MINISTRY OF EDUCATION AND TRAINING HO CHI MINH CITY UNIVERSITY OF BANKING GRADUATION THESIS FACTORS AFFECTING THE QUALITY OF AUDITING ACCOUNTING ESTIMATES: EVIDENCE IN BIG4 AUDITING COMPANIES NGUYEN THI THUY VY HO CHI MINH CITY – 2023 GRADUATION THESIS FACTORS AFFECTING THE QUALITY OF AUDITING ACCOUNTING ESTIMATES: EVIDENCE IN BIG4 AUDITING COMPANIES Major: Accouting - Auditing Code: 7340301 Student name: Nguyen Thi Thuy Vy Student code: 050607190654 Class: HQ7-GE01 Supervisor: Ph. Nguyen Thi Mai Huong HO CHI MINH CITY – 2023 DECLARATION Under the guidance of Ph. Nguyen Thi Mai Huong, I am currently conducting a research project titled "FACTORS AFFECTING THE QUALITY OF AUDITING ACCOUNTING ESTIMATES: EVIDENCE IN BIG4 AUDITING COMPANIES." I confirm that the entire content of this dissertation has not been published or used for attribution elsewhere, except for the sources duly referenced. Any content borrowed from other individuals that were not appropriately cited is not present in this thesis.
The information used for this study was obtained through transparent, reliable, accurate, and unbiased procedures. I confirm that this dissertation is a result of my own work. Signature Nguyen Thi Thuy Vy ACKNOWLEDGE First and foremost, I want to convey my deepest gratitude to the esteemed professors at the Ho Chi Minh City University of Banking , specifically those in the Accounting and Auditing Department, for providing me with the fundamental knowledge that has enabled me to successfully finish this thesis. I am particularly appreciative of the guidance and time given by Mrs.
Nguyen Thi Mai Huong. Her support and encouragement in the academic realm have been truly invaluable. Moreover, I extend my thanks to my fellows, whose enthusiastic and open- minded discussions have greatly contributed to the expansion of my knowledge. I am also thankful to the individuals who assisted me in collecting research data, as their contribution was significant.
Lastly, I express my heartfelt appreciation to my family and close friends for their unwavering encouragement and support, which played a crucial role in my completion of the Accounting and Auditing program. Although I made every effort to conduct comprehensive research, I recognize the limitations of my expertise and experience. As a result, there may be some inaccuracies or deficiencies in my report. I wholeheartedly welcome feedback and suggestions from professors and readers to further enhance the quality of this project.
i TABLE OF CONTENTS TABLE OF CONTENTS. i LIST OF ACRONYMS. iv LIST OF TABLES .v LIST OF FIGURES. Research aims and objectives.
Subject and scope of the research. LITERATURE REVIEW AND THEORETICAL BASIS. Auditing accounting estimates. The factors that affect the quality of auditing financial statement.
The factors that affect the quality of auditing accounting estimate. The concept and nature of accounting estimates. The concept of accounting estimates. The nature of accounting estimates.
Auditing procedures for accounting estimates. The concept of audit quality of accounting estimates. The concept of quality. The concept of audit quality.
The quality of auditing accounting estimates. The framework for audit quality according to the International Auditing and Assurance Standards Board (IAASB). General information about IAASB. Main content of audit quality issued by IAASB.
Factors affecting the audit quality of accounting estimates. Factors related to auditors. Factors related to audited entities. Factors related to external .36 SUMMARY OF CHAPTER 2.
Sample and sampling method .55 SUMMARY OF CHAPTER 3. DATA ANALYSIS AND DISCUSSION. Description of research samples. Descriptive statistics of the sample characteristics.
Descriptive statistics of the measurement scale. Result of exploratory factor analysis (EFA). Pearson correlation Analysis. Linear regression analysis.
Level of explanation and multicollinearity test. Analysis of Variance (ANOVA). Analyze the results of the regression model. Test the research hypothesis.
Research results and discussion .72 SUMMARY OF CHAPTER 4. CONCLUSION AND IMPLICATIONS. Audit professional competence. Effectiveness of internal control related to accounting estimates.
Limitations and future research. Future research directions .84 SUMMARY OF CHAPTER 5 .91 iv LIST OF ACRONYMS Acronyms Meaning SPSS Statistical Package for the Social Sciences EFA Exploratory Factor Analysis ANOVA Analysis of Variance FS Financial Statement IAASB International Auditing and Assurance Standards Board PCAOB Public Company Accounting Oversight Board ODA Official Development Assistance BOD Board of Directors HCMC Ho Chi Minh City v LIST OF TABLES Table 3. The scale of the dependent factor – Audit quality of accounting estimates. The scale of the independent factor - Audit professional competence.
The scale of the independent factor - Professional skepticism. The scale of the independent factor - Uncertainty of data, assumptions, models, and accounting estimate methods. The scale of the independent factor - Internal control related to accounting estimates. The scale of the independent factor - Support from experts.
The scale of the independent factor - Legal environment related to accounting estimates. Structure of the official survey questionnaire. Descriptive statistics of the observed sample. Cronbach's Alpha reliability testing result.
KMO and Bartlett's test for the independent factors. Eigenvalues and covariance deviations for independent variables. Result of independent factor analysis with principal varimax rotation method. KMO and Bartlett's test for the dependent factor.
Eigenvalues and covariance deviations for dependent variable. Pearson correlation analysis. Result of dependent variables‟ linear regression. Hypothesis testing result.
The impact level of factors affecting audit quality of accouting estimates .72 LIST OF FIGURES Figure 1. The proposed research model. Audit process of accounting estimate. Model of factors affecting audit quality of accounting estimates.
Research statement Amidst Vietnam's increasing integration into other economies worldwide, our country has been presented with many opportunities, but also accompanied by many challenges for business managers. To enhance competitiveness in both domestic and international markets, attract more investment, secure easy access to loans, and win large contracts, under the pressure of maximizing profits, corporate managers often resort to tactics aimed at "beautifying" their financial statement (FS). One of the tools commonly used for financial report fraud by these managers is "accounting estimates". Accounting estimates and fair values, commonly referred to as accounting estimates, are important indicators in FS.
Along with the increasing development of the economy, this indicator is widely used and plays an indispensable role in the FS of each enterprise. According to International Standard on Auditing 540 (ISA 540), a monetary amount for which the measurement, in accordance with the requirements of the applicable financial framework, is subject to estimation uncertainly. Besides the positivities such as improving the faithfulness and relevance of FS, this indicator also carries many risks due to its inherent uncertainty and subjective judgment in assessment, which are influenced by many factors such as measurement methods and assumptions applied, data resources, and the subjectivity of the estimator, … Therefore, this is one of the indicators that often have material misstatements and is exploited to beautify FS, serving the personal interests of the FS preparer, and reducing the trust of investors in the transparency of FS, especially in the current economic crisis period. According to Nguyen Thi Le Thanh (2017), audit opinions that are not unqualified are usually expressed in two circumstances: qualified opinions due to the limited scope of the audit, which relates to accounting estimates for 31%, while qualified opinions due to material misstatements (discovered by the auditor but not adjusted by the audited entity) related to accounting estimates of 24%.
The accounting estimates are an important 2 element but often contains many errors, and faults due to intentional or unintentional accounting. In fact, due to the unprecedented impact of Covid-19, many businesses are facing difficulties with negative production and operation results, unstable financial situations, increasing bad debts that are difficult to collect, slow inventory turnover, and a stock market downturn1,. In addition, for various reasons, some businesses need to prepare financial reports with better financial conditions. As a result, the entity may intentionally omit or carry out inappropriate accounting estimates.
Meanwhile, the information in the FS reflects the business operations and financial status of the enterprise, which has not only significant for the enterprise itself but also for other related parties in the economy such as government agencies, employment organizations, investors, potential partners,. Therefore, the faithfulness and relevance of FS are currently a matter of great concern to society. After over 30 years of development, external auditing plays a crucial role in ensuring trustworthiness and reasonableness, enhancing transparency for FS, and establishing trust for investors. This creates opportunities for the auditing profession to develop but also brings many difficulties and challenges for auditors in performing the audit of FS in general and auditing accounting estimates to ensure the quality of the audit.
Based on the above summary and analysis, the author concludes that the topic "Factors affecting the quality of auditing accounting estimates: Evidence in BIG4 auditing companies" is a necessary research topic at present, with the aim of identifying and determining the extent to which factors affect the quality of auditing accounting estimates at independent auditing companies in the BIG4 group, and recommending measures to improve the quality of auditing accounting estimates in particular and the quality of auditing FS in general. Research aims and objectives a. Overall objective 1 Nguyen Thi Phuoc. Auditing of accounting estimates during the COVID-19 pandemic.
3 The general objective of the study is to assess the impact of factors on the quality of auditing accounting estimates of independent auditing companies in the BIG4 group in Ho Chi Minh City (HCMC) and to propose solutions to improve the quality of auditing the section. Specific objective Firstly, to identify the factors that affect the quality of auditing accounting estimates of independent auditing companies belonging to the BIG4 group in HCMC and measure the level of influence of these factors. Secondly, to provide recommendations to improve the quality of auditing accounting estimates, thereby contributing to improving the quality of information on FS. Research questions Q1: What factors are currently affecting the quality of auditing accounting estimates in Vietnam and to what extent do they affect it? Q2: How can we address the factors that impact the quality of auditing accounting estimates to improve their quality and thereby contribute to enhancing the quality of financial information in FS? 4.
Subject and scope of the research a. Research subject The research subject of this topic is the auditing of accounting estimates in independent audit firms belonging to the BIG4 group in HCMC. Research scope Time scope The research is conducted from March 2023 to June 2023 Spatial scope The study focuses only on external audit activities and does not investigate other audit activities (state audit, internal audit). The study only focuses on surveying opinions related to accounting estimate auditing in the financial reporting audit activities of auditors and audit assistants at 4 independent audit firms in the BIG4 group in HCMC, without studying other subjects in companies such as the Board of Directors (BOD) of companies, accountants, and investors, … The study does not address the audit of fair value in the FS.
Accounting Law No. 88/2015/QH13 dated November 20, 2015, has regulations on fair value. The accounting regime for enterprises issued under Circular 200/2014/TT-BTC dated December 22, 2014, by the Ministry of Finance also provides for recognition of asset values and liabilities to be paid after initial recognition related to fair value. However, up to the present time, there is still no specific, official, and unified guidance on the method and input data sources used to determine fair value in a reliable manner.
Research method The author uses a mixed research method, which combines both qualitative and quantitative approaches. Based on previous studies related to the topic, the author establishes the theoretical foundation and constructs a research model, proposing a measurement scale for the variables.