DETERMINANTS AFFECTED TO THE CHOICES OF AUDITOR ENTITY: THE CASE OF LISTED COMPANY IN VIET NAM’S STOCK EXCHANGE45457

VIETNAM NATIONAL UNIVERSITY - UNIVERSITY OF ECONOMICS AND BUSINESS DETERMINANTS AFFECTED TO THE CHOICES OF AUDITOR ENTITY: THE CASE OF LISTED COMPANY IN VIET NAM’S STOCK EXCHANGE Hoang Thi Hong Van Banking Academy ABSTRACT The study was conducted to understand the factors affecting the selection of auditors by non-financial companies listed on Vietnam's stock market The analysis of data of listed companies from 2014 to 2016 shows that there are factors affecting the selection of auditing firms including firm size (SIZE), ownership ratio of foreign investors (FORSHA), enterprises with subsidiaries (GROUP), the ratio of liabilities to total assets (DEBT_ASSET) and stock exchange where entities are listed (HOSE) Keywords: Auditor choice, listed, size, foreign investors, group INTRODUCTION The reliability of financial statements of businesses, especially listed companies, is always a matter of concern due to the spread of information, affecting many objects and the investment public In Vietnam, although the State Securities Commission has regulations on conditions for independent auditing firms to audit financial statements of public companies, they are inaccurate in auditing activities However, some scandals had occurred Vien Dong Pharmaceutical Company, Bong Bach Tuyet, recently has become Truong Thanh Wood Group Joint Stock Company These violations have caused significant damage to investors, more seriously, reducing the confidence of users of financial information with an independent audit This has caused many investors and public opinion to wonder why an independent auditing firm in the list of auditing firms approved to audit public companies will cause such serious errors In the world, there have been many studies on the reasons for choosing auditors such as those of Blackwell et al (1988), Carey et al (2000), Knechel et al (2008), Revier and Schroe (2010) or research by Beattie and Fearnley (1998) acknowledges that auditor choice can be driven by three groups of factors: the audit environment, Corresponding author Email address: vanhth@hvnh.edu.vn 603 IN TERNATIONAL CONFERENCE ON - CIFBA 2020 the characteristics of the firm, the characteristics of the customer These studies have been conducted in many different countries, with differences in culture, politics, the legal environment, the development of the market economy as well as the market of audit services Each one of the study addresses specific groups of factors according to each specific research objective and context Besides, the authors' studies are studied in different contexts with the political, cultural, and cognitive institutions of businesses that have many differences compared to Vietnam This study was conducted with non-financial enterprises listed on the stock market in Vietnam to answer the question "What factors affect the firm's choice of auditors" Data analysis results of 276 non-financial enterprises listed on Vietnam's stock market in 2014, 2015, 2016 have pointed out factors affecting the selection of auditing firms, namely: the size of the enterprise, the ownership ratio of foreign investors, the enterprise with subsidiaries, the ratio of liabilities in the total assets and the stock exchange of listed enterprises The research results provide investors, management agencies and auditing companies with information on several factors involved in the selection of auditing firms by enterprises in Vietnam, basis for acknowledging and assessing current audit practice in Vietnam RELATED LITERATURE OF AUDITOR CHOICE 2.1 The Reasons for an entity hire an auditor Audit hiring purposes are different between businesses, which may stem from various internal or external issues Wallace (1980), De Ketelaere (2007) emphasized the need for external monitoring with firms by an auditing firm in an unregulated environment through three hypotheses: "The Management Hypothesis", "The Information Hypothesis "and" The Insurance Hypothesis " “The Management Hypothesis" relates to representative theories, mentioned by Jensen and Meckling (1976), that managers will be willing to provide enterprise transparent information to stakeholders Accordingly, this hypothesis refers to an organization's audit as a means to reduce costs resulting from conflicts of interest between owners and managers (Jensen and Meckling, 1976, Watts and Zimmerman, 1983) DeFond (1992) identified two factors related to the external monitoring needs of a business: (1) the difference in roles between the manager and the owner, the owner must respect the managerial actions and (2), owner's imperfect observation ability for managerial actions Jensen and Meckling (1976), De Ketelaere (2007) provide explanations for hiring external monitoring by auditors and agree with DeFond's first factor (1992) that the Owner always tries to protect their rights This action is likened to a response to moral hazard issues "The Information hypothesis," which suggests that auditors can help improve the quality of information provided to users Investors and creditors rely on audited financial statements to make investment decisions Financial information audited and provided by independent auditing firms will be highly reliable for users Investors and creditors rely on audited financial statements to make investment decisions Enterprises usually operate based on external financial resources for the development of production and business activities A company that is planning to apply for funding 604 VIETNAM NATIONAL UNIVERSITY - UNIVERSITY OF ECONOMICS AND BUSINESS or wants to attract new investment will want to prove to investors that the information on the financial statements is correct, reliable and that is the reason for promoting businesses This firm hired an independent high-quality auditing firm to increase the reliability of financial statements In particular, in case the business has to provide reports on its complex transactions to investors “The Insurance Hypothesis" proposes that an audit be regarded as an insurance policy for investors This hypothesis holds that auditing firms act as insurance companies for investors, banks, regulators, etc When investors make inaccurate decisions due to based on the financial statements of material misstatement, the auditing firms and auditors will be responsible When suffering from losses, investors believe that they will be able to recover their losses from auditing firms by auditing firms that are eligible to implement an insurance policy for any investor and risk-taking from venture capital (Chang et al., 2009) Chow (1982) argues that external financial providers and other funds may require auditing as a way to reduce certain types of damages, as a guarantee of accountability Lennox (2000) provides supporting evidence for the insurance hypothesis In New Zealand, auditing firms are responsible for their negligence in causing damage to information users including financial providers and may face litigation costly 2.2 The quality of auditing, reputation of auditing firms in selecting auditing firms Klein and Leffler (1981) defined quality: "Quality refers to the extent to which some desired characteristics are good" DeAngelo (1981) also gave a brief definition of audit quality “Auditing service quality is defined as evaluating auditing firms in two aspects: Firstly, it is the firm's business Does the audit detect customer offenses? Second: is the auditing business's reporting of these violations" The auditing firms are hired the main difference is in the quality of audit (DeAngelo, 1981) For some businesses, the quality of the audit services they provide is the reason for deciding to choose an auditing firm The quality of the service here is considered based on the "satisfaction" of the information users with the conclusions and opinions that the auditing firm gives However, with physical products, it is not too difficult to assess the quality of products, but with audit services, evaluating a company that provides quality services is not easy According to DeAngelo (1981), due to the inability to observe audit quality, several observable alternatives to assess the audit quality are the size, reputation, or market share of the firm audit DeAngelo points out that for large auditing firms, the quality of their audit is higher so they get more customers, based on existing clients Revier and Schroé (2010) think that auditing firms with a good reputation or large scale such as Big Four are considered auditing firms with high audit quality Large audit firms are less dependent on a specific number of customers and therefore make fewer mistakes in their audit In another aspect, the quality of the auditing firms is expressed by the competence of auditors in the company (Choi et al., 2010) Hiring a reputable audit firm can help companies effectively solve their loan contracting issues by independent auditors providing credible information about the borrower (Jensen and Meckling, 1976) 2.3 The impact of ownership on auditor choice Chan et al (2007) used organizational theory to test the difference in auditing needs for listing information depending on the change in ownership in state-owned 605 IN TERNATIONAL CONFERENCE ON - CIFBA 2020 enterprises or not by investigating state-owned companies in China for changes in ownership structure They realized that reducing state ownership in enterprises and increasing the ownership of organizations and individuals led to a general increase in the need for higher quality audits in the Chinese stock market The author did not find the role of shareholders in the decision to choose an auditing firm They conclude that the capital ownership of large organizations and shareholders has a great influence on the quality of audits in the transition of the economy Makni et al (2012) show that for a business where the CEO cum chairman of the business with the presence of a major shareholder positively affects the demand for a high-quality audit than In contrast, the presence of institutional investors and small businesses negatively impacts the need for better quality audits Moreover, the existence of independent members, the Board of Directors, the ownership of the CEO and the level of corporate debt greatly influence the choice of a reputable auditing firm Researching family companies in Europe, El Ghoul et al (2007) hypothesize that the quality of financial statements of companies will not increase in the presence of high-quality auditing firms (such as big four) because the firm owner The family always wants to reflect the true performance of the company This is consistent with their assumptions: when a family company has control from the owner itself, the company almost doesn't want to hire an audit firm anymore The study by Arifur et al (2015), Steve et al (2003) provide empirical evidence on the impact of family ownership of control to audit prices and firm selection Math in the context of a developing economy in Bangladesh Guedhami et al (2009) studied a sample of 176 private enterprises in 32 countries, showing that private companies worldwide did not hire an auditor of the Big Four Businesses seeking finance abroad or foreign partners are more likely to hire an international audit firm because they have an understanding of the accounting system and accounting standards of international math According to different accounting standards across countries, the presence of global auditing firms helps businesses have a guarantee of comparable financial information after auditing nationally, beyond geographical boundaries, it is difficult for local audit firms to 2.4 The influence of internal characteristics on auditor choice Many studies such as Abbott and Parker (2000), Piot (2001), Fan and Wong (2005), Kane and Velury (2005), Lennox (2005), Dumontier (2006), show the size of audited firms is an important determinant of choosing a reputable auditing firm Lennox (2005), with the study of the relationship between firm size and the need for high-quality auditing firms, shows a positive relationship between firm size and firm choice High-quality math Large firms are more likely to hire a large, reputable firm and may pay a higher audit fee Abdel-Khalik (1993) uses an organization structure measured by a firm's hierarchy to examine the impact of firm size on the need for high-quality audits He found a positive relationship between the need for external auditors and the level of organizational complexity Davis and Hay and David (2004) studied the causes of demand for high-quality audit firms in New Zealand The study concludes that the demand for high-quality audit firms is real because larger firms 606 VIETNAM NATIONAL UNIVERSITY - UNIVERSITY OF ECONOMICS AND BUSINESS often need more control and management Piot (2001) shows that the probability of choosing an independent audit firm among "Big Four" firms increases with the size of the auditing firm, especially those related to export Pige (2003) states that the size of client companies is a determinant of the auditor's workload He assumes that in large enterprises, the auditing firms will spend more time to perform the audit task and thus the ability to detect abnormalities, mistakes will be higher Also, he argued that the amount of time spent on auditing is not the only factor that ensures the quality of the audit 2.5 Researching the debt needs of enterprises and the selection of auditing firms Reed et al (2000) predict that firms choose an audit firm belonging to the "Big Four" firms to help negotiate debt more They suggest that businesses often choose a higher quality auditing firm to minimize external supervision related to capital costs In contrast, Titman and Trueman (1986) show that managers of the companies with the highest debt ratios are more likely to choose low-quality auditing firms Experimental researchers Firth and Smith (1992), Cooper and Morgan (2008) examining the relationship between capital structure and independent audit choice conclude that managers are less interested in selecting Choose a better auditing firm to increase the ability to transfer capital from the finance provider Among the researches of these researchers, there is a contradiction in determining the effect of loan purposes and debt ratio on the choice of auditing firms The reason for the difference in the conclusions of the studies may be due to the size of the research enterprise or other factors such as culture, political institutions, characteristics of the audit service market in other countries According to Jensen (1993), firms with high debt demand or highly dependent on debt are more likely to seek higher quality audit firms to protect the interests of their stakeholders Therefore, the probability of choosing a higher quality audit firm increases for companies with large debt ratios or the desire to obtain large loans On the contrary, and based on theoretical signs, Titman and Trueman (1986) predicts that for firms with large debt ratios, if the post-audit information is not beneficial, there will be no incentive to choose a firm that has high-quality auditing Revier and Schroé (2010) found the positive effect of corporate internal complexity on the selection of auditing firms The conclusion is drawn: companies that are financed by different ways are different in making decisions regarding hiring an auditing firm For businesses with a large financial need in the form of capital or debt, there is an organizational complexity (due to the size, the large workforce) that is required by auditing firms to audit If they are reputable, they often decide to hire a large international auditing firm or the nation's leading auditing firm The results suggest that different segments of the audit service market may be sensitive to various aspects and benefits of the audit process Large companies with broad financial needs often choose high-quality auditing firms, smaller ones may be more sensitive to the benefits they get from auditors in the areas of improvement improve internal operations and gain access to consultants This conclusion is consistent with the evidence in previous studies 607 IN TERNATIONAL CONFERENCE ON - CIFBA 2020 THE HYPOTHESES AND RESEARCH MODELS 3.1 Decision of auditor choice The current market for auditing services in Vietnam is significantly decentralized Large audit firms such as Ernst and Young, Deloitte Vietnam, KPMG, PWC (also known as Big Four) have revenue and a larger number of customers than many other auditing firms Big4 are big auditing firms with global nature These firms have a superior number of employees and sales from the financial statement audit and other services than other auditing firms According to information from the annual meeting of Directors of auditing enterprises on June 24, 2016, organized by the Ministry of Finance in association with the Vietnam Association of Certified Public Accountant (VACPA), according to the data summarizing the audit activities In 2015, there were 10 largest auditing firms assessed according to criteria: Revenue, number of customers, number of employees, number of auditors Of which, Big4 is the auditing firm with the largest total revenue of 2,799 billion out of 3,393 billion of 10 companies, accounting for 82.5% of the revenue of the 10 largest companies, and also the enterprises with the total number of customers, the most employees Big4 is also the big auditing firms, having brand and quality of auditing superior to other auditing firms This is the reason why the author chooses the dependent variable AUDCHOICE to indicate the choice of auditing firms belonging to Big Four or non-Big Four groups of auditing firms 3.2 The complexity in the operation of a firm affects the choice of firm to audit The general assumption in research is that problems arising in an organization's operations often increase with the growth in size and complexity of the company's production and business activities A general assumption is that the need to hire a high-quality audit firm will increase with the complexity of the operations and the size of the firms Complicated operations and increased business size, managers have reduced visibility to the current management hierarchy, and information and communication are reduced This poses a high risk of ethical risks and opportunism Internal control cannot always compensate for the deficiency in this control (Abdelkhalik, 1989), which is why companies require monitoring systems through independent auditing to enhance their Owner's confidence in reducing the risk of moral hazard Simunic and Stein (1987), Abdel-khalik (1989), Hay and Davis (2004), Knechel et al (2008) found evidence for the relationship between accounting firm choice and the complexity of the company Business complexity is measured through three criteria: the size of the business, the enterprise has subsidiaries, the ratio of inventories and accounts receivable in total assets Studies of Abbott and Parker (2000), Piot (2001), Fan and Wong (2005), Lennox (2005) show that auditing firm size is a factor that influences firm selection reputable math Lennox (2005), in his study of the relationship between firm size and the need for high-quality audit services, shows a positive relationship between firm size and firm choice Auditing firms are of high quality because, in practice, large firms are more likely to pay high audit fees for audits conducted by large, quality auditing firms Abdel-Khalik (1993) examines the impact of firm size (as measured by the 608 VIETNAM NATIONAL UNIVERSITY - UNIVERSITY OF ECONOMICS AND BUSINESS hierarchy of the economy) on the need for high-quality audit services He found a positive relationship between the need for high-quality external audits and the complexity or size of the business Hay and Davis (2004) explain the causes of the need for high-quality audit services in New Zealand Research shows that the need for high-quality audits is necessary because larger businesses require more management control For Piot (2001), the probability of selecting an auditor in the "Big Four" companies increases with the size of the audited firm, especially those related to the export sector He argued that the size of the client companies was a deciding factor of the auditor's workload He assumes that in large enterprises, auditing firms will spend more time to perform the audit task and therefore the ability to detect abnormalities will be higher Besides, he also said that the cost of the audit is not the only guarantee for the quality of the audit Accordingly, large-scale businesses tend to choose reputable and quality auditing firms and vice versa, small and medium-sized enterprises often tend to hire large-scale audit firms Smaller and less reputable In the studies, the Total assets used is a scale to measure the size of the business Healy and Lys (1986), Johnson and Lys (1986), Simunic and Stein (1987), Francis and Wilson (1988), Firth and Smith (1992), Abbott and Parker (2000) hypothesize a positive link between the size of the audited firm and the selection of higher quality auditing firms as the size of the customer is considered as an important criterion measuring the extent of the cost that can be paid for the audit Citron and Manalis (2000) found that the size of the audited firm positively influences the selection of the Big auditing firm Also, large firms may receive more attention from Large audit firms (Berton, 1995) Similarly, large clients may have received consulting services from large firms, so larger firms may be less satisfied with the services of the small firm The size of a company is a variable defined by the natural logarithm of total assets, mentioned in the documents of researchers such as Chow (1982), DeFond (1992), Broye and Weill (2008), Knechel et al (2008) There are many reasons why the demand for high quality audits increases with the size of an entity (Chow, 1982) For larger businesses, the owner is more likely to request an audit or a higher quality audit firm as a means of monitoring The scale can be used in many studies to measure firm size: it is sales, total assets, number of employees Based on the above studies, it can be hypothesized that there is a positive relationship between firm size and highquality audit firm selection Firm size can be measured by total assets, revenues, and the number of employees However, turnover and number of employees vary widely among businesses with different business lines Therefore, in the study, the author uses Total assets as criteria to measure the size of the business In the model, size variables are measured by the Logarithm of a firm's total assets Research hypotheses: H1: The firm size has a positive influence on the selection of auditing firms under Big In the financial statements of businesses, especially manufacturing enterprises, inventory targets are often important indicators, the violations in this item exist quite 609 IN TERNATIONAL CONFERENCE ON - CIFBA 2020 a lot, but the audit results are also It is pointed out that due to the complexity of the item, the problems in the process of auditing the item are often included in the auditor's report Inventory and receivables are two factors reflecting the complexity of assets and transactions Therefore, the operational complexity of an enterprise is measured through the second indicator, the ratio of Receivables and Inventories to total assets Following Knechel et al (2008), the author studies the choice of a high-quality audit firm with the internal complexity of the organization Knechel et al (2008) argue that there is a relationship between the number of transactions made in a business and its complexity, in other words, the number of sales transactions that demonstrate operational complexity of a business, measured by the ratio of Receivables and inventories, in line with Stice (1991) Therefore, INVREC - the ratio of inventories and accounts receivable to total assets mentioned by Abdel-khalik (1993), Hay and Davis (2004) is affecting the selection of auditing firms Research hypotheses: H2: The ratio of inventory and accounts receivable to total assets has a positive effect on the selection of auditing firms under Big4 The level of complexity in a company is also reflected in whether or not it has subsidiaries In Knechel's (2004) study of audit firm choice, organizational complexity is also measured by the number of subsidiaries the firm has The author uses the GROUP variable - a dummy variable, which will get the value when a company has subsidiaries, and get the value when a company doesn't have subsidiaries According to the research of Ge and Mc Vay (2005), when the enterprise is large with many subsidiaries, often raises more complex issues and therefore the control of the parent company is weak There is, therefore, a need for increased oversight of subsidiaries through high-quality audit firms A study by Hay and Knechel (2005) also provides evidence that a company with subsidiaries is more likely to use the same auditing firm to reduce management complexity and communication risk believe The GROUP variable used to represent whether a business has a proposed subsidiary is positively related to the selection of a high-quality audit firm such as Big4 Research hypotheses: H3: Companies with subsidiaries often tend to choose auditing firms under Big4 3.3 Ownership ratio of foreign investors to the selection of auditing firms Companies seeking finance abroad or foreign partners are more likely to hire an international audit firm because of the global nature of these audit firms Besides, foreign-invested enterprises believe that international auditing firms have a good understanding of the foreign accounting system or international accounting standards Such international auditing firms will be more reliable, which can help businesses increase the reliability of financial statements in the eyes of users of this information (Citrone and Manalis, 2000) Foreign investors will increase the ownership of capital in enterprises as they believe in their business performance and business results that have been verified by reputable independent auditing firms The current reality shows that the percentage of foreign 610 VIETNAM NATIONAL UNIVERSITY - UNIVERSITY OF ECONOMICS AND BUSINESS investors' shares is increasing in companies listed on Vietnam's stock exchange This may also affect the selection of auditing firms by Vietnamese enterprises El's research Ghoul et al (2007), Khan et al (2015) are quite consistent with the reality of audit needs in Vietnam, this is also the reason why the author put the (variable) factor on foreign ownership model of auditing firm selection of Vietnamese enterprises to re-test the suitability of this factor in the independent audit environment in Vietnam The author chooses the variable of ownership is the ownership ratio of foreign investors in the enterprise (FORSHA) wishing to consider this factor affecting the choice of auditing firms by Vietnamese enterprises Male or not the author expects that the percentage of shares held by foreign investors (foreign ownership) will have a positive impact on the selection of high-quality auditing firms like Big4 companies The proposed research hypothesis: H4: The ownership ratio of foreign investors has a positive influence on the decision to choose an auditing firm under Big4 3.4 Ratio of liabilities of a company to the selection of auditing firms A study of the level of corporate debt for auditing firm selection, in previous studies (e.g Fama and Miller, 1972, Jensen and Meckling, 1976) shows the severity of the conflict in the institution increases as the debt ratio in the capital structure of the business increases A contract with an external firm and especially a high-quality firm may limit conflicts of interest between bond investors and corporate managers Moreover, the increase in bad debt affects the financial situation of the organization, increasing the solvency of the business The study of Chow (1982), Beasely (2001) find evidence that companies involved in relationships with external financial institutions tend to provide reliable information The fact that an enterprise requires external financial support has a positive effect on hiring a Big Four auditing firm (Blackwell, Noland and Wind, 1998, Pitman and Fortin, 2004, Maxwell, 2005) Knechel et al (2008) used the ratio of total liabilities to total assets (DEBT_ASSET) as a variable to measure the debt ratio in a company The ratio of liabilities is determined by the total liabilities of an enterprise (including current liabilities and long-term liabilities) divided by the total assets of the enterprise The ratio of liabilities indicates the percentage of assets formed from liabilities of organizations and individuals out of the total assets of existing enterprises Several previous studies (e.g Sundgren, 1998, Broye and Weill, 2008), using different definitions of financial leverage, investigated the impact of financial leverage on choice Choose an auditing business Although the relationship is often assumed to be positive, the results were not convincing In addition to previous studies focusing on European countries, studies conducted by Broye and Weill (2008) provided a clearer view of the impact of financial leverage on public selection auditors According to their research, the use of leverage as a criterion in the selection process of auditing firms varies significantly among European contexts In the study, Broye and Weill (2008) investigated this relationship in 10 European countries and found evidence that the standard forms of financial leverage are related to varying degrees of auditor’s responsibility Researchers later proved that financial leverage hurts the choice of an auditing firm Although this finding provides evidence of a change in the impact of financial leverage on firm selection 611 IN TERNATIONAL CONFERENCE ON - CIFBA 2020 The authors view financial leverage as a single variable that is not affected by the domestic legal system to enable further in-depth studies than expected Research hypotheses: H5: The ratio of liabilities of the company has a positive influence on the selection of auditing firms under Big4 3.5 Return on total assets affects the selection of auditing firms The ratio of net profit to total assets (ROA-Return on total assets) is the ratio of net profit (profit after tax) to total assets ROA measures the profitability of each company's assets In other words, the ROA refers to the effect of managing capital (assets) to generate income, regardless of where the asset comes from Johnson and Lys (1990) identified ROA as a variable that may be related to firm selection Consistent with this argument, Abbott, and Parker (2000) hypothesize that ROA has a positive influence on the promotion of special services, auditing Another argument is that when companies are highly profitable, they will be able to pay higher audit fees to large firms The researchers found a positive, but negligible, correlation between the ROA and the selection of auditing firms However, Citron and Manalis (2000) did not see a significant difference between the ROA levels of two groups of customers using the audit services of Big6 and Non-Big6 auditing firms in Greece market They also found that Big6's customers were more profitable than customers of secondclass auditing firms But more surprisingly, local auditing firms' clients have higher (but not significantly) higher ROAs than second-tier auditing firms Knechel et al (2008) suggested that a company may be motivated to hire a lowquality audit firm to make it easier to hide its true profit He measured a company's profit by its return on assets (ROA) Dedman and Lennox point out that many highly profitable companies have a stronger incentive to hide information, suggesting that profitable companies will also be motivated to hire low-quality auditors Similarly, with unprofitable companies, its managers will want to hide the company's weakness from shareholders and lenders The views of many researchers on the impact of ROA on the choice of auditing firms are different This is the reason why the author put the ROA variable into the research model to test the impact of this factor on the selection of auditing firms of enterprises in Vietnam Accordingly, the author expects ROA to have a positive impact on the selection of high-quality auditing firm These hypothetical tests are limited to non-financial companies Research hypotheses: H6: Companies with a high ratio of net profit to total assets (ROA) tend not to choose Big4 auditing firms In the process of collecting information, the author found that businesses listed on the two stock exchanges HNX and HOSE also have many differences in size The number of companies with large asset value on HOSE is higher than on HNX The large difference in the size of companies listed on both HNX and HOSE may affect the choice of 612 VIETNAM NATIONAL UNIVERSITY - UNIVERSITY OF ECONOMICS AND BUSINESS auditing firms of listed companies This is the reason why the author added the HOSE variable to the model to assess whether there are differences of enterprises listed on the two stock exchanges with the choice of auditing firms or not The HOSE variable receives a value of when the company is listed on the HOSE and gets a value of when the business is selected to be listed on the HNX Research hypotheses: H7: There are differences in the selection of auditing companies under Big4 among the companies listed on HNX and HOSE The proposed research model: AUDCHOICE = β0 + β1SIZE + β2INVREC + β3GROUP + β4FORSHA + β5 DEBT_ ASSETS + β6 ROA + β7 HOSE + Ui Inside: AUDCHOICE: Auditing business selected AUDCHOICE receives a value of when the selected auditing firm is a Big4 firm, zero if the selected auditing firm is not a Big4 auditing firm SIZE: Enterprise size, measured through the total asset's Logarithm GROUP: Dummy variable indicating whether a company has subsidiaries or not GROUP equals when an enterprise has subsidiaries, equal to if the business has no subsidiaries FORSHA: Percentage of ownership by foreign investors in the business INVREC: The ratio of inventories and receivables to total assets DEBT_ASSET: Ratio of Liabilities to total assets ROA: Net interest rate HOSE: Dummy variable representing where the company is listed HOSE receives a value of when the company is listed on the Hanoi Stock Exchange (HNX), equal to if the company is listed on the Ho Chi Minh Stock Exchange (HOSE) RESEARCH METHODOLOGY 4.1 The sample The number of enterprises listed on the Ho Chi Minh Stock Exchange (HOSE, now the HSX) as of December 31, 2016, is 312, at the Hanoi Stock Exchange: 386 businesses The total of listed companies is 698, so for listed companies, when determining the overall study, according to Slovin (1960), if the total number of businesses listed on the HNX and HOSE is 698, 95% accuracy, standard error is + -5%, the number of samples to choose is: 255 enterprises In the sample, the author chooses only non-financial companies but not financial companies because the information on financial statements of financial companies is significantly different from nonfinancial companies on some information such as inventories, accounts receivable this may affect the research results Of the 255 non-financial companies expected to be selected, the author chose to allocate equally to all industry groups However, the number of companies in different industry groups and sizes varies so the specific 613 IN TERNATIONAL CONFERENCE ON - CIFBA 2020 number of each industry also varies Also, out of 698 enterprises listed on the two stock exchanges, only 530 businesses were listed in 20 specific industry groups, the rest 168 enterprises were not listed in the list of industries of the two stock exchanges The number of sampled enterprises was 255, accounting for 36.53% of the total enterprises on the two stock exchanges Enterprises not specifically listed in any of the two stock groups on the stock exchange are also selected by the author into the research sample to ensure the objectivity of the selected sample During the sampling process, the number of samples was increased to 276 businesses because the author selected the whole industry to ensure the representative of the selected sample The number of enterprises and industries respectively selected on both exchanges in 2016 and correspondingly refer to 2014 and 2015 Enterprises not specifically listed in any of the two stock groups on the stock exchange are also selected by the author into the research sample to ensure the objectivity of the selected sample During the sampling process, the number of samples was increased to 276 businesses because the author selected the whole industry to ensure the representative of the selected sample The number of enterprises and industries respectively selected on both exchanges in 2016 and correspondingly refer to 2014 and 2015 The process of collecting information showed that the businesses listed on both HNX and HOSE stock assets have quite different sizes The number of enterprises on the two stock exchanges with the asset value of over VND 1,000 billion accounts for about 35% of the total number of listed enterprises, the value of assets is less than VND 100 billion, accounting for about 8.5% of the total The rest are enterprises with assets from over VND 100 billion to under VND 1,000 billion Therefore, in the sample selected by the size of the enterprise assets, the author is classified into groups as large-sized enterprises Large assets with a value of over VND 1,000 billion and enterprises with smaller asset sizes of less than VND 1,000 billion are taken evenly on both HNX and HOSE stock exchanges to ensure representation of the sample The number of enterprises sampled according to size is shown in Table Table 1: Sample sizes selected according to asset size Criteria Scale of assets> VND 1,000 billion Scale of assets