MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY By Phan Van Dung THE FACTORS AFFECTING AUDIT QUALITY OF AUDIT FIRMS IN VIETNAM ORIENTED TO STRENGTHEN COMPETITIVE CAPABILITY IN INTERNATIONAL INTEGRATION CONDITIONS Major: Accounting Code: 62.34.03.01 ECONOMICS PHILOSOPHY DOCTOR THESIS PROFESSIONAL ADVISER ASSOCIATE PROFESSOR, PHD MAI THI HOANG MINH Ho Chi Minh City - 2015 This thesis is made at: University of Economics Ho Chi Minh City Professional adviser: Associate Professor – PhD Mai Thi Hoang Minh Critic 1: Critic 2: Critic 3: This thesis will be presented to the Thesis Committee at At …, the….day…month…year… This thesis can be found in library: INTRODUCTION The urgency of research Quality in general and Audit quality in particular is always the top concern of many objects Several researchers have tried to define the audit quality for more than 30 years; the ways of measurement these factors affect quality, and the impact of quality to competitive capabilities However, so far, these concepts have not been united yet and researches on this topic are continued This caused because audit quality is a multifaceted concept, difficult to observe and measure, depends on feeling and judgment of each individual, therefore it is difficult to have a unified viewpoint Vietnam officially joined WTO, and is a member of TPP, ASEAN Economic Community (AEC); According to the committed roadmap, Vietnam officially open all financial services from 2015; In the trend of globalization, the success of Audit Firms in Vietnam depends much on Audit quality and Competitive Capabilities in the market Meanwhile, according to the Ministry of Finance: "The size and quality of independent auditors have not reached the expectation yet and are also struggling to be recognized by regional and international , the competition among the auditing firms derive from local interests, arising unhealthy competition such as reducing audit fees that leads the auditquality uncertainty " This situation requires more researches on Audit quality oriented enhance the competitive capability of Audit Firms in Vietnam in terms of economic integration that is increasing intensive now In order to meet the above requirements, based on the theoretical gaps in previous studies, economic integration requirements and the status of Audit quality and the competitive capability of Audit Firms in Vietnam, the author conducted the research with theme named: "The factors affecting Audit quality of Audit Firms in Vietnam oriented to strengthen competitive capability in international integration conditions" The research results are expected to contribute more in terms of theory and practice in order to contribute to the development of independent auditing activities in Vietnam Research objectives - Discover and measure factors affect Audit quality of Audit Firms in Vietnam - Discover and measure factors affect the competitive capability of Audit Firms in Vietnam - Discover and measure the impact of Audit quality to competitive capability to Audit Firms in Vietnam i Research questions To achieve the research objectives, the research questions include: Q1: What factors affect Audit quality and competitive capability of Audit Firms in Vietnam in the current economic integration period? Q2: Does Audit quality affect the competitive capability? Which Audit quality factors affect the competitive capability of Audit Firms in Vietnam in the current economic integration period? Q3: The impact level of these factors on the audit quality, the impact level of these factors on the competitive capability of Audit Firms in Vietnam in the economic integration period? Q4: The impact level of Audit quality and factors of Audit quality on competitive capability of Audit Firms in Vietnam in the current economic integration period? Research’s objects Research’s objects in this thesis are the factors affect Audit quality, the competitive capability of Audit Firms in Vietnam which oriented to strengthen Competitive capability in the context of international integration Research’s scope Scope of the research: The research was conducted on the independent Audit Firms in Vietnam, not including foreign auditing firms as Big Four and other foreigners firms in Vietnam Scope of the research does not include auditing activities such as State Auditing, Internal Auditing Research methodology Research methodology used in this thesis is mixed and discovered research methods, combine research methods in qualitative and quantitative In particular, qualitative research methods aimed at exploring the factors that impact on Audit quality and competitive capability, the impact of Audit quality and Audit quality factors on competitive capability of Audit Firms in Vietnam Quantitative research methods were implemented in the next step to measure the impact of each factor on the audit quality and the competitive capability of Audit Firms in Vietnam Significance of the research - Scientific significance The Thesis discovered factors affect Audit quality, competitive capability and audit quality factors which impact on competitive capability of Audit Firms in Vietnam and also show the level as well as sequences of audit quality factors on competitive capability of Audit Firms in Vietnam Audit Firms in Vietnam Audit Firms in Vietnam ii - Practical significance Base on the factors affect Audit quality, competitive capability, and the impact of Audit quality factors on the competitive capability of Audit Firms in Vietnam which are discovered and presented in a systematic way, the Thesis could be a reference material for organizations and individuals who study independent auditing activities in Vietnam New contributions of this thesis In comparison with other studies, the results of this thesis reflect the following innovations: Regarding the content, the thesis has combined different studies, viewpoints, schools of audit quality, competitive capability; research models of factors affect audit quality and competitive capability of audit firms This is an important theory foundation for further researches in the context of economic transit Regarding methodology, the thesis has used different methods to solve the set objectives The author’s approach has created the quantitative method in auditing in Vietnam Regarding the results, the thesis has developed models of factors affect audit quality, competitive capability and the impact of audit quality on competitive capability These researches prove scientific hypothesis developed by the author in the context of Vietnam In the domain of theory, learning and New contributions concluded from the research In particular:  In the domain of theory and learning + Firstly, the thesis was to synthesize and develop theory by deepen the factors that affect Audit quality in Audit Firms in Vietnam who oriented to strengthen competitive capability in the process of international integration + Secondly, the author has provided the Audit quality model and competitive capability of Audit Firms in Vietnam based on the results of research analysis on Audit quality and competitive capability in the conditions of Vietnam socio-economic and Audit Firms in Vietnam characteristics + Thirdly, through the impact model of Audit quality and Audit quality factors on competitive capability, authors have shown the impact of Audit quality on competitive capability This bullet point proves the research targets the service of business activities of Audit Firms in Vietnam + Fourthly, the thesis has clarified in theory, the role of Agency theory and theory of Supply and Demand on the Audit quality iii New contributions concluded from the research + Firstly, the definition of Audit quality and competitive capability of Audit Firms in Vietnam + Secondly, Discovering the factors that affect Audit quality of Audit Firms in Vietnam + Thirdly, Discovering the factors affect the competitive capability of Audit Firms in Vietnam + Fourthly, the most important finding of this research is to explore the impact of Audit quality and Audit quality factors on the competitive capability of Audit Firms in Vietnam + Fifth, based on quantitative findings, the author has measured the impact level of factors on the audit quality of Audit Firms in Vietnam and identified factors already impact on Audit quality with 24 criteria to measure + Sixth, Measuring the impact of these factors on the competitive capability of Audit Firms in Vietnam: based on results of quantitative research, there are factors were identified that impact on competitive capability, with 16 measurable criteria + Seventh, measuring the impact of Audit quality to the competitive capability of Audit Firms in Vietnam + Eighth, measuring the impact level of Audit quality factors on the competitive capability of Audit Firms in Vietnam According to results of quantitative research, there are six audit quality factors were identified that impact on the competitive capability with 24 criteria of measurement + Ninth, Introducing model of Audit quality and model of Competitive capability, Model of the factors that impact the quality of the audit to the competitive capability of Audit Firms in Vietnam Thereby, it’s shown the correlation and the degree of correlation between the factors of Audit quality, Competitive capability to Audit quality and Competitive capability + Finally, recommending a framework for analysis of Audit quality factors Structure of the thesis In addition to the Introduction, the thesis is divided into chapters which are presented in order with the main contents as follows: Chapter - Overview of previous studies Chapter - Theoretical basis of the factors that affect Audit quality of Audit Firms in Vietnam oriented to strengthen Competitive capability in the context of international integration Chapter – Research methods Chapter - Results of research and inference Chapter - Conclusion and policy implications This thesis consists of 159 pages, with 22 tables, 58 figures and 20 appendices iv CHAPTER OVERVIEW OF PREVIOUS STUDIES This chapter systemizes the previous studies relating to factors affecting Audit quality, Competitive capability and impact of Audit quality to Competitive capability in recent years in Vietnam and overseas, analyzes, assesses what the previous researchers have done on the factors that affect Audit quality and impact of Audit quality to Competitive capability of Audit Firms in Vietnam to identify theoretical gaps and issues that require further research 1.1 Overview and analysis of the results of previous studies 1.1.1 The research on factors affecting Audit quality 1.1.1.1 The foreign researches on factors affecting Audit quality (1) Some viewpoint in Audit quality Audit quality is a complex and multifaceted concept; therefore, many researches have been done, in order to define Audit quality, factors affecting Audit quality as well as measure Audit quality However, according to the International Auditing and Assurance Standards Board, the concept of Audit quality has reached no consensus; many studies are continuing to be done Although there are many different ways to approach Audit quality, all the global researchers in recent years mainly focused on three main points: (i) Opinion that Audit quality is the level of guarantee the ability to detect and report errors on financial statement This view is derived from the definition of DeAngelo (1981): "Audit quality as the market – assessed joint probability that a given auditor will both discover a breach in the client’s accounting system, and report the breach" the researcher represents the view is Titman & Trueman (1986), Palmrose (1988), Beatty (1989), Knechel (2009), Defond & Zhang (2014); (ii) Opinion that Audit quality is the Level of Compliance with auditing standard In the early 1990s, from impact of the economic - financial crisis and auditing scandals, some researchers suggest that the definition of DeAngelo does not fully grasp the potential conflicts of various persons in the audit market Moreover, this definition is limited to specialization, not considering the aspects of the independence and influence of customers to the opinion of Auditor (Sutton, 1993) According to the researcher protecting this perspective, the suitable level of Auditing standard reflects the degree of Audit quality Typical representative of this view is McConnell & Banks (1998), Aldhizer & et al (1995), Krishnan & Schauer (2001) (iii) Opinion combining level of compliance with standards and the level of assurance about the ability to detect and report on essential errors in the financial statement Recently, the global economy faces more and more challenges related to financial markets Besides the intervention of the State, the responsibility of the auditor has been extended to ensure Audit quality (Defond & Zhang, 2014) The researchers have reviewed Audit quality based on the combination of Auditing standard levels of compliance and the ability to detect errors, report misstatement on financial statement as Skinner & Srinivasan (2012), Tritschler (2013) (2) The tendency to research the factors affecting Audit quality Although there are many different studies about Audit quality and factors affecting Audit quality, these studies generally can be grouped into the following major trends: (i) Audit quality research based on directly measurement methods from the results of the audit (Dechow et al, 1996), (Krishnan & Schauer, 2000), (Geiger & Raghunandan, 2002) or indirectly measurement through sizes of Auditing firms, audit fees, (DeAngelo, 1981), (Wooten, 2003), (Lawrence et al, 2011) (ii) Research based on Source of Differentiation: differences between national institutions, the audit office and the specialized level (Francis, 2004), (Ettredge et al, 2008) (iii) Research relies on output, process and input, context and interaction between objects related to this process (Duff, 2004), (Francis, 2011), (Defond & Zhang, 2014) (iv) Research based on Organizational Aspects as Auditing firms, audit groups Audit quality firms belong to Big Four and non - Big Four (Schroeder et al, 1986), (Carcello et al, 1992), (Sun & Liu, 2011) (v) Research based on Behavioral Perspectives and Auditor Quality, characters of leaders and auditor staff (Rayburn & Rayburn, 1996), (Carcello et al, 1992), (Daniels & Booker, 2011) (vi) Research based on Different Perception of Audit Quality (Warming - Rasmussen & Jensen, 2001), (Duff, 2004) (3) The research results have made about factors affecting Audit quality  The models researching Audit quality published In the research of factors affecting Audit quality in the past decades, the model of findings that affect the change of the regulations on Independent auditing in many countries and used as platform for research on Audit quality Typically: Audit quality model of Wooten (2003), Audit quality Model of Duff (2004), Globe of Audit quality model of Tritschler (2013) In addition to the above models, the researchers evaluating Audit quality according to the audit process involve three issues: technology, quality of Auditors and organizational characteristics of Auditing firms (Manita & Elommal, 2010) Based on the review Audit quality through input and output of the audit process, Defond & Zhang (2014) presented an Audit quality Framework that shows the relationship between demand and capacity of customers, capacity to supply of Auditing firms, intervene and regulate of functional agencies  Results of research on the factors affecting Audit quality through previous studies As stated above, in the past decades, many research results on Audit quality have been published in multiple views and different perspectives, but high achievement can be categorized and aggregated by affective subjects as follows:  Group of factors on part of Auditors/ Auditor Groups: Methodology and personality of the Auditor; Qualifications, the professional in Auditing; Independence; Auditing tenure  Group of factors on part of Auditing firms: Size; Industry, client/audit experience  Group of external factors: Audit fees; Legal liability, learning & education, external quality control 1.1.1.2 The national studies on factors affecting Audit quality Compared with countries with developed Independent auditing activities, the Independent auditing in Vietnam is still quite young Therefore, the research of Audit quality, factors affecting Audit quality is not much, and has just appeared in recent years Factors affecting Audit quality mentioned in their research works of Vietnamese researchers are listed as follows: + Group of factors on part of Auditors includes Factors: Methodology and personality of the Auditor; Professional skepticism; Auditor's perception about compliance standards of professional ethics; The independence of the Auditors; The experience and the professional of the Auditors; The tenure of the auditor + Group of factors on part of Auditing firms includes factors: Auditing fees; Size, professional degree of Auditing firms; Strategy of Auditing firms; Internal Quality Control + Group of external factors includes factors: The cost of the auditing; The impact of the legal system; Audit quality personnel training; External Quality Control 1.1.2 The researches carried out on the factors effect on the Competitive capability of Auditing firms 1.1.2.1 The foreign researches on the factors affecting the Competitive capability of Auditing firms  The foreign researches on the factors affecting the Competitive capability of Auditing firms Compared with the "explosion" of studies of the Competitive capability of Auditing Firms in Independent auditing, the research of factors affecting the Competitive capability of Auditing firms as well as the impact of the factors of Audit quality to the Competitive capability of Auditing Firms still limited The typical studies of the Competitive capability of Auditing firms include: Findings of Maijoor & Witteloostuijn (1996) show that imperfections of AccountingAuditing services market create high penetration of the external Auditing firms to the Auditing market in countries with the restrictions on the ability and quality of audit services Therefore, the quality of audit services is a competitive factor affecting the Competitive capability of Auditing firms Lian Kee et al (2011) have developed the research of Newbert (2008) and made five key resources that can create Competitive capability of Auditing firms including financial resources, human resources, intellectual resources, and organizational Source and material resources Lian Kee et al also suggested that in order to improve the Competitive capability of small and medium Auditing firms, it needs to make the connection with the other international Auditing firms through network of member firms or associations, which takes the experience, technology and training by the international auditing firm 1.1.2.2 The national researches on the factors impact on the Competitive capability of Auditing firms Compared to the long-term development of the Independent auditing on the world, the Independent auditing of Vietnam still is young Views on competition in the field of auditing still have different recognitions In Vietnam, there are only a few studies on the impact on the Competitive capability of the Audit Firms in Vietnam The research has set out a number of factors creating the Competitive capability of Auditing firms such as business strategy, business size, the qualifications to hold executive business management, leadership, ability of information capture, the ability to cooperate with relevant businesses, maintain the integrity of business, quality of workforce and manager staff, the cost of business and entrepreneurial culture in the auditing firms 1.1.3 The researches on the impact of Audit quality to the Competitive capability of Auditing Firms As per Cronin & Taylor's research (1994), Taylor & Baker (1994) showed a positive impact of Audit quality on the Competitive capability Audit quality relates positively with customer’s satisfaction Higher Audit quality services can bring greater customer’s loyalty, attract new customers, employee engagement, enhance auditing firms’ image and increase business efficiency Therefore, commitment to quality service has clear benefits for the Competitive capability of Auditing firms Research on aspects of Audit quality of Duff (2004) showed that the quality of service can be a source of Competitive Advantages, a sustainable means to provide customers what they want or need, better and more effectively In Vietnam, some researches on Audit quality of Pham, H., Amaria, P., Bui, T., & Tran, S (2014) also found that competition affects Audit quality, besides impact of auditing tenure, change of senior personnel; competitive factors also affect negatively to Audit quality of Audit Firms in Vietnam 3.4 Research model and generalized regression equation 3.4.1 Research model  Research model of factors affecting Audit quality Audit quality Factor Auditor Audit quality Factor Audit quality Factor Audit firms Audit quality Audit quality Factor Audit quality Factor Audit quality Factor Outside factors Figure 3.4: Research model of factors affecting Audit quality of Audit Firms in Vietnam  Research model of factors affecting Competitive capability Competitive capability factor Competitive capability factor Auditor Competitive capability factor Audit firms Competitive capability factor Competitive capability factor Competitive capability factor Competitive capability Outside factors Figure 3.5: Research model of factors affecting to Competitive capability of Audit Firms in Vietnam 15  Research model of Audit quality and factors of Audit quality affecting to Competitive capability Audit quality factor Auditor Audit quality factor Audit quality factor Audit firms Audit quality Audit quality factor Competitive capability Audit quality factor Outside factor Audit quality factor Figure 3.6: Research model of Audit quality and factors of Audit quality affecting to Competitive capability of Audit Firms in Vietnam 3.4.2 General regression equation Linear regression equation shows the impact of these factors on the dependent variable: Y = β0 + β1X1 + β2X2+ β3X3 + … + βiXi Conclusion of Chapter In this chapter, the author went deeply into analyzing research method and establishment to select research method In this research, it was applied mixed research method combining between qualitative research and quantitative research All steps and methods applied in the collection and processing of data have been presented in this Chapter, in which, qualitative research method is a method of in-depth interview through one-on-one interview with qualified and experience Experts in the field of auditing Resulting in discovering factors affecting Audit quality, Competitive capability, the impact of Audit quality and audit quality factors on Competitive capability which are tested by statistics For quantitative research, The process of data processing is done through a software named IBM SPSS Statistics 22 The method of Exploratory factor analysis (EFA) was used in this research to extract the factors The result of multiple regression model used to estimate the research model, this model after being determined will be assessed the level of appropriateness, multi-collinearity phenomenon, the phenomenon of self-correlation and covariance of the changed remainder Research method selected and researched sequence designed as well as data processing methods selected in this chapter will be important grounds to actual research in order to achieve practical research results presented in Chapter 4: "Research result and inference" 16 CHAPTER RESEARCH RESULT AND INFERENCE This chapter presents the research results achieved on the basis of research objectives set out in the Introduction and research method defined in the previous chapter The research results include: (i) Results of research on status and assessment of Competitive capability and Audit quality of Audit Firms in Vietnam; (ii) qualitative research results and (iii) quantitative research results on factors affecting Audit quality, Competitive capability, and the impact of these factors of Audit quality to the Competitive capability of Audit Firms in Vietnam in the context of international integration Then, the inference problems will be given on the basis of research results 4.1 Research results on the activity status of Independent auditing, Audit quality and Competitive capability of Audit Firms in Vietnam 4.1.1 Situation of Audit quality and Competitive capability of Audit Firms in Vietnam In this section, the author focuses on analyzing the environmental factors affecting Audit quality and Competitive capability of Audit Firms in Vietnam through statistical tables for the period from 2010 to 2015 4.1.2 Evaluation of Audit quality and Competitive capability of Audit Firms in Vietnam  About Audit quality: In general, the Audit quality of audit firms is still low and has not reached regional and international level An audit quality firm is not synchronized and has large differences compared to foreign auditing firms  Competitive capability of Audit Firms in Vietnam is still limited, management and administration capabilities has not yet reached the level of management in regional countries Many auditing firms don’t have any long-term business strategy and corporate culture aimed at developing a sustainable business Audit Firms in Vietnam need to overcome these limitations, especially in the period of world economic integration 4.1.3 Reasons of this actual situation Because of the transition to a market economy under socialist orientation, it should not avoid the initial difficulties, legal systems of Independent auditing not being synchronized, the size of the auditing market not being consistent with the potential of economic development, auditing firms being less focused on developing strategies and improving Audit quality and Competitive capability,etc 4.2 The results of qualitative research to explore the factors impact on Audit quality and Competitive capability of Audit Firms in Vietnam 4.2.1 Method and process 17 4.2.2 Result of qualitative analysis By means of Grounded Theory method, through the Outline of inference with experts by form analytical method according to King (2004) and analysis process of Cresswell (2003) Qualitative research results are as follows:  There are 13 factors that affect Audit quality of Audit Firms in Vietnam in the period of economic integration in the world, are shown in Table 4.7  There are 12 factors that affect Competitive capability of Audit Firms in Vietnam in the period of economic integration in the world, are shown in Table 4.8  The result of qualitative research also explored Audit quality and factors of Audit quality which impact on Competitive capability of Audit Firms in Vietnam This is also the main objective of the research The author has discovered four new elements on Audit quality and 12 factors of Competitive capability are shown in Table 4.7 and Table 4.8: Table 4.7: Factors affecting to Audit qualityof Auditing firmsin Vietnam No Code Factors affecting to Audit quality Properties CLCK Business strategy New findings CLCP Audit cost New findings CLQM Size, professional level of auditing firms Inherit CLPP Auditing methodology Inherit CLNT Perceptions of auditor, directors of auditing firms Inherit CLCM Professional degree in auditing Inherit CLĐL Independence Inherit CLNK Auditor’s tenure Inherit CLGP Audit fees Inherit 10 CLBT Internal quality control New findings 11 CLBN External quality control New findings 12 CLPL Effect of legal liability Inherit 13 CLĐT Learning & education Inherit Table 4.8: Factors affecting to Competitive capability of Auditing firms in Vietnam No 10 11 12 Code CTQT CTQM CTCL CTTC CTLĐ CTVH CTCN CTDV CTGI CTTH CTNL CTQH Factors affecting to Competitive capability Management capacity Size of auditing firms Business strategy of auditing firms Financial capacity Quality of human resources and managers Enterprise Culture Applied technology and information technology Service quality Competitive capability on fees Business’s brand Human resource Capacity of relationship development Properties New findings New findings New findings New findings New findings New findings New findings New findings New findings New findings New findings New findings 18 4.2.3 Check the results of qualitative research To ensure the objectivity of qualitative research results, result of statistical test showed that all factors identified in the qualitative research have reached consensus over 50% This shows the considerable objectivity and reliability of research results 4.2.4 Inference of qualitative research results  For factors affecting Audit quality: Compared with the Globe of audit quality model of Tritschler (2013) used in the research, there are four new factors affecting on Audit quality detected include: business strategy, auditing cost, internal quality control, external quality control Besides from that, there are two factors that affect Globe of Audit quality model of Tritschler not appear in the results of research: Factor of non-audit services, Audit effort & resource mix This shows that starting from the characteristics of the market economy under Socialist orientation in Vietnam, the State consider independent auditing as a tool to directly manage independent auditing operations, due to limitations on management capacity and sense of assurance in Audit Firms in Vietnam, it should have led to tighter controls on the audit from the State management and the auditing firms Moreover, due to the size and capacity of the enterprise still being limited, non-audit services in Vietnam are almost little attended The support of other related industries such as the expansion of market size from the State and VACPA is still limited; the supply of manpower for independent auditing in Vietnam has yet met with high demand on Audit quality  For factors impacting Competitive capability of Audit Firms in Vietnam, in knowledge of the author, there hasn’t any no qualitative research results on factors impacting Competitive capability been announced Therefore it can only refer to the publishment of the World Economic Forum - WEF (2004) on factors affecting Competitive capability of the businesses in general Although the primary objective of the research was to determine the factors affecting Audit quality of Audit Firms in Vietnam to strengthen Competitive capability, but the findings of the factors affecting the Competitive capability identified in the thesis can be considered as the basis for the next research step Factors of Competitive capability of Audit Firms in Vietnam are explored in the qualitative research results which are consistent with the recommendations of the WEF (2004), and the research results of the author Doan Xuan Tien (2006) 19  Under the condition that Vietnam is affected by the audit quality and Audit quality factors on Competitive capability This shows that there is a correlation between Audit quality factors and Competitive capability of Audit Firms in Vietnam such as audit firm size, business strategy of the audit firms, Audit fees, human resources and the correlation between the explanatory factors of Audit quality and Competitive capability such as technological applicability, technology, financial capacity, degree of intimacy with customers, and classified into different groups including Audit quality, Competitive capability of Audit Firms in Vietnam due to approaches between Audit quality and Competitive capability of Audit Firms in Vietnam There are some factors of Audit quality that directly impact on Competitive capability, some others affects indirectly on the Competitive capability The results of this research may explain the impact of factors of Audit quality and factors of Audit quality impact on Competitive capability of Audit Firms in Vietnam  Perception to role of Audit quality and Audit quality factors impact on Competitive capability of Audit Firms in Vietnam has shown clearly This perception will be a force for Audit Firms in Vietnam to compete on market fairly by increasing Audit quality rather than unfair competition by reducing the cost, Since then, create sustainable Competitive capability for Audit Firms in Vietnamin world integration process 4.3 Result of quantitative research and inference 4.3.1 Research Hypothesis 4.3.2 Develop size 4.3.3 Research Sample 4.3.4 Measurement result of factors impact on Audit quality  Through the assessment analysis as per Cronbach's Alpha showed that the 14-size models ensure good quality with 56 specific variables  The result of explored factor analysis (EFA): Testing the suitability of EFA, Testing correlation of observed variables in representative measure, testing the level of explanation for observed variables on factors, results in line with the parameters defined in quantitative research  Analysis of multivariate regression exploration (Multiple Regression Analysis-MRA): The real factors directly impacting on Audit quality is expressed through linear regression equation: 20 Audit quality = 1,137E-16+ 0,494 (Methodology and perception of auditor) + 0,348 (External Quality control and auditing laws system) + 0,174 (Independence) + 0,254 (Business strategy) + 0,181 (Auditing fees) + 0,205 (Audit cost)  Result of Hypothesis Testing about factors impact on Audit quality Table 4.11: The assessment result of hypothesis about factors impacting on Audit quality of Audit Firms in Vietnam No Hypothesis Result H’1.1: Positive effect of methodology and perception of auditor to Accepted Audit quality of Audit Firms in Vietnam H’1.2: Positive effect from External Quality control and auditing Accepted laws system on Audit quality of Audit Firms in Vietnam H’1.3: Positive effect of the Independence of auditor to Audit Accepted quality of Audit Firms in Vietnam H’1.4: Positive effect of Business strategy of Audit Firms in Vietnam Accepted to the Audit quality of them H’1.5: Positive effect of Audit fees to Audit quality of Audit Firms Accepted in Vietnam H’1.6: Positive effect of Auditing cost to Audit quality of Audit Accepted Firms in Vietnam Research result showed that through tests, it can confirm that the factors affecting the audit quality in order of importance as follows: Table 4.12: The importance of the factors impact on quality of Audit Firms in Vietnam Density Absolute (%) value Methodology and perception of auditors (X1) 0,494 29,83 External Quality control and auditing laws system (X2) 0,348 21,01 Independence (X3) 0,174 10,51 Business strategy (X4) 0,254 15,34 Auditing fees (X5) 0,181 10,93 Auditing cost (X6) 0,205 12,38 Total 100 4.3.5 The research result of factors impact on Competitive capability Independent variable Affect order -  Through assessment analysis of Cronbach's Alpha showed a 13-size model to ensure good quality with 52 unique variables  Results of explored factor analysis (EFA): Testing the suitability of EFA, Testing correlation of observed variables in representative measure, Testing explanation degree 21 of observed variables for factors, result in line with the parameters defined in quantitative research  Analysis of multivariate regression exploration (MRA): The real factors directly impact on Competitive capability showed through linear regression equation: Competitive capability = -2,497*E-16 + 0,364 (Capacity of Information technology) + 0,468 (service quality) + 0,327 (Size of auditing firms) + 0,378 (culture of auditing firms) + 0,291 (Capacity of Development and Business relationship)  Hypothesis Testing Result of factors affecting Competitive capability Table 4.13: Hypothesis Testing Result of factors affecting Competitive capability of Audit Firms in Vietnam No Hypothesis Result H’2.1: Positive effect of applied technology, Information technology on the Competitive capability of Audit Firms in Vietnam H’2.2: Positive effect of Service quality on the Competitive capability of Audit Firms in Vietnam H’2.3: Positive effect Business Size on the Competitive capability of Audit Firms in Vietnam H’2.4: Positive effect of Auditing firms’s Culture on the Competitive capability of Audit Firms in Vietnam H’2.5: Positive effect of Development Capacity on the Competitive capability of Audit Firms in Vietnam Accepted Accepted Accepted Accepted Accepted  Inference the above result Research result showed that through tests, it can confirm that the factors affecting Competitive capability in order of importance as follows: Table 4.14: The importance of the factors affecting Competitive capability of Audit Firms in Vietnam Independent variable Capacity of information technology (X1) Service quality (X2) Size of enterprise (X3) Culture of auditing firms (X4) Capacity of development and business relationship (X5) Total Absolute value 0,364 0,468 0,327 0,378 Density (%) 19,91 25,60 17,89 20,68 Affect order 0,291 15,92 - 100 - 22 4.3.6 The research result of the impact of Audit quality on the Competitive capability of Audit Firms in Vietnam  Multivariate regression analysis (MRA): Audit Quality Factors directly impact on Competitive capability, as per the linear regression equation follows: Competitive capability = -2,497E-16 + 0,798 (Audit quality)  Inference of above result Through testing, it can confirm that Audit quality factors positively impact on the Competitive capability of Audit Firms in Vietnam H3: Positive effect of Audit quality to the Competitive capability of Audit Firms in Vietnam is accepted 4.3.7 Findings of Audit quality factors impact on the Competitive capability  Multivariate regression analysis (MRA): The audit quality factors directly impact on the Competitive capability, as expressed through the linear regression equation follows: Competitive capability = -1,536E-16 + 0,448 (methodology and perception of the auditors) + 0,472 (External quality control & auditing laws system) + 0,237 (Independence) + 0,258 (Business strategy)+ 0,238 (Audit fees) + 0,195 (Audit cost)  Result of Hypothesis Testing about factors impact on the Competitive capability of Audit Firms in Vietnam Table 4.15: Result of hypothesis testing about factors impact on the Competitive capability of Audit Firms in Vietnam No Hypothesis H4.1: Positive effect of Methodology and Perception of the auditors on the Competitive capability of Audit Firms in Vietnam H4.2: Positive effect of External quality control & auditing laws system on the Competitive capability of Audit Firms in Vietnam H4.3: Positive effect of the Independence on the Competitive capability of Audit Firms in Vietnam H4.4: Positive effect of Business strategy on the Competitive capability of Audit Firms in Vietnam H4.5: There is a positive impact of auditing fees to Competitive capability of Audit Firms in Vietnam H4.6: Positive effect of auditing cost on the Competitive capability of Audit Firms in Vietnam Result Accepted Accepted Accepted Accepted Accepted Accepted 23  Inference the above result: Through testing, it can confirm that the Audit quality factors impact on the Competitive capability in order of importance as follows: Table 4.16: The importance of Audit quality factors inpact on Competitive capability of Audit Firms in Vietnam Independent variable Methodology and perception of the auditors (X1) External quality control and auditing laws system (X2) Independence (X3) Business strategy (X4) Auditing fees (X5) Auditing cost (X6) Total Absolute value 0,448 0,472 0,237 0,258 0,238 0,195 - Density (%) 24,24 25,54 12,82 13,96 12,88 10,56 100 Affect order - Conclusion of Chapter Research results on the status and evaluation of Audit quality, Competitive capability of Audit Firms in Vietnam, and the auditing market in Vietnam in the recent years, has developed significantly in the regulatory environment, the size and the performance However, Audit quality and Competitive capability of Audit Firms in Vietnam is still limited Auditing firms are not really interested in the Competitive capability and new effects of the integration process, the competition among auditing firms Compared with the previous research models, there are four Audit quality factors that newly discovered with 16 criteria to measure Compared with Audit quality factors under the framework of IAASB (2014) there are three new factors with 12 criteria to measure There are factors with 24 observed variables, really impact on the Audit quality in order of importance as follows: (i) Methodology and perception of Auditor; (ii) External quality control and auditing laws system; (iii) business strategy; (iv) Auditing cost; (v) Audit fees; (vi) Independence There are factors with 16 observed variables, really impact on the Competitive capability in order of importance as follows: (i) quality of service; (ii) Culture of auditing firms; (iii) capacity of information technology; (iv) Size of auditing firms; (v) Capacity of development and business relationship Audit quality impacts on the Competitive capability of Audit Firms in Vietnam, in which, there are Audit quality factors really impact on the Competitive capability of the Audit Firms in Vietnam in order of importance as follows: (i) External quality control and auditing laws system; (ii) Methodology and perception of Auditor; (iii) Business strategy; (iv) Audit fees; (v) Independence; (vi) Audit cost 24 CHAPTER CONCLUSION AND POLICY IMPLICATION Firstly, this chapter will make a conclusion drawn from the process and the result of the above researches, then present new contributions of the thesis, therefore presenting points of views, orientation, and resolution to improve Audit quality, enhance the Competitive capability of auditing firmsduring the period of economic integration Finally, this chapter will present scientific meanings, reality of research, limitation of research and suggest the next direction 5.1 Conclusion Audit quality is a complex and multifaceted concept, many researchers had attempted to define, measure and identify the Audit quality through representative factors There are many views on Audit quality based on different aspects However, up to now there isn’t any definition of Audit quality, as well as methods of measurement and representation factors that are widely accepted, so there isn’t any system of factors impacting on the Audit quality that is reputedly complete Thus continuing research of Audit quality and factors impacting Audit quality in Audit Firms in Vietnam to suggest the view, definition of Audit quality, also finding, exploring and measuring factors impacting the Audit quality and Competitive capability which were shown in the thesis if necessary In the context of the market economy in the period of world economic integration, Audit quality, Competitive capability is one of the most important issues deciding the survival and development of the auditing firms Researching on the Competitive capability and competitive factors impact on Competitive capability the Audit Firms in Vietnam is a necessary step in order to identify the core elements Thereby implementing the necessary solutions in order to constantly improve the competitive advantages of Audit Firms in Vietnam in the economy of international integration market with many opportunities and challenges The research results showed the correlation relationship between Audit quality factors and the Competitive capability Researching the impact of Audit quality and Audit quality factors on the Competitive capability of Audit Firms in Vietnam is oriented to the business goals of audit firms Thereby offering solutions to improve the Audit quality, improve business performance through enhanced the Competitive capability This represents an outlook based on performance and business goals of auditing firms in the research of Audit quality One of the causes of the differences in the research result often starts with the role of socio-economic characteristics, the legal position, the position of the object in research market Therefore, based on specific conditions of each country, each form of auditing firms, there will be certain differences The new findings create these differences and diversity, and it will also create a colorful picture of the independent auditing activities 25 5.2 View and orientation to improve the Audit quality, increase the Competitive capability of Audit Firms in Vietnam term of world economic integration 5.2.1 View on improving Audit quality and the Competitive capability of Audit Firms in Vietnam  Firstly, establish consistency with the development strategy of the State in the process of international integration, as well as long-term development strategy of Auditing industry  Secondly, propose solution based on the identification of opportunities and challenges in the economic integration process and based on the findings made in the thesis  Thirdly, the proposed solution must meet the target to approach management degree, advanced technologies, leverage the experience, and learn from the experience of international Auditing firms as well as the increasing requirements of Accounting - Auditing organizations in the world where Vietnam has joined 5.2.2 Orientation of improving the Audit quality, increasing the Competitive capability of Audit Firms in Vietnam  About Audit quality: Improving the professional capacity, quality of provided services to minimize occupational risk, completing the independent auditing Law system, organizing management, investment in engineering technology such as the process of auditing technology, controlling quality of provided services, enhancing the State’s management capacity, strengthening support ofbusiness management organizations for Auditing activities, implementing internationalized professional staff, quickly integrate the Independence Auditing industry of Vietnam into the regional market as well as international market, under the recognition of the regional and international level  About the Competitive capability: Developing accounting services market, continue to improve the number of Auditor and auditing firms; expand market of accounting – auditing services; improve the quality of accounting - audit services; diversify products of accounting - audit services to meet the requirements of the national economy; strengthen the Competitive capability of Audit Firms in Vietnam 5.3 Orientation of solutions to raising Audit quality and the Competitive capability of Audit Firms in Vietnam  Orient solutions to enhance Audit quality of Audit Firms in Vietnam on the factor of auditing laws system; External quality control; Business strategy; Methodology and perception of Auditor; The independence of the auditor; Audit fees and audit cost  Orient solutions to enhance the Competitive capability of Audit Firms in Vietnam on factors of service quality; Size of Auditing firms; Capacity of Information technology; Culture of Auditing firms; Capacity of development and business relationship  Conditions to implement the solutions toward the State, VACPA, Auditing firms and training facilities 26 5.4 Scientific - practical significance, limitations of the research and direction of next research - Scientific and Practical significance + Scientific significance: The thesis has fully synthesized all factors impacting the Audit quality, Competitive capability to create an impact model of these factors on Audit quality, Competitive capability of auditing firms, the thesis also identified impact model of Audit quality to the Competitive capability of Audit Firms in Vietnam Thus creating conditions for the further studies on aspects of target-oriented research Moreover, the proposed research model will be a reference to develop and build all models relating to the Audit quality, Competitive capability of auditing firms + Practical significance Firstly, the research result has contributed to the State management agency for establishing and planning development strategy and implementation control over audit activities quality Secondly, the research contributes to Auditing firms and Auditors to propose specific measurement to enhance Audit quality, Competitive capability of auditing firms in general and capacity of the Auditor in particular Thirdly, it helps in researching and training institutions could base on the results of this research to perform next research and development, implement and update the curriculum and teaching content  Limitations of the research and subsequent research In addition to achieved results, this research has many limitations, the problems that still exist in the thesis research will be continued in the future, including: + Auditing is more specialized than other activities Therefore, all theories involving Audit quality, Competitive capability as well as factors impacting Audit quality and Competitive capability are not much, some concepts haven’t been agreed Therefore, the establishment of the theoretical basis for research goals remain limited It lays out a followup research of the theoretical basis related to factors affecting Audit quality, Competitive capability as well as the impact of Audit quality to the Competitive capability of Audit Firms in Vietnam + In the scope of the research, the essential object of this research was the Audit Firms in Vietnam Therefore, the findings may not generalize the overall independent auditing industry of Vietnam, including Vietnam Audit Firms and foreign audit firms The research results should be viewed from a starting point for further studies in this area and the interpretation of result should weigh these limitations Any further research will expand the object to enhance the generalization of the research result 27 + In addition to the achieved results, about research degree, the research result only stops at exploring and measuring the impact of Audit quality factors, Competitive capability, not examining the internal elements of these factors Based on the result of this research, it could open up many new research on the effects of intrinsic factors in each factors, including Audit fees, auditor's capacity, audit tenure, Brand of enterprise… + The objective of the research is mainly focused on the exploring and measuring the impact on the Audit quality and Competitive capability based on the enterprise’s dynamic capabilities resources theory to create competitive advantage However, it doesn’t make in-depth research on the process of forming the source of enterprise’s dynamic capabilities as what has been done in many countries On the other hand, the research about the Competitive capability factors impact on the Audit quality has yet to be specified It should be researched further to make a model of dynamic capability forming of competitive advantage of Auditing firms as well as indepth research on the impact of the Competitive capability on the Audit quality CONCLUSION Although there are still many different views about Audit quality and the Competitive capability of Auditing firms but it’s undeniable that Audit quality is always a competitive advantage The purpose of this research is to explore the auditing quantity factors, as well asCompetitive capability and measure the impact degree of audit quality factors on the Competitive capability of Auditing Firms, thereby making appropriate solutions in order to improve Audit quality andthe Competitive capability of Audit Firms in Vietnam.That is a critical requirement of Audit Firms in Vietnam in the current period and that is also the objective of this research The research result showed that starting from the characteristics of the economic social environment and characteristics of the Independent auditing operations in Vietnam, the factors impacting Audit quality and Competitive capability of Audit Firms in Vietnam are different from research results of other countries In addition, research results also explored and measured the impact of these factors on the Audit quality and the Competitive capability of Audit Firms in Vietnam Apart from the theoretical contributions, the research result of the thesis also has essential significance in practice, therefore Auditing management agencies, professional associations, Auditing firms can plan a policy, present specific solutions to enhance either the Audit quality or the Competitive capability of Audit Firms in Vietnamin the stage of world economic integration In summary, although it inevitably has some certain restrictions, but the result obtained in this thesis has contributed to improving the Audit quality, the Competitive capability of Auditing firms in particular and the Independent auditing in general At the same time it opens up many new ways of research in viewpoint of improving Audit quality by strengthening the Competitive capability of enterprises The authors hope that the contents and results of the research will become a reference which can contribute to the wealth of auditors’ knowledge, as well as a basis for subsequent researches 28 LIST OF RESEARCH PROJECTS HAVE BEEN PUBLISHED BY AUTHOR RELATED TO THE THESIS (2010) Enhancing legal framework for Vietnam Association of Auditors meeting the regional and international standards An article published on Auditing Journal No 33 (07/2010) (ISSN – 1859 – 1671) Page 26 - 30 (2010) Law on independent auditing and auditing enterprises An article published on the magazine of VACPA (2010) VACPA enhances value for members An article published on the summary book of year anniversary of VACPA Page 51 - 52 (2010) Authority to issue Certificate of Business Registration of auditing enterprises: Should it be Ministry of Finance? An article about policies and regulations Enterprise Forum Newspaper – Vietnam Chamber of Commerce and Industry (VCCI), No 98 (1372) date 8/12/2010 Page 13 (2012) PAOs Support efficient development of small and medium sized Audit Firms in Vietnam An article published in a book on an international conference The vital role of professional accountancy organizations, VACPA_CAPA conference Hanoi 16, August 2012 Page 70 - 72 (2013) Improving legal framework on accounting – Enhance quality of accounting – auditing for global integration An article published on a journal Journal of development and integration No 12 (22) September - October/2013, University of Economics and Finance Ho Chi Minh City (ISSN 1859 – 428 X) Page 70 - 77 (2014) Auditing Firm’s operation quality competitive capacity and international integration in Vietnam An article published on a book for an international conference International conference on finance and economics – ICFE – Ho Chi Minh City 2014 Page 566-581 (2014) Enhance quality and capacity of auditing activities of enterprises for global integration An article published on magazine Development and Integration No 17 (27) July - August/2014, University of Economics and Finance, Ho Chi Minh City (ISSN 1859– 428 X) Page 61 - 72 (2014) Improve the legal framework of Accounting and Auditing – enhance quality and activities of training and education of accounting and auditing, an article published on magazine of Accounting and Auditing No 08/2014 (131) ISSN 1859-1914 Page 11 - 14 ... different views Within the scope of the thesis, the theoretical basis for the research includes: Competitive theory, Competitive theory on anticipatory future; Competitive theory based on enterprise’s... to Competitive capability of audit firms such as competitive theory, competitive theory on anticipatory future; Competitive theory based on enterprise’s resources; The theory based on the enterprise’s... Result Accepted Accepted Accepted Accepted Accepted Accepted 23  Inference the above result: Through testing, it can confirm that the Audit quality factors impact on the Competitive capability