The Effect of audit quality offered by audit firms on client satisfaction : luận văn thạc sĩ

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Hoang Thi Kim Thuan THE EFFECTS OF AUDIT QUALITY OFFERED BY AUDIT FIRMS ON CLIENT SATISFACTION MASTER OF BUSINESS (Honours) Ho Chi Minh City – 2014 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Hoang Thi Kim Thuan THE EFFECTS OF AUDIT QUALITY OFFERED BY AUDIT FIRMS ON CLIENT SATISFACTION MASTER OF BUSINESS (Honours) SUPERVISOR: Dr Nguyen Thi Nguyet Que Ho Chi Minh City – 2014 INDEX ACKNOWLEDGEMENTS LIST OF FIGURES LIST OF TABLES LIST OF ABBREVIATION ABSTRACT CHAPTER 1: INTRODUCTION 10 1.1 Background to the research 10 1.2 Research motivation 12 1.3 Research objective 13 1.4 Research scope and methodology 14 1.5 Structure of the study 14 CHAPTER 2: LITERATURE REVIEW 15 2.1 Introduction 15 2.2 Audit quality 15 2.2.1 Definition of audit quality 15 2.2.2 Research on measurement of audit quality 16 2.3 Client satisfaction 19 2.4 Research framework and hypothesis development 20 2.4.1 Audit quality dimensions and client satisfaction 20 2.4.1.1 Reputation and client satisfaction 21 2.4.1.2 Capability and client satisfaction 21 2.4.1.3 Expertise and client satisfaction 22 2.4.1.4 Experience and client satisfaction 23 2.4.1.5 Responsiveness and client satisfaction 23 2.4.1.6 Client service and client satisfaction 24 2.4.1.7 Empathy and client satisfaction 24 2.4.2 Research framework 25 2.5 Conclusion 26 CHAPTER 3: METHODOLOGY 27 3.1 Introduction 27 3.2 Research process 27 3.3 Questionnaire development 28 3.4 Pilot study 32 3.5 Main study 33 3.5.1 Sampling method 33 3.5.2 Sample size 33 3.5.3 Questionnaire design and administration 34 3.6 Data analysis method 35 3.7 Conclusion 36 CHAPTER 4: DATA ANALYSIS 37 4.1 Introduction 37 4.2 Sample description 37 4.3 Reliability Analysis 38 4.4 Exploratory factor analysis (EFA) 40 4.5 Hypotheses testing 42 4.5.1 Pearson Correlation Coefficient 42 4.5.2 Testing assumptions of Multiple Regression 44 4.5.3 Regression analysis 45 4.6 Discussion of research findings 47 4.7 Conclusion 48 CHAPTER 5: CONCLUSION AND IMPLICATION 50 5.1 Conclusion 50 5.2 Managerial implications 50 5.3 Limitation and suggestion for future research 52 REFERENCES 53 APPENDIX 60 Appendix A: The findings of pilot study 60 Appendix B: Questionnaire (English version) 65 Appendix C: Questionnaire (Vietnamese version) 70 Appendix D: Descriptive Analysis 75 Appendix E: Total Variance Explained 77 Appendix F: Multiple Linear Regression Assumption testing results 78 ACKNOWLEDGEMENTS I would like to express my sincere gratitude to my supervisor, Dr Nguyen Thi Nguyet Que for her valuable guidance, insightful comments and continuous support to my thesis I am sure that this thesis would not have been possible without her supervision and constant help I would like to acknowledge with much appreciation to leaders, teachers, and staffs in ISB who help me usefully all the subjects of my master course I would like to thank my dear colleagues and friends for their invaluable advice, help, encouragement and support during the time I was doing this thesis Last but not least, a special thank goes to my husband who always stay with me in good and bad times His continuous support in pursuing my study is invaluable to me Ho Chi Minh City, February 22, 2014 LIST OF FIGURES Figure 2.1: Research model 25 Figure 3.1: Research Design Process .27 LIST OF TABLES Table 3.1: Draft questionnaire to measure audit quality 29 Table 3.2: Deleted items in pilot study 60 Table 3.3: Final questionnaire to measure audit quality 62 Table 3.4: Cronbach’s alpha reliability coefficient 35 Table 4.1: Sample characteristics 75 Table 4.2: Cronbach’s alpha reliability of first analysis 38 Table 4.3: Cronbach’s alpha reliability of final analysis .40 Table 4.4: EFA results 40 Table 4.5: Pearson Correlation 42 Table 4.6: Coefficients 44 Table 4.7: Regression results 45 Table 4.8: Hypotheses testing results 46 Table 4.9: The summary of hypotheses testing results 49 LIST OF ABBREVIATION AAA: American Accounting Association WTO: World Trade Organization VACPA: Vietnam Association of Certified Public Accountants CPA: Certificated Public Accountant CFO: Chief Financial Officer SSC: State Security Commission AASC: Auditing and Accounting Financial Consultancy Services Limited Company SPSS: Statistical Package Software for Social Science EFA: Exploratory Factor Analysis ABSTRACT Audit quality is crucial for financial market to function smoothly due to its effects on the credibility of financial statements The users of financial statements are more likely to feel secure about the information presented in the financial statements if the audit of the financial statements is perceived as high quality The current financial crisis and competitive business environment have brought on more challenges for audit firms They have confronted with the increasing pressure from financial statement’s users to improve audit quality To be successful in this environment, audit firms must continually strive to improve audit quality and hence, maximize client satisfaction This research aims at investigating the effects of audit quality provided by audit firms on client satisfaction in Vietnam In this study, the author uses AUDITQUAL model (Duff, 2004, 2009) focusing on seven dimensions of audit quality which were label Reputation, Capability, Expertise, Experience, Responsiveness, Client Service and Empathy and test the effect of each dimension of audit quality on client satisfaction An survey of 380 responses was conducted in the convenient method in Ho Chi Minh City, Dong Nai and Binh Duong Province A statistical package for social sciences (SPSS) version 20.0 was used to analyze the collected data Results show that seven dimensions of audit quality including Reputation, Capability, Expertise, Experience, Responsiveness, Client Service and Empathy associated positively with client satisfaction and Experience has the most influence on client satisfaction Keywords: Audit quality, AUDITQUAL, Client satisfaction CHAPTER 1: INTRODUCTION 1.1 Background to the research Service quality and client satisfaction are very important concepts that companies must understand if they want to remain competitive and grow (Angelova and Zekiri, 2011) In today’s global competitive environment, it is recognized that high quality service is essential for firms that want to be successful in their business (Parasuraman et al., 1998; Rust & Oliver, 1994) Therefore, service quality and client satisfaction become interesting research subjects in the marketing literature as well as in the reality In the auditing context, it is the same as other service industries that audit quality and client satisfaction are very important Higher audit quality provided by audit firms will lead to higher clients’ satisfaction and higher repurchase intentions After many well-known audit failures, such as: Arthur Andersen's audit failure at Enron, Deloitte and Touche’s audit failure at U.S Adelphia Communications, PricewaterhouseCoopers’s audit failures at Tyco, Ernst & Young’s audit failure at Heath South Corporation, KPMG’s audit failure at Xerox Corporation…, audit firms are more and more focusing on the audit quality in order to increase client satisfaction and repurchase intentions In Vietnam, joining in the WTO has created a lot of opportunities to develop Vietnamese economy In this process, investors require the financial information more accurate and explicit than ever before Accordingly, audit and non-audit services offered by audit firms are in great demand However, in recent years, there are many scandals in Vietnam financial market that led to the bankrupt of some listed companies and caused big losses for stakeholders, such as: cheating on financial reports of Bach Tuyet Cotton Corporation, giving unfaithful information and crucial 10