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subjected to time constraint when conducting auditing listed enterprises This requires auditor to be capable of judging with great specialist knowledge throughout the audit process to properly assess risks of material misstatement in audited financial statements CHAPTER INTRODUCTION 1.1 The importance of research topic In today's market economy, auditing have gained considerable public interest and trust , thereore the demands for auditing are increasingly high, which require auditors and auditing companies to improve both their professional capabilities and audit services The audit report is the foundation for the third party to seek information and make investment decision In the current market economy, securities is a relatively new investment form in Vietnam, laws and policies on securities are still limited thus, the audit report of listed enterprises is a matter of great concern to the public when they intend to invest in stocks on the stock market Globally, the collapse of Enron Energy (2001), Worldcom (2002), Tyco International (2004), Peregrine Systems, Olympus (2012) , US Health South (2003) were caused by fraudulent financial statements, however the auditor did not detect material misstatement due to fraud Audit firm Arthur Anderson, who conducted the audit of Enron Energy Group, did not properly evaluate a $ 51 million deviation (of $ 105 million in total profits), which was considered nonmaterial, therefore the bankruptcy of Enron also led to the bankruptcy of Arthur Anderson In Vietnam, listed companies who defrauded their financial statements such as Eastern Pharmaceutical Company or SME Securities Company, Bach Tuyet Cotton Company However, when auditing, auditor and auditing company did not detect material misstatement in the financial statements of these companies In addition, during the auditing process, auditor often encounters difficulties in applying procedures to detect material misstatements in financial statements (Dikmen, 2010; Porter & Cameron, 1987; Coderre, 1999) As a consequence, when conducting the audit of financial statements, material misstatement risk assessment of auditors still have certain limitations listed enterprises manager must make sure that the financial statements are truthful and fair without material misstatement (APB; FASB) Nonetheless, mistakes are often hidden by the manager or the information released to the shareholders and investors is incomplete in order to maintain the stock price, the reputation of the business (Jensen & Meckly, 1976) According to the VSA 200, the purpose of financial statement auditing is to increase the credibility of the financial statement, based on the auditor’s opinion as to whether the financial statements are written with a material respect in accordance with the framework of writing and presenting a financial statement [VSA 200] With the responsibility to so, auditor and auditing firm are also In addition, the competition between auditing firms to maintain and increase the number of customers leads to these firms have to reduce their price Audit approach based on material misstatement risk assessment is the key to help auditor to ensure the effectiveness and efficiency of the audit For these reasons, the author has boldly selected the PhD thesis " Assessing the risk of material misstatement in financial statement auditing of enterprises listed on Vietnam securities market " 1.2 Overview of Related Researchs Globally: Study of Norman & Associates shows the effect of internal control on the reliability of financial statements, errors in financial reporting (Norman et al., 2011) The potential for material misstatement might be caused by control risk and audit risk Technically, material misstatement may be due to errors or fraud Early study of frauds in financial report includes the work of Rommey & Associates (1980), which issued 87 Red Flags for predicting fraud Then, Albrecht & Rommey used the predictive signs to study study about fraud Studies have concluded that these signs are significant in predicting fraud and integrity of the Board of Manangement A study by Loebbecke et al (1989) provides a predictive model for the risk of errors due to fraud A study by Bell & Carcello (2000), Nieschwitz et al (2000), Wilks & Zimbleman (2004) shows that the Loebbecke & Associates model is quite effective in detecting fraud in fianancial statement The study of material misstatements in fianancial statement is common to the indicators in balance sheet Outstanding representatives of this field are Mock and Wright, 1993; Kreutzfeldt and Wallace, 1986; Wright and Ashton, 1989; Albrecht & Zimbleman, 2009; Beclard, 1989; waller, 1993; Schultz, Bierstaker & O'Donnell, 2010; Brazel et al., 2009 These studies have showed that the frequency of material misstatement in revenue target, receivables from customers and inventories and commodities is higher than other indicator on the balance sheet One of the causes of risk in material misstatement is the management of the company Intentionally concealed to make it difficult to detect material misstatement (Jensen & Meckling, 1976) since managers consistently seek measures to avoid damage to personal property and reputation of the manager (Kothari Shu & Wysucki, 2009) or material misstatement were discovered when firms went bankrupt (Ettridge et al., 2010; Palmrose, Richardson, Scholz, 2004; Anderson & Yohn, 2002; Kinney & McDaniel, 1989; Srinivasan, 2005) Management model is also one of the causes of MATERIAL MISSTATEMENT (Behn and Riley, 1999; Lundholm & McVay, 2008; Riley, Preason & Trompeter, 2003) Study of Marsha Kay Bradford Keune,2010 assessed the risk of material misstatement due to fraud and focused on signs of fraud in revenue accounts , receivable accounts and inventory accounts Compared with previous studies which only investigate one account which is prone to material misstatement resulting from fraud, this study expanded to a range of possible frauds Research on financial fraud forecasting are case studies using accrual model as studied by DeAngelo (1986), followed by Friedlan (1994), Healy (1985), Jones (1991) Studies using adjusted models based on accrual standards and regulations, adjusted accrual models are instrumental in detecting potential fraud in financial statements if there is any unusal deviation between reported and projected numbers The research by DeAngelo (1986), Friedlan (1994) and Jones (1991) focuses on how managers adjust revenue by adjusting accrued accounting variables Beneish's (1999) study is the first study about building a model predicting possibility of finanacial statement fraud (named M-Score rate), which aims to help auditor, investors assess the possibility of fraudulent financial statements of enterprises The Beneish model of detecting companies capable of fraudulent financial reporting has a precise probability of up to 76% The Beneish model has helped Cornell students detect Enron fraud a year before the company went bankrupt when even the auditor did not detect any errors F-sore study model of Dechow and associates (2011) studied 2190 listed companies in the 1982-2005 period The F-score model consists of models After systemizing studies of material misstatement risk in the financial statement audit, the author has concluded as follows: The material misstatement on the balance sheet when auditing often focus on indicators such as : revenue, inventory, receivables , which is caused by the characteristics of industries and business sectors of enterprises affecting these indicators more compared with other indicators on the balance sheet When auditing and collecting auditing evidence to assess the risk of material misstatement, the auditor has difficulty in carrying out auditing procedures, difficulties in assessing whether errors are material misstatement or not (W.Robert Knechel (2006), or the inflexible application of audit techniques of auditor also influence the material misstatement risk assessment results (Oentland, 1993) Furthermore, auditor violates the principle of independence in the process of audit when auditor conducts material misstatement risk assessment through business risk assessment, on the other hand, auditor becomes consultant of the customer(Zeff,2003) This is a problem for auditor when the customer thinks that auditor is increasing the profitability of the unit and interfere when auditor formulates opinion on audited financial statements In Vietnam Material misstatement is discussed but mainly in the audit planning stage Doan Thanh Nga(2011), Nguyen Thi My (2012), Bui Thi Thuy (2012) studied the factors that influence the quality of audit through financial statement auditing, according to survey in reality, auditors have not paid due attention to material misstatement risk assessment, hence, there are stll many errors in the audiors’ audit opinion Phan Thanh Hai (2013) examines the quality of auditing from a new perspective on the organizational model of independent auditing, including two elements: structure and operating mechanism on the micro and macro level affecting the quality and effectiveness of the audit In structure aspect: the level of influence of each factor varies The most influential is the size of the auditing firm, the internal administration of the auditing firm, the quality of the manager staff and the auditor On operational mechanism aspect: the basis of the customer, the auditor, the third party using the results of the audit Research solution for assessing the quality of audit based on the point of view of detecting and reporting material misstatement in the financial report Research on the risk of material misstatement by Man Dinh (2010) proposed solutions to improve the quality of auditing for listed enterprises is internal control and external control, besides control by the audit firm itself there should be control of the state management agency Tran Thi Giang Tan et al (2014) assessed the material misstatement in accordance with VSA 240 and applied triangular fraud in the detection and forecasting of material misstatement from fraud in companies in Vietnam Ngo Thi Thu Ha (2007), Ly Tran Kim Ngan (2011), Nguyen Thi Huong Giang (2013), Le Nguyen The Cuong (2013) studied fraudulent risk assessment and design of financial reporting procedures , have outlined some of the basic steps of auditor's fraudulent and auditor’s response to fraud risk, and evaluates the sample audit program for detecting fraud However, these studies have not conducted systematic and comprehensive studies on fraudulent risk assessment as well as how auditor changed the audit program The Beneish model applied in Vietnam was conducted by Nguyen Cong Phuong and Nguyen Tran Nguyen Tran (2004) with 30 companies with material misstatement in 2012 financial statements detected and released by auditors The results indicate a precise predictive probability of 53.33% in detecting material misstatements in the company's financial statements Thus, the Beneish model can be used as a tool to assist auditors to assess the risk of material misstatement in the financial statements In summary, the researchs on the risk of material misstatement are presented in the following aspects: The study provides a solution to limit material misstatement affecting financial statement audits by applying material misstatement evaluation models Material misstatement were assessed by the authors through the application of the VSA 240 audit standard and triangular fraud, or risk assessment in the internal control system The fact that independent auditing firms has not paid due attention to the assessment of material misstatement affects the quality of auditing, but the studies have not presented any identification that may affect the material statement risk assessment in financial statement audit On the other hand, major studies assess material misstatement primarily in the planning stage without paying much attention to material misstatement throughout the entire audit process 1.3 Research Objectives The main objective of the study is to examine the relationships among factors affecting the results of material misstatement risk assessment in financial statement of listed enterprises on the stock market of Vietnam in all three stages: planning, performing and reporting audit 1.4 Research Question: In order to achieve the objectives mentioned above, this research focused on the following questions: Question 1: The theoretical basis for material misstatement risk assessment in financial statements audit of listed enterprises in stages: how to plan, perform and report an audit? Question 2: What factors influence the results of risk assessment in financial statements audit of listed enterprises in audit stages? Question 3: What is the direction of impact factors affecting the results of risk assessment in financial statement audit of listed enterprises in stages: planning, performing and reporting an audit? Question 4: The level of influence of the factors on the results of the results of risk assessment in financial statement audit of listed enterprises in stages: planning, performing and reporting an audit? Question 5: Which solution would help auditing company to control the factors affecting the results of risk assessment in financial statement audit of enterprises listed on Vietnam stock market? 1.5 Objective and scope of the research Objective: To assess the risk of material misstatement in the financial statement audit of enterprises listed on Vietnam stock market in three stages: planning audit, performing audit and reporting audit of auditors Research scope: To achieve the research objectives, the thesis focuses on independent auditing companies which are certifiated by the State Securities Commission to performing audit for listed companies such as: Deloitte Vietnam Limited, Nhan Viet Auditing Company Limited, VaCo Auditing Company, Sao Viet Auditing Company Limited 1.6 New contributions of the thesis (1) Determining the influence of factors on the results of material misstatement risk assessment in audit planning stage including the control environment of the enterprise, information system, industry characteristics, economic environment, third-party pressure, in the performing stage, influencing factors: auditor's pressure, accounting capacity, objective factors, in the ending stage, influencing factors: sum up the auditing results and assess the effect of errors detected in the ending stage (2) The thesis finds that independent auditor firms perform risk assessment of material misstatement in the audit planning stage, but has not paid due attention to the performing and reporting stages 1.7 Structure of the thesis This thesis is structured into chapters: Chapter 1: Introduction Chapter 2: The theoretical basis for material misstatement risk assessment in the audit of financial statements of listed companies Chapter 3: Methods of studying the factors influencing the results of risk assessment with material misstatement in financial statement audit of enterprises listed on Vietnam stock market Chapter 4: Results of study on the impact of factors on risk assessment results in financial statement audit of enterprises listed on the stock market in Vietnam Chapter 5: Solutions to complete the material misstatement risk assessment in financial audit of enterprises listed on Vietnam stock market CHƯƠNG THEORETICAL BASIS OF MATERIAL MISSTATEMNENT RISK ASSESSMENT IN FINANCIAL STATEMENT AUDIT OF LISTED COMPANIES 2.1 Characteristics of financial statement of listed companies and requirements on reliability of information 2.1.1 Characteristics of financial statements of listed enterprises First, the financial statements of listed enterprises need to ensure high reliability and financial statements of listed enterprises are counted Secondly, the financial statements provide the indicators of profitability Thirdly, the financial statement summarize a number of arising operations Fourth, the financial statements of listed enterprises must comply with the strict regulations of the stock market, which require mandatory auditing 2.1.2 Requirements on the reliability of information 2.2 Sai sót sai sót trọng yếu báo cáo tài Errors and material misstatement in the financial statements 2.2.1 Missatement in financial statements 2.2.1.1 Definition of error 2.1.1.2 Factors cause the error to arise and develop 2.2.1.3 The errors in financial statement of enterprises Firstly, false evenue recognition (state higher revenue) Secondly, false accounting year recognition Thirdly, concealed liabilities and costs Fourthly, mispriced assets Fifthly, incomplete information disclosure 2.2.1.4 Features of the errors in accounting 2.2.2 Material misstatements in financial statements The material misstatements in financial statements may be caused by error or fraud, or may be the result of: (a) inaccuracy in the collection or processing of the data relevant to the financial statements due to the lack of discretion in documents collecting, data entry leads to inaccurate data affecting the financial statements of enterprises; The pressure of management or accountants in deficit leads to pressure leading to material misstatement in the financial statements; Misuse of the accounting system due to limitations in accounting qualifications or new professional operations 2.3 Risk of Material Misstatement in Financial Statements When referring to risk from a simple point of view, risk is an indication of an event that is unintended and when it occur it would lead to a disadvantageous result Definition of material misstatement risk in financial statements are risks that have a spillover effect on many items on the financial statements and potentially affect to multiple data bases These risks represent situations that may increase the risk of material misstatement at the primary data level Evaluating the risk of material misstatement is a very important matter affecting the design of technical method, timing, staffing and content of financial report when make auditing plan 2.4 Material misstatement risk assessment in financial statement audit of listed enterprises 2.4.1 Relationship of Auditing risks 2.4.2 Significant material misstatement in audit planningstage As defined in IAG 25, Materiality and Risk of Auditing, "Auditing Risks are risks that auditor may encounter when making inaccurate remarks concerning financial information which are serious errors " Auditing risk on account level is represented by the model: AR ≡ f (IR, CR, DR) (1) Where: AR: auditing risk IR potential risk CR: control risk DR: detection risk In this stage, the auditors assess the possibility of material misstatements, make initial assessment of the materiality and conduct analytical procedures to determine the time required to perform the audit and other audit procedures 2.4.3 Material misstatement risk assessment in performing stage According to Nguyen Quang Quynh & Ngo Tri Tue (2006), the performing phase of audit plan to collect evidence to ensure the credibility of the internal control system Therefore, the satisfactory test is called a control test or a control quiz Performing audits depends on the reliability of the internal control system at various levels 2.4.4 Material misstatement risk assessment in the ending stage of audit According to Nguyen Quang Quynh and Ngo Tri Tue (2014), in the ending stage, auditor should assess the materiality and risks for the last time First, auditor should first gather all evidence collected during the audit to carry out a final assessment of materiality and risk for the entire audit The auditor also needs to determine the cumulative number of all errors that have not been adjusted to their material value If the cumulative number of all unadjusted errors is material, auditor should consider decreasing the audit risk by extending the scope of its audit or by requiring manager to adjust the financial statement Regarding the risk of undetected material misstatement, auditor considers implementing necessary audit procedures to obtain the final audit evidence, eg, the guarantee by the board of management regarding questionable matter 3.2 Data sources The thesis uses two sources of data in the research process: secondary data and primary data Secondary data: The thesis collects secondary data from the following sources: (1) Based on the current status of financial statements of companies listed on the stock market of Hanoi Stock Exchange and Ho Chi Minh City Stock Exchange, SSC , information on securities websites (2) Summary of research results of previous studies (3) Gathering actual evidence and performed audit procedures; collecting materials related to auditor activities Primary data: The author sent survey questionnaires to eligible auditor of listed enterprisess on Vietnam stock market The author base on the the list of auditors eligible for auditing listed enterprisess on the website of Vietnam Association of Certified Public Accountants (VCAs) over the years to send questionnaires 3.3 Qualitative research 3.3.1 Research model introduction Establish research model, the author has studied document, current situation, implemented the method of expert interview, synthesis and analysis 3.3.1.1 Document review The author has made a generalized system of theoretical backgrounds of previously studied documents on: (1) Characteristics of financial statement of listed enterprises and information reliability requirements; (2) Errors and material misstatement in the financial statements; (3) Risk of material misstatement in financial statements; (4) Assess the risk of material misstatement in the financial statement audits through stages of planning, performing and conclusion of audit (5) Conditions for listing on Vietnam stock market; (6) Characteristics of an independent auditing firm eligible to perform auditing for listed enterprises; (7) The current status of the risk of material misstatement in financial statements of listed enterprises Documentation methods help the author identify: variables in the research model and representative scales, research hypotheses 3.3.1.2 Practical research The author conducted a material misstatement risk assessment in financial statement of enterprises listed in Vietnam and in the world, the method of risk assessment in: planning, performing and ending audit, websites of auditing management organizations, websites on current situation of securities market 10 CHAPTER METHODOLOGY OF MATERIAL MISSTATEMENT RISK ASSESSMENT IN FINANCIAL STATEMENT AUDIT OF ENTERPRISES LISTED ON VIETNAM SECURITIES MARKET 3.1 Overview of research process Researh qualitatively Review previous researchs Identify research purpose Review quantitative model Discuss, analyse research subject Analyse data Model and hypotheses Design questionnaire and sample Collect data Hình 3.1 Research process Source: Author Collected 3.3.1.3 Methods of expert interviews Prior to identifying the research model, variables in the research model, questionnaire, the author interviewed experts who had many years of experience in the field of accounting, auditing, finance, stock market Thereby, information is collected about: (1) the difference between material misstatement due to errors and due to fraud, indicators to distinguish; (2) Factors affecting the results of risk assessment with material misstatement; (3) The method of material misstatement risk assessment in audit of financial statements through stages of audit 3.3.1.4 Synthesis, analysis Through documentary research methods, practical research, expert interviews The author conducted an analysis of the overall assessment of material misstatement risk in financial statements of companies listed on Vietnam stock market Accordingly, the author has defined the content the thesis: First, the reasoning system of material misstatement in financial report auditing; Second, the potential risk and control risk to assess the risk of material misstatement in financial statement audit; Third, material misstatements risk should be assessed through all three phases of the audit and assessment method 3.4 Quantitative research 3.4.1 Research model and hypothesis ] The author based on VSA 315 to conduct quantiative survey and build research model with the following factors: Control enviroment Risk assessment process of enterprises Control activities Information system H1H2H3H4- Control supervisor H5- Material misstatements risk assessment - Brand H6 H7H8- Sector characteristic H9Economic enviroment Third party pressure Figure 3.3 Study model of audit planning process From the model, the athor put forward the following hypotheses: H1: Control environment has the direct impact on the results of the assessment of material misstatement in the audit of financial statements H2: process of enterprises has the direct impact on the results of material misstatement in the audit of financial statements H3: Control activities have the direct impact on the result of material misstatement in the audit of financial statements 11 12 H4: Supervision of controls has the direct impact on the result of material misstatement risk assessment in the audit of financial statements H5: Information system has the direct impact on the result with serious misstatement in the audit of enterprise financial statements H6: Brand name of the audited company has the inverse impact on the result of material misstatement risk assessment in auditing the enterprise financial statement H7: Sectoral characteristics have the direct impact on the result of material misstatement risk assessment in the audit of financial statements H8: Economic environment influences the results of material misstatement risk assessment in the audit of financial statements H9: Third party pressure on auditors affects the results of material misstatement risk assessment in the audit of financial statements Study model of audit’s performing and reporting stage Assessment model of material misstatement risk at the end of the audit period as following: Figure 3.5 Study model of reporting stage of audit H14: Consolidating audit results has an impact on the results of material misstatement risk assessment in the audit of financial statements H15: Evaluating the impact of misstatement detected at reporting period of auditing has an impact on the material misstatement of the financial statements From the model and hypotheses given, the author estimated the regression equations as follows: Results of material misstatement risk assessment(R) = β0 + β1*CE + β2*RA + β3*AC + β4*MO + β5*IS + β6*TR + β7*DD + β8*MTKT + β9*AL+ β10*HD+ β11*NL+ β12*KQ +β13*PR+ β14*TH + β15*RSTT Figure 3.4 Study model of performing stage From the model above, the author came up with the following assumptions: H10: The intervention of board of directors in accounting activities affects the results of material misstatement in the audit of financial statements H11: The capability of accountants affects the results of material misstatement assessment in the audit of financial statements H12: The objective factor affects the results of the of material error in the audit of financial statements H13: The pressure factor of the auditor affects the result of material misstatement assessment in the audit of financial statements 3.5 Survey methodology 3.5.1 Survey forms and scales development 3.5.1.1 Design scales 3.5.1.2 Design questionnaire and methods of collecting questionnaires 3.5.2 Research sample and procedure 3.6 Data Analysis Methods 3.6.1 Collect data from survey questionnaire 3.6.2 Descriptive statistics analysis 3.6.3 Reliability of scale analysis 3.6.4 Explorations of factor analysis 3.6.5 Correlational regression method analysis 3.6.6 Analyze differences among groups of auditors 13 14 CHAPTER STUDY RESULTS OF IMPACTS OF FACTORS ON THE RESULTS OF MATERIAL MISSTATEMENT RISK ASSESSMENT IN THE AUDIT OF FINANCIAL STATEMENTS OF ENTERPRISES LISTED ON VIETNAM SECURITIES MARKET 4.1 Auditing financial statements of enterprises listed on the Vietnam securities market 4.1.1 Conditions of listing enterprises on Vietnam securities market 4.1.2 Characteristics of the independent auditing firms approved to audit financial statements of listed enterprises 4.1.2.1 Formation and development of independent audit in Vietnam 4.1.2.2 Legal basis of independent audit activities on financial statements of listed enterprises 4.1.3 Vietnamese Auditing Standards on material misstatement risk assessment in auditing financial statements of listed companies 4.2 Results of material misstatement risk assessment in auditing financial statement of listed on the Vietnam securities market 4.2.1 Describe the subject of the survey 4.2.2 Verify scale reliability 4.2.2.1 Test groups of factors at the audit planning stage 4.2.3 Test groups of factors at the audit performing stage 4.2.4 Test groups of factors at the audit reporting stage 4.2.5 Test dependent variable R factors 4.3 Analyze the discovery of EFA factor 4.3.1 Analyze groups of factors at the audit planning stage Table 4.22 Analysis of factors for independent variables MAIN COMPONENTS MO3 794 AC3 785 AC4 781 MO4 748 MO1 743 AC1 733 AC2 731 MO2 679 RA3 880 RA4 844 15 RA2 RA1 AL1 AL3 AL2 MTKT3 MTKT2 MTKT1 TR4 TR1 TR3 TR2 CE3 CE1 CE2 DD1 DD2 DD3 IS1 IS2 IS3 821 785 922 861 839 823 804 795 790 742 731 675 868 813 726 881 873 723 830 800 671 KMO p-value of Bartlett Average Variance Extracted 0.744 0.000 70.23% Source: Author collected 4.3.2 Analysis of factors at the performing stage Table 4.23 Analysis of factors for independent variables at the performing stage MAIN COMPONENTS PR2 889 PR1 878 PR4 808 PR3 795 KQ1 874 KQ2 866 KQ3 754 HD1 855 16 MAIN COMPONENTS HD2 796 HD4 788 HD3 729 NL1 920 NL2 744 NL3 669 KMO 0.704 p-value of Bartlett 0.000 Average Variance Extracted 73.91% Source: Author collected 4.3.3 Analysis of factors at the reporting stage Table 4.24 Analysis of factors for independent variables at the reporting stage Main components TH2 923 TH1 914 TH3 881 RSTT3 877 RSTT2 873 RSTT1 850 KMO 0.670 p-value of Bartlett 0.000 Average Variance Extracted 79.49% Source: Author collected 4.3.4 Analysis of dependent variables Table 4.25 Analysis of factors for dependent variables Main components R3 924 R2 881 R1 840 R4 698 KMO 0.782 p-value of Bartlett 0.000 Average Variance Extracted 70.51% Source: Author collected 17 4.4 Correlation Analysis 4.5 Regression analysis Coefficients Standardized Coefficients Beta a Unstandardized Coefficients Model B Std Error (Constant) 2.855 416 ACMO -.094 CE -.101 RA DD AL 001 149 125 IS -.350 TR MTKT -.025 095 NL -.102 KQ HD PR TH 139 092 178 145 RSTT -.155 T Sig 6.863 000 038 -.094 2.49 013 030 -.129 3.32 001 035 002 042 966 032 166 4.625 000 037 142 3.340 001 040 -.362 8.72 000 043 -.020 -.579 563 031 128 3.056 002 034 -.129 3.04 003 041 143 3.342 001 031 117 2.956 003 033 206 5.441 000 032 211 4.475 000 033 -.175 4.73 000 a Dependent Variable: R Collinearity Statistics Tolerance VIF 789 1.268 744 1.343 785 868 613 1.275 1.152 1.631 647 1.546 932 630 1.073 1.586 616 1.622 605 711 774 501 1.654 1.407 1.291 1.996 815 1.226 Source: SPSS Test After hypothesis testing, the regression equations are: Results of material misstatement risk assessment(R) = 2.855 0.094ACMO - 0.101CE +0.149DD +0.125AL - 0.350IS +0.095MTKT 0.102NL + 0.139KQ + 0.092HD+ 0.178PR + 0.145TH - 0.155RSTT 18 Through the standardized beta factor, it is possible to see the level of impact of factors on the material misstatement risk assessment Based on the standardized beta of the factors used to assess the impact of factors on the material misstatement risk assessment , it can be ordered as follows: Having the strongest effect on the R-rating is the IS Information System factor (standardized beta coefficient 0.35); having the second strongest influence on R is the auditor's pressure factor (standardized beta coefficient is 0.178); The third strong influence on the assessment of misstatement detected at the audit reporting stage RSTT (standardized beta coefficient (-55); the fourth strongest influencer on R is the characteristic of the sector DD (standardized beta coefficient -0.149); the fifth strongest influence on R is the aggregation of audit results TH (standardized beta coefficient is 0.145), the sixth strong influence on the result is third party pressure factor (standardized beta coefficient 0.125), the seventh strong influence on R is objective factor KQ (standardized beta coefficient 0.139); The 8th influence on R is the capacity of accountants NL (standardized beta coefficient -0.102): the ninth one is the control environment CE (-101): the 10th strongest influence on R is economics environment MTKT which has a standardized beta coefficient of 0.095 The 11th most powerful influence on R is the ACMO factor (standardized beta coefficient 0.094) The weakest influence on R is the management operation (unstandardized beta coefficient beta factor 0.092) 4.6 Evaluating differences between characteristics of the survey subject and material misstatement risk assessment Table 4.29 Analysis of auditors' gender differences Levene’s test for equal variancet test for equal mean R Equal variance F p-value 239 625 Unequal variance 19 t p-value 315 375 313 374 Table 4.30 Analysis of different sizes of audited enterprises Levene’s test for equal F test for equal Mean variance mean value F p-value T p-value Equal variance 807 481 -.426 765 R Unequal variance Source: SPSS statistics Table 4.31 Analysis of differences in sectors of audited enterprises Levene’s test Levene stat p-value Sector of operation - Risk 983 403 Equal mean test t p-value 1.070 365 Source: SPSS statistics CHAPTER SOLUTIONS TO COMPLETE THE MATERIAL MISSTATEMENT RISK ASSESSMENT IN AUDITING FINANCIAL STATEMENTS OF LISTED ENTERPRISES IN VIETNAM SECURITIES MARKET 5.1 The necessity and requirement to complete the material misstatement risk assessment of listed enterprises on the Vietnam securities market 5.2 Complete solution to assess the material misstatement risk in auditing financial statements of listed enterprises on the Vietnam securities market As material misstatement risk assessment in the financial statement auditing process is carried out according to the audit process, the author presents the groups of solution as following process: 5.2.1 Solutions in the audit planning phase 5.2.2 Complete solution for assessing the Internal Security Policy of listed enterprises Auditors can use business risk as a base to assess the material misstatement risk as follows: 20 Orient audit procedure to support areas with high risk Examine the effect of business risk on audit risk Study business strategy of the customers Study response and control plan in business environment of the customers Consider the possibility of error due to business Assess business risk the of the customer Figure 5.1 Material misstatement risk assessment process To assess the material misstatement risk by using the business risk the auditors can follow the procedure: 5.2.2 Complete solution for assessing the internal control system of listed enterprises 5.2.3 Completing the evaluation of material misstatement risk assessment in the audit performing period Enhance the capacity of auditors On the side of the auditors: Actively approach and learn about the realities of different business areas of enterprises to gain knowledge for the audits Improve qualifications by participating in short-term courses, workshops on auditing, accounting, tax of audit associations, reputable auditing organizations On the side of the auditing company: Create conditions for the auditors to study in order to develop their qualifications Have a finite supportive, rewarding and sanctioning regime Have contact with the professional association of auditors to update information on changes in accounting and auditing standards Improve objectivity of auditors: In order to improve the objectivity of auditors, auditors need to understand the ethical standards of audit profession Understand the responsibility of the auditors with society and users of financial statements Auditing companies should have clear and strict regulations on violations of ethical standards of auditors and auditors, if having serious violation of objectivity, must be fined and may not continue working, which depends on the level of the incident Professional associations need to hold advanced seminars on the responsibilities and duties of the auditors as well as the regulations for auditors; if not complying, auditors will be removed from the association and the auditors' licenses will be revoked Pressure on auditors Consolidate audit results: During the audit phase, the auditors shall consolidate audit results collected during the course of audit, which is truthful and follows prescribed forms set by the auditing company Consolidators of auditing results are highly qualified auditors who have experience in auditing the business field of customers Auditing company should have a manual on the process of consolidating audit results for each stage and add notes on the material misstatement as a basis for auditors' opinion formation, and it will be eassier for the auditors to recheck Figure 5.2 Material misstatement risk assessment process Evaluate the impact of misstatement detected at the audit reporting phase: During the audit reporting phase, auditing companies should request the 21 22 supervisor to check whether the errors in this ending period is a material misstatement or not 5.3 Some recommendations to strengthen the solution 5.3.1 For the authorities To enhance the feasibility of these solutions, the author presents some recommendations for the relevant authorities as follows: For SSC (State Securities Commission) The SSC should have auditing requirements for subsidiaries, joint ventures, joint ventures of listed enterprises, public companies, companies having large transactions with listed enterprises Because, according to surveys, characteristics of sectors have a great impact on the assessment of the material misstatement risk in auditing financial statements This provision will facilitate the audit of financial statements of listed enterprises as well as precisely assess the material misstatement in auditors' report on the financial statements For the Ministry of Finance The Ministry of Finance is the authority to issue auditing standards, which directly affects the auditing process and greatly affects the auditor The market economy is developing and there are much more complex qualifications, so the Ministry of Finance should have specific regulations and instructions associating with changes to help the auditors conduct the audits For VACPA (Vietnam Association of certified public accountants) VCPA, a professional reunion which supports auditors plays an important role However, to enhance their role, VACPA should focus on improving the quality of auditors by solutions such as: holding seminars between the association and the auditor periodically, quarterly on issues such as material misstatement that auditors often ignore and how to handle it VACPA should organize more training courses on sample audit programs for all auditors Assessing the material misstatement risk in auditing financial statements has an important role, affecting the audit opinions of auditors, audited companies and the users of financial statements About reasoning The thesis has systematized theories of errors and material misstatements in financial statements, errors and material misstatements in the audit of financial statements, material misstatement risk assessment at the period planning, performing and reporting stage of an audit The thesis has provided an overview of the material misstatement in the audit of financial statements through research works About research method The author has collected data from two sources, secondary and primary sources Secondary data sources are based on the current status of financial statements of listed enterprises in the Vietnam securities market from Hanoi Stock Exchange and Ho Chi Minh City Stock Exchange, SSC, information on websites of securities, study results aggregated from previous studies, the collection of actual evidence and performed procedures of the audit; documents related to the auditor's activities Secondary data sources through expert interviews help to develop an audit model and make recommendations on completing of material misstatements in the audit of financial statements The author has identified the factors that influence material misstatement risk assessment by using statistical methods and correlated regression analysis (through SPSS software) About survey results, analysis The author has sent survey to 390 auditors on the list of auditors who are approved to audit financial statements for businesses having public interest in 2015 169 results are obtained The author used these results to run the software SPSS and obtained results on the factors affecting the of material misstatement: information systems, pressure factors, consolidation of audit results , assessment of the impact of errors detected at the end of audit, third party pressure, industry characteristics, objective factors, control environment, economic environment, operations of board of directors Recommendations Based on the analysis of the current status, results, test, the authors presented the recommendations on three stages of the audit process and make recommendations to the SSC, the Ministry of Finance, VACPA Research Limit During research, the thesis just mainly obtained questionnaires results from auditors operating in Hanoi but not many results from auditors operating in Ho Chi Minh City The scope of the study only covers the assessment of the auditor's results but not the process of conducting a material misstatement risk assessment in the audit of the financial statements Although in the process of researching, the author has taken much effort, actively applied research methods, the thesis can not avoid some shortcomings The author is looking forward for the contribution of other scientists so that the thesis would be more complete Sincerely! 23 24 ... information 2.2 Sai sót sai sót trọng yếu báo cáo tài Errors and material misstatement in the financial statements 2.2.1 Missatement in financial statements 2.2.1.1 Definition of error 2.1.1.2 Factors... (2010) proposed solutions to improve the quality of auditing for listed enterprises is internal control and external control, besides control by the audit firm itself there should be control of... research model with the following factors: Control enviroment Risk assessment process of enterprises Control activities Information system H1H2H3H4- Control supervisor H5- Material misstatements risk