Research objectives to clarify and verify the factors and the degree affecting to the financial audit time performed by independent auditing firms in Vietnam

s (AQIs) Disclosure Framework. . The AQIs comprise eight (8) comparable quality markers that correlate closely with audit quality based on ACRA’s observations from inspecting auditors over the past decade. ACRA has given 08 indicators, including: number of audit hours performed by senior audit members; audit experience and specialization by field; training activities; results of inspections; compliance with requirements for independence; quality control; staff oversight; attrition. These include hours spent by senior audit team members involved in the audit, relevant experience of the senior audit team members and results from internal and external inspections of auditors. Extensive consultations were carried out with audit firms and audit committees on the proposed set of AQIs. 7 For the total audit hours, the guidance includes: - Audit hours incurred for audits of group entities (e.g.subsidiaries, joint ventures and associates) by the Singapore firm and its member firms of the same network. They include statutory audits of these entities. - Audit hours incurred by specialists (both internal and external of the firm) in areas such as technical consultations, information technology, taxation or valuation. - Audit hours incurred by professional staff based in outsourced offices or seconded from an overseas member firm to the Singapore firm. Total audit hours exclude audit hours incurred by non-professional staff (e.g.interns, temporary staff and administrative support staff) Thus, in the research scope of the thesis, the audit time is defined as the actual audit hours for each client conducted by the members of the audit engagement. Hours here include the number of audit hours is interim audit and the number of final audit hours. During the research process, the fact about the number of audit hours is an internal sensitive factor of auditing firms and there is not regulations on disclosure of audit time for each client in Vietnam. Therefore, to evaluate and measure the audit time, when conducting a survey, the thesis has clearly and clearly identified for the surveyed subjects on determining who counted in the audit time. Compiling from AQIs of countries and organizations mentioned above shows that the AQIs all provide guidance, evaluation criteria on audit time such as: the allocation of audit hours for the stages of the audit; the allocation of time to areas containing risks identified during audit planning; engagement partner actively participate in the risk assessment, planning, and supervising the audit; partner and professional staff have enough time to perform the job effectively; partner and staff have enough time to resolve difficult problems; or pressure from audit fees is limited by partner to reduce the number of audit procedures, ... and here are also suggestions to help the PhD candidate perform survey on the criteria to evaluate factors affecting the audit time when conducting the survey. 2.3 The basic theories determining factors affecting financial audit time performed by independent auditors 2.3.1 The relationship between factors belonging to the client and the audit environment with the financial audit time a. Characteristics of the operational structure and scale of the client b. Characteristics of the client's financial statement preparation process c. Internal control of client 8 d. The risk of litigation affects auditors and auditing firm 2.3.2 The basic theories of determining the relationship between factors belonging to auditing firms and auditors with audit time a. Professionalism of auditing firms and auditors b. Experience of auditors c. Auditing personnel capacity of auditing firms 2.3.3 Other factors that affect the audit time In addition to the above factors that may have the most significant effects on the audit time, there may be many other ones that affect audit fees, gender of the auditor, ... 2.4 Research model 2.4.1 Dependent Variable 2.4.2 Independent Variable The thesis develops the following hypotheses: H1: The complexity of the operational structure, the scale of the client (OPEC) positively impact on audit time (AT). H2: The complexity of the client's financial statements preparation process (FSCPL) positively impacts on the audit time (AT) H3: Control risk (CR) positively impacts on the audit time (AT). H4: Legal risk related to auditing firms and auditors (LR) positively impacts on auditing time (AT) H5: Experience of auditing firms and auditors (EXP) negatively impacts on the audit time (AT) H6: Professionalism of auditing firms and auditors (PRO) negatively impacts on Auditing time (AT) H7: Auditing personnel capacity of auditing firms (AC) negatively impacts on the audit time (AT) 2.4.3 Control variables 2.4.4 Research model 9 Research model CR Audit time (AT) LR EXP PRO AC FSCPL Implications Control variable: gender, audit fees OPE C 10 CHAPTER 3: RESEARCH PROCESS AND METHOD 3.1 Research method and process 3.1.1 Research process Qualitative research Develop research model Quantative reseach Literature overview Collect data and perform quantitative research Conclusions and implications Find out the factors affecting audit time Analyse results Research gap 11 3.1.2 Research method 3.2 Quality research 3.3 Quantative research 3.3.1 General regression equation AT = β0 + β1 * OPEC + β2 * FSCPL + β3* CR + β4* LR + β5* EXP + β6* PRO + β7* AC + µi 3.3.2 Data sources Data source used in the thesis is the information collected directly via email, the media from the questionnaires have been cleaned and discarded inadequate or not satisfied data. 3.3.3 Sample of the dissertation The object of the survey identified in the quantitative research of the dissertation are mainly auditors from the position of leader of the audit team (senior) or higher, audit manager and engagement partner, partner in charge of audit quality in auditing firms and experts from Vietnamese and international professional associations, accounting and auditing lecturers, especially research on auditing at universities. Due to the specific characteristics of the audit profession, the type of auditing firms has a role to play a lot on the organization and arrangement of the audit, so the researcher has surveyed into 3 main objects, which are international auditing firms under Big4, the second group is the auditing firms that are approved to audit listed companies according to the Securities Commission's regulations, and the smaller local auditing firms ( fully Vietnamese, established and operated only in Vietnam) to increase identity for target groups. After a period of about 4 months (from October 2019 to January 2020) from sending the survey questionnaires to objects. During the survey process, besides the direct survey samples, the postgraduate mainly used the google forms survey tool through email, the number of responses received was 258 reponses. The quality of the returned feedback was very good, of which 250 were valid and only 08 were excluded, this is due to the selection of subjects suitable for the study as a whole right from the time the survey was submitted. With the number of observations collected is 250, compared with the guidance on experience of previous studies, with a scale of 36 observed variables, the number of observations 250 can be accepted with the EFA analysis procedure (with exploratory factor analysis EFA, according to research by Hair, Anderson, Tatham and Black (1998), refer to the expected sample size of at least 5 times the total number of observed variables. This, there are 36 observed variables, the sample size should be 36 * 5 = 180 observations, respectively). 12 3.3.4 Process and method of quantitative data analysis a. Design questionnaires b. Select a survey sample c. Collect survey data d. Processing raw data e. Verifying the quality of the scale g. EFA analysis h. Test regression model 13 CHAPTER 4: ANALYSIS OF THE STATUS AND EXPERIMENTAL RESULTS OF FACTORS AFFECTING THE FINANCIAL AUDIT TIME PERFORMED BY INDEPENDENT AUDITING FIRMS IN VIETNAM 4.1 Status of operation and quality of independent auditing in Vietnam 4.2 Results of qualitative research 4.2.1 Implementation and survey participants 4.2.2 Implemenation process 4.2.1.1 Design questions for experts The specific questions are designed as follows: (1) Can you briefly describe your current work: what field are you currently working in, which clients are you in charge of (if the auditor)? With auditor subjects: (2) Do you know that the number of clients you are auditing is facing great pressure on time? (3) In your opinion, what issues does an audit company need to consider when providing audit services to clients? (4) In your company, when and how is the audit period determined? Does your company have detailed instructions on timing of audits? (5) According to you, what factors affect the audit time? Of these factors, which factors do you see the most influencing on the audit time and the direction of their impacts? (6) Do you have any recommendations/suggestions to help auditing firms/auditors to control and manage the audit time better? 4.2.2.2 Performing surveys 4.2.3 Results of qualitative research The concepts formed through the synthesis of the results of previous studies and opinions discussed through the survey process are unanimous. There are 7 factors affecting audit time divided into 2 groups. The first group belongs to auditing clients, including: characteristics and scale of client operations; characteristics of the client's financial statements preparation process; client's internal control and litigation risks related to auditing firms and 14 auditors. The next group belongs to auditing firms and auditors, this group includes the following factors: experience, professionalism and human resources capacity of auditing firms/auditors, details are as below table: With the above results, the PhD candidate continues to survey and measure the impact of the above factors on the audit time through experimental analysis by quantitative research. 4.3 Analysis of experimental results on factors affecting financial audit time performed by independent auditing firms in Vietnam 4.3.1 Sample Characteristics 4.3.2 Descriptive statistical analysis 4.3.3 Evaluate the reliability of the scale With the scope of the thesis, the research sample has a size of 250 units, the thesis retains the scales with Cronbach's alpha coefficients> = 0,6; Cronbach's alpha If Item Deleted coefficients are smaller than Cronbach's alpha coefficients of the total variable and the total variable correlation coefficient> = 0.3. All component scales corresponding to the variables of the research model of factors affecting the financial audit time all meet the requirements for reliability due to the larger Cronbach's Alpha coefficient 0,6, at the same time the total variable correlation coefficient of the observed variables in each component scale is greater than 0,3. Thus, the results of evaluating the scale values through Cronbach's alpha's coefficients show that observed variables previously identified in the model are retained 4.3.4. Correlation matrix The matrix above shows the correlation between the dependent variable of audit time (AT) with each independent variable. Correlation between the variable EXP (Experience of auditing firm and auditor) and the dependent variable AT (Audit time) is the strongest and has the opposite effect with the dependent variable AT. Correlation analysis results showed that the dependent variable and the independent variables were correlated with sig value <0.05 (statistically significant). 4.3.5 Results of EFA The results showed the following factors: internal control of client; Professionalism of auditing firms and auditors; Operational characteristics, client size; Characteristics of the client's financial statement preparation process; Litigation risks related to auditing firms and auditors; Auditing personnel capacity; Audit experience has observed the same factor loading 15 greater than 0.3, valid for satisfying the requirements. Thus, the scales built for the independent variable in the model ensure requirements and continue to be used in the research. 4.3.6. Result of MLR Based on the factors explored in the above steps, the regression model of factors affecting the time to audit financial statements performed by independent auditing firms in Vietnam is as follows: ATi = β0 + β1 * OPECi + β2 * FSCPLi + β3* CRi + β4* LRi + β5* EXPi + β6* PROi + β7* ACi + µi According to the analysis results, research hypotheses and the impact level of the independent variables on the dependent variable are concluded as follows: Independent variable Absolute value Density (%) Affect order Positve effect The complexity of the operational structure, the scale of client .123 18,3 4 The complexity of the financial statement preparation process .268 40,0 1 Internal control .129 19,3 3 Litigation risk related to auditor and auditing firm .150 22,4 2 Total 100% Negative effect Experience of auditor -.367 57,0 1 Professionalism of auditor and auditing firm -.181 28,1 2 Personnel capacity of auditing firm -.096 14,9 3 Total 100% The above results show impact level in order of strongest to lowest. Factors affecting the same direction to the audit time, in particular: the complexity of the operational structure, 16 the client scale; the complexity of the client's financial statement preparation process; Control risks and litigation risks related to auditing firms and auditors. In which, the complexity of the client's financial statement preparation process has the strongest impact on the audit time. Factors that have a negative impact on the audit time include: experience of auditing firms, auditors; Professionalism of auditing firms, auditors and auditing personnel capacity of auditing firms. In which, the dominant and the strongest impact is the experience of auditing firms and auditors. 17 CHAPTER 5: CONCLUSIONS AND IMPLICATIONS 5.1 Conclusions 5.1.1 Analysis of research results From the initial research model, there are 7 factors included in the research model, namely "Characteristics of operational structure, client scale", "Characteristics of the financial statement preparation process", "Control risk ”,“ Litigation risks related to auditing firms and auditors”,“Experience of auditing firms and auditors”,“ Professionalism of auditing firms and auditors ”,“Auditing personnel capacity of auditing firms ”. These 7 variables are concretized into 28 scales. After the reliability analysis, no variables were excluded from the model. And after regression analysis, these 7 ones explain the fluctuation of the audit time in which the variables have the same directional impact, including: Operational structure characteristics, client scale; Characteristics of the client's financial statement preparation process; Control risk; Litigation risks related to auditing firms and auditors. Specifically as follows: the more complex the characteristics of the operation structure, the client scale and the process of preparing the client's financial statements, the more the audit time will have to be; Control risks and litigation risks related to auditing firms and auditors are greater, the more audit time; the more experience and professionalism of auditing firms and auditors, the lower the audit time; Auditing personnel capacity of auditing firms is larger, the lower the audit time is. In which, the complexity of the process of preparing customers' financial statements and the experience of auditing firms and auditors has the greatest influence on the audit time. The above results are also supported more firmly in the conclusions because during the survey, the thesis investigated some more "interesting" information as follows: Number of clients of auditors during "audit season" Through surveying the number of clients in the latest "audit season" that the auditors responded with the client situation show that: The more professional level, the more clients. Thus the higher level allocation of audit hours to each audit engagement will decrease due to pressure on client number. Among the auditors working in Big4, with the period in a "audit season" from the end of the fiscal year to the time of signing the financial statements (about 90 days), the number of audit hours can be analyzed for each client will gradually decrease from senior to partner 18 For the number of overtime of auditor per week during the peak audit season: This data is shown as follows: common feature in the audit field, most of the overtime are not included in the audit fees quoted to clients. One of the great reasons here is that all Big4 auditing companies are equipped with modern audit technologies such as audit software, modern machines (high-configuration computers, locations) to support working well and there is always an annual upgrade in technology, machine facilities, ... and auditors receive great and professional support from a team of experts, consultants, support teams for logistics, As analyzed in Chapter 4, all 4 Big4 auditing firms have used audit software and support tools in audit contract management. These management tools apply modern technology and use and manage data online. These tools also manage the members of the audit team on the deadline to submit working papers, ... based on the statistics on the system, the auditors' ability to manage time is assessed and as a basis for evaluating the results and performance of each individual. Therefore, the professional members of the audit team will always be faced with how to manage the audit time most effectively. Through surveys, and in-depth interviews showed that a problem posed, for small auditing firms, the audit was still mainly based on detailed inspection but the planning stage was still limited, with little attention to the audit approach according to the risk based approach and evaluate the internal control. This is in contrast to Big4 firms, Big4 auditors will focus more on audit planning and risk assessment of material misstatements and risk based approach to be able to detect risk areas most likely to have a crime. This approach will greatly reduce the audit time to perform substantive procedures which greatly improve the performance of the auditor. This fact is also consistent with some studies of foreign scholars on the difference in audit approach as analyzed in chapter 2. 5.1.2 Assessing the status of determining audit time and referrence to audit quality in Vietnam The first problem, as analyzed in Chapter 4, the determination and management of the audit time of the auditing firms in Vietnam today has not really been as focused as its inherent importance. There still exists a clear disparity between the group of Big4 auditing firms and local firm. In fact, the Big4 auditing companies have an audit process that is deployed and monitored in accordance with global firm regulations, so they must comply with the company's strict regulations to perform and maintain quality at high-level to maintain and protect the company's professional reputation. Therefore, for these firms, the identification and estimation of audit time is strictly carried out and there are supporting technology tools to track and manage audit performance easily. On the other hand, for pure local auditing firms, because they always face in an audit market with many competitive challenges, finding clients for them is relatively difficult. And to maintain businesses, finding clients is their biggest goal, 19 and many firms that are bigger than the goal of maintaining audit quality. Therefore, many auditing firms only need to accept clients, give a fee if they feel suitable, but almost do not calculate how much audit time needs for clients. At the same time, the management of audit time in these businesses is also completely loose. The second problem, the management and control of the current audit time of the professional association for the firms are almost not implemented or are not qualified to help them do it. For many developed countries such as the United State, Singapore, Canada ..., the audit time performed for each client is a quantitative factor in the Audit Quality Indicators, which contributes to the association's assessment to obtain the audit quality of each engagement and enable the client themselves (e.g., the client's audit committee) to have clearer, more transparent information when comparing, evaluating and choosing auditing firms by more objective indicators. The third problem, in the process of learning and building the theoretical basis for the Thesis shows that many foreign studies also discover the fact that there is a large difference in the process, the method of testing approach. accounting of many auditing firms Big4 and outside Big4. The fourth problem, for big firms, the human resource capacity is very good, the recruitment of high quality personnel is actually a competitive problem of Big4 auditing firms and big firms (about top 10 auditing firms large), and most of the workers with top-notch expertise will work for these firms. As for the average Vietnamese auditing firms, the problem of recruiting and maintaining a stable staff is a difficult problem, which leads to the existence of quality assurance, therefore new recruiting staff for local auditing firms is still facing many difficulties. Regarding this issue, there is also a big differentiation between big international firms and local ones that the income difference between the two types of auditing firms here is also very large. In addition, international auditing firms receive very strong support in terms of technology, expert team, infrastructure and HR administration, so their audit time is used very efficiently and well controlled 5.2 The development orientation of independent auditing firms in Vietnam 5.3 Recommendation 5.3.1 For regulators 5.3.2 For VACPA a. Enhance the role and position of the VACPA b. Necessary need to develop Audit Quality Indicators 20 c. Design and implement supporting tools for Vietnamese auditing firms 5.3.3 For auditing firms and auditors Auditing firms need to make continuous efforts in improving their reputation and confidence in their profession. It is very difficult to build a brand name and reputation, but to maintain and maintain it is even more difficult, so in each staff level, auditors in auditing companies need to always adhere to the top ethical code, always have professional behaviors suitable to the profession and always maintain and update knowledge, expertise, skills, technology to catch up with the development trends of the times. Auditing company and leaders need to build a vision, mission, development strategy and goals for the firm to develop a long-term, sustainable objectives in the market. To improve professional reputation, there is no better solution is to increasingly ensure and improve audit quality at the best level. To do this, determining the audit time for each audit engagement needs to be done seriously before signing the contract. In which, the auditor should pay attention to the following issues: First, auditors need to pay great attention to what is the purpose of the audit, find out the characteristics of the operational structure and the scope of the client's operation is complex or simple. Second, auditors need to consider the characteristics of the client's financial statements preparation process, what are the items that make up the client’s financial statements, ... what are the standards for preparing financial statements (Vietnamese accounting standards or IFRS,). The simpler this process, the lower the audit time. Third, in the audit planning process, auditors need to pay great attention to review the internal control of the clients to determine whether the control risk is high or low, thereby estimating and implementing the time of inspection procedures appropriately. Next, just before agreeing to the audit engagement, the auditor needs to carefully assess the risks that may lead to the defendant being involved in a lawsuit related to the client. Besides the factors that make the audit time in