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MINISTRY OF TRAINING AND EDUCATION FOREIGN TRADE UNIVERSITY -*** SUMMARY OF PHD THESIS FACTORS AFFECTING THE AUDIT QUALITY OF BANKS PERFORMED BY THE STATE AUDIT Discipline: Business Major: Business Administration Code number: 62.34.01.02 (New code number: 9340101) NGUYEN DANG KHOA HANOI - 2020 This PhD thesis is completed at: FOREIGN TRADE UNIVERSITY Supervisor: Associate Professor NGUYEN THU THUY- FOREIGN UNIVERSITY Examiner 1: ………………………… Examiner 2: ………………………… Examiner 3: ………………………… The PhD thesis will be defensed at the Board of Examiners at: Foreign Trade University Time Date Month Year This PhD could be found at: - Vietnam National Library; - Library of Foreign Trade University TRADE CHAPTER 1: INTRODUCTION 1.1 Rationale of the research In recent years, the State Audit of Vietnam (SAV) has strengthened auditing of banks such as the State Bank, Vietnam Bank for Agriculture and Rural Development (Agribank), Vietnam Bank for Investment and Development (BIDV), Vietnam Bank for Industry and Trade (Vietinbank), Vietnam Bank for Industry and Trade (Vietcombank), Vietnam Bank for Social Policies (VBSP) and many other financial institutions In 2017, the State Audit implemented the audit of a number of banks that have been restructured and acquired by the State Bank for VND Through the audit, banks and credit institutions, the SAV promptly detected and handled mistakes, proposed amendments and supplements to the inadequacies of the policy regime Then, SAV contributes to improve the law implementatiion, accountability and efficiency of entities audited Although achieving some encouraging results, the management and implementation of audits of banks and credit institutions in our country currently has not really met the requirements such as: legal framework on auditing of commercial banks is still incomplete; the quality and audit results were still at a limited level because SAV only focus on the financial accounting regime and investment management and not go in deep in audit of specific contents of the Bank In addtition, due to the implementation of post-audit, SAV has not carried out many activities audits and information technology audits for banks and credit institutions Besides, the management and implementation of audits of banks and the assessment of the audit quality by the SAV are not easily assessed Specifically, the audit results metrics not reflect the factors and the level of factors that affects the audit quality Meanwhile, audit quality plays a very important role in confirming the correctness and truthfulness of audit conclusions and one of the most important strategies of the State Audit Therefore, the topic "Factors affecting the audit quality of banks performed by the State Audit" is selected for research with the desire to use quantitative and qualitative research methods to clearly defining the audit status and factors affecting the quality of the auditing of banks performed by the SAV Thereby, the thesis points out the limitations and gives solutions to improve the audit quality of the SAV in Vietnam and recommendations to improve the governance activities at banks based on audit reports 1.2 Literature review of the research 1.2.1 Researches about audit quality and factors affecting audit quality Researches overseas such as: DeAngelo (1981), Mock and Samet (1982), Sutton and Lampe (1991), Schroeder et al (1982), Carcello et al (1992), Angus Duff (2004), Alpaslan Yasar (2013), IAASB (2013), Studies in Vietnam such as: Doan Xuan Tien (2008), Nguyen Thi My (2013), Bui Thi Thuy (2014), Tran Khanh Lam (2015), Vu Thi Duyen (2016), Lai Thi Thu Thuy and Pham Duc Hieu (2017) 1.2.2 Researches about audit quality in banking industry Researches overseas such as Schipper (1989), Vincent et al (2003), Kanagaretnam et al (2010, Sherolli (2016) Studies in Vietnam such as such as: Nguyen Thi Le Thanh (2011), Nguyen Phu Giang (2011), Phi Thi Kieu Anh (2018) 1.2.3 Researches about state audit Researches overseas such as Clark et al (2007), Zdyrko (2016), Studies in Vietnam such as: Ha Ngoc Son and Nguyen Dinh Huu (2002), Le Thu Hang (2016), 1.2.4 Research gap It can be seen that the research on the quality of the auditing of financial statements of commercial banks in Vietnam is still relatively poor, and the research is mainly under the perspective of of independent audit Besides, there are very few researches on state audit in the world and in Vietnam If any, the studies only focus on the role of SAV Thus, there is currently a lack of research to build a theoretical framework on audit quality, as well as a lack of research on measuring the factors that affect the quality of auditing financial statements from the perspective of the State Audit 1.3 Research objectives The research objective of the thesis is to identify the factors affecting the quality of auditing of banks' financial statements audited by the SAV Thereby, the thesis offers solutions to improve the quality of auditing financial statements of the SAV in Vietnam 1.4 Research questions Firstly, what factors affect the quality of auditing of banks' financial statements performed by the SAV? Second, to what extent factors affect the quality of auditing of banks' financial statements performed by the SAV? Third, what solutions and recommendations should be given to improve the quality of auditing of banks' financial statements performed by the SAV and help banks improve their governance through audit reports? 1.5 Object and scope of the research 1.5.1 Object of the research The research object of the thesis is the factors affecting the quality of auditing of banks' financial statements audited by the SAV 1.5.2 Scope of the research + Scope of space: banking audits performed by SAV, including banks, namely Vietnam Bank for Agriculture and Rural Development (Agribank), Vietnam Bank for Investment and Development (BIDV), Vietnam Bank for Industry and Trade (Vietinbank), Vietnam Bank for Industry and Trade (Vietcombank), Vietnam Development Bank (VDB), Vietnam Bank for Social Policies (VBSP), and Cooperative Bank of Vietnam (Co-opBank) + Scope of time: research based on banking audits conducted by the SAV in the past five years, from 2015 to 2019 + Scope of content: the contents only focus on banks’ financial statements auditing performed by SAV 1.6 Methodology and data Research methods used in the thesis include qualitative methods and quantitative methods Qualitative method: The qualitative method is used through in- depth surveys and interviews, including (i) a questionnaire for the auditor / audit team to investigate the factors affecting the audit quality of the financial statements of banks implemented by the SAV; (ii) indepth interview questionnaire with bank leaders to assess the quality of auditing activities of SAV's financial statements The research sample is the auditors who has participated in the audit teams or has conducted a quality review of the audits of banks in the period 20152019 and the General Director / Deputy General Director or Head of the internal audit department banks, including: Vietnam Bank for Agriculture and Rural Development (Agribank), Vietnam Bank for Investment and Development (BIDV), Joint Stock Commercial Bank for Industry and Trade Vietnam Nаm (Vietinbank), Viet Nam Commercial Joint Stock Bank (Vietcombank), Vietnam Development Bank (VDB), Vietnam Bank for Social Policies (VBSP), and Vietnam Cooperative Bank (Co-opBank) Primary data through questionnaires were surveyed directly or indirectly via email / phone interview The survey period will take place from November 2019 to March 2020 As a result, the study collected 275 responses from the State Auditors and in-depth interviews of the leaders of the banks audited by the SAV In addition, the qualitative method in the thesis is also demonstrated through case study analysis- research on the quality of auditing financial statements of SAV at Vietnam Bank for Social Policies (VBSP) This is the bank that audited four times by the SAV in 2015, 2016, 2017 and 2018 Quantitative method: The thesis analyzes quantitatively based on secondary data collected through the questionnaires and SPSS 26.0 software to see the relationship of 12 factors to audit quality Thereby, pointing out which factor is the most important, which factor is less important in improving the quality of auditing financial statements of SAV Specific quantitative methods include: Cronbach's Alpha reliability test method, Exploratory Factor Analysis (EFA), CFA (Confirmator factor analysis), linear regression method (Regression Model) In addition to the qualitative and quantitative methods as described above, the research also uses other methods such as comparison method, synthesis method, description method, 1.7 Structure of the thesis The structure of the thesis includes chapters as follows: Chapter 1: Introduction Chapter 2: Literature review on factors affecting the quality of financial statements audit performed by State Audit Chapter 3: Research Methodology Chapter 4: Research results on factors affecting the quality of auditing of banks' financial statements performed by State Audit Chapter 5: Solutions and recommendations to improve the quality of financial statements audit performed by State Audit CHAPTER 2: LITERATURE REVIEW ON FACTORS AFFECTING THE QUALITY OF FINANCIAL STATEMENTS AUDIT PERFORMED BY STATE AUDIT 2.1 Literature review on financial statements audit and the quality of financial statements audit 2.1.1 Concept of audit and financial statements audit - Audit is the process by which competent and independent experts collect and evaluate evidence of an entity's information for the purpose of confirming and reporting this information in comparison with the established standards - Auditing of financial statements or financial statements audits of the State Audit is the process by which the state auditors give an opinion on the truthfulness and reasonableness of the financial statements of the audited entity 2.1.2 Concept of the quality of financial statements audit A good quality audit can be understood when the entire audit process is performed in accordance with audit standards, ensuring the highest possibility that the auditor can detect and report the material misstatement of the audited financial statements, and the results of the audit satisfy the best use of the results by the parties 2.1.3 Some of the views assessing audit quality - The point of view of DeAngelo (1981) - FRC Audit Quality framework (2008) - The points of view of Francis (2011), Knechel et al (2013) - IAASB Audit Quality Framework (2013) 2.2 Literature review on financial statements audit and the quality of financial statements audit of State Audit 2.2.1 Definition, objectives and audit process of financial statements audit of the State Audit 2.2.1.1 Definition of financial statements audit of the State Audit There are very few documents that define State Audit's financial statements auditing activities In the State Audit Standards System issued by the State Audit under Decision No 02/2016 / QDKTNN, the concept of financial statements audit is not introduced However, it classified audit into main categories In which, the audit of financial statements or the financial audit of the State Auditor is the state auditor giving an opinion on the truthfulness and reasonableness of the material financial statements of audited unit 2.2.1.2 Objectives of financial statements audit of the State Audit - Obtain reasonable assurance that, in all material respects whether the financial statements and the financial information are still materially misstated due to fraud or error, are the financial statements prepare and present in accordance with applicable financial reporting frameworks; - Prepare an audit report and publish the results of the audit in accordance with audit findings 2.2.1.3 Audit process and method for financial statements audit performed by State Audit According to Decision No 08/2016 / QD- KTNN, the audit process consists of steps: Auditing preparation; Conduct audits; Making and submitting audit reports; and Monitoring, examining the implementation of audit conclusions and recommendations 2.2 The definition and the criteria for evaluating the quality of financial statements audit of the State Audit The quality of of financial statements audit from State Audit persepective is defined as the level of satisfaction of the requirements of the subjects using audit results in terms of the truthfulness, objectivity and reliability; satisfying the requirements of objectivity, timeliness and feasibility for the recommendations made by the State Audit Office; ensuring reasonable costs of resources used in audit activities of the State Audit The criteria for evaluating the quality of financial statements audit of the State Audit includes: - Audit reports meet related subjects' requirements to use information about the audited entities - Audit results and conclusions of the State Audit must ensure truthfulness, objectivity and reliability - Audit proposals of the State Audit must be objective, right subject and feasible - Resources are used reasonably and effectively to perform audit 2.2.3 Some experiences in quality assurance of state audit under the Asian organizations of Supreme Audit Institutions (ASOSAI) - The case of the State Audit in Philippine - The case of the State Audit in Turkey - The case of the State Audit in China - Lessons learned for the State Audit of Vietnam Firstly, it is necessary to establish a clear function of audit quality assurance in the SAV and clarify the relative independence of the technical quality assurance system Second, the division in charge of Audit quality assurance must be structured in a high-level position to fully support the SAV leaders and have full authority to perform their functions and duties Thirdly, the audit quality must be fully implemented at both levels: audit level and the entire level of the SAV Fourth, it is necessary to have appropriate strategies and policies for the promotion and development of technical quality assurance activities, including raising awareness for the contingent of cadres, civil servants, and state auditors on technical quality assurance Fifth, need to aim to check the audit quality in the form of external inspection by an outside agency or organization that is qualified to assess the quality of the SAV or of the supreme audit agencies 2.3 Factors affecting the quality of financial statements audit performed by State Audit 2.3.1 Factors belong to the State Auditors (a) Technical Competence According to Bui Thi Thuy (2014), the professional capacity of auditors shows the qualifications of auditors, mainly through the qualifications, practicing certificates that auditors achieve, as well as training courses in which the auditor is involved, required by regulation or voluntarily According to Richard (2006), practicing certificates illustrate the auditors' personal knowledge, thereby showing that the auditor has the knowledge and experience to perform auditing activities effectively (b) Industry Expertise Industry expertise demonstrates an entity's deep understanding of the specialized field Auditors with enough experience in the industry of the audited entity will have the capacity to identify risks, opportunities as well as the financial situation SAV and professional organizations not train these knowledge, but it is accumulated by each auditor through active learning, observation and practical experience in auditing firms operating in each field of business (Craswell et al., 1995; Slomon et al., 1999) (c) Working Experience (a) Factors belong to the audited entity The capacity, qualifications and perception of business management are factors that are believed to have an impact on the audit quality The size and characteristics of the business firms also indirectly affect the quality of the audit (b) Factors that are part of the regulatory environment for the audit activity Factors belonging to the legal environment for auditing activities include the system of accounting standards and regimes, auditing and related legal documents.They create the basis and guidance for the auditing activities (c) Other external factors The macroeconomic environment such as economic growth, inflation and interest rates are important factors that directly affect businesses in general and units audited by the SAV in particular CHAPTER 3: RESEARCH METHODOLOGY 3.1 Research process The thesis is implemented through steps as follows: (1) Building theoretical framework, (2) Building research model and method, (3) Assessing the current situation, (4) Analyzing research results, and (5) Solutions and recommendations 3.2 Research model and hypotheses 3.2.1 Research model 12 factors (divided into groups A, B, C) with 55 influencing criteria is built to determine the factors that affect the quality of auditing of banks' financial statements performed by the SAV In addition, based on the Vietnam Auditing Standard (2016), the four criteria to measure the audit quality of the SAV's financial statements are as follows: Table 3.2 The measurement criteria for the dependent variable – The quality of financial statements audit The dependent variable Acronym The quality of financial statements audit CLKT performed by State Audit Audit reports meet related subjects' CLKT1 requirements to use information about the audited entities Audit results and conclusions of the State Audit CLKT2 must ensure truthfulness, objectivity and reliability Audit proposals of the State Audit must be CLKT3 objective, right subject and feasible Resources are used reasonably and effectively to CLKT4 perform audit Source: Audit quality control fostering document, 2015 Thus, the research model of factors affecting the quality of financial statements audit of banks performed by the SAV is built as follows: 10 3.2.2 Research hypotheses Hypothesis (H1): Technical Competence (Nangluc) has a positive impact on the quality of auditing financial statements of banks performed by the SAV Hypothesis (H2): Industry Expertise (Chuyenmon) have a positive relationship with the quality of auditing financial statements of banks performed by the SAV Hypothesis (H3): Working Experience (Kinhnghiem) have a positive relationship with audit quality of auditing financial statements of banks performed by the SAV Hypothesis (H4): Auditing Standards compliance (Tuanthu) has a positive relationship with audit quality of financial statements of banks performed by the SAV Hypothesis (H5): Due care and information security (Thantrong) is an important factor that positively affects the audit quality of the financial statements of banks performed by the SAV Hypothesis (H6): Integrity, independence and objectivity (Doclap) is proportional to the audit quality of the financial statements of banks performed by the SAV Hypothesis (H7): The more favorable working conditions of the SAV (DKLV), the better quality of auditing financial statements of banks performed by the SAV Hypothesis (H8): An effective audit process has a positive impact on audit quality when Audit Approach (Phuongphap) applied in the audit process are well organized Hypothesis (H9): The better SAV quality control system (KSCL), the better quality of auditing financial statements of banks performed by the SAV Hypothesis 10 (H10): Factors belong to the audited banks (Nganhang) will positively affect the audit quality of the SAV 11 Hypothesis 11 (H11): The legal environment for auditing activities (Phaply) of the SAV is fully built, the higher the quality of the audit of financial statements is improved Hypothesis 12 (H12): Macroeconomic environment (Ngoaikhac) positively affects quality of auditing financial statements of SAV 3.3 Research methodology - Qualitative method: The qualitative method is used through types of questionnaires, including (i) a questionnaire for the auditor / audit team to investigate the factors affecting the audit quality of the financial statements of banks implemented by the SAV; (ii) in-depth interview questionnaire with bank leaders to assess the quality of auditing activities of SAV's financial statements In addition, the qualitative method in the thesis is also demonstrated through case study analysis- research on the quality of auditing financial statements of SAV at Vietnam Bank for Social Policies (VBSP) This bank was audited four times by the SAV in 2015, 2016, 2017 and 2018 - Quantitative method: The thesis analyzes quantitatively based on secondary data collected through the questionnaires and SPSS 26.0 software to see the relationship of 12 factors to audit quality of financial statements of banks performed by State Audit 3.4 Method of collecting and processing data 3.4.1 Design questionaires The survey questionnaire is designed based on a theoretical framework such as the research of DeAngelo (1981), Francis (2011), Knechel et al (2013), The Audit Quality Framework of FRC (2008), IAASB (2013); based on the Vietnam Audit Standard 2016; and combined with characteristics of financial statements audit of banks performed by the SAV 3.4.2 The objects of survey The interviewees are the auditors who has participated in the audit teams or has conducted a quality review of the audits of banks in the period 2015-2019 and the General Director / Deputy General Director or Head of the internal audit department banks, including: Vietnam Bank for Agriculture and Rural Development (Agribank), Vietnam Bank for Investment and Development (BIDV), Joint Stock Commercial Bank for Industry and Trade Vietnam Nаm (Vietinbank), Viet Nam Commercial Joint Stock Bank (Vietcombank), Vietnam 12 Development Bank (VDB), Vietnam Bank for Social Policies (VBSP), and Vietnam Cooperative Bank (Co-opBank) 3.4.3 Data collecting and processing method (a) Methods of data collection - Collection of primary data: Primary data through questionnaires were surveyed directly or indirectly via email / phone interview The survey period will take place from November 2019 to March 2020 As a result, the study collected 275 responses from the State Auditors and in-depth interviews of the leaders of the banks audited by the SAV - Collection of secondary data: In addition to primary data, secondary data are also collected to assess the current stituation of auditing quality of banks' financial statements performed by the SAV, including internal documents, reports of the Department of Regime and Quality Control on auditing of banks, Vietnam Auditing Standard, documents and decisions of the State Auditor General relating to quality audit (b) Data processing method: After being checked to ensure the suitability, data will be encoded and entered into Excel file 13 CHAPTER 4: RESEARCH RESULTS ON FACTORS AFFECTING THE QUALITY OF AUDITING OF BANKS’ FINANCIAL STATEMENTS PERFORMED BY STATE AUDIT 4.1 Characteristics of auditing activities of banks' financial statements performed by the SAV 4.1.1 General introduction about State Audit 4.1.1.1 The process of formation and development State Audit Office of Vietnam was established in 1994 Until now, it has become increasingly powerful and effective tool of the State and National Assembly in checking and monitoring public finance and public property 4.1.1.2 Organizational structure The organizational structure of the SAV includes 32 departments and units equivalent to the department level 4.1.1.3 Audit Quality Control Department The Audit Quality Control Department consists of functional departments: the State Budget Department, the Investment Project Department, the Enterprise Department and the Banking and Financial Institutions Department Thus, the organizational structure with a department of Audit Quality Control for financial and banking institutions shows that the SAV pay great attention to ensuring the audit quality for financial and banking institutions 4.1.2 Characteristics of banks' financial statements audit performed by the SAV (1) Auditing contents of a bank's financial statements must be consistent with this subject's business operations (2) The bank's accounting system is relatively different from the account system of other types of businesses Therefore, audit method for banks’ financial statements auditing also needs to be developed in order to access this account system (3) The operations of the banks in the current conditions must be based on a modern information technology system Therefore, it can be seen that information technology audit is an important audit content in the auditing of banks’financial statements (4) The auditing risk of banks’ financial statements should be assessed based on observations and analysis of the bank's operations 14 (5) The business operation of a bank affects many economic entities in society Therefore, information on the bank's financial statements is of interest to many subjects in the economy; especially the bad debt situation, the capital adequacy of banks Therefore, this is one of the important contents of the auditing of a bank's financial statements 4.2 The situtation of the quality of banks' financial statements audit performed by the SAV 4.2.1 The situtation of controlling the quality of banks' financial statements audit performed by the SAV According to the annual plan of audit quality control, the Department of Audit Quality Control of the State Audit conducted the audit quality control and issued reports on audit quality Audit quality control has always been focused by the SAV The control groups show their roles in the stage of survey, collecting information, making audit plans, performing audits, issuing audit reports Thereby, the control results have helped the Chief Auditor to have instructions to promptly rectify the operation and improve the quality of the audit teams 4.2.2 The situation that State Auditors evaluate the quality of banks’ financial statements audit The SAV has detailed regulations in grading to assess the quality of audits, but the scoring still shows subjectivity because there is no external unit involved in the grading process 4.2.3 The situation that banks evaluate the quality of financial statements audit performed by the SAV Through in-depth interviews with leaders who are General Directors / Deputy General Directors or Head of the Supervisory Board of audited banks, leaders rated the audit quality as quite high (4.6 / points respectively) and noted that the audit activities of the SAV have helped banks re-evaluate and adjust many of their governance activities to increase transparency and higher operational efficiency 4.2.4 The case of Vietnam Bank for Social Policies (VPBS) In the period 2015-2019, Vietnam Bank for Social Policies (VBSP) was audited by the SAV times in 2015, 2016, 2017 and 2018 Therefore, VBSP was selected for the case study 4.3 Factors affecting the quality of banks’ financial statements audit performed by the State Audit 4.3.1 Descriptive statistics 15 Factors are evaluated on a scale of 1-5, of which 1- Very Low, 2- Low, 3- Normal, 4- High, 5- Very High Table 4.4 shows the minimum and maximum values of each factor are and (except for the three factors Kinhnghiem, CLKT and Nganhang have the smallest values of 1.8, 1.25 and 1.33) In terms of average value, the independent variable CLKT has the largest average value of 4.2891 The dependent variables whose mean value is lower than the independent variable and ranked from high to low are KINHNGHIEM (3.9898), KSCL (3.9861), TUANTHU (3.9760), and CHUYENMON (3.9582), THANTRONG (3.9513), NANGLUC (3.9273), PHAPLY (3.8646), NGANHANG (3.8358) DOCLAP (3.8246), PHUONG PHAP (3.8246), DKLV ( 3.6248) The factor NGOAIKHAC has the lowest mean value of 2.6618 4.3.2 The reliability test After evaluating by Cronbach's Alpha index, it shows that besides the factor Ngoaikhac did not meet the minimum requirement, the other 11 factors all reached the reliable value 4.3.3 Exploratory factor analysis (EFA) All 53 observed variables met the requirements 4.3.4 Confirmation factor analysis (CFA) CFA results show that 53 observed variables have weights greater than 0.5 (satisfying the convergence value condition), in which, CHUYENMON3 has weight less than the rest (0.79> 0.5) and is statistically significant The P- values are equal to 0.000 then the scales in the research model reach convergent value 4.3.5 Regression analysis results The thesis uses regression analysis model for the 11 factors identified above (excluding the variable Ngoaikhac) The adjusted Rsquare of 0.712 shows that the model explains 71.2% of audit quality greater than the required level of 50% and about 28.8% of the independent variable of audit quality has not been explained by the model This can be completely explained by a number of factors outside the model and random error The coefficient Durbin - Watson = 1.424, is in the range of 1.0 to 3.0, so there is no first order series autocorrelation 16 Table 4.9 The results of regression analysis on factors affecting the quality of banks’ financial statements of audit performed by the SAV Adjusted R2 0,712 Durbin-Watson 1,424 Variables Unstandardized Coefficients Standardized Coefficients Sig Error 0,391 0,157 0,014 KSCL 0,115 0,038 0,003 CHUYENMON 0,112 0,037 0,003 PHUONGPHAP 0,112 0,035 0,001 THANTRONG 0,100 0,031 0,001 NANGLUC 0,099 0,037 0,008 DKLV 0,098 0,035 0,005 KINHNGHIEM 0,088 0,038 0,021 PHAPLY 0,084 0,031 0,007 TUANTHU 0,072 0,033 0,033 NGANHANG 0,067 0,033 0,042 DOCLAP 0,055 0,033 0,095 VIF 1,901 1,866 1,734 1,490 1,911 1,807 1,475 1,792 1,747 1,768 1,659 Source: By the SPSS results 17 The results of the regression analysis model show that all 11 factors have a positive influence on the audit quality, including factors: KSCL, CHUYENMON, PHUONGPHAP, THANTRONG, NANGLUC, DKLV and PHAPLY are statistically significant at 1%, factors: KINHNGHIEM, NGANHANG and TUANTHU are statistically significant at 5% and only DOCLAP statistically significant at 10% The detail results are as follows: 0.115*KSCL + 0.112*CHUYENMON + 0.112*PHUONGPHAP + 0.100*THANTRONG + 0.099*NANGLUC + 0.098*DKLV + 0.088*KINHNGHIEM + 0.084*PHAPLY + 0.072*TUANTHU + 0.067*NGANHANG + 0.055*DOCLAP 18 CHAPTER 5: SOLUTIONS AND RECOMMENDATIONS TO IMPROVE THE QUALITY OF FINANCIAL STATEMENT AUDIT PERFORMED BY STATE AUDIT 5.1 Orientation to improve the quality of financial statements audit performed by the SAV in the period 2020-2030 and a vision to 2035 Audit quality is one of the important pillars of the State Audit Development Strategy to 2030 (the period 2020- 2030) and a vision to 2035 Accordingly, audit quality must be continually improved advancement and enhancement on all three aspects are competence, efficiency and efficiency 5.2 Recommendations for the SAV to improve the quality of auditing financial statements of banks 5.2.1 Improving the quality of audit quality control activities Firstly, the SAV needs to concretize the audit quality control objectives and contents Second, the awareness of the self-control of audit quality must be raised by the team leaders, group leaders and auditors Third, the SAV should promote internal culture of audit performance to encourage self-awareness to improve audit quality 5.2.2 Completing audit methods and processes - Completing the audit method based on risk assessment and critical identification - Perfecting sampling techniques - Selecting branches to audit and defining audit scope - Completing the preparation and releasing of audit reports - Examining the implementation of audit conclusions and recommendations 5.2.3 Building and strengthening the professional capacity of State Auditors Firstly, the SAV should continue to send staff to participate fully in the training programs of the State Audit; Secondly, the SAV should focus on training and fostering professional skills for the auditing team Thirdly, the SAV needs to have a reasonable strategy to recruit new graduates 5.2.4 Raising requirements on professional ethics of State Auditors Firstly, enhancing the training and controlling professional ethics of auditors of SAV in the direction of using measures to prevent 19 violations of professional ethics, creating awareness of auditors about preserving and cultivating professional ethics Second, strengthen the control of professional ethics of auditors of SAV by many measures, many tasks and from many different sides and levels Third, strengthen the role and responsibility of professional organizations in fostering, improving and controlling the professional ethics of state auditors 5.2.5 Improving working conditions of State Auditors The working conditions such as basic equipments and means of vehicles, need to be paid attention The regime of per diem, reward and sanctioning regime for the auditors' mistakes should be specified, transparent and appropriate Besides, the application of information technology in auditing activities such as audit diary will also help the auditor to work more effectively 5.3 Some solutions for audited banks 5.3.1 Strictly implementing audit recommendations on law observance, financial and public property management The situation shows that many banks have not implemented the audit recommendations enough and on time Therefore, in the coming time, in order to improve operational efficiency, banks need to strictly and thoroughly implement audit recommendations 5.3.2 Improving the quality of financial reports Firstly, Banks can consider the application of International Accounting Standards (IFRS) in financial statement preparation Second, accounting system applied should be consistent and the use of audited financial statements should be effective 5.3.3 Strengthening management of credit activities Banks need to improve the quality of appraisal of debt repayment sources, fully analysis of risks, correctly identifying loan needs and loan terms, fully assessing feasibility and effectiveness of loan plan 5.3.4 Building an internal audit system, a modern resource management system The application of modern resource management technologies enables banks to track business operations scientifically, manage business units effectively remotely and update quickly, accurately the developments of business units, helping administrators to accurately grasp trends for their business products 20 5.3.5 Applying modern information technology trends In audit reports, the SAV always recommends that banks focus on investing and building modern information technology systems to ensure the system is operating safely, continuously and effectively 5.4 Some other recommendations 5.4.1 Recommendation on improving the legal status of SAV 5.4.2 Recommendation for the State Bank The State Bank of Vietnam needs to coordinate with the State Audit, the Ministry of Finance, and the State Securities Commission in inspecting and supervising the operations of banks as well as the implementation of audit conclusions for banks every year 5.4.3 Recommendation for the Audit Training School under the Sate Audit 21 CONCLUSIONS The thesis "Factors affecting the audit quality of banks performed by the State Audit" pointed out the factors that affect the audit quality of banks’ financial statements, including groups of factors: Factors belong to the State Auditors or the State Audit team (Technical competence, Industry expertise, Working experience, Auditing standards compliance, Due care and information security, Integrity, independence and objectivity); Factors belong to the State Audit (Working conditions of State Auditors, Audit Approach, The Quality Control System) and External factors (Factors belong to the audited entity, Factors that are part of the regulatory environment for the audit activity) The quantitative analysis results show that the above factors all directly affect the audit quality of SAV when performing audits at banks In which, the factors of the quality control system of the SAV, the audit approach and Industry Expertise are the three factors that most strongly affect the audit quality Therefore, a number of solutions have been proposed to improve the quality of auditing financial statements at banks performed by the SAV The solutions include: (1) Improving the quality of audit quality control activities, (2) Completing audit methods and processes, (3) Building and strengthening the professional capacity of State Auditors, (4) Raising requirements on professional ethics of State Auditors, (5) Improving working conditions of State Auditors At the same time, solutions are also offered for banks to improve their governance based on the results of their audit reports, specifically: (1) Improving the quality of financial reports, (2) Strengthening management of credit activities, (3) Building an internal audit system, a modern resource management system, (4) Applying modern information technology trends Research results still have limitations, but this will be the orientation to develop further research on audit quality 22 LIST OF PUBLICATIONS Nguyễn Đăng Khoa, 2020, Nâng cao chất lượng hoạt động định giá doanh nghiệp lĩnh vực tài chính- ngân hàng, Tạp chí tài chính, số tháng 03/2020 (724), trang 77- 80 ISSN: 2615-8973 (đồng tác giả) Nguyễn Đăng Khoa, 2020, Luận bàn nhân tố ảnh hưởng tới chất lượng kiểm tốn, Tạp chí nghiên cứu khoa học kiểm toán, số 148 (tháng 2/2020), trang 63- 68 ISSN: 1859- 1671 Nguyễn Đăng Khoa, 2020, Các nhân tố ảnh hưởng đến chất lượng kiểm toán ngân hàng Kiểm tốn nhà nước thực hiện, Tạp chí nghiên cứu tài kế tốn, số 08 (205), trang 30-33 ISSN: 18594093 (đồng tác giả) 23 ... nhân tố ảnh hưởng tới chất lượng kiểm toán, Tạp chí nghiên cứu khoa học kiểm tốn, số 148 (tháng 2/2020), trang 63- 68 ISSN: 1859- 1671 Nguyễn Đăng Khoa, 2020, Các nhân tố ảnh hưởng đến chất lượng. .. Nguyễn Đăng Khoa, 2020, Các nhân tố ảnh hưởng đến chất lượng kiểm toán ngân hàng Kiểm toán nhà nước thực hiện, Tạp chí nghiên cứu tài kế toán, số 08 (205), trang 30-33 ISSN: 18594093 (đồng tác giả)... quality 22 LIST OF PUBLICATIONS Nguyễn Đăng Khoa, 2020, Nâng cao chất lượng hoạt động định giá doanh nghiệp lĩnh vực tài chính- ngân hàng, Tạp chí tài chính, số tháng 03/2020 (724), trang 77- 80