrol procednres, accounting information ystems is an impartant component of intemat contro!

systems, Poor cnterpriscs of intemal control systems have risk of frauds not detectod in time or ercate opportunities for individuals’ individual groups to carry oul Keauds,

5.4 Ineflective Supervision of Board of Directors

Monopoly in mamagamest of a person or a group of people wilhoul scaonable control procedures wid supervision activities af the Board of Directors for process of building and presenting financial statements and

‘weak intemal control,

5.5 Benefits of Roond of Directrs/ Management Roard Associated with Finance Situation of Unierprises

Tncome simeture, salary and bonus of Hoard of T.eader depend significantly on finance results of enterprises there arc motivations for Board of Directors €o adjust reports in the better direction to get higher incomes / bonuses ‘The greater the proportion of bomuses from enterprise results is, the stronger molives (o increase business results are and vice versa To promote and generate motivations for production and business development, enterprises today have trend of increasing the proportion of incomes/honnses for statfs, employees, especially senior leader groups associated with business results of units This tool also creates motives for distorting reports to perform terminal income goals of Board of Leaders it compames if uo! well coutrolled

-5 Pressure of Meeting Expectations of Tlard Parties

Expectations of third partics (shurcholdcrs, investors and banks) relate goals sucls us stock price, profil cfliciency aud finance structure, If expectation levels are loo optimistic, i will pul pressure on Executive Bourd to meet these expectations inchuling to distorting financial statements Especially when enterprises have plans to issue stocks and shares or mobilize capital from a bank, or a number of major shareholders plan to withdraw capital rom companies, changes of profit results increase / dcereage vatue of stocks and shares, or changes af finance structure inerease financial capacity of enterprises Companies listed on tke stock market tefore information releasing more stocks and shares are quite common,

Tn addition, auditors shonld pay attention to pressure of company in a year stich as pressures an loans, pressures

to achicve financial goals Management Board has set is an important factor affecting risks of derogations in the Einanvial stalements thal migh! be fiauds of units, Scclor environment has considerable elmauges in the direction

of adverse or positive for enterprises: when there are changes in market demand, competition and macro factors affecting enterprise business plans, enterprises will have trend of handling technically financial statements in order to achieve business goals assigned Economic recestion in recent years, enterprises do not reach business plans, even fall into losses and bankrupicies ‘Yo survive und conlmuc Lo reccive support from investors, banks providing loans, trusinesses will (eud lo build financial slulemenls of increasing pralils / decreasing losses However, enterprises are always under pressure of ohjective and subjective causes auch as political instability, natural disasters, high competition irom competitors and rapid changer in technical technology while business market saturates and demand of consuming products declines, Abnormal fluctuations from husiness activities and financial situations of business profession and seclor negatively iinpact finarwial siluation of enterprises even stake Insses in bnsiness activities leading fo risks of bankruptcy or asset attachment ar distrainment To

maintain financial stability and potentially Incrative, directors or employees of nnits should adjust financial statements in the positive direction for business bencfits,

Professional qualification of auditors presents the quality of auditing in developed countries Similarly, qualification and quality are cssentially important to auditing financial statements in Vietnam ‘This iz the basis for researches in hoth theories and applicati

References

Boon, K., Crowe, $., McKianan, J., & Ross (2005) Compulsory Andit Tendering and Audit Fees: Evidence from Austratian Local Government Infernational Journal of Auditing Accotoning Research Journal, 9(3), 221-241 http://ds doi org/10.1111,j,1099-1123,2005.00288.x

9

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

Dull, A (2004), Dinentions of audit quality: University of Paisley

Ha, H ' N (2012), Solutions fo improve and strengthen quality control of financial sterement audit in public interest units, Branch-level research project Ministry of Firance

Hai, D H Q014) Criteria system of business culture indentification Applying for Vietnam: businesses (Doctoral thesis) National Feonomics University

Lam, 8., & Chang, 8 (1994) Auditor Service Quality and Auditor Size: Evidence from Initial Public Offerings

in Singapore Journal of hnernation:d Accounting, Auditing & Taxation, 3, 103-114 hip: idx doi.org/10 1016/1061-8518(94)90009-4

Lennox, C 8 (1999) Audit Quality and Auditor Size: An Evaluation of Reputation and Deep Pockets Hypotheses Journal of Business Kinance and Acconrling, 20/8), tr 778-805 bilip:{fdx.doi.org/LO.LLLM

1468-5957.00275

Long, N D (2002) Solutions to improve quality of independent caudit in Vieinam (Doctoral thesis) Vieinam

‘University of Commerce

My, N T (2013) Improving the audit of financial statemenis af listed firms on Vietuam stock market (Doctoral

thesis) National Kconomics University

Palmrose, Z (1988) An Analysis of Auditor Litgation and Audit Service Quality, The Accovmling Review 63,

55-73

Thuy, B 1 (2014) #ezeech on factors thal affect financial stetenvend caukl quedity of companies listed on stock market of Fietnant (Doctoral thesis) National Economics University

Copyrights

Copyright for this articte is retained by the author(s), with first publication rights granted to the journal

‘Vhis is an oper-access article dislribuled under lhe lens arid couditions of the Creative Commons Atiribulion license (hitp:/creativecommons.org/licenses/hy/3.00)

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

for unplementing frauds (if any} of the board of enterprise directors, Poiicics and management procedures are an

đmporlant systeun in management and control of cornpanies; if crucial transaclions / businesses in organizations

do not have specific regulations on how to organize and conduct or are not strictly complied creating opportunitics for individuals to perform non-coutrolled frauds,

‘Management information systems are not enough details and not reported regularly If report systems of company management (especially financial management reports) are not reviewed periodically (uonthly quarterly) aud nol enough details 1o analyze and evaluale actual stales of enterprise activities, fraud actions (if any) are difficult to be discovered and prevented in time Besides control environments, policy

systemsicontrol procednres, accounting information ystems is an impartant component of intemat contro!

systems, Poor cnterpriscs of intemal control systems have risk of frauds not detectod in time or ercate opportunities for individuals’ individual groups to carry oul Keauds,

5.4 Ineflective Supervision of Board of Directors

Monopoly in mamagamest of a person or a group of people wilhoul scaonable control procedures wid supervision activities af the Board of Directors for process of building and presenting financial statements and

‘weak intemal control,

5.5 Benefits of Roond of Directrs/ Management Roard Associated with Finance Situation of Unierprises

Tncome simeture, salary and bonus of Hoard of T.eader depend significantly on finance results of enterprises there arc motivations for Board of Directors €o adjust reports in the better direction to get higher incomes / bonuses ‘The greater the proportion of bomuses from enterprise results is, the stronger molives (o increase business results are and vice versa To promote and generate motivations for production and business development, enterprises today have trend of increasing the proportion of incomes/honnses for statfs, employees, especially senior leader groups associated with business results of units This tool also creates motives for distorting reports to perform terminal income goals of Board of Leaders it compames if uo! well coutrolled

-5 Pressure of Meeting Expectations of Tlard Parties

Expectations of third partics (shurcholdcrs, investors and banks) relate goals sucls us stock price, profil cfliciency aud finance structure, If expectation levels are loo optimistic, i will pul pressure on Executive Bourd to meet these expectations inchuling to distorting financial statements Especially when enterprises have plans to issue stocks and shares or mobilize capital from a bank, or a number of major shareholders plan to withdraw capital rom companies, changes of profit results increase / dcereage vatue of stocks and shares, or changes af finance structure inerease financial capacity of enterprises Companies listed on tke stock market tefore information releasing more stocks and shares are quite common,

Tn addition, auditors shonld pay attention to pressure of company in a year stich as pressures an loans, pressures

to achicve financial goals Management Board has set is an important factor affecting risks of derogations in the Einanvial stalements thal migh! be fiauds of units, Scclor environment has considerable elmauges in the direction

of adverse or positive for enterprises: when there are changes in market demand, competition and macro factors affecting enterprise business plans, enterprises will have trend of handling technically financial statements in order to achieve business goals assigned Economic recestion in recent years, enterprises do not reach business plans, even fall into losses and bankrupicies ‘Yo survive und conlmuc Lo reccive support from investors, banks providing loans, trusinesses will (eud lo build financial slulemenls of increasing pralils / decreasing losses However, enterprises are always under pressure of ohjective and subjective causes auch as political instability, natural disasters, high competition irom competitors and rapid changer in technical technology while business market saturates and demand of consuming products declines, Abnormal fluctuations from husiness activities and financial situations of business profession and seclor negatively iinpact finarwial siluation of enterprises even stake Insses in bnsiness activities leading fo risks of bankruptcy or asset attachment ar distrainment To

maintain financial stability and potentially Incrative, directors or employees of nnits should adjust financial statements in the positive direction for business bencfits,

Professional qualification of auditors presents the quality of auditing in developed countries Similarly, qualification and quality are cssentially important to auditing financial statements in Vietnam ‘This iz the basis for researches in hoth theories and applicati

References

Boon, K., Crowe, $., McKianan, J., & Ross (2005) Compulsory Andit Tendering and Audit Fees: Evidence from Austratian Local Government Infernational Journal of Auditing Accotoning Research Journal, 9(3), 221-241 http://ds doi org/10.1111,j,1099-1123,2005.00288.x

9

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

variable and sum were over 0.3, 90 the reliability of scale of cach aspcet is enzurod the specifie Cronbach Alpha coefficient is: Legal enviroment (MIPL) 0.891; Facturs belonging to business (DN} 0.853; Independeace (DL) = 0.836, Occupational qualifications (TCM) = 0,656, Quality control system af the firm (HTKS} = 0.819 and Others (NTK) = 0.798

4.2 Factor Anabusis

‘To assese whether the ETA meazure is suitable to analyze in thie case, the author used KMO and Bartlett's tests

An exploratory factor analysis, KMO (Kaiscr-Meycr-Olkin) index is uscd Lo lest lhe appropriateness of factor

analysis This analysis is appropriate when KMO value ranges from 0.5 to 1 If this value is lower than 0.5 factor analysis is possibly inappropriate to dara

KMO and Bartlett's tests iu factor analysis using, 25 observed variables af the scale shows that KMO index

is high (0.853) with significance equal to 0 (sig = 0.000) Thus, KM index of aver than 0.5 indicates that the application of exploratory FacLor analysis is appropriate

For factor analysis, the author used cigenvalucs to determine number of factors Eigenvalues represents the amount of variation explained by the factors Only Factors Uhat ave eigeuvalue of higher than 1 were reluined in the model

The results provided data on eigenvalue analyzed from 25 observed variables There are 25 factors with

calculated eigenvalues corresponding, to 25 observed variables Ilowever, there are only 6 factors that have

cigonvaluc of higher than 1, while the cigenvaluc of the remaining factors is lower than 1 Rotation Sums of Squared Loadmgs hil a high Lo approximalely 66.02%%, winch means hal lhe use of 6 fatlor representing 25 observed vatiables can explain 66.09% of data variation In analysis, the Rotation Sums of Squated Loadings” reaching 50% is

acceptable Tence, we can conclude that six factors can he used to reflect the information provided by 25 cheerved

variables

Factor analysis is done with extraction method of Principal Component Analysis using Varimax rotation based

‘on suck criteria of Communality >= 0,5 and Factor loading >= 0.3 Facimrcs in table Rotated Component

Mautrix called Fnetor londings shall be selevlied if salisfying the above crileria, On a certain row, observed variable with highest factor loading lies in any colnmn, then observed variable shall belong to factor in that

column After rotation, 25 observed variables all satistied the criteria for factar loading of higher than 0.5 These

observed variables were divided into 6 groups of factor The specific factor loading of cach observed factor iz presented in Rotated Component Matrix Table (Table 2)

Table 2 Rotated Component Matrix*

079L 0.743 0.736 1.696

08 0.654

0484 B316 0.875

0.776

9401

0666 sae

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

for unplementing frauds (if any} of the board of enterprise directors, Poiicics and management procedures are an

đmporlant systeun in management and control of cornpanies; if crucial transaclions / businesses in organizations

do not have specific regulations on how to organize and conduct or are not strictly complied creating opportunitics for individuals to perform non-coutrolled frauds,

‘Management information systems are not enough details and not reported regularly If report systems of company management (especially financial management reports) are not reviewed periodically (uonthly quarterly) aud nol enough details 1o analyze and evaluale actual stales of enterprise activities, fraud actions (if any) are difficult to be discovered and prevented in time Besides control environments, policy

systemsicontrol procednres, accounting information ystems is an impartant component of intemat contro!

systems, Poor cnterpriscs of intemal control systems have risk of frauds not detectod in time or ercate opportunities for individuals’ individual groups to carry oul Keauds,

5.4 Ineflective Supervision of Board of Directors

Monopoly in mamagamest of a person or a group of people wilhoul scaonable control procedures wid supervision activities af the Board of Directors for process of building and presenting financial statements and

‘weak intemal control,

5.5 Benefits of Roond of Directrs/ Management Roard Associated with Finance Situation of Unierprises

Tncome simeture, salary and bonus of Hoard of T.eader depend significantly on finance results of enterprises there arc motivations for Board of Directors €o adjust reports in the better direction to get higher incomes / bonuses ‘The greater the proportion of bomuses from enterprise results is, the stronger molives (o increase business results are and vice versa To promote and generate motivations for production and business development, enterprises today have trend of increasing the proportion of incomes/honnses for statfs, employees, especially senior leader groups associated with business results of units This tool also creates motives for distorting reports to perform terminal income goals of Board of Leaders it compames if uo! well coutrolled

-5 Pressure of Meeting Expectations of Tlard Parties

Expectations of third partics (shurcholdcrs, investors and banks) relate goals sucls us stock price, profil cfliciency aud finance structure, If expectation levels are loo optimistic, i will pul pressure on Executive Bourd to meet these expectations inchuling to distorting financial statements Especially when enterprises have plans to issue stocks and shares or mobilize capital from a bank, or a number of major shareholders plan to withdraw capital rom companies, changes of profit results increase / dcereage vatue of stocks and shares, or changes af finance structure inerease financial capacity of enterprises Companies listed on tke stock market tefore information releasing more stocks and shares are quite common,

Tn addition, auditors shonld pay attention to pressure of company in a year stich as pressures an loans, pressures

to achicve financial goals Management Board has set is an important factor affecting risks of derogations in the Einanvial stalements thal migh! be fiauds of units, Scclor environment has considerable elmauges in the direction

of adverse or positive for enterprises: when there are changes in market demand, competition and macro factors affecting enterprise business plans, enterprises will have trend of handling technically financial statements in order to achieve business goals assigned Economic recestion in recent years, enterprises do not reach business plans, even fall into losses and bankrupicies ‘Yo survive und conlmuc Lo reccive support from investors, banks providing loans, trusinesses will (eud lo build financial slulemenls of increasing pralils / decreasing losses However, enterprises are always under pressure of ohjective and subjective causes auch as political instability, natural disasters, high competition irom competitors and rapid changer in technical technology while business market saturates and demand of consuming products declines, Abnormal fluctuations from husiness activities and financial situations of business profession and seclor negatively iinpact finarwial siluation of enterprises even stake Insses in bnsiness activities leading fo risks of bankruptcy or asset attachment ar distrainment To

maintain financial stability and potentially Incrative, directors or employees of nnits should adjust financial statements in the positive direction for business bencfits,

Professional qualification of auditors presents the quality of auditing in developed countries Similarly, qualification and quality are cssentially important to auditing financial statements in Vietnam ‘This iz the basis for researches in hoth theories and applicati

References

Boon, K., Crowe, $., McKianan, J., & Ross (2005) Compulsory Andit Tendering and Audit Fees: Evidence from Austratian Local Government Infernational Journal of Auditing Accotoning Research Journal, 9(3), 221-241 http://ds doi org/10.1111,j,1099-1123,2005.00288.x

9

rww.cesencl onyiass Asion Social Scicuce ‘Vol 11, No 27; 2015

Exlaclion Melhod: Principal Component Analy

Rotation Melhod: Varismax wilh Kaiser Normalization"

4 Rolation converged in 15 iterations

4.3 Scale Test by CHA

Collected CFA results: Chi-square/df 1408; GFI 0.826, TLE 9.912, CFI 923; RMSEA 0.052 proving that

scale modet of factors affecting financial auditing quality of business is appropriate to the market data

The standardized weights of scale are all high and higher than 0.5, and P-valne of each pair of concepts is lower than 0.05 On the other hand, the correlation coefficient with the standard deviation shows that they are higher than 1, Therefore, the stndy model haz been adjusted and achieves converged value and differential value, The

‘model has no correlation among measurement crrors of factors, zo the model is unitary

Figure 1, Result of SEM theoretical model (standardized)

‘Table 3 Assumptions Lesting resulls

rww.cesencl onyiass Asion Social Scicuce ‘Vol 11, No 27; 2015

Exlaclion Melhod: Principal Component Analy

Rotation Melhod: Varismax wilh Kaiser Normalization"

4 Rolation converged in 15 iterations

4.3 Scale Test by CHA

Collected CFA results: Chi-square/df 1408; GFI 0.826, TLE 9.912, CFI 923; RMSEA 0.052 proving that

scale modet of factors affecting financial auditing quality of business is appropriate to the market data

The standardized weights of scale are all high and higher than 0.5, and P-valne of each pair of concepts is lower than 0.05 On the other hand, the correlation coefficient with the standard deviation shows that they are higher than 1, Therefore, the stndy model haz been adjusted and achieves converged value and differential value, The

‘model has no correlation among measurement crrors of factors, zo the model is unitary

Figure 1, Result of SEM theoretical model (standardized)

‘Table 3 Assumptions Lesting resulls

rww.cesencl onyiass Asion Social Scicuce ‘Vol 11, No 27; 2015

Exlaclion Melhod: Principal Component Analy

Rotation Melhod: Varismax wilh Kaiser Normalization"

4 Rolation converged in 15 iterations

4.3 Scale Test by CHA

Collected CFA results: Chi-square/df 1408; GFI 0.826, TLE 9.912, CFI 923; RMSEA 0.052 proving that

scale modet of factors affecting financial auditing quality of business is appropriate to the market data

The standardized weights of scale are all high and higher than 0.5, and P-valne of each pair of concepts is lower than 0.05 On the other hand, the correlation coefficient with the standard deviation shows that they are higher than 1, Therefore, the stndy model haz been adjusted and achieves converged value and differential value, The

‘model has no correlation among measurement crrors of factors, zo the model is unitary

Figure 1, Result of SEM theoretical model (standardized)

‘Table 3 Assumptions Lesting resulls

rww.cesencl onyiass Asion Social Scicuce ‘Vol 11, No 27; 2015

Exlaclion Melhod: Principal Component Analy

Rotation Melhod: Varismax wilh Kaiser Normalization"

4 Rolation converged in 15 iterations

4.3 Scale Test by CHA

Collected CFA results: Chi-square/df 1408; GFI 0.826, TLE 9.912, CFI 923; RMSEA 0.052 proving that

scale modet of factors affecting financial auditing quality of business is appropriate to the market data

The standardized weights of scale are all high and higher than 0.5, and P-valne of each pair of concepts is lower than 0.05 On the other hand, the correlation coefficient with the standard deviation shows that they are higher than 1, Therefore, the stndy model haz been adjusted and achieves converged value and differential value, The

‘model has no correlation among measurement crrors of factors, zo the model is unitary

Figure 1, Result of SEM theoretical model (standardized)

‘Table 3 Assumptions Lesting resulls

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

for unplementing frauds (if any} of the board of enterprise directors, Poiicics and management procedures are an

đmporlant systeun in management and control of cornpanies; if crucial transaclions / businesses in organizations

do not have specific regulations on how to organize and conduct or are not strictly complied creating opportunitics for individuals to perform non-coutrolled frauds,

‘Management information systems are not enough details and not reported regularly If report systems of company management (especially financial management reports) are not reviewed periodically (uonthly quarterly) aud nol enough details 1o analyze and evaluale actual stales of enterprise activities, fraud actions (if any) are difficult to be discovered and prevented in time Besides control environments, policy

systemsicontrol procednres, accounting information ystems is an impartant component of intemat contro!

systems, Poor cnterpriscs of intemal control systems have risk of frauds not detectod in time or ercate opportunities for individuals’ individual groups to carry oul Keauds,

5.4 Ineflective Supervision of Board of Directors

Monopoly in mamagamest of a person or a group of people wilhoul scaonable control procedures wid supervision activities af the Board of Directors for process of building and presenting financial statements and

‘weak intemal control,

5.5 Benefits of Roond of Directrs/ Management Roard Associated with Finance Situation of Unierprises

Tncome simeture, salary and bonus of Hoard of T.eader depend significantly on finance results of enterprises there arc motivations for Board of Directors €o adjust reports in the better direction to get higher incomes / bonuses ‘The greater the proportion of bomuses from enterprise results is, the stronger molives (o increase business results are and vice versa To promote and generate motivations for production and business development, enterprises today have trend of increasing the proportion of incomes/honnses for statfs, employees, especially senior leader groups associated with business results of units This tool also creates motives for distorting reports to perform terminal income goals of Board of Leaders it compames if uo! well coutrolled

-5 Pressure of Meeting Expectations of Tlard Parties

Expectations of third partics (shurcholdcrs, investors and banks) relate goals sucls us stock price, profil cfliciency aud finance structure, If expectation levels are loo optimistic, i will pul pressure on Executive Bourd to meet these expectations inchuling to distorting financial statements Especially when enterprises have plans to issue stocks and shares or mobilize capital from a bank, or a number of major shareholders plan to withdraw capital rom companies, changes of profit results increase / dcereage vatue of stocks and shares, or changes af finance structure inerease financial capacity of enterprises Companies listed on tke stock market tefore information releasing more stocks and shares are quite common,

Tn addition, auditors shonld pay attention to pressure of company in a year stich as pressures an loans, pressures

to achicve financial goals Management Board has set is an important factor affecting risks of derogations in the Einanvial stalements thal migh! be fiauds of units, Scclor environment has considerable elmauges in the direction

of adverse or positive for enterprises: when there are changes in market demand, competition and macro factors affecting enterprise business plans, enterprises will have trend of handling technically financial statements in order to achieve business goals assigned Economic recestion in recent years, enterprises do not reach business plans, even fall into losses and bankrupicies ‘Yo survive und conlmuc Lo reccive support from investors, banks providing loans, trusinesses will (eud lo build financial slulemenls of increasing pralils / decreasing losses However, enterprises are always under pressure of ohjective and subjective causes auch as political instability, natural disasters, high competition irom competitors and rapid changer in technical technology while business market saturates and demand of consuming products declines, Abnormal fluctuations from husiness activities and financial situations of business profession and seclor negatively iinpact finarwial siluation of enterprises even stake Insses in bnsiness activities leading fo risks of bankruptcy or asset attachment ar distrainment To

maintain financial stability and potentially Incrative, directors or employees of nnits should adjust financial statements in the positive direction for business bencfits,

Professional qualification of auditors presents the quality of auditing in developed countries Similarly, qualification and quality are cssentially important to auditing financial statements in Vietnam ‘This iz the basis for researches in hoth theories and applicati

References

Boon, K., Crowe, $., McKianan, J., & Ross (2005) Compulsory Andit Tendering and Audit Fees: Evidence from Austratian Local Government Infernational Journal of Auditing Accotoning Research Journal, 9(3),

rww.cesencl onyiass Asion Social Scicuce ‘Vol 11, No 27; 2015

Exlaclion Melhod: Principal Component Analy

Rotation Melhod: Varismax wilh Kaiser Normalization"

4 Rolation converged in 15 iterations

4.3 Scale Test by CHA

Collected CFA results: Chi-square/df 1408; GFI 0.826, TLE 9.912, CFI 923; RMSEA 0.052 proving that

scale modet of factors affecting financial auditing quality of business is appropriate to the market data

The standardized weights of scale are all high and higher than 0.5, and P-valne of each pair of concepts is lower than 0.05 On the other hand, the correlation coefficient with the standard deviation shows that they are higher than 1, Therefore, the stndy model haz been adjusted and achieves converged value and differential value, The

‘model has no correlation among measurement crrors of factors, zo the model is unitary

Figure 1, Result of SEM theoretical model (standardized)

‘Table 3 Assumptions Lesting resulls

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

Dull, A (2004), Dinentions of audit quality: University of Paisley

Ha, H ' N (2012), Solutions fo improve and strengthen quality control of financial sterement audit in public interest units, Branch-level research project Ministry of Firance

Hai, D H Q014) Criteria system of business culture indentification Applying for Vietnam: businesses (Doctoral thesis) National Feonomics University

Lam, 8., & Chang, 8 (1994) Auditor Service Quality and Auditor Size: Evidence from Initial Public Offerings

in Singapore Journal of hnernation:d Accounting, Auditing & Taxation, 3, 103-114 hip: idx doi.org/10 1016/1061-8518(94)90009-4

Lennox, C 8 (1999) Audit Quality and Auditor Size: An Evaluation of Reputation and Deep Pockets Hypotheses Journal of Business Kinance and Acconrling, 20/8), tr 778-805 bilip:{fdx.doi.org/LO.LLLM

1468-5957.00275

Long, N D (2002) Solutions to improve quality of independent caudit in Vieinam (Doctoral thesis) Vieinam

‘University of Commerce

My, N T (2013) Improving the audit of financial statemenis af listed firms on Vietuam stock market (Doctoral

thesis) National Kconomics University

Palmrose, Z (1988) An Analysis of Auditor Litgation and Audit Service Quality, The Accovmling Review 63,

55-73

Thuy, B 1 (2014) #ezeech on factors thal affect financial stetenvend caukl quedity of companies listed on stock market of Fietnant (Doctoral thesis) National Economics University

Copyrights

Copyright for this articte is retained by the author(s), with first publication rights granted to the journal

‘Vhis is an oper-access article dislribuled under lhe lens arid couditions of the Creative Commons Atiribulion license (hitp:/creativecommons.org/licenses/hy/3.00)

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

5 Conclusions

‘This study shag built a model of factors affecting financial statement audit quality of business “Lhe test results showed thal factors: H4 - Gccupatiowal Qualificalion is au important Caclor affecting audit quatity of enterprise

financial statements, and HI - Legal Fnvironment, H2 - Factors belonging to bus 3 - Independence, H5 -

Quality control system of audit firm, [16 - Other factors that do not affect audit quality of business financial statements because of (P> 0.1 - ‘Table 2) At the same time, the results showed that thcorctical models which iz suilable with market duta, mueaming thai here is a positive relatioaship between the factors thai affect audit quality of business financial statements, Since then, in the perspective of independent auditors, study of effect of

audit quality factors in building financial statements has helped auditors focus on important factors affecting on

Sraud actions in building business financial statement in Victnam and design appropriate audit procedures delecting fraud, and encouraged audilurs fo enhance effective audil procedures im order to detect fraud in

‘building Vietnam enterprise financial statements, especially enterprises listed on Vietnam's stock macket The

research results as a reference for anditors to have sohitions for improving audit quality of financial statements

Spceifically, Occupation Qualification hay evaluated factors belonging to business a3 follows:

5.1 Sữnebge Qƒ Capitel Ouerahip

Jn factors belonging to enterprises, structure of capital ownership to following types of enterprises: State

Enterprises: Characteristics of stale cnterprises are thal capital belorigs 10 State and is nol associated wilh an

organization aud a specific person in the role of shareholders, Board of Directors, or Executive Board, Stale capital representatives seem more of token rather than real shareholders As a result, business of state enterprises does not bring direct benefits to state capital representatives Fraud opportunities and motives are higher than that in private enterprisca, jomt-stock companics, specially, in declaring profitabie achievements for one or individual group of state capital representatives

Enterprises which have capital governed by several major shareholders: the fewer the number of shareholder is, the more opportunities are for enterprises to perform fraud actions with the aim of serving personal henefits of governing shareholders / shareholder groups Typical example: are public businesses / organization: and financial msfitulions Risk levels of fraud and inlucnee are marked if manipulated ‘The revenl incidenls involve acts of acquiring und manipulating banks in the world and in Vietnam

5.2 Opercding Sector Characteristic of Enterprises

Enlerprises operating in highly monopolistic fields are able Lo anpose conditions on business partners: ‘This advantage may help enterprises conduet some non-market transactions in order to serve benefits of businesses or individual gronps of leaders and investors State moncpoly enterprises in some fields/ sectors will often have this advantage

Group model enterprises including may member units: Enterprises can perform these fiands through (assictious with menber units, joint venture units, especially non-market’ short transactions implenentiug goals of enterprise leaders A typical sample in recent years is establishing backyard companies! subsidiaries of

some corporations for the purpose of producing henefits for some individual groups! avoiding tax, conducting

capital mobility transactions wien conducting transactions throug these units

have more characteristic business uclivitics: many different business aclivitics, complexity of transactions, and muy characteristic accounting policies or financial businesses using a lot of accounting estimates accounting to increase chances of carrying out frauds to enterprises The risk of frand in conglomerate enterprises is larger than that in monophyletic ones

5.3 Ineffective Quality-Comrol Systems

Members of Board of Tirectors are not separated from Tixecutive Roard: effectiveness of independence and mouttoring role of Board of Directors is reduced and opportunities to perform frauds in these businesacs will rise,

‘ypical exumples are enlerprises whose chainuan of the Board of Directors is general director, They are also snain causes which managers concider as holes in control process to produce frauds of largest economic Groups

in the world and Vietnam

Insufficient and ineffective management policies: Management Policies, ineffective Accounting and Finance Policies, no details and regulations for Irmsaction and finance activities of companies will provide opportumilies

rww.cesencl onyiass Asion Social Scicuce ‘Vol 11, No 27; 2015

Exlaclion Melhod: Principal Component Analy

Rotation Melhod: Varismax wilh Kaiser Normalization"

4 Rolation converged in 15 iterations

4.3 Scale Test by CHA

Collected CFA results: Chi-square/df 1408; GFI 0.826, TLE 9.912, CFI 923; RMSEA 0.052 proving that

scale modet of factors affecting financial auditing quality of business is appropriate to the market data

The standardized weights of scale are all high and higher than 0.5, and P-valne of each pair of concepts is lower than 0.05 On the other hand, the correlation coefficient with the standard deviation shows that they are higher than 1, Therefore, the stndy model haz been adjusted and achieves converged value and differential value, The

‘model has no correlation among measurement crrors of factors, zo the model is unitary

Figure 1, Result of SEM theoretical model (standardized)

‘Table 3 Assumptions Lesting resulls

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

Dull, A (2004), Dinentions of audit quality: University of Paisley

Ha, H ' N (2012), Solutions fo improve and strengthen quality control of financial sterement audit in public interest units, Branch-level research project Ministry of Firance

Hai, D H Q014) Criteria system of business culture indentification Applying for Vietnam: businesses (Doctoral thesis) National Feonomics University

Lam, 8., & Chang, 8 (1994) Auditor Service Quality and Auditor Size: Evidence from Initial Public Offerings

in Singapore Journal of hnernation:d Accounting, Auditing & Taxation, 3, 103-114 hip: idx doi.org/10 1016/1061-8518(94)90009-4

Lennox, C 8 (1999) Audit Quality and Auditor Size: An Evaluation of Reputation and Deep Pockets Hypotheses Journal of Business Kinance and Acconrling, 20/8), tr 778-805 bilip:{fdx.doi.org/LO.LLLM

1468-5957.00275

Long, N D (2002) Solutions to improve quality of independent caudit in Vieinam (Doctoral thesis) Vieinam

‘University of Commerce

My, N T (2013) Improving the audit of financial statemenis af listed firms on Vietuam stock market (Doctoral

thesis) National Kconomics University

Palmrose, Z (1988) An Analysis of Auditor Litgation and Audit Service Quality, The Accovmling Review 63,

55-73

Thuy, B 1 (2014) #ezeech on factors thal affect financial stetenvend caukl quedity of companies listed on stock market of Fietnant (Doctoral thesis) National Economics University

Copyrights

Copyright for this articte is retained by the author(s), with first publication rights granted to the journal

‘Vhis is an oper-access article dislribuled under lhe lens arid couditions of the Creative Commons Atiribulion license (hitp:/creativecommons.org/licenses/hy/3.00)

in

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

variable and sum were over 0.3, 90 the reliability of scale of cach aspcet is enzurod the specifie Cronbach Alpha coefficient is: Legal enviroment (MIPL) 0.891; Facturs belonging to business (DN} 0.853; Independeace (DL) = 0.836, Occupational qualifications (TCM) = 0,656, Quality control system af the firm (HTKS} = 0.819 and Others (NTK) = 0.798

4.2 Factor Anabusis

‘To assese whether the ETA meazure is suitable to analyze in thie case, the author used KMO and Bartlett's tests

An exploratory factor analysis, KMO (Kaiscr-Meycr-Olkin) index is uscd Lo lest lhe appropriateness of factor

analysis This analysis is appropriate when KMO value ranges from 0.5 to 1 If this value is lower than 0.5 factor analysis is possibly inappropriate to dara

KMO and Bartlett's tests iu factor analysis using, 25 observed variables af the scale shows that KMO index

is high (0.853) with significance equal to 0 (sig = 0.000) Thus, KM index of aver than 0.5 indicates that the application of exploratory FacLor analysis is appropriate

For factor analysis, the author used cigenvalucs to determine number of factors Eigenvalues represents the amount of variation explained by the factors Only Factors Uhat ave eigeuvalue of higher than 1 were reluined in the model

The results provided data on eigenvalue analyzed from 25 observed variables There are 25 factors with

calculated eigenvalues corresponding, to 25 observed variables Ilowever, there are only 6 factors that have

cigonvaluc of higher than 1, while the cigenvaluc of the remaining factors is lower than 1 Rotation Sums of Squared Loadmgs hil a high Lo approximalely 66.02%%, winch means hal lhe use of 6 fatlor representing 25 observed vatiables can explain 66.09% of data variation In analysis, the Rotation Sums of Squated Loadings” reaching 50% is

acceptable Tence, we can conclude that six factors can he used to reflect the information provided by 25 cheerved

variables

Factor analysis is done with extraction method of Principal Component Analysis using Varimax rotation based

‘on suck criteria of Communality >= 0,5 and Factor loading >= 0.3 Facimrcs in table Rotated Component

Mautrix called Fnetor londings shall be selevlied if salisfying the above crileria, On a certain row, observed variable with highest factor loading lies in any colnmn, then observed variable shall belong to factor in that

column After rotation, 25 observed variables all satistied the criteria for factar loading of higher than 0.5 These

observed variables were divided into 6 groups of factor The specific factor loading of cach observed factor iz presented in Rotated Component Matrix Table (Table 2)

Table 2 Rotated Component Matrix*

079L 0.743 0.736 1.696

08 0.654

0484 B316 0.875

0.776

9401

0666 sae

rww.cesencl onyiass Asion Social Scicuce ‘Vol 11, No 27; 2015

Exlaclion Melhod: Principal Component Analy

Rotation Melhod: Varismax wilh Kaiser Normalization"

4 Rolation converged in 15 iterations

4.3 Scale Test by CHA

Collected CFA results: Chi-square/df 1408; GFI 0.826, TLE 9.912, CFI 923; RMSEA 0.052 proving that

scale modet of factors affecting financial auditing quality of business is appropriate to the market data

The standardized weights of scale are all high and higher than 0.5, and P-valne of each pair of concepts is lower than 0.05 On the other hand, the correlation coefficient with the standard deviation shows that they are higher than 1, Therefore, the stndy model haz been adjusted and achieves converged value and differential value, The

‘model has no correlation among measurement crrors of factors, zo the model is unitary

Figure 1, Result of SEM theoretical model (standardized)

‘Table 3 Assumptions Lesting resulls

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

for unplementing frauds (if any} of the board of enterprise directors, Poiicics and management procedures are an

đmporlant systeun in management and control of cornpanies; if crucial transaclions / businesses in organizations

do not have specific regulations on how to organize and conduct or are not strictly complied creating opportunitics for individuals to perform non-coutrolled frauds,

‘Management information systems are not enough details and not reported regularly If report systems of company management (especially financial management reports) are not reviewed periodically (uonthly quarterly) aud nol enough details 1o analyze and evaluale actual stales of enterprise activities, fraud actions (if any) are difficult to be discovered and prevented in time Besides control environments, policy

systemsicontrol procednres, accounting information ystems is an impartant component of intemat contro!

systems, Poor cnterpriscs of intemal control systems have risk of frauds not detectod in time or ercate opportunities for individuals’ individual groups to carry oul Keauds,

5.4 Ineflective Supervision of Board of Directors

Monopoly in mamagamest of a person or a group of people wilhoul scaonable control procedures wid supervision activities af the Board of Directors for process of building and presenting financial statements and

‘weak intemal control,

5.5 Benefits of Roond of Directrs/ Management Roard Associated with Finance Situation of Unierprises

Tncome simeture, salary and bonus of Hoard of T.eader depend significantly on finance results of enterprises there arc motivations for Board of Directors €o adjust reports in the better direction to get higher incomes / bonuses ‘The greater the proportion of bomuses from enterprise results is, the stronger molives (o increase business results are and vice versa To promote and generate motivations for production and business development, enterprises today have trend of increasing the proportion of incomes/honnses for statfs, employees, especially senior leader groups associated with business results of units This tool also creates motives for distorting reports to perform terminal income goals of Board of Leaders it compames if uo! well coutrolled

-5 Pressure of Meeting Expectations of Tlard Parties

Expectations of third partics (shurcholdcrs, investors and banks) relate goals sucls us stock price, profil cfliciency aud finance structure, If expectation levels are loo optimistic, i will pul pressure on Executive Bourd to meet these expectations inchuling to distorting financial statements Especially when enterprises have plans to issue stocks and shares or mobilize capital from a bank, or a number of major shareholders plan to withdraw capital rom companies, changes of profit results increase / dcereage vatue of stocks and shares, or changes af finance structure inerease financial capacity of enterprises Companies listed on tke stock market tefore information releasing more stocks and shares are quite common,

Tn addition, auditors shonld pay attention to pressure of company in a year stich as pressures an loans, pressures

to achicve financial goals Management Board has set is an important factor affecting risks of derogations in the Einanvial stalements thal migh! be fiauds of units, Scclor environment has considerable elmauges in the direction

of adverse or positive for enterprises: when there are changes in market demand, competition and macro factors affecting enterprise business plans, enterprises will have trend of handling technically financial statements in order to achieve business goals assigned Economic recestion in recent years, enterprises do not reach business plans, even fall into losses and bankrupicies ‘Yo survive und conlmuc Lo reccive support from investors, banks providing loans, trusinesses will (eud lo build financial slulemenls of increasing pralils / decreasing losses However, enterprises are always under pressure of ohjective and subjective causes auch as political instability, natural disasters, high competition irom competitors and rapid changer in technical technology while business market saturates and demand of consuming products declines, Abnormal fluctuations from husiness activities and financial situations of business profession and seclor negatively iinpact finarwial siluation of enterprises even stake Insses in bnsiness activities leading fo risks of bankruptcy or asset attachment ar distrainment To

maintain financial stability and potentially Incrative, directors or employees of nnits should adjust financial statements in the positive direction for business bencfits,

Professional qualification of auditors presents the quality of auditing in developed countries Similarly, qualification and quality are cssentially important to auditing financial statements in Vietnam ‘This iz the basis for researches in hoth theories and applicati

References

Boon, K., Crowe, $., McKianan, J., & Ross (2005) Compulsory Andit Tendering and Audit Fees: Evidence from Austratian Local Government Infernational Journal of Auditing Accotoning Research Journal, 9(3),

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

5 Conclusions

‘This study shag built a model of factors affecting financial statement audit quality of business “Lhe test results showed thal factors: H4 - Gccupatiowal Qualificalion is au important Caclor affecting audit quatity of enterprise

financial statements, and HI - Legal Fnvironment, H2 - Factors belonging to bus 3 - Independence, H5 -

Quality control system of audit firm, [16 - Other factors that do not affect audit quality of business financial statements because of (P> 0.1 - ‘Table 2) At the same time, the results showed that thcorctical models which iz suilable with market duta, mueaming thai here is a positive relatioaship between the factors thai affect audit quality of business financial statements, Since then, in the perspective of independent auditors, study of effect of

audit quality factors in building financial statements has helped auditors focus on important factors affecting on

Sraud actions in building business financial statement in Victnam and design appropriate audit procedures delecting fraud, and encouraged audilurs fo enhance effective audil procedures im order to detect fraud in

‘building Vietnam enterprise financial statements, especially enterprises listed on Vietnam's stock macket The

research results as a reference for anditors to have sohitions for improving audit quality of financial statements

Spceifically, Occupation Qualification hay evaluated factors belonging to business a3 follows:

5.1 Sữnebge Qƒ Capitel Ouerahip

Jn factors belonging to enterprises, structure of capital ownership to following types of enterprises: State

Enterprises: Characteristics of stale cnterprises are thal capital belorigs 10 State and is nol associated wilh an

organization aud a specific person in the role of shareholders, Board of Directors, or Executive Board, Stale capital representatives seem more of token rather than real shareholders As a result, business of state enterprises does not bring direct benefits to state capital representatives Fraud opportunities and motives are higher than that in private enterprisca, jomt-stock companics, specially, in declaring profitabie achievements for one or individual group of state capital representatives

Enterprises which have capital governed by several major shareholders: the fewer the number of shareholder is, the more opportunities are for enterprises to perform fraud actions with the aim of serving personal henefits of governing shareholders / shareholder groups Typical example: are public businesses / organization: and financial msfitulions Risk levels of fraud and inlucnee are marked if manipulated ‘The revenl incidenls involve acts of acquiring und manipulating banks in the world and in Vietnam

5.2 Opercding Sector Characteristic of Enterprises

Enlerprises operating in highly monopolistic fields are able Lo anpose conditions on business partners: ‘This advantage may help enterprises conduet some non-market transactions in order to serve benefits of businesses or individual gronps of leaders and investors State moncpoly enterprises in some fields/ sectors will often have this advantage

Group model enterprises including may member units: Enterprises can perform these fiands through (assictious with menber units, joint venture units, especially non-market’ short transactions implenentiug goals of enterprise leaders A typical sample in recent years is establishing backyard companies! subsidiaries of

some corporations for the purpose of producing henefits for some individual groups! avoiding tax, conducting

capital mobility transactions wien conducting transactions throug these units

have more characteristic business uclivitics: many different business aclivitics, complexity of transactions, and muy characteristic accounting policies or financial businesses using a lot of accounting estimates accounting to increase chances of carrying out frauds to enterprises The risk of frand in conglomerate enterprises is larger than that in monophyletic ones

5.3 Ineffective Quality-Comrol Systems

Members of Board of Tirectors are not separated from Tixecutive Roard: effectiveness of independence and mouttoring role of Board of Directors is reduced and opportunities to perform frauds in these businesacs will rise,

‘ypical exumples are enlerprises whose chainuan of the Board of Directors is general director, They are also snain causes which managers concider as holes in control process to produce frauds of largest economic Groups

in the world and Vietnam

Insufficient and ineffective management policies: Management Policies, ineffective Accounting and Finance Policies, no details and regulations for Irmsaction and finance activities of companies will provide opportumilies

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

Dull, A (2004), Dinentions of audit quality: University of Paisley

Ha, H ' N (2012), Solutions fo improve and strengthen quality control of financial sterement audit in public interest units, Branch-level research project Ministry of Firance

Hai, D H Q014) Criteria system of business culture indentification Applying for Vietnam: businesses (Doctoral thesis) National Feonomics University

Lam, 8., & Chang, 8 (1994) Auditor Service Quality and Auditor Size: Evidence from Initial Public Offerings

in Singapore Journal of hnernation:d Accounting, Auditing & Taxation, 3, 103-114 hip: idx doi.org/10 1016/1061-8518(94)90009-4

Lennox, C 8 (1999) Audit Quality and Auditor Size: An Evaluation of Reputation and Deep Pockets Hypotheses Journal of Business Kinance and Acconrling, 20/8), tr 778-805 bilip:{fdx.doi.org/LO.LLLM

1468-5957.00275

Long, N D (2002) Solutions to improve quality of independent caudit in Vieinam (Doctoral thesis) Vieinam

‘University of Commerce

My, N T (2013) Improving the audit of financial statemenis af listed firms on Vietuam stock market (Doctoral

thesis) National Kconomics University

Palmrose, Z (1988) An Analysis of Auditor Litgation and Audit Service Quality, The Accovmling Review 63,

55-73

Thuy, B 1 (2014) #ezeech on factors thal affect financial stetenvend caukl quedity of companies listed on stock market of Fietnant (Doctoral thesis) National Economics University

Copyrights

Copyright for this articte is retained by the author(s), with first publication rights granted to the journal

‘Vhis is an oper-access article dislribuled under lhe lens arid couditions of the Creative Commons Atiribulion license (hitp:/creativecommons.org/licenses/hy/3.00)

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

variable and sum were over 0.3, 90 the reliability of scale of cach aspcet is enzurod the specifie Cronbach Alpha coefficient is: Legal enviroment (MIPL) 0.891; Facturs belonging to business (DN} 0.853; Independeace (DL) = 0.836, Occupational qualifications (TCM) = 0,656, Quality control system af the firm (HTKS} = 0.819 and Others (NTK) = 0.798

4.2 Factor Anabusis

‘To assese whether the ETA meazure is suitable to analyze in thie case, the author used KMO and Bartlett's tests

An exploratory factor analysis, KMO (Kaiscr-Meycr-Olkin) index is uscd Lo lest lhe appropriateness of factor

analysis This analysis is appropriate when KMO value ranges from 0.5 to 1 If this value is lower than 0.5 factor analysis is possibly inappropriate to dara

KMO and Bartlett's tests iu factor analysis using, 25 observed variables af the scale shows that KMO index

is high (0.853) with significance equal to 0 (sig = 0.000) Thus, KM index of aver than 0.5 indicates that the application of exploratory FacLor analysis is appropriate

For factor analysis, the author used cigenvalucs to determine number of factors Eigenvalues represents the amount of variation explained by the factors Only Factors Uhat ave eigeuvalue of higher than 1 were reluined in the model

The results provided data on eigenvalue analyzed from 25 observed variables There are 25 factors with

calculated eigenvalues corresponding, to 25 observed variables Ilowever, there are only 6 factors that have

cigonvaluc of higher than 1, while the cigenvaluc of the remaining factors is lower than 1 Rotation Sums of Squared Loadmgs hil a high Lo approximalely 66.02%%, winch means hal lhe use of 6 fatlor representing 25 observed vatiables can explain 66.09% of data variation In analysis, the Rotation Sums of Squated Loadings” reaching 50% is

acceptable Tence, we can conclude that six factors can he used to reflect the information provided by 25 cheerved

variables

Factor analysis is done with extraction method of Principal Component Analysis using Varimax rotation based

‘on suck criteria of Communality >= 0,5 and Factor loading >= 0.3 Facimrcs in table Rotated Component

Mautrix called Fnetor londings shall be selevlied if salisfying the above crileria, On a certain row, observed variable with highest factor loading lies in any colnmn, then observed variable shall belong to factor in that

column After rotation, 25 observed variables all satistied the criteria for factar loading of higher than 0.5 These

observed variables were divided into 6 groups of factor The specific factor loading of cach observed factor iz presented in Rotated Component Matrix Table (Table 2)

08 0.654

0484 B316 0.875

0.776

9401

0666 sae

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

5 Conclusions

‘This study shag built a model of factors affecting financial statement audit quality of business “Lhe test results showed thal factors: H4 - Gccupatiowal Qualificalion is au important Caclor affecting audit quatity of enterprise

financial statements, and HI - Legal Fnvironment, H2 - Factors belonging to bus 3 - Independence, H5 -

Quality control system of audit firm, [16 - Other factors that do not affect audit quality of business financial statements because of (P> 0.1 - ‘Table 2) At the same time, the results showed that thcorctical models which iz suilable with market duta, mueaming thai here is a positive relatioaship between the factors thai affect audit quality of business financial statements, Since then, in the perspective of independent auditors, study of effect of

audit quality factors in building financial statements has helped auditors focus on important factors affecting on

Sraud actions in building business financial statement in Victnam and design appropriate audit procedures delecting fraud, and encouraged audilurs fo enhance effective audil procedures im order to detect fraud in

‘building Vietnam enterprise financial statements, especially enterprises listed on Vietnam's stock macket The

research results as a reference for anditors to have sohitions for improving audit quality of financial statements

Spceifically, Occupation Qualification hay evaluated factors belonging to business a3 follows:

5.1 Sữnebge Qƒ Capitel Ouerahip

Jn factors belonging to enterprises, structure of capital ownership to following types of enterprises: State

Enterprises: Characteristics of stale cnterprises are thal capital belorigs 10 State and is nol associated wilh an

organization aud a specific person in the role of shareholders, Board of Directors, or Executive Board, Stale capital representatives seem more of token rather than real shareholders As a result, business of state enterprises does not bring direct benefits to state capital representatives Fraud opportunities and motives are higher than that in private enterprisca, jomt-stock companics, specially, in declaring profitabie achievements for one or individual group of state capital representatives

Enterprises which have capital governed by several major shareholders: the fewer the number of shareholder is, the more opportunities are for enterprises to perform fraud actions with the aim of serving personal henefits of governing shareholders / shareholder groups Typical example: are public businesses / organization: and financial msfitulions Risk levels of fraud and inlucnee are marked if manipulated ‘The revenl incidenls involve acts of acquiring und manipulating banks in the world and in Vietnam

5.2 Opercding Sector Characteristic of Enterprises

Enlerprises operating in highly monopolistic fields are able Lo anpose conditions on business partners: ‘This advantage may help enterprises conduet some non-market transactions in order to serve benefits of businesses or individual gronps of leaders and investors State moncpoly enterprises in some fields/ sectors will often have this advantage

Group model enterprises including may member units: Enterprises can perform these fiands through (assictious with menber units, joint venture units, especially non-market’ short transactions implenentiug goals of enterprise leaders A typical sample in recent years is establishing backyard companies! subsidiaries of

some corporations for the purpose of producing henefits for some individual groups! avoiding tax, conducting

capital mobility transactions wien conducting transactions throug these units

have more characteristic business uclivitics: many different business aclivitics, complexity of transactions, and muy characteristic accounting policies or financial businesses using a lot of accounting estimates accounting to increase chances of carrying out frauds to enterprises The risk of frand in conglomerate enterprises is larger than that in monophyletic ones

5.3 Ineffective Quality-Comrol Systems

Members of Board of Tirectors are not separated from Tixecutive Roard: effectiveness of independence and mouttoring role of Board of Directors is reduced and opportunities to perform frauds in these businesacs will rise,

‘ypical exumples are enlerprises whose chainuan of the Board of Directors is general director, They are also snain causes which managers concider as holes in control process to produce frauds of largest economic Groups

in the world and Vietnam

Malli: scetor cnlxrpl

Txecutive Board is decentralized with great power, power is concentrated in one or a number of people: Decentralization of marked power to Executive Board will raise the sense of initiative; however, this will also create opporlunities for isplanenting fauds if any

Insufficient and ineffective management policies: Management Policies, ineffective Accounting and Finance Policies, no details and regulations for Irmsaction and finance activities of companies will provide opportumilies

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

5 Conclusions

‘This study shag built a model of factors affecting financial statement audit quality of business “Lhe test results showed thal factors: H4 - Gccupatiowal Qualificalion is au important Caclor affecting audit quatity of enterprise

financial statements, and HI - Legal Fnvironment, H2 - Factors belonging to bus 3 - Independence, H5 -

Quality control system of audit firm, [16 - Other factors that do not affect audit quality of business financial statements because of (P> 0.1 - ‘Table 2) At the same time, the results showed that thcorctical models which iz suilable with market duta, mueaming thai here is a positive relatioaship between the factors thai affect audit quality of business financial statements, Since then, in the perspective of independent auditors, study of effect of

audit quality factors in building financial statements has helped auditors focus on important factors affecting on

Sraud actions in building business financial statement in Victnam and design appropriate audit procedures delecting fraud, and encouraged audilurs fo enhance effective audil procedures im order to detect fraud in

‘building Vietnam enterprise financial statements, especially enterprises listed on Vietnam's stock macket The

research results as a reference for anditors to have sohitions for improving audit quality of financial statements

Spceifically, Occupation Qualification hay evaluated factors belonging to business a3 follows:

5.1 Sữnebge Qƒ Capitel Ouerahip

Jn factors belonging to enterprises, structure of capital ownership to following types of enterprises: State

Enterprises: Characteristics of stale cnterprises are thal capital belorigs 10 State and is nol associated wilh an

organization aud a specific person in the role of shareholders, Board of Directors, or Executive Board, Stale capital representatives seem more of token rather than real shareholders As a result, business of state enterprises does not bring direct benefits to state capital representatives Fraud opportunities and motives are higher than that in private enterprisca, jomt-stock companics, specially, in declaring profitabie achievements for one or individual group of state capital representatives

Enterprises which have capital governed by several major shareholders: the fewer the number of shareholder is, the more opportunities are for enterprises to perform fraud actions with the aim of serving personal henefits of governing shareholders / shareholder groups Typical example: are public businesses / organization: and financial msfitulions Risk levels of fraud and inlucnee are marked if manipulated ‘The revenl incidenls involve acts of acquiring und manipulating banks in the world and in Vietnam

5.2 Opercding Sector Characteristic of Enterprises

Enlerprises operating in highly monopolistic fields are able Lo anpose conditions on business partners: ‘This advantage may help enterprises conduet some non-market transactions in order to serve benefits of businesses or individual gronps of leaders and investors State moncpoly enterprises in some fields/ sectors will often have this advantage

Group model enterprises including may member units: Enterprises can perform these fiands through (assictious with menber units, joint venture units, especially non-market’ short transactions implenentiug goals of enterprise leaders A typical sample in recent years is establishing backyard companies! subsidiaries of

some corporations for the purpose of producing henefits for some individual groups! avoiding tax, conducting

capital mobility transactions wien conducting transactions throug these units

have more characteristic business uclivitics: many different business aclivitics, complexity of transactions, and muy characteristic accounting policies or financial businesses using a lot of accounting estimates accounting to increase chances of carrying out frauds to enterprises The risk of frand in conglomerate enterprises is larger than that in monophyletic ones

5.3 Ineffective Quality-Comrol Systems

Members of Board of Tirectors are not separated from Tixecutive Roard: effectiveness of independence and mouttoring role of Board of Directors is reduced and opportunities to perform frauds in these businesacs will rise,

‘ypical exumples are enlerprises whose chainuan of the Board of Directors is general director, They are also snain causes which managers concider as holes in control process to produce frauds of largest economic Groups

in the world and Vietnam

Insufficient and ineffective management policies: Management Policies, ineffective Accounting and Finance Policies, no details and regulations for Irmsaction and finance activities of companies will provide opportumilies

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

variable and sum were over 0.3, 90 the reliability of scale of cach aspcet is enzurod the specifie Cronbach Alpha coefficient is: Legal enviroment (MIPL) 0.891; Facturs belonging to business (DN} 0.853; Independeace (DL) = 0.836, Occupational qualifications (TCM) = 0,656, Quality control system af the firm (HTKS} = 0.819 and Others (NTK) = 0.798

4.2 Factor Anabusis

‘To assese whether the ETA meazure is suitable to analyze in thie case, the author used KMO and Bartlett's tests

An exploratory factor analysis, KMO (Kaiscr-Meycr-Olkin) index is uscd Lo lest lhe appropriateness of factor

analysis This analysis is appropriate when KMO value ranges from 0.5 to 1 If this value is lower than 0.5 factor analysis is possibly inappropriate to dara

KMO and Bartlett's tests iu factor analysis using, 25 observed variables af the scale shows that KMO index

is high (0.853) with significance equal to 0 (sig = 0.000) Thus, KM index of aver than 0.5 indicates that the application of exploratory FacLor analysis is appropriate

For factor analysis, the author used cigenvalucs to determine number of factors Eigenvalues represents the amount of variation explained by the factors Only Factors Uhat ave eigeuvalue of higher than 1 were reluined in the model

The results provided data on eigenvalue analyzed from 25 observed variables There are 25 factors with

calculated eigenvalues corresponding, to 25 observed variables Ilowever, there are only 6 factors that have

cigonvaluc of higher than 1, while the cigenvaluc of the remaining factors is lower than 1 Rotation Sums of Squared Loadmgs hil a high Lo approximalely 66.02%%, winch means hal lhe use of 6 fatlor representing 25 observed vatiables can explain 66.09% of data variation In analysis, the Rotation Sums of Squated Loadings” reaching 50% is

acceptable Tence, we can conclude that six factors can he used to reflect the information provided by 25 cheerved

variables

Factor analysis is done with extraction method of Principal Component Analysis using Varimax rotation based

‘on suck criteria of Communality >= 0,5 and Factor loading >= 0.3 Facimrcs in table Rotated Component

Mautrix called Fnetor londings shall be selevlied if salisfying the above crileria, On a certain row, observed variable with highest factor loading lies in any colnmn, then observed variable shall belong to factor in that

column After rotation, 25 observed variables all satistied the criteria for factar loading of higher than 0.5 These

observed variables were divided into 6 groups of factor The specific factor loading of cach observed factor iz presented in Rotated Component Matrix Table (Table 2)

Table 2 Rotated Component Matrix*

079L 0.743 0.736 1.696

08 0.654

0484 B316 0.875

0.776

9401

0666 sae

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

Dull, A (2004), Dinentions of audit quality: University of Paisley

Ha, H ' N (2012), Solutions fo improve and strengthen quality control of financial sterement audit in public interest units, Branch-level research project Ministry of Firance

Hai, D H Q014) Criteria system of business culture indentification Applying for Vietnam: businesses (Doctoral thesis) National Feonomics University

Lam, 8., & Chang, 8 (1994) Auditor Service Quality and Auditor Size: Evidence from Initial Public Offerings

in Singapore Journal of hnernation:d Accounting, Auditing & Taxation, 3, 103-114 hip: idx doi.org/10 1016/1061-8518(94)90009-4

Lennox, C 8 (1999) Audit Quality and Auditor Size: An Evaluation of Reputation and Deep Pockets Hypotheses Journal of Business Kinance and Acconrling, 20/8), tr 778-805 bilip:{fdx.doi.org/LO.LLLM

1468-5957.00275

Long, N D (2002) Solutions to improve quality of independent caudit in Vieinam (Doctoral thesis) Vieinam

‘University of Commerce

My, N T (2013) Improving the audit of financial statemenis af listed firms on Vietuam stock market (Doctoral

thesis) National Kconomics University

Palmrose, Z (1988) An Analysis of Auditor Litgation and Audit Service Quality, The Accovmling Review 63,

55-73

Thuy, B 1 (2014) #ezeech on factors thal affect financial stetenvend caukl quedity of companies listed on stock market of Fietnant (Doctoral thesis) National Economics University

Copyrights

Copyright for this articte is retained by the author(s), with first publication rights granted to the journal

‘Vhis is an oper-access article dislribuled under lhe lens arid couditions of the Creative Commons Atiribulion license (hitp:/creativecommons.org/licenses/hy/3.00)

in

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

for unplementing frauds (if any} of the board of enterprise directors, Poiicics and management procedures are an

đmporlant systeun in management and control of cornpanies; if crucial transaclions / businesses in organizations

do not have specific regulations on how to organize and conduct or are not strictly complied creating opportunitics for individuals to perform non-coutrolled frauds,

‘Management information systems are not enough details and not reported regularly If report systems of company management (especially financial management reports) are not reviewed periodically (uonthly quarterly) aud nol enough details 1o analyze and evaluale actual stales of enterprise activities, fraud actions (if any) are difficult to be discovered and prevented in time Besides control environments, policy

systemsicontrol procednres, accounting information ystems is an impartant component of intemat contro!

systems, Poor cnterpriscs of intemal control systems have risk of frauds not detectod in time or ercate opportunities for individuals’ individual groups to carry oul Keauds,

5.4 Ineflective Supervision of Board of Directors

Monopoly in mamagamest of a person or a group of people wilhoul scaonable control procedures wid supervision activities af the Board of Directors for process of building and presenting financial statements and

‘weak intemal control,

5.5 Benefits of Roond of Directrs/ Management Roard Associated with Finance Situation of Unierprises

Tncome simeture, salary and bonus of Hoard of T.eader depend significantly on finance results of enterprises there arc motivations for Board of Directors €o adjust reports in the better direction to get higher incomes / bonuses ‘The greater the proportion of bomuses from enterprise results is, the stronger molives (o increase business results are and vice versa To promote and generate motivations for production and business development, enterprises today have trend of increasing the proportion of incomes/honnses for statfs, employees, especially senior leader groups associated with business results of units This tool also creates motives for distorting reports to perform terminal income goals of Board of Leaders it compames if uo! well coutrolled

-5 Pressure of Meeting Expectations of Tlard Parties

Expectations of third partics (shurcholdcrs, investors and banks) relate goals sucls us stock price, profil cfliciency aud finance structure, If expectation levels are loo optimistic, i will pul pressure on Executive Bourd to meet these expectations inchuling to distorting financial statements Especially when enterprises have plans to issue stocks and shares or mobilize capital from a bank, or a number of major shareholders plan to withdraw capital rom companies, changes of profit results increase / dcereage vatue of stocks and shares, or changes af finance structure inerease financial capacity of enterprises Companies listed on tke stock market tefore information releasing more stocks and shares are quite common,

Tn addition, auditors shonld pay attention to pressure of company in a year stich as pressures an loans, pressures

to achicve financial goals Management Board has set is an important factor affecting risks of derogations in the Einanvial stalements thal migh! be fiauds of units, Scclor environment has considerable elmauges in the direction

of adverse or positive for enterprises: when there are changes in market demand, competition and macro factors affecting enterprise business plans, enterprises will have trend of handling technically financial statements in order to achieve business goals assigned Economic recestion in recent years, enterprises do not reach business plans, even fall into losses and bankrupicies ‘Yo survive und conlmuc Lo reccive support from investors, banks providing loans, trusinesses will (eud lo build financial slulemenls of increasing pralils / decreasing losses However, enterprises are always under pressure of ohjective and subjective causes auch as political instability, natural disasters, high competition irom competitors and rapid changer in technical technology while business market saturates and demand of consuming products declines, Abnormal fluctuations from husiness activities and financial situations of business profession and seclor negatively iinpact finarwial siluation of enterprises even stake Insses in bnsiness activities leading fo risks of bankruptcy or asset attachment ar distrainment To

maintain financial stability and potentially Incrative, directors or employees of nnits should adjust financial statements in the positive direction for business bencfits,

Professional qualification of auditors presents the quality of auditing in developed countries Similarly, qualification and quality are cssentially important to auditing financial statements in Vietnam ‘This iz the basis for researches in hoth theories and applicati

References

Boon, K., Crowe, $., McKianan, J., & Ross (2005) Compulsory Andit Tendering and Audit Fees: Evidence from Austratian Local Government Infernational Journal of Auditing Accotoning Research Journal, 9(3),

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

variable and sum were over 0.3, 90 the reliability of scale of cach aspcet is enzurod the specifie Cronbach Alpha coefficient is: Legal enviroment (MIPL) 0.891; Facturs belonging to business (DN} 0.853; Independeace (DL) = 0.836, Occupational qualifications (TCM) = 0,656, Quality control system af the firm (HTKS} = 0.819 and Others (NTK) = 0.798

4.2 Factor Anabusis

‘To assese whether the ETA meazure is suitable to analyze in thie case, the author used KMO and Bartlett's tests

An exploratory factor analysis, KMO (Kaiscr-Meycr-Olkin) index is uscd Lo lest lhe appropriateness of factor

analysis This analysis is appropriate when KMO value ranges from 0.5 to 1 If this value is lower than 0.5 factor analysis is possibly inappropriate to dara

KMO and Bartlett's tests iu factor analysis using, 25 observed variables af the scale shows that KMO index

is high (0.853) with significance equal to 0 (sig = 0.000) Thus, KM index of aver than 0.5 indicates that the application of exploratory FacLor analysis is appropriate

For factor analysis, the author used cigenvalucs to determine number of factors Eigenvalues represents the amount of variation explained by the factors Only Factors Uhat ave eigeuvalue of higher than 1 were reluined in the model

The results provided data on eigenvalue analyzed from 25 observed variables There are 25 factors with

calculated eigenvalues corresponding, to 25 observed variables Ilowever, there are only 6 factors that have

cigonvaluc of higher than 1, while the cigenvaluc of the remaining factors is lower than 1 Rotation Sums of Squared Loadmgs hil a high Lo approximalely 66.02%%, winch means hal lhe use of 6 fatlor representing 25 observed vatiables can explain 66.09% of data variation In analysis, the Rotation Sums of Squated Loadings” reaching 50% is

acceptable Tence, we can conclude that six factors can he used to reflect the information provided by 25 cheerved

variables

Factor analysis is done with extraction method of Principal Component Analysis using Varimax rotation based

‘on suck criteria of Communality >= 0,5 and Factor loading >= 0.3 Facimrcs in table Rotated Component

Mautrix called Fnetor londings shall be selevlied if salisfying the above crileria, On a certain row, observed variable with highest factor loading lies in any colnmn, then observed variable shall belong to factor in that

column After rotation, 25 observed variables all satistied the criteria for factar loading of higher than 0.5 These

observed variables were divided into 6 groups of factor The specific factor loading of cach observed factor iz presented in Rotated Component Matrix Table (Table 2)

08 0.654

0484 B316 0.875

0.776

9401

0666 sae

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

5 Conclusions

‘This study shag built a model of factors affecting financial statement audit quality of business “Lhe test results showed thal factors: H4 - Gccupatiowal Qualificalion is au important Caclor affecting audit quatity of enterprise

financial statements, and HI - Legal Fnvironment, H2 - Factors belonging to bus 3 - Independence, H5 -

Quality control system of audit firm, [16 - Other factors that do not affect audit quality of business financial statements because of (P> 0.1 - ‘Table 2) At the same time, the results showed that thcorctical models which iz suilable with market duta, mueaming thai here is a positive relatioaship between the factors thai affect audit quality of business financial statements, Since then, in the perspective of independent auditors, study of effect of

audit quality factors in building financial statements has helped auditors focus on important factors affecting on

Sraud actions in building business financial statement in Victnam and design appropriate audit procedures delecting fraud, and encouraged audilurs fo enhance effective audil procedures im order to detect fraud in

‘building Vietnam enterprise financial statements, especially enterprises listed on Vietnam's stock macket The

research results as a reference for anditors to have sohitions for improving audit quality of financial statements

Spceifically, Occupation Qualification hay evaluated factors belonging to business a3 follows:

5.1 Sữnebge Qƒ Capitel Ouerahip

Jn factors belonging to enterprises, structure of capital ownership to following types of enterprises: State

Enterprises: Characteristics of stale cnterprises are thal capital belorigs 10 State and is nol associated wilh an

organization aud a specific person in the role of shareholders, Board of Directors, or Executive Board, Stale capital representatives seem more of token rather than real shareholders As a result, business of state enterprises does not bring direct benefits to state capital representatives Fraud opportunities and motives are higher than that in private enterprisca, jomt-stock companics, specially, in declaring profitabie achievements for one or individual group of state capital representatives

Enterprises which have capital governed by several major shareholders: the fewer the number of shareholder is, the more opportunities are for enterprises to perform fraud actions with the aim of serving personal henefits of governing shareholders / shareholder groups Typical example: are public businesses / organization: and financial msfitulions Risk levels of fraud and inlucnee are marked if manipulated ‘The revenl incidenls involve acts of acquiring und manipulating banks in the world and in Vietnam

5.2 Opercding Sector Characteristic of Enterprises

Enlerprises operating in highly monopolistic fields are able Lo anpose conditions on business partners: ‘This advantage may help enterprises conduet some non-market transactions in order to serve benefits of businesses or individual gronps of leaders and investors State moncpoly enterprises in some fields/ sectors will often have this advantage

Group model enterprises including may member units: Enterprises can perform these fiands through (assictious with menber units, joint venture units, especially non-market’ short transactions implenentiug goals of enterprise leaders A typical sample in recent years is establishing backyard companies! subsidiaries of

some corporations for the purpose of producing henefits for some individual groups! avoiding tax, conducting

capital mobility transactions wien conducting transactions throug these units

have more characteristic business uclivitics: many different business aclivitics, complexity of transactions, and muy characteristic accounting policies or financial businesses using a lot of accounting estimates accounting to increase chances of carrying out frauds to enterprises The risk of frand in conglomerate enterprises is larger than that in monophyletic ones

5.3 Ineffective Quality-Comrol Systems

Members of Board of Tirectors are not separated from Tixecutive Roard: effectiveness of independence and mouttoring role of Board of Directors is reduced and opportunities to perform frauds in these businesacs will rise,

‘ypical exumples are enlerprises whose chainuan of the Board of Directors is general director, They are also snain causes which managers concider as holes in control process to produce frauds of largest economic Groups

in the world and Vietnam

Malli: scetor cnlxrpl

Txecutive Board is decentralized with great power, power is concentrated in one or a number of people: Decentralization of marked power to Executive Board will raise the sense of initiative; however, this will also create opporlunities for isplanenting fauds if any

Insufficient and ineffective management policies: Management Policies, ineffective Accounting and Finance Policies, no details and regulations for Irmsaction and finance activities of companies will provide opportumilies

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

Dull, A (2004), Dinentions of audit quality: University of Paisley

Ha, H ' N (2012), Solutions fo improve and strengthen quality control of financial sterement audit in public interest units, Branch-level research project Ministry of Firance

Hai, D H Q014) Criteria system of business culture indentification Applying for Vietnam: businesses (Doctoral thesis) National Feonomics University

Lam, 8., & Chang, 8 (1994) Auditor Service Quality and Auditor Size: Evidence from Initial Public Offerings

in Singapore Journal of hnernation:d Accounting, Auditing & Taxation, 3, 103-114 hip: idx doi.org/10 1016/1061-8518(94)90009-4

Lennox, C 8 (1999) Audit Quality and Auditor Size: An Evaluation of Reputation and Deep Pockets Hypotheses Journal of Business Kinance and Acconrling, 20/8), tr 778-805 bilip:{fdx.doi.org/LO.LLLM

1468-5957.00275

Long, N D (2002) Solutions to improve quality of independent caudit in Vieinam (Doctoral thesis) Vieinam

‘University of Commerce

My, N T (2013) Improving the audit of financial statemenis af listed firms on Vietuam stock market (Doctoral

thesis) National Kconomics University

Palmrose, Z (1988) An Analysis of Auditor Litgation and Audit Service Quality, The Accovmling Review 63,

55-73

Thuy, B 1 (2014) #ezeech on factors thal affect financial stetenvend caukl quedity of companies listed on stock market of Fietnant (Doctoral thesis) National Economics University

Copyrights

Copyright for this articte is retained by the author(s), with first publication rights granted to the journal

‘Vhis is an oper-access article dislribuled under lhe lens arid couditions of the Creative Commons Atiribulion license (hitp:/creativecommons.org/licenses/hy/3.00)

in

rww.cesencl onyiass Asion Social Scicuce ‘Vol 11, No 27; 2015

Exlaclion Melhod: Principal Component Analy

Rotation Melhod: Varismax wilh Kaiser Normalization"

4 Rolation converged in 15 iterations

4.3 Scale Test by CHA

Collected CFA results: Chi-square/df 1408; GFI 0.826, TLE 9.912, CFI 923; RMSEA 0.052 proving that

scale modet of factors affecting financial auditing quality of business is appropriate to the market data

The standardized weights of scale are all high and higher than 0.5, and P-valne of each pair of concepts is lower than 0.05 On the other hand, the correlation coefficient with the standard deviation shows that they are higher than 1, Therefore, the stndy model haz been adjusted and achieves converged value and differential value, The

‘model has no correlation among measurement crrors of factors, zo the model is unitary

Figure 1, Result of SEM theoretical model (standardized)

‘Table 3 Assumptions Lesting resulls

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

5 Conclusions

‘This study shag built a model of factors affecting financial statement audit quality of business “Lhe test results showed thal factors: H4 - Gccupatiowal Qualificalion is au important Caclor affecting audit quatity of enterprise

financial statements, and HI - Legal Fnvironment, H2 - Factors belonging to bus 3 - Independence, H5 -

Quality control system of audit firm, [16 - Other factors that do not affect audit quality of business financial statements because of (P> 0.1 - ‘Table 2) At the same time, the results showed that thcorctical models which iz suilable with market duta, mueaming thai here is a positive relatioaship between the factors thai affect audit quality of business financial statements, Since then, in the perspective of independent auditors, study of effect of

audit quality factors in building financial statements has helped auditors focus on important factors affecting on

Sraud actions in building business financial statement in Victnam and design appropriate audit procedures delecting fraud, and encouraged audilurs fo enhance effective audil procedures im order to detect fraud in

‘building Vietnam enterprise financial statements, especially enterprises listed on Vietnam's stock macket The

research results as a reference for anditors to have sohitions for improving audit quality of financial statements

Spceifically, Occupation Qualification hay evaluated factors belonging to business a3 follows:

5.1 Sữnebge Qƒ Capitel Ouerahip

Jn factors belonging to enterprises, structure of capital ownership to following types of enterprises: State

Enterprises: Characteristics of stale cnterprises are thal capital belorigs 10 State and is nol associated wilh an

organization aud a specific person in the role of shareholders, Board of Directors, or Executive Board, Stale capital representatives seem more of token rather than real shareholders As a result, business of state enterprises does not bring direct benefits to state capital representatives Fraud opportunities and motives are higher than that in private enterprisca, jomt-stock companics, specially, in declaring profitabie achievements for one or individual group of state capital representatives

Enterprises which have capital governed by several major shareholders: the fewer the number of shareholder is, the more opportunities are for enterprises to perform fraud actions with the aim of serving personal henefits of governing shareholders / shareholder groups Typical example: are public businesses / organization: and financial msfitulions Risk levels of fraud and inlucnee are marked if manipulated ‘The revenl incidenls involve acts of acquiring und manipulating banks in the world and in Vietnam

5.2 Opercding Sector Characteristic of Enterprises

Enlerprises operating in highly monopolistic fields are able Lo anpose conditions on business partners: ‘This advantage may help enterprises conduet some non-market transactions in order to serve benefits of businesses or individual gronps of leaders and investors State moncpoly enterprises in some fields/ sectors will often have this advantage

Group model enterprises including may member units: Enterprises can perform these fiands through (assictious with menber units, joint venture units, especially non-market’ short transactions implenentiug goals of enterprise leaders A typical sample in recent years is establishing backyard companies! subsidiaries of

some corporations for the purpose of producing henefits for some individual groups! avoiding tax, conducting

capital mobility transactions wien conducting transactions throug these units

have more characteristic business uclivitics: many different business aclivitics, complexity of transactions, and muy characteristic accounting policies or financial businesses using a lot of accounting estimates accounting to increase chances of carrying out frauds to enterprises The risk of frand in conglomerate enterprises is larger than that in monophyletic ones

5.3 Ineffective Quality-Comrol Systems

Members of Board of Tirectors are not separated from Tixecutive Roard: effectiveness of independence and mouttoring role of Board of Directors is reduced and opportunities to perform frauds in these businesacs will rise,

‘ypical exumples are enlerprises whose chainuan of the Board of Directors is general director, They are also snain causes which managers concider as holes in control process to produce frauds of largest economic Groups

in the world and Vietnam

Insufficient and ineffective management policies: Management Policies, ineffective Accounting and Finance Policies, no details and regulations for Irmsaction and finance activities of companies will provide opportumilies

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

variable and sum were over 0.3, 90 the reliability of scale of cach aspcet is enzurod the specifie Cronbach Alpha coefficient is: Legal enviroment (MIPL) 0.891; Facturs belonging to business (DN} 0.853; Independeace (DL) = 0.836, Occupational qualifications (TCM) = 0,656, Quality control system af the firm (HTKS} = 0.819 and Others (NTK) = 0.798

4.2 Factor Anabusis

‘To assese whether the ETA meazure is suitable to analyze in thie case, the author used KMO and Bartlett's tests

An exploratory factor analysis, KMO (Kaiscr-Meycr-Olkin) index is uscd Lo lest lhe appropriateness of factor

analysis This analysis is appropriate when KMO value ranges from 0.5 to 1 If this value is lower than 0.5 factor analysis is possibly inappropriate to dara

KMO and Bartlett's tests iu factor analysis using, 25 observed variables af the scale shows that KMO index

is high (0.853) with significance equal to 0 (sig = 0.000) Thus, KM index of aver than 0.5 indicates that the application of exploratory FacLor analysis is appropriate

For factor analysis, the author used cigenvalucs to determine number of factors Eigenvalues represents the amount of variation explained by the factors Only Factors Uhat ave eigeuvalue of higher than 1 were reluined in the model

The results provided data on eigenvalue analyzed from 25 observed variables There are 25 factors with

calculated eigenvalues corresponding, to 25 observed variables Ilowever, there are only 6 factors that have

cigonvaluc of higher than 1, while the cigenvaluc of the remaining factors is lower than 1 Rotation Sums of Squared Loadmgs hil a high Lo approximalely 66.02%%, winch means hal lhe use of 6 fatlor representing 25 observed vatiables can explain 66.09% of data variation In analysis, the Rotation Sums of Squated Loadings” reaching 50% is

acceptable Tence, we can conclude that six factors can he used to reflect the information provided by 25 cheerved

variables

Factor analysis is done with extraction method of Principal Component Analysis using Varimax rotation based

‘on suck criteria of Communality >= 0,5 and Factor loading >= 0.3 Facimrcs in table Rotated Component

Mautrix called Fnetor londings shall be selevlied if salisfying the above crileria, On a certain row, observed variable with highest factor loading lies in any colnmn, then observed variable shall belong to factor in that

column After rotation, 25 observed variables all satistied the criteria for factar loading of higher than 0.5 These

observed variables were divided into 6 groups of factor The specific factor loading of cach observed factor iz presented in Rotated Component Matrix Table (Table 2)

Table 2 Rotated Component Matrix*

079L 0.743 0.736 1.696

08 0.654

0484 B316 0.875

0.776

9401

0666 sae

eww cesencl org/ass Asian Social Science ‘VoL LL, No 27, 2015

variable and sum were over 0.3, 90 the reliability of scale of cach aspcet is enzurod the specifie Cronbach Alpha coefficient is: Legal enviroment (MIPL) 0.891; Facturs belonging to business (DN} 0.853; Independeace (DL) = 0.836, Occupational qualifications (TCM) = 0,656, Quality control system af the firm (HTKS} = 0.819 and Others (NTK) = 0.798

4.2 Factor Anabusis

‘To assese whether the ETA meazure is suitable to analyze in thie case, the author used KMO and Bartlett's tests

An exploratory factor analysis, KMO (Kaiscr-Meycr-Olkin) index is uscd Lo lest lhe appropriateness of factor

analysis This analysis is appropriate when KMO value ranges from 0.5 to 1 If this value is lower than 0.5 factor analysis is possibly inappropriate to dara

KMO and Bartlett's tests iu factor analysis using, 25 observed variables af the scale shows that KMO index

is high (0.853) with significance equal to 0 (sig = 0.000) Thus, KM index of aver than 0.5 indicates that the application of exploratory FacLor analysis is appropriate

For factor analysis, the author used cigenvalucs to determine number of factors Eigenvalues represents the amount of variation explained by the factors Only Factors Uhat ave eigeuvalue of higher than 1 were reluined in the model

The results provided data on eigenvalue analyzed from 25 observed variables There are 25 factors with

calculated eigenvalues corresponding, to 25 observed variables Ilowever, there are only 6 factors that have

cigonvaluc of higher than 1, while the cigenvaluc of the remaining factors is lower than 1 Rotation Sums of Squared Loadmgs hil a high Lo approximalely 66.02%%, winch means hal lhe use of 6 fatlor representing 25 observed vatiables can explain 66.09% of data variation In analysis, the Rotation Sums of Squated Loadings” reaching 50% is

acceptable Tence, we can conclude that six factors can he used to reflect the information provided by 25 cheerved

variables

Factor analysis is done with extraction method of Principal Component Analysis using Varimax rotation based

‘on suck criteria of Communality >= 0,5 and Factor loading >= 0.3 Facimrcs in table Rotated Component

Mautrix called Fnetor londings shall be selevlied if salisfying the above crileria, On a certain row, observed variable with highest factor loading lies in any colnmn, then observed variable shall belong to factor in that

column After rotation, 25 observed variables all satistied the criteria for factar loading of higher than 0.5 These

observed variables were divided into 6 groups of factor The specific factor loading of cach observed factor iz presented in Rotated Component Matrix Table (Table 2)

08 0.654

0484 B316 0.875

0.776

9401

0666 sae