RESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAM

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF TRANSPORT AND COMMUNICATIONS BUI DUY THO RESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAM Specialized Transpo[.]RESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAMRESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAM

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF TRANSPORT AND COMMUNICATIONS BUI DUY THO RESEARCH TO IMPROVE THE INTERNAL CONTROL IN PASSENGER CAR TRANSPORT ENTERPRISES IN VIETNAM Specialized: Transportation orgnisation and management Code: 9.84.01.03 SUMMARY OF DOCTOR OF THESIS HÀ NỘI - 2023 The work was completed at: University of Transport and Communications Science Advisor 1: Prof Dr Tu Sy Sua Science Advisor 2: Dr Le Thu Hang Review 1: Review 2: Review 3: The thesis will be defended in front of the School-level Evaluation Board for Doctoral thesis according to Decision No…/QD-ĐHGTVT …/… / 2023 Meeting at: University of Transport and Communications At …/ …/ 2023 Thesis can be found at: - The library of University of Transport and Communications; - National library INTRODUCTION Research problem Research on the internal control has been approached by many authors around the world, but mainly in three main research directions: (i) focusing on explaining and proving the existence of the relationship between the internal control with financial, accounting and auditing performance of enterprises; (ii) research on internal control associated with organizational information system; (iii) research on the internal control in the relationship with organizational governance Besides, most of the world's research on internal control is usually conducted on large enterprises and is often associated with functional level activities In Vietnam, most of the studies on internal control only approached in assessing the factors of internal control in the enterprise or improving the internal control without considering the impact of internal control on other activities Stemming from the above theoretical and practical issues, with the aim of building a theoretical and practical basis for improving the internal control of passenger transport by car in Vietnamese companies, the author chooses the doctoral thesis topic "Research to improve the internal control in passenger car transport enterprises in Vietnam" Research objectives and research mission Research objectives Assess the impact of the constituent factors on the effectiveness of the internal control in order to improve the internal control in passenger transport enterprises by car in Vietnam Research mission • Systematize and evaluate the results of domestic and foreign studies on the internal control in general, including the elements constituting the internal control • Research and evaluate the impact of different components on the effectiveness of the internal control in passenger car transport enterprises in Vietnam • Provide solutions to improve the internal control by increasing the effectiveness of the internal control in passenger car transport enterprises in Vietnam Research objectives and scope Research objectives The most commonly used criterion of the internal control is the effectiveness Therefore, this thesis focuses on studying the impact of the structural components on the effectiveness of the internal control in passenger car enterprises in Vietnam Research scope In term of content: Studying the impact of different components on the effectiveness of internal control in passenger transport enterprises by car from the perspective of corporate governance, and applying the assessment for the passenger transport enterprises by car in Vietnam In term of space: The study was conducted at passenger transport enterprises by car in Vietnam, excluding foreign enterprises and foreign-invested enterprises in Vietnam In term of time: The research period is from 2018 to 2021, in which, the primary data is surveyed for the period 2018 – 2019 The secondary data is collected and analyzed mainly from 2018 to 2021 Research framework The thesis is conducted according to the following steps: Step 1: Identify research objectives and aims; Step 2: Theoretical overview; Step 3: Build the model and verify the scale; Step 4: Quantitative analysis; Step 5: Write reports and propose solutions Contribution of the thesis The specific contributions of the thesis are: • Systematize and build a theoretical framework • The research results show that the elements constituting the internal control have a positive impact on the effectiveness of it The element "Information and communication system" has the strongest impact on the effectiveness of the internal control • The study evaluated the actual status of the elements constituting the internal control, the actual status of the effectiveness of the internal control, especially the study used a set of criteria to evaluate the performance of enterprises to verify the effectiveness of the internal control in passenger transport enterprises by car in Vietnam • Through the ANOVA test, the study finds that the size of the business and the form of ownership have different effects on the effectiveness of the internal control in passenger car transport enterprises in Vietnam • Research proposes five main solutions to improve the internal control at passenger transport enterprises by car in Vietnam in the coming years Thesis structure In addition to the introduction, conclusion, list of abbreviations, list of references, the thesis consists of five main chapters: • Chapter 1: Literature review • Chapter 2: Theoretical and practical basis of the internal control in the enterprise • Chapter 3: Research models and methods • Chapter 4: Analysis and assessment of the current situation of the internal control at passenger transport enterprises by car in Vietnam • Chapter 5: Solutions to improve the structural elements of the internal control at passenger transport enterprises by car in Vietnam CHAPTER LITERATURE REVIEW 1.1 Abroad related research 1.1.1 General research about Internal control The field of internal control has undergone a fairly long period of formation and development, and is basically divided into stages including (1) Early stage; (2) Formation stage; (3) Development stage; (4) Modern period Academic studies on the internal control, accordingly, are also carried out in many in-depth directions However, these studies can be generalized in three main directions: (i) Research direction of internal control associated with organizational information system; (ii) Research direction of internal control associated with organizational governance activities and (iii) research direction of internal control associated with financial activities of the organization 1.1.2 Research direction on internal control associated with organizational information system There are not many in-depth studies to evaluate the relationship between information systems and internal controls This is a new research direction and has many limitations because it requires a deep assessment of the organization's information system, especially on the basis of information technology application Therefore, not many authors have conducted research, so the conclusions are not universal 1.1.3 Research direction on the internal control associated with organizational governance activities This research direction emphasizes the role of the internal control in corporate governance activities An effective internal control will improve the efficiency of corporate governance 1.1.4 Research direction on the impact of the elements constituting the internal control on the financial performance of the organization This is the most popular research direction on internal control because the starting point of internal control is associated with accounting and financial activities of the enterprise According to this approach, the internal control is considered as a whole that affects the financial performance of the enterprise The conclusion is that if the internal control works effectively, it will improve the financial efficiency of the business 1.2 Domestic related research 1.2.1 General research about internal control Most of studies are mainly based on the basic arguments on internal control, developed in the direction of evaluating application conditions and developing internal controls in enterprises 1.2.2 Research on the impact of constituent factors on the effectiveness of the internal control At the initial stage, domestic studies are mainly assessing the current status of the internal control of a particular unit, thereby comparing it with legal regulations and professional manuals to offer complete solutions to improve the internal control The main research method is qualitative research In the next stage, the studies combined qualitative and quantitative research methods to assess the impact of the constituent factors on the effectiveness of the internal control in many business fields However, these studies applied different scales, control variables and regression models 1.3 Research gap Firstly, most of the studies have been conducted to explain and prove that there is a relationship between the internal control and the financial, accounting and auditing performance of the enterprise Secondly, a number of studies in the world verify the relationship between internal control and corporate governance activities, usually at functional management level Thirdly, the majority of research in the world is conducted in developed countries, where the size of enterprises is large, the operating mechanism of the financial market is completed, and private enterprises account for a large proportion Fourthly, most of the studies in Vietnam only evaluate the components of internal control in enterprises, rather than the impact of the internal control on other activities Particularly, the research of author Chu Thi Thu Thuy has assessed the impact on the financial performance of enterprises, but the scope of internal control activities is restricted in controlling production costs Fifttly, in Vietnam, authors Pham Thi Bich Thu and Do Thi Huyen have researched on the impact of constituent factors on the effectiveness of the internal control, but in large-scale manufacturing enterprises However, there has not been any research to evaluate in a synthetic way the factors constituting internal control affecting the effectiveness of the internal control in passenger transport enterprises by car Conclusion of chapter The author conducts an overview of studies that have been carried out in Vietnam and abroad about internal control in enterprises Foreign studies are carried out in three directions of a general assessment of the internal control in relationship with other activities in business However, due to the limitation of time and scope of implementation of internal control activities in enterprises, domestic studies are limited in research works on internal control in general and the components creating the effectiveness of the internal control From the results of analysis and synthesis, the author points out a research gap on the internal control at passenger transport enterprises by car in Vietnam The research overview results are an important premise for the author to continue to work in the next chapters CHAPTER THEORETICAL FRAMEWORK AND PRACTICES OF THE INTERNAL CONTROL IN BUSINESSES 2.1 Concept, role and benefits of the internal control 2.1.1 The concept of the internal control Eventhough there are many different approaches, the concept of internal control is generally accepted to include the following four basic contents: (i) Internal control is a process; (ii) Internal control is designed and operated by people; (iii) Reasonable assurance; (iv) Objectives 2.1.2 The role of the internal control • Protect the assets and accounting books of the entity • Ensure the reliability and quality of information • Ensure the implementation of the legal regime • Ensure the effectiveness of operation 2.1.3 Benefits of the internal control The construction and good management of the internal control will bring the following basic benefits: • Create effective tools to support the management • Help to ensure that regimes and management decisions are properly followed and monitor their effectiveness • Help to timely detect possible risks to propose solutions • Help to detect errors and frauds in activities and departments in a timely manner • Help to ensure the recording of accounting information • Help to protect assets and information from abuse and misuse 2.2 Internal control system 2.2.1 The concept of internal control system The concept of internal control system began to be mentioned in the definition of AICPA System is understood as a collection of different elements There is a close relationship and interaction according to a certain rule among them Each concept has a view of the internal control from different angles Basically, the internal control has common characteristics: • Internal control includes regulations, policies on financial management, accounting, human resources and control processes, regulations and procedures established and operated by managers • Internal control is associated with the responsibility and authority of every department, process, operation and employee in a unit • Internal control has the goal of protecting the assets of the unit, ensuring the accuracy of accounting information, ensuring compliance with the law, and ensuring operational efficiency • Internal control does not stop the accounting and financial management function but also includes other areas of corporate governance • Internal controls only provide a reasonable rather than absolute assurance that the management and control objectives will be achieved 2.2.2 Components of the internal control 2.2.2.1 Control environment The control environment includes: • Commitment to integrity and ethical values, management philosophy and operating style of managers • Enterprise's organizational structure and how to decentralize and divide tasks • Personnel policy and employee's capacity 2.2.2.2 Risk assessment Risk is defined as the possibility of accidental damage and loss of the business An uncertain event is considered as a risk when it has an adverse effect on the outcome of the entity To limit the damage caused by risks, managers need to follow the risk assessment process, including: defining business objectives; identify existing and potential risks that may affect the achievement of business objectives; assess and analyze the impact of risks; identify measures to manage and minimize the harmfulness of the risk 2.2.2.3 Control activities According to COSO, control activities are established through policies and procedures to help ensure that governance directives are implemented to limit risks and achieve business objectives In term of functions, common control activities include: 11 CHAPTER RESEARCH MODEL AND METHODOLOGY 3.1 Overview of passenger transport enterprises by car in Vietnam 3.1.1 Current status of passenger car transport enterprises Currently, there are 19.355 transport service enterprises with 153.369 vehicles in Vietnam Table 3.1: Number of enterprises, vehicles and volume of passenger transport by car Number of Number of Type Outcomes businesses vehicles Fixed line 1.576 16.778 6.568.561 (trip) Contract 16.725 62.872 600.147.198 (passenger) Touring 222 2.032 3.283.270 (passenger) Bus 196 6.185 19.192.222 (trip) Taxi 634 65.502 Total 19.355 153.369 Source: Directorate for Roads of Vietnam 2019 3.1.2 Organizational structure of passenger car transport enterprises Currently, passenger car transport enterprises in Vietnam mainly operate under three common types of organizational structure: (1) Direct structure; (2) Direct structure – functionality; and (3) Regional structure 3.2 Research Methodology 3.2.1 Qualitative research methods 3.2.2 Quantitative research methods 3.2.2.1 Research model Through the analysis and evaluation of research works of domestic and foreign authors on the internal inspection system, the effectiveness of the internal control and the performance of the enterprise in general and at passenger transport enterprises using cars 12 in Vietnam in particular The author proposes the following research model: Control environment Size; Ownership type Risk assessment Effectiveness of Internal Control activities Infomation and control Communication Monitoring Figure 3.1: Research model of the impact of constitutive factors on the effectiveness of the internal control in passenger car transport enterprises in Vietnam Source: Author's compilation Based on the research model and research hypotheses, the author generalizes the linear regression model describing the relationship between the factors constituting the internal control with the effectiveness of internal control in the form as follows: Y = βo + β1*X1 + β2*X2 + β3*X3 + + β5*X5 + e The author expects that the coefficients βi of the model will bear the sign (+) showing the proportional relationship of the factors constituting the internal control affecting the effectiveness of internal control in the transportation enterprises passenger by car in Vietnam 3.2.2.2 Building concepts, scales and building questionnaires In this study, the author consulted the scale and calculated the scores of many domestic and foreign studies as summarized above, and adjusted to the approach and scope of this study Thus, the questionnaire used for the official survey includes: 05 factors of the internal control affecting the effectiveness of the internal control of 13 passenger car transport enterprises in Vietnam with 33 observed variables and conventionally coded The value of the factors in the model is calculated as the average value of the predetermined observed variables and is divided into intervals corresponding to levels from low to high and the width of each interval is 0.8 units with distance value = (5 - 1)/5 From the results of mathematical statistical analysis, based on the above levels, the author will make comments, assessments and conclusions about the status of the factors in the research model of the internal control and the effectiveness and efficiency of the internal control in passenger transport enterprises by car in Vietnam 3.4 Survey methods 3.4.1 Preliminary survey 3.4.2 Formal Survey 3.4.2.1 Sampling method and sample description In this study, the author uses non-probability random sampling method To ensure high reliability, the author has conducted sampling survey to ensure representativeness by region (in the north, central and south, in the highlands, ), by ownership in both domestic and foreign passenger transport enterprises by car 3.4.2.2 Sample size In this study, data will be collected using a survey questionnaire, surveying the opinions of respondents who are working at passenger car transport enterprises in Vietnam according to the sampling formula of Hair et al (1998), each enterprise surveyed 04 individuals, then took the average value of these 04 votes to calculate into 01 representative for that enterprise In fact, the author distributed 800 questionaires in 200 passenger transport enterprises by car in Vietnam and collected all of them Only 189 businesses gave all 04 valid answers, equivalent to 756 valid votes and 44 invalid votes due to missing information in the answer sheets 14 3.5 Quantitative data analysis 3.5.1 Quantitative data analysis procedures and methods After collecting the answer sheets of enterprises, the author proceeds to process raw data, assess the quality of information collected through the following steps: Step 1: Process raw data; Step 2: Exploratory factor analysis; Step 3: Assess the reliability of the scale; Step 4: Correlation analysis; Step 5: Regression analysis 3.5.2 Assess the accuracy of the scales The results of exploratory factor analysis are as follows: Table 1: Summary of coefficients in factor analysis Number Number of of Extracted Analysed Time KMO Sig observed excluded variance factors variables variables 19 0.725 0.000 68.85 05 Source: Data processing results on SPSS software Through the data table, we can see that the coefficient KMO = 0.725 satisfies the condition of 0.5