unlicensed the impact of audit quality on firm performance empirical evidence in vietnam

UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY VIETNAM THE HAGUETHE NETHERLANDS VIETNAM – NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS THE IMPACT OF AUDIT QUALITY ON FIRM PERFORMANCE: EMPIRICAL EVIDENCE IN VIETNAM A thesis submitted in partial fulfillment of the requirements for the degree of MASTER OF ART IN DEVELOPMENT ECONOMICS By LÊ THỊ ANH THƯ Academic Supervision Dr LÊ HỒ AN CHÂU HO CHI MINH CITY, November, 2016 DECLARATION “I certify the content of this thesis entitled “The impact of audit quality on firm performance: empirical evidence in Vietnam” has not already been submitted for any degree and is not being currently submitted for any other degrees I certify that, to be the best of my knowledge, any help received in preparing this thesis and all sources used, have been acknowledged in this dissertation” Signature Lê Thị Anh Thư Date: November ……., 2016 ACKNOWLEDGEMENT First and foremost, I would like to express my gratefulness and my dearest thank to my supervisor, Dr Lê Hồ An Châu for her guidance and support during my thesis completion In additional, I would like to thank Dr Trương Đăng Thụy, who also gave me the useful help for my research More special thanks for all lecturers and staffs at VietnamNetherlands Program and my VNP 21 classmates Furthermore, thanks to the support from my colleagues at Gia Cat Consulting and Auditing Co., Ltd who create more conditions for me to complete this thesis Last but not least, I would like to express my many thanks to my family and my friends, who encourage and support to me in both mental and physical during the thesis process ABBREVIATIONS CSMAR: China Stock Market Accounting Research ICAEW: Institution of Chartered Accountants in England and Wales IPO: Initial Public Offering ISA: International Standards Auditing IFAC: International Federation of Accountants GAO: Government Accountability Office GMM: Generalized Method of Moments HOSE: Hochiminh Stock Exchange NSE: Nigeria Stock Exchange OLS: Ordinary Least Squares PCAOB: Protecting Investors through Audit Oversight TPP: Trans-Pacific Strategy Economic Partnership Agreement UKFRC: United Kingdom Financial Reporting Council VACPA: Vietnam Association of Certified Public Accountants VSA: Vietnam Standards of Auditing WTO: World Trade Organization ABSTRACT This study empirically examines the impact of audit quality on firm performance in Vietnam Audit quality is considered as an external monitoring factor which objectively affects firm performance In this thesis, audit quality is measured by three variables including audit rotation, audit reputation and audit experience whereas firm performance is proxied by accounting profits (ROA), market value (Tobin’s Q) and risk of bankruptcy (Zscore) The dataset includes 268 listed non-financial companies in Vietnam over the period from 2010 to 2015 The results show that there is no relationship between audit rotation, audit reputation and audit experience on Tobin’s Q and Z-score However, audit reputation and audit experience are insignificantly correlated with firm profitability The effect of audit rotation on ROA is positive, suggesting that companies which have audit rotation are more likely to have higher profits This implies that the change of audit firm increases the independence of auditors as well as enhances audit quality and hence positively affects firm performance Key words: audit quality, audit rotation, audit reputation, audit firm experience, firm performance, listed companies, Vietnam TABLE OF CONTENTS CHAPTER 1:INTODUCTION 1.1 PROBLEM STATEMENT 1.2 RESEARCH OBJECTIVES AND RESEARCH QUESTIONS 1.3 RESEARCH METHODOLOGY AND DATA 1.4 RESEARCH CONTRIBUTION 1.5 THESIS STRUCTURE CHAPTER 2:THEORETICAL FRAMEWORK AND EMPIRICAL EVIDENCE OF AUDIT QUALITY AND FIRM PERFORMANCE 2.1 THEORETICAL LITERATURE OF AUDIT QUALITY AND FIRM PERFORMANCE 2.1.1 Audit quality definition and relevant theoretical framework 2.1.1.1 Agency Theory 2.1.1.2 The stakeholder theory 2.1.1.3 Theory of Asymmetric Information 2.1.2 Definition and measure of firm performance 10 2.2 EMPIRICAL EVIDENCE ABOUT THE IMPACT OF AUDIT QUALITY ON FIRM PERFORMANCE 11 2.2.1 The impact of audit rotation on firm performance 12 2.2.2 The impact of audit reputation on firm performance 16 2.2.3 The impact of audit firm experience on firm performance 17 2.2.4 The effect of Vietnamese Auditing Standards (VSA 220) on “Quality control of financial statements audit activities” on firm performance 18 2.3 THE CONCEPTUAL FRAMEWORK 19 CHAPTER 3:RESEARCH METHODOLOGY AND DATA 20 3.1 DATA COLLECTION 20 3.2 METHODOLOGY 20 CHAPTER 4:DATA ANALYSIS AND EMPIRICAL RESULTS 27 4.1 DESCRIPTIVE STATISTICS AND BASIC ESTIMATION 27 4.1.1 Descriptive Statistics 27 4.1.2 The correlation matrix of variables 32 4.1.3 Heteroskedasticity 34 4.1.4 Identification of Endogeneity Problem 34 4.2 REGRESSION RESULTS AND DISCUSSION 35 4.2.1 Audit quality and firm performance measured by ROA: 35 4.2.2: Audit quality and firm performance measured by Tobin’s Q: 38 4.2.3: Audit quality and firm performance measured by Z-Score 39 4.2.4: Changing Policy and Firm Performance 40 CHAPTER 5:CONCLUSIONS AND POLICY IMPLICATIONS 41 5.1 MAIN FINDINGS 41 5.2 POLICY IMPLICATION 42 5.3 LIMITATION AND FURTHER RESEARCH 43 REFERENCES 44 APPENDIX 50 LIST OF TABLES Table 1: Rules on mandatory audit firm rotation and mandatory auditor rotation for listed companies 49 Table 2: The Z-Score level 23 Table 3: Summary of variables and predicted sign of coefficient 26 Table 4: Categorized business fields 27 Table 5: Descriptive Statistic 28 Table 6: Correlation matrix 33 Table 7: Heteroskedasticity test 34 Table 8: Endogeneity test 35 Table 9: System GMM estimation of firm performance measured by ROA 36 Table 10: System GMM estimation of firm performance measured by Tobin’s Q 38 Table 11: System GMM estimation of firm performance measured by Z-Score 39 Table 12: Companies in year of establishment 52 LIST OF FIGURES Figure 2.1: The Agency Theory Figure 2.2: The Stakeholder model of the corporation Figure 2.3: The Asymmetric Information Theory 10 Figure 2.4: The Analytical Framework 20 Figure 4.1: The prediction of relationship between audit firm experience and ROA 30 Figure 4.2: The prediction of relationship between audit firm experience and Tobin’s Q 31 Figure 4.3: The prediction of relationship between audit firm experience and Z-Score 32 CHAPTER 1: INTRODUCTION 1.1 Problem statement From the agency theory’s perspective, the separation of function between ownership and management in corporation leads to information asymmetry problem and conflict of interest between managers and shareholders The role of third party who gives the opinion related to financial information disclosure is very important and audit quality is considered as an external monitoring factor which has a significant effect on firm performance There are some previous studies which investigate the role of audit quality in terms of its effect on firm performance However, they use the different measures of audit quality and conduct in different markets, so the empirical results are inconsistent Some studies point out that the impact of audit quality on firm performance is positive whereas other studies find negative or insignificant effects on firm performance However, the role of audit quality as a key driver of firm performance has not yet attracted sufficient attention from researchers and policy makers in Vietnam This may result in the fact that investors lack the proper consideration about audit quality which might affect the financial disclosure and useful information for investors’ decision-making In the process of integration and development, Vietnam has more opportunities to approach and take part in the global organization such as WTO, TPP etc One of the difficulties in the foreseen future isto guarantee the reliance and the transparency of declared financial information to attract foreign investment and create the fair competitive environment The collapse of Arthur Andersen, one of the five biggest audit firms (Big 5) in 2002, the scandal and infringement related to audit quality recently and the integrity of firms’ financial statements force to enhance the investors’ perception about the audit quality and even the pressure to improve the audit quality of external parties In Vietnam, there is also a rising concern about this issue after a serial of scandal of listed companies in the stock exchange such as the evaporated inventories of Truong Thanh Corp (TTF), NTACO Corp (ATA) and bad debt from Ocean Group (OGC) which led to sharp deterioration in stock market and investor’s belief Table 1: Rules on mandatory audit firm rotation and mandatory auditor rotation for listed companies (Continued) STT Country Mandatory audit firm rotation Detail Mandatory auditor rotation Detail Every five years 30 Taiwan No Yes 31 Thailand No Yes United Kingdom No Yes Venezuela Partial 33 A policy of rotation every three years for banks is scheduled for 2014 Every five years Every five years No The following information sources were used to compile this table: Cameran et al (2005); GAO (2003); Siregar et al (2012); Ewelt-Knauer et al (2012); www.worldbank.org/ifa/rosc.html; http://pcaobus.org/Rules/Rulemaking/Docket037/163_Deloitte_Touche_LLP.pdf Lennox (2014) https://msbfile03.usc.edu/digitalmeasures/clennox/intellcont/Book%20chapter-1.pdf, Siregar et al., (2012) Table 12 : Companies by year of establishment No Audit firm Abbreviation Established date 10 11 12 13 14 15 16 17 18 19 20 Cơng ty TNHH Kiểm tốn Tư vấn A&C Cơng ty TNHH kiểm tốn Mỹ (American Auditing - AA) Cơng ty TNHH Kiểm tốn Kế tốn Cơng ty TNHH Hãng Kiểm toán AASC Cty TNHH Dịch Vụ Kiểm Tốn, Kế Tốn Và Tư Vấn Thuế AAT Cơng ty TNHH Dịch vụ Kiểm toán Tư vấn UHY ACA Cơng ty TNHH Kiểm tốn Đơng Á Cơng ty TNHH Kiểm tốn AFC Việt Nam Cơng ty TNHH Kiểm tốn An Phú Cơng ty TNHH Kiểm tốn An Việt Cơng ty TNHH Kiểm tốn ASC Cơng ty TNHH Kiểm tốn Thẩm định giá Việt Nam (AVA) Công ty TNHH Kiểm tốn BDO Cơng ty Kiểm tốn Kế tốn Hà Nội - CPA Công ty TNHH Deloitte Việt Nam Cơng ty TNHH Kiểm tốn DFK Việt Nam (DFK) Cơng ty TNHH Kiểm tốn DTL Cơng ty TNHH Ernst & Young Việt Nam Cơng ty TNHH Kiểm tốn FAC (FAC) Công ty TNHH Grant Thornton A&C AA AAC AASC AAT ACA AEA AFC An Phú An Việt ASC AVA BDO CPAVN DELOITTE DFK DTL EY FAC Grant Thornton 1995 2001 13/02/1995 13/05/1991 04/06/2007 29/08/2006 27/03/2006 13/02/1995 2006 08/01/2003 21/12/2006 10/10/2006 09/12/2002 26/01/1999 1991 09/04/2003 09/07/2001 03/11/1992 07/04/2006 14/09/1999 Table 12 : Companies by year of establishment (Con’t) No Audit firm Abbreviation IFC 21 Cơng ty TNHH Kiểm tốn TV Tài quốc tế (IFC) 22 KPMG Cơng ty TNHH KPMG Việt Nam 23 Kreston ACA Công ty TNHH Kiểm tốn KRESTON ACA Việt Nam 24 Ksi Cơng ty TNHH Kiểm toán KSI Việt Nam (KSI) 25 Nhân Tâm Việt Cơng ty TNHH Kiểm tốn Nhân Tâm Việt (NVT) 26 PKF Công ty TNHH PKF Việt Nam 27 PWC Công ty TNHH Pricewaterhouse Coopers Việt Nam 28 SAO VIET Công ty TNHH Kiểm tốn Sao Việt 29 TDK Cơng ty TNHH Kiểm toán Định giá Thăng Long – T.D.K 30 Tin Học (AISC) Cơng ty TNHH Kiểm tốn Dịch vụ Tin học 31 VACO Công ty TNHH Kiểm tốn VACO 32 VAE Cơng ty TNHH Kiểm tốn Định giá Việt Nam 33 Vietland Công ty TNHH Kiểm tốn - Tư vấn Đất Việt 34 Vietvalue Cơng ty TNHH Kiểm toán Tư vấn Chuẩn Việt 35 VIỆT NHẤT Cơng ty TNHH Kiểm tốn Việt Nhất (CTY K.T.V.N) The following information sources were used to compile this table which retrieved from http://www.vacpa.org.vn/Page/GioiThieuCongTyKiemToan.aspx Established date 24/10/2001 17/05/1994 24/08/2001 2002 22/09/2006 14/09/2015 14/05/1994 17/07/2006 2003 29/04/1994 27/11/2007 21/12/2001 26/09/2002 20/11/2003 03/11/2005 The impact of audit quality measured by audit rotation, audit reputation and audit experience, respectively and simultaneously on ROA (TABLE 9)  Audit rotation - ROA (1) Dynamic panel-data estimation, two-step system GMM -+ -Instruments for first differences equation Standard D.lag1 GMM-type (missing=0, separate instruments for each period unless collapsed) L(0/1).ROA Instruments for levels equation Standard lag1 _cons GMM-type (missing=0, separate instruments for each period unless collapsed) DL.ROA -Arellano-Bond test for AR(1) in first differences: z = -2.72 Pr > z = 0.007 Arellano-Bond test for AR(2) in first differences: z = 1.11 Pr > z = 0.266 -Sargan test of overid restrictions: chi2(10) = 64.21 Prob > chi2 = 0.000 (Not robust, but not weakened by many instruments.) Hansen test of overid restrictions: chi2(10) = 15.55 Prob > chi2 = 0.113 (Robust, but weakened by many instruments.) Difference-in-Hansen tests of exogeneity of instrument subsets: GMM instruments for levels iv(lag1) Hansen test excluding group: chi2(9) Difference (null H = exogenous): chi2(1) = = 14.94 0.61 Prob > chi2 = Prob > chi2 = 0.093 0.434  Audit reputation _ ROA (2) Dynamic panel-data estimation, two-step system GMM -+ -Instruments for first differences equation Standard D.lag1 GMM-type (missing=0, separate instruments for each period unless collapsed) L(0/1).ROA Instruments for levels equation Standard lag1 _cons GMM-type (missing=0, separate instruments for each period unless collapsed) DL.ROA -Arellano-Bond test for AR(1) in first differences: z = -2.33 Pr > z = 0.020 Arellano-Bond test for AR(2) in first differences: z = 1.05 Pr > z = 0.295 -Sargan test of overid restrictions: chi2(10) = 80.76 Prob > chi2 = 0.000 (Not robust, but not weakened by many instruments.) Hansen test of overid restrictions: chi2(10) = 19.80 Prob > chi2 = 0.588 (Robust, but weakened by many instruments.) Difference-in-Hansen tests of exogeneity of instrument subsets: GMM instruments for levels iv(lag1) Hansen test excluding group: chi2(9) Difference (null H = exogenous): chi2(1) = = 19.75 0.05 Prob > chi2 = Prob > chi2 = 0.020 0.821  Audit firm experience – ROA (3) Dynamic panel-data estimation, two-step system GMM -+ -Instruments for first differences equation Standard D.lag1 GMM-type (missing=0, separate instruments for each period unless collapsed) L(0/1).ROA Instruments for levels equation Standard lag1 _cons GMM-type (missing=0, separate instruments for each period unless collapsed) DL.ROA -Arellano-Bond test for AR(1) in first differences: z = -2.18 Pr > z = 0.030 Arellano-Bond test for AR(2) in first differences: z = 0.73 Pr > z = 0.463 -Sargan test of overid restrictions: chi2(10) = 84.24 Prob > chi2 = 0.000 (Not robust, but not weakened by many instruments.) Hansen test of overid restrictions: chi2(10) = 20.16 Prob > chi2 = 0.407 (Robust, but weakened by many instruments.) Difference-in-Hansen tests of exogeneity of instrument subsets: GMM instruments for levels iv(lag1) Hansen test excluding group: chi2(9) Difference (null H = exogenous): chi2(1) = = 19.47 0.69 Prob > chi2 = Prob > chi2 = 0.021 0.208  Audit rotation, audit reputation, audit firm experience – ROA (4) Dynamic panel-data estimation, two-step system GMM -+ -Instruments for first differences equation Standard D.lag1 GMM-type (missing=0, separate instruments for each period unless collapsed) L(0/1).ROA Instruments for levels equation Standard lag1 _cons GMM-type (missing=0, separate instruments for each period unless collapsed) DL.ROA -Arellano-Bond test for AR(1) in first differences: z = -2.42 Pr > z = 0.016 Arellano-Bond test for AR(2) in first differences: z = 0.76 Pr > z = 0.445 -Sargan test of overid restrictions: chi2(8) = 59.50 Prob > chi2 = 0.000 (Not robust, but not weakened by many instruments.) Hansen test of overid restrictions: chi2(8) = 12.04 Prob > chi2 = 0.149 (Robust, but weakened by many instruments.) Difference-in-Hansen tests of exogeneity of instrument subsets: GMM instruments for levels iv(lag1) Hansen test excluding group: chi2(7) Difference (null H = exogenous): chi2(1) = = 12.03 0.01 Prob > chi2 = Prob > chi2 = 0.100 0.935 The impact of audit quality measured by audit rotation, audit reputation and audit firm experience on Tobin’s Q (TABLE 10)  Audit rotation – Tobin’s Q (1) Dynamic panel-data estimation, two-step system GMM -+ -Instruments for first differences equation Standard D.lag2 GMM-type (missing=0, separate instruments for each period unless collapsed) L(0/1).TobinQ Instruments for levels equation Standard lag2 _cons GMM-type (missing=0, separate instruments for each period unless collapsed) DL.TobinQ -Arellano-Bond test for AR(1) in first differences: z = -1.50 Pr > z = 0.013 Arellano-Bond test for AR(2) in first differences: z = -1.39 Pr > z = 0.165 -Sargan test of overid restrictions: chi2(10) = 192.83 Prob > chi2 = 0.000 (Not robust, but not weakened by many instruments.) Hansen test of overid restrictions: chi2(10) = 39.26 Prob > chi2 = 0.242 (Robust, but weakened by many instruments.) Difference-in-Hansen tests of exogeneity of instrument subsets: GMM instruments for levels iv(lag2) Hansen test excluding group: chi2(9) Difference (null H = exogenous): chi2(1) = = 37.89 1.37 Prob > chi2 = Prob > chi2 = 0.000 0.202  Audit reputation – Tobin’s Q (2) Dynamic panel-data estimation, two-step system GMM -+ -Instruments for first differences equation Standard D.lag2 GMM-type (missing=0, separate instruments for each period unless collapsed) L(0/1).TobinQ Instruments for levels equation Standard lag2 _cons GMM-type (missing=0, separate instruments for each period unless collapsed) DL.TobinQ -Arellano-Bond test for AR(1) in first differences: z = -1.57 Pr > z = 0.011 Arellano-Bond test for AR(2) in first differences: z = -1.39 Pr > z = 0.166 -Sargan test of overid restrictions: chi2(10) = 355.26 Prob > chi2 = 0.000 (Not robust, but not weakened by many instruments.) Hansen test of overid restrictions: chi2(10) = 32.40 Prob > chi2 = 0.528 (Robust, but weakened by many instruments.) Difference-in-Hansen tests of exogeneity of instrument subsets: GMM instruments for levels iv(lag2) Hansen test excluding group: chi2(9) Difference (null H = exogenous): chi2(1) = = 32.00 0.40 Prob > chi2 = Prob > chi2 = 0.000 0.151  Audit firm experience – Tobin’s Q (3) Dynamic panel-data estimation, two-step system GMM -+ -Instruments for first differences equation Standard D.lag2 GMM-type (missing=0, separate instruments for each period unless collapsed) L(0/1).TobinQ Instruments for levels equation Standard lag2 _cons GMM-type (missing=0, separate instruments for each period unless collapsed) DL.TobinQ -Arellano-Bond test for AR(1) in first differences: z = -1.45 Pr > z = 0.014 Arellano-Bond test for AR(2) in first differences: z = -0.53 Pr > z = 0.599 -Sargan test of overid restrictions: chi2(10) = 11.36 Prob > chi2 = 0.330 (Not robust, but not weakened by many instruments.) Hansen test of overid restrictions: chi2(10) = 6.32 Prob > chi2 = 0.787 (Robust, but weakened by many instruments.) Difference-in-Hansen tests of exogeneity of instrument subsets: GMM instruments for levels iv(lag2) Hansen test excluding group: chi2(9) Difference (null H = exogenous): chi2(1) = = 5.94 0.39 Prob > chi2 = Prob > chi2 = 0.746 0.534  Audit rotation, audit reputation, audit firm experience – Tobin’s Q (4) Dynamic panel-data estimation, two-step system GMM -+ -Instruments for first differences equation Standard D.lag2 GMM-type (missing=0, separate instruments for each period unless collapsed) L(0/1).TobinQ Instruments for levels equation Standard lag2 _cons GMM-type (missing=0, separate instruments for each period unless collapsed) DL.TobinQ -Arellano-Bond test for AR(1) in first differences: z = -1.78 Pr > z = 0.074 Arellano-Bond test for AR(2) in first differences: z = -0.25 Pr > z = 0.799 -Sargan test of overid restrictions: chi2(8) = 6.34 Prob > chi2 = 0.609 (Not robust, but not weakened by many instruments.) Hansen test of overid restrictions: chi2(8) = 4.02 Prob > chi2 = 0.856 (Robust, but weakened by many instruments.) Difference-in-Hansen tests of exogeneity of instrument subsets: GMM instruments for levels iv(lag2) Hansen test excluding group: chi2(7) Difference (null H = exogenous): chi2(1) = = 4.01 0.00 Prob > chi2 = Prob > chi2 = 0.778 0.956 The impact of audit quality measured by audit rotation, audit reputation and audit experience, respectively and simultaneously on Z-Score (TABLE 11)  Audit rotation – Z-Score (1) Dynamic panel-data estimation, two-step system GMM -+ -Instruments for first differences equation Standard D.lag3 GMM-type (missing=0, separate instruments for each period unless collapsed) L(0/1).ZSCORE1968 Instruments for levels equation Standard lag3 _cons GMM-type (missing=0, separate instruments for each period unless collapsed) DL.ZSCORE1968 -Arellano-Bond test for AR(1) in first differences: z = -2.10 Pr > z = 0.036 Arellano-Bond test for AR(2) in first differences: z = 0.71 Pr > z = 0.476 -Sargan test of overid restrictions: chi2(10) = 144.42 Prob > chi2 = 0.000 (Not robust, but not weakened by many instruments.) Hansen test of overid restrictions: chi2(10) = 8.09 Prob > chi2 = 0.620 (Robust, but weakened by many instruments.) Difference-in-Hansen tests of exogeneity of instrument subsets: GMM instruments for levels iv(lag3) Hansen test excluding group: chi2(9) Difference (null H = exogenous): chi2(1) = = 5.34 2.75 Prob > chi2 = Prob > chi2 = 0.804 0.097  Audit reputation – Z-Score (2) Dynamic panel-data estimation, two-step system GMM -+ -Instruments for first differences equation Standard D.lag3 GMM-type (missing=0, separate instruments for each period unless collapsed) L(0/1).ZSCORE1968 Instruments for levels equation Standard lag3 _cons GMM-type (missing=0, separate instruments for each period unless collapsed) DL.ZSCORE1968 -Arellano-Bond test for AR(1) in first differences: z = -1.80 Pr > z = 0.071 Arellano-Bond test for AR(2) in first differences: z = 0.28 Pr > z = 0.778 -Sargan test of overid restrictions: chi2(10) = 162.35 Prob > chi2 = 0.000 (Not robust, but not weakened by many instruments.) Hansen test of overid restrictions: chi2(10) = 5.71 Prob > chi2 = 0.839 (Robust, but weakened by many instruments.) Difference-in-Hansen tests of exogeneity of instrument subsets: GMM instruments for levels iv(lag3) Hansen test excluding group: chi2(9) Difference (null H = exogenous): chi2(1) = = 5.01 0.70 Prob > chi2 = Prob > chi2 = 0.833 0.403  Audit firm experience – Z-Score (3) Dynamic panel-data estimation, two-step system GMM -+ -Instruments for first differences equation Standard D.lag3 GMM-type (missing=0, separate instruments for each period unless collapsed) L(0/1).ZSCORE1968 Instruments for levels equation Standard lag3 _cons GMM-type (missing=0, separate instruments for each period unless collapsed) DL.ZSCORE1968 -Arellano-Bond test for AR(1) in first differences: z = -2.50 Pr > z = 0.012 Arellano-Bond test for AR(2) in first differences: z = 0.70 Pr > z = 0.486 -Sargan test of overid restrictions: chi2(10) = 171.28 Prob > chi2 = 0.000 (Not robust, but not weakened by many instruments.) Hansen test of overid restrictions: chi2(10) = 5.97 Prob > chi2 = 0.818 (Robust, but weakened by many instruments.) Difference-in-Hansen tests of exogeneity of instrument subsets: GMM instruments for levels iv(lag3) Hansen test excluding group: chi2(9) Difference (null H = exogenous): chi2(1) = = 4.91 1.06 Prob > chi2 = Prob > chi2 = 0.842 0.303  Audit rotation, audit reputation and audit firm experience – Z-Score (4) Dynamic panel-data estimation, two-step system GMM -+ -Instruments for first differences equation Standard D.lag3 GMM-type (missing=0, separate instruments for each period unless collapsed) L(0/1).ZSCORE1968 Instruments for levels equation Standard lag3 _cons GMM-type (missing=0, separate instruments for each period unless collapsed) DL.ZSCORE1968 -Arellano-Bond test for AR(1) in first differences: z = -1.45 Pr > z = 0.014 Arellano-Bond test for AR(2) in first differences: z = -0.34 Pr > z = 0.730 -Sargan test of overid restrictions: chi2(8) = 86.19 Prob > chi2 = 0.000 (Not robust, but not weakened by many instruments.) Hansen test of overid restrictions: chi2(8) = 4.54 Prob > chi2 = 0.806 (Robust, but weakened by many instruments.) Difference-in-Hansen tests of exogeneity of instrument subsets: GMM instruments for levels iv(lag3) Hansen test excluding group: chi2(7) Difference (null H = exogenous): chi2(1) = = 3.74 0.80 Prob > chi2 = Prob > chi2 = 0.810 0.371 ... expressing audit opinion The initial auditing institution appeared early in 1942, which is the institute of Internal Auditors in the United States of America In Vietnam, the independent auditing firms... external monitoring factor in firm financial performance including Agency theory, stakeholder theory and Information Asymmetric theory In addition, evidence of the impact of audit quality on firm performance. .. ON FIRM PERFORMANCE 11 2.2.1 The impact of audit rotation on firm performance 12 2.2.2 The impact of audit reputation on firm performance 16 2.2.3 The impact of audit