- The Factors that Affect the Auditor Independence in Financial Statements Audit in Vietnam. - Financial information that meets the needs of the user must be accurate, sufficient, timely and reliable. - To achieve this, the auditor independence must be ensured. - However, the auditor independence is influenced by various factors such as the provision of non-audit services, audit fees, audit time, etc. - Using a questionnaire instrument, Viet Nam interested parties’ perceptions of the influence on auditor independence of a large set of 26 factors are elicited. - Most of the research on this topic has been done in large countries such as USA and UK (Beattie et al., 1999. - In view of the above, Viet Nam has been chosen as an ideal case for research.. - Independence in fact refers to the actual objective state of the relationship between auditing firms and their clients. - 70/2015 / TT-BTC dated 8 May 2015 of the Ministry of Finance as well as in the Independent Auditing Law of 2011. - The results show that these five factors seriously affect the perception of the independence of Malaysian credit officers, in which the auditor independence on income from a client is the most important factor.. - (1999) investigated factors influencing the auditor independence:. - Their investigative instrument consists of 45 economic and legal factors that represent the threat or enhancement of the auditor independence. - They report that almost of the threat factors are the economic dependence of the auditor and the provision of non-audit services while significant enhancements are the existence of an audit committee, the risk associated with the financial statements review and the risk to the auditor of the loss of registered technicians.. - (2005) reported that credit officers in Malaysia recognized that the auditor independence was influenced by the size of the audit company, the audit firm's tenure, high level of competition within the external audit market, the existence of the audit committee, the provision of non-audit services and audit fee.. - (2006) investigated the auditor independence in Barbados from the point of view of auditors and users. - They reported that the independence was negatively impacted by a number of factors such as the auditor's economic dependence on customers, the provision of non-audit services, high competition, scale the status of a single audit specialist, the length of the tenure or the scale and proximity of the Barbados society.. - The study by Alajmi (2011) also shows the effect of different factors on the auditor independence in Bahrain. - Based on previous studies on the factors affecting the auditor independence as well as legal conditions in Vietnam, the author inherits and synthesizes the typical elements of the model of Imhoff (1978), Abu Bakar et al. - (2005), Alajmi (2011) and Nguyen Thi Phuong Hong, Ha Hoang Nhan (2015) to review factors affecting the auditor independence.. - the relationship between the auditor and their clients. - high level of competition within the external audit market and the size of the audit firm. - the existence of the audit committee. - risks for the auditor from providing poor quality audit services and the disclosure of financial relationship.. - After the Enron incident, there have been many recommendations concerning the limitation of the term of the auditor and the rotation of the auditor. - At present, there are many studies on the relationship between audit tenure and audit quality, and there are various views that long audit periods will have an impact on audit quality as well as on two part of the audit quality is the capacity and auditor independence.. - The point of view of the audit rotation is that long audit tenure will reduce the auditor's independence and thereby reduce the audit quality. - They argue that a long audit period will undermine the audit quality, and the auditor's ability to work is also likely to decrease as the audit period increases, the auditor independence will be destroyed by the long-term relationship of the audit with their clients (Hoyle.J, 1978). - Therefore, an obligatory limitation on the audit period is required to reduce the influence of the customer on the auditor's opinion, thereby improving the audit quality.. - (1999) concluded that the rotation of partners was viewed as one of the factors contributing to increase the auditor independence. - The provisions of the Sarbanes - Oxley Act (2002). - (2007), there is a greater belief in the financial statements of the companies that have the rotation of the auditor than the companies that transfer the audit partners or not.. - This study suggests that the audit firm may be more discerning and familiar with the client company's organization through repetition of the audit work, and therefore the audit quality will increase as the audit period is longer.. - 17/2012 / ND-CP dated March 13, 2012 of the Government detailing and guiding a number of articles of the Law on Independent Auditing: “Practicing auditors must not sign audit reports for an audited unit for more than three (03) consecutive years”.. - Ha Thi Ngoc Ha (2011) pointed out the importance of the audit tenure, the audit term and the impact on the audit quality. - It specifies that the audit period should comply with international regulations, from 3 to 5 years and at the same time there are different provisions on the rotation duration and the deadline for returning auditors is the audit responsibility and the auditor is responsible for controlling the quality of the audit.. - The results of the survey by Nguyen Thi Phuong Hong, Ha Hoang Nhan (2015) also show that the audit tenure in particular is that the auditor performs an audit for a client over a period of more than five years that is a threat to its independence, although this is one of the three least threatening factors on the Likert scale.. - Some researchers believe that the audit firm's provision of non-audit services will increase the auditor's ability to improve audit quality. - company to gain an understanding of auditing clients, better understanding of the internal control system of auditing clients as well as understanding the financial risks that auditor customers may face. - In contrast, many researchers believe that the quality of the audit will be reduced when the audit firm provides audit and non-audit services to the same client. - The auditor independence will be affected when the audit firm provides additional non-audit services to the client (Canning and G.William, 1999). - The temptation to earn more non-audit fees may reduce the auditor's independence (Frankel, Johnson, &. - Saudagaran in Bahrain (2011), non-audit fees of more than or equal to 100% of audit fees are considered as one of the most threatening factors to independence. - Under the provisions of Article 40 of the Independent Auditing Law of 2011, accounting and tax consulting services provided in conjunction with auditing services for the same client would reduce audit independence. - However, in the opinion of the audited entity, auditor independence is ensured if audit and non-audit services are performed by different groups of people. - (2006) and previous studies, economic dependence is considered to be one of the most threatening factors of independence, in particular when audit fees from a client account for up to 10% of the firm's revenues. - Research by Phan Thanh Hai (2012) points out some limitations of Vietnamese auditing services in the process of operation, that is, lowering the price, shortening the audit time to retain customers affect the quality of the audit and the transparency of the financial statements.. - The relationship between the auditor and their clients. - The relationship between the customer and the auditor will affect the auditor independence. - The auditor independence will be impaired if they participate or have a position that may affect the audit group of the old audit firm that is conducting an audit at the audit client where the auditor get a job offer (Independence Standard Board, 2000).. - Imhoff (1978) conducted an investigation of auditors and users of the financial statements to assess the auditor independence when the auditor accepts for their client company. - Accounting also specifies: “If the previous member of the audit team or the board of directors of an audit firm currently holds the same position in the client but has no significant relationship with the audit firm, the existence and severity of the risk from familiarity or threat is subject to the following factors:. - (3) The period since the member is no longer a member or audited or a member of the Board of Directors of the auditing firm until the time of conducting the audit;. - (4) The previous position of that member in the audit group or in the audit firm, for example, whether the member is responsible for regular contact with the board of directors or the management of the clients.”. - In this case, the audit firm must assess the seriousness of the risk and apply the necessary protection measures to eliminate or reduce the risk to an acceptable level.. - Article 30 of the Law on Independent Auditing of Vietnam also states in cases where audit firms are not allowed to conduct audits when they have affectionate or economic relationships with their clients, such as: the auditing member, manager or executive member of the audit firm is a member, contributing capital to the audited entity or having other economic or financial relations with clients in accordance with the standards of professional ethics of accounting and auditing;….. - There is no precise, complete definition of the audit committee. - is one of the board of directors of an issuer for the purpose of monitoring the accounting processes and financial statements of issuers and the auditing financial statements of issuers”. - Results from previous studies have shown that the existence of an audit committee is one of the factors that increase the auditor's independence (Beattie et al. - High level of competition within the external audit market and the size of the audit firm. - (1999), the high competition in the auditing market and the small size of the audit firm from both the auditor's and the financial reporting user's point of view are potential factors that threaten the auditor independence. - Gwilliam (1999) conclude that the small size of the audit firm and the proximity of the audit market in Ireland reinforce the independence. - This makes the higher competition in audit and non-audit services, with many factors threatening the auditor independence.. - Risks for the auditor from providing poor quality audit services. - A number of studies have shown that identifying and evaluating risk factors for auditors who do not guarantee independence may affect the quality of the audit that will increase their independence. - the relationship between the auditor and their clients (QH). - high level of competition within the external audit market and the size of the audit firm (CT) have a negative impact on the auditor independence. - The existence of the audit committee (UB), the risk to the auditor from the provision of poor quality audit services (RR), and the disclosure of financial relations (CK) have a positive impact on the auditor independence.. - There is no significant difference in perception of the positive and negative factors affecting the auditor independence between the two groups (auditors and users). - The study by Nguyen Thi Phuong Hong and Ha Hoang Nhan (2015) summarized and indicates factors that affect the auditor independence such as the provision of non-audit services, audit fees, auditing market competition, audit risks…. - The questionnaire consisted of two parts: demographic questions and questionnaires on the degree of influence of the factors on the auditor independence.. - The survey gave their views on the impact of 26 factors on the independence of the Likert scale: (1) serious threat independence, (2) rather threatening independence, (3) not influencing independence, (4) increasing independence, (5) strongly increasing independence.. - Then, to test the hypotheses H1a and H1b, this study uses the Compare Mean tool included in IBM SPSS 20 and the support of MS Excel 2013 to compare the average value that auditors and the users measure on the level of the influence of each factor. - To test the H2 hypothesis, this study of the Independent Samples T-test analysis tool on IBM SPSS 20 looked at the difference in opinion among the groups at which factor and the specific difference.. - Of the surveyed subjects, the percentage of auditors was 59.3%, while the users of financial statements was 40.7% divided into different sectors such as managers, investors, bank credit officers. - The age of the respondent is from 30 to 50 years old so that the knowledge and experience needed for the occupation. - The auditors has a high level of experience in auditing and accounting, with 12 members of the CPA, ACCA. - The frequency of uses of the surveyed subjects also focused on the auditors, while the uses were lower.. - (QH3) The rank of the ex-auditor who. - The results of the survey on the provision of non- audit services, the audit tenure, and the size of the audit firm are consistent with previous studies.. - Starting with the analysis of the factors considered to be the most robust independent, we find that for the overall sample, that is, risks for the auditor from providing poor quality audit services (RR). - Thus, unlike previous studies, factor (UB) the existence of audit committee that appointed auditor did not really have a strong impact on the auditor independence, the reason may be due to the specificity in Vietnam, the organizational structure of the enterprises is inadequate. - most of the enterprises do not have the Audit Committee. - To investigate differences in the views of the two groups on the extent to which factors influence their independence, the study used the Independent Sample T - test. - The rank of the ex-auditor who accepts employment with a client firm. - In general, 17 factors have different viewpoints, there are 10 threatening factors and 7 factors that increase the auditor independence. - secondly, the characteristics of the. - operations of Vietnamese audit firms, together with the qualifications and experiences of the surveyed subjects.. - The five factors undermining independence are informations which users desired to be published so that the auditor independence can be considered and assessed more specifically, this can be a pressure on the auditors to ensure independence, to satisfy the requirements of the users.. - Derived from the characteristics of the operations of the Vietnamese audit firms, the pressures experienced by audit firms in the performance of their work such as budget pressures, competition among foreign enterprises. - This can cause unhealthy competition, reduce the auditor independence and reduce the quality of auditing financial statements.. - On the other hand, due to the level and experience of the respondents, the subjective assessment of factors may also make a big difference between the two groups.. - In summary, by synthesizing and analyzing the results of the survey of factors affecting the auditor independence, the author gives some comments as follows:. - In general, users rated higher levels of threat in 8 factors of independence and assessed the higher levels of increase in 5 factors of independence than those of the auditor.. - Firstly, the results of the study can inform policy makers, governments, and professional accounting bodies in emerging markets in countries that share similar economic, political, and cultural environment on how policies and frameworks related to PAI can be structured to ensure adequate regulation of the capital market. - First, this study investigates the perceptions of the factors influencing PAI of five objects using financial reports. - Third, data were collected using a survey questionnaire which may affect the reliability of the respondents’ answers. - So, researchs in the future should to contribute the linear regression for estimating the level of influence on the auditor independence.. - (1985), “Audit conflict: an empirical study of the perceived ability of auditors to resist management pressure”, The Accounting Review, Vol. - Le Doan Minh Duc (2017),“Non-audit services and the auditor independence of Vietnam”, Financial Journal, Vol 7/2017. - Nguyen Thi Phuong Hong and Ha Hoang Nhan (2015), “Factors affect to the auditor independence – Evidence in VietNam”, Journal of Economics and Development. - SOX (2002), Sarbanes-Oxley (SOX) Act of 2002 by the 107th Congress of the United States, Securities and Exchange Commission, Washington, DC.. - (1996), “An empirical study of the effects of audit committees.
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