Tài liệu The factors affecting audit quality of audit firms in vietnam oriented to strengthen competitive capability in international integration conditions

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY ------------------------------------By Phan Van Dung THE FACTORS AFFECTING AUDIT QUALITY OF AUDIT FIRMS IN VIETNAM ORIENTED TO STRENGTHEN COMPETITIVE CAPABILITY IN INTERNATIONAL INTEGRATION CONDITIONS Major: Accounting Code: 62.34.03.01 ECONOMICS PHILOSOPHY DOCTOR THESIS PROFESSIONAL ADVISER ASSOCIATE PROFESSOR, PHD MAI THI HOANG MINH Ho Chi Minh City - 2015 This thesis is made at: University of Economics Ho Chi Minh City Professional adviser: Associate Professor – PhD Mai Thi Hoang Minh Critic 1: ........................................................................................ ...................................................................................................... Critic 2: ........................................................................................ ...................................................................................................... Critic 3: ......................................................................................... ...................................................................................................... This thesis will be presented to the Thesis Committee at ........... ...................................................................................................... ...................................................................................................... At …, the….day…month…year… This thesis can be found in library: .............................................. INTRODUCTION The urgency of research Quality in general and Audit quality in particular is always the top concern of many objects. Several researchers have tried to define the audit quality for more than 30 years; the ways of measurement these factors affect quality, and the impact of quality to competitive capabilities. However, so far, these concepts have not been united yet and researches on this topic are continued. This caused because audit quality is a multifaceted concept, difficult to observe and measure, depends on feeling and judgment of each individual, therefore it is difficult to have a unified viewpoint. Vietnam officially joined WTO, and is a member of TPP, ASEAN Economic Community (AEC); According to the committed roadmap, Vietnam officially open all financial services from 2015; In the trend of globalization, the success of Audit Firms in Vietnam depends much on Audit quality and Competitive Capabilities in the market. Meanwhile, according to the Ministry of Finance: "The size and quality of independent auditors have not reached the expectation yet and are also struggling to be recognized by regional and international , the competition among the auditing firms derive from local interests, arising unhealthy competition such as reducing audit fees that leads the auditquality uncertainty ". This situation requires more researches on Audit quality oriented enhance the competitive capability of Audit Firms in Vietnam in terms of economic integration that is increasing intensive now. In order to meet the above requirements, based on the theoretical gaps in previous studies, economic integration requirements and the status of Audit quality and the competitive capability of Audit Firms in Vietnam, the author conducted the research with theme named: "The factors affecting Audit quality of Audit Firms in Vietnam oriented to strengthen competitive capability in international integration conditions". The research results are expected to contribute more in terms of theory and practice in order to contribute to the development of independent auditing activities in Vietnam. Research objectives - Discover and measure factors affect Audit quality of Audit Firms in Vietnam. - Discover and measure factors affect the competitive capability of Audit Firms in Vietnam. - Discover and measure the impact of Audit quality to competitive capability to Audit Firms in Vietnam. i Research questions To achieve the research objectives, the research questions include: Q1: What factors affect Audit quality and competitive capability of Audit Firms in Vietnam in the current economic integration period? Q2: Does Audit quality affect the competitive capability? Which Audit quality factors affect the competitive capability of Audit Firms in Vietnam in the current economic integration period? Q3: The impact level of these factors on the audit quality, the impact level of these factors on the competitive capability of Audit Firms in Vietnam in the economic integration period? Q4: The impact level of Audit quality and factors of Audit quality on competitive capability of Audit Firms in Vietnam in the current economic integration period? Research’s objects Research’s objects in this thesis are the factors affect Audit quality, the competitive capability of Audit Firms in Vietnam which oriented to strengthen Competitive capability in the context of international integration. Research’s scope Scope of the research: The research was conducted on the independent Audit Firms in Vietnam, not including foreign auditing firms as Big Four and other foreigners firms in Vietnam. Scope of the research does not include auditing activities such as State Auditing, Internal Auditing. Research methodology Research methodology used in this thesis is mixed and discovered research methods, combine research methods in qualitative and quantitative. In particular, qualitative research methods aimed at exploring the factors that impact on Audit quality and competitive capability, the impact of Audit quality and Audit quality factors on competitive capability of Audit Firms in Vietnam. Quantitative research methods were implemented in the next step to measure the impact of each factor on the audit quality and the competitive capability of Audit Firms in Vietnam. Significance of the research - Scientific significance The Thesis discovered factors affect Audit quality, competitive capability and audit quality factors which impact on competitive capability of Audit Firms in Vietnam and also show the level as well as sequences of audit quality factors on competitive capability of Audit Firms in Vietnam. Audit Firms in Vietnam Audit Firms in Vietnam ii - Practical significance Base on the factors affect Audit quality, competitive capability, and the impact of Audit quality factors on the competitive capability of Audit Firms in Vietnam which are discovered and presented in a systematic way, the Thesis could be a reference material for organizations and individuals who study independent auditing activities in Vietnam. New contributions of this thesis In comparison with other studies, the results of this thesis reflect the following innovations: Regarding the content, the thesis has combined different studies, viewpoints, schools of audit quality, competitive capability; research models of factors affect audit quality and competitive capability of audit firms. This is an important theory foundation for further researches in the context of economic transit. Regarding methodology, the thesis has used different methods to solve the set objectives. The author’s approach has created the quantitative method in auditing in Vietnam. Regarding the results, the thesis has developed 3 models of factors affect audit quality, competitive capability and the impact of audit quality on competitive capability. These researches prove scientific hypothesis developed by the author in the context of Vietnam. In the domain of theory, learning and New contributions concluded from the research In particular:  In the domain of theory and learning + Firstly, the thesis was to synthesize and develop theory by deepen the factors that affect Audit quality in Audit Firms in Vietnam who oriented to strengthen competitive capability in the process of international integration. + Secondly, the author has provided the Audit quality model and competitive capability of Audit Firms in Vietnam based on the results of research analysis on Audit quality and competitive capability in the conditions of Vietnam socio-economic and Audit Firms in Vietnam characteristics. + Thirdly, through the impact model of Audit quality and Audit quality factors on competitive capability, authors have shown the impact of Audit quality on competitive capability. This bullet point proves the research targets the service of business activities of Audit Firms in Vietnam. + Fourthly, the thesis has clarified in theory, the role of Agency theory and theory of Supply and Demand on the Audit quality. iii New contributions concluded from the research + Firstly, the definition of Audit quality and competitive capability of Audit Firms in Vietnam + Secondly, Discovering the factors that affect Audit quality of Audit Firms in Vietnam + Thirdly, Discovering the factors affect the competitive capability of Audit Firms in Vietnam + Fourthly, the most important finding of this research is to explore the impact of Audit quality and Audit quality factors on the competitive capability of Audit Firms in Vietnam. + Fifth, based on quantitative findings, the author has measured the impact level of factors on the audit quality of Audit Firms in Vietnam and identified 6 factors already impact on Audit quality with 24 criteria to measure. + Sixth, Measuring the impact of these factors on the competitive capability of Audit Firms in Vietnam: based on results of quantitative research, there are 5 factors were identified that impact on competitive capability, with 16 measurable criteria. + Seventh, measuring the impact of Audit quality to the competitive capability of Audit Firms in Vietnam. + Eighth, measuring the impact level of Audit quality factors on the competitive capability of Audit Firms in Vietnam. According to results of quantitative research, there are six audit quality factors were identified that impact on the competitive capability with 24 criteria of measurement. + Ninth, Introducing model of Audit quality and model of Competitive capability, Model of the factors that impact the quality of the audit to the competitive capability of Audit Firms in Vietnam. Thereby, it’s shown the correlation and the degree of correlation between the factors of Audit quality, Competitive capability to Audit quality and Competitive capability. + Finally, recommending a framework for analysis of Audit quality factors. Structure of the thesis In addition to the Introduction, the thesis is divided into 5 chapters which are presented in order with the main contents as follows: Chapter 1 - Overview of previous studies. Chapter 2 - Theoretical basis of the factors that affect Audit quality of Audit Firms in Vietnam oriented to strengthen Competitive capability in the context of international integration. Chapter 3 – Research methods. Chapter 4 - Results of research and inference. Chapter 5 - Conclusion and policy implications. This thesis consists of 159 pages, with 22 tables, 58 figures and 20 appendices. iv CHAPTER 1 OVERVIEW OF PREVIOUS STUDIES This chapter systemizes the previous studies relating to factors affecting Audit quality, Competitive capability and impact of Audit quality to Competitive capability in recent years in Vietnam and overseas, analyzes, assesses what the previous researchers have done on the factors that affect Audit quality and impact of Audit quality to Competitive capability of Audit Firms in Vietnam to identify theoretical gaps and issues that require further research. 1.1. Overview and analysis of the results of previous studies. 1.1.1. The research on factors affecting Audit quality 1.1.1.1. The foreign researches on factors affecting Audit quality (1) Some viewpoint in Audit quality Audit quality is a complex and multifaceted concept; therefore, many researches have been done, in order to define Audit quality, factors affecting Audit quality as well as measure Audit quality. However, according to the International Auditing and Assurance Standards Board, the concept of Audit quality has reached no consensus; many studies are continuing to be done. Although there are many different ways to approach Audit quality, all the global researchers in recent years mainly focused on three main points: (i) Opinion that Audit quality is the level of guarantee the ability to detect and report errors on financial statement. This view is derived from the definition of DeAngelo (1981): "Audit quality as the market – assessed joint probability that a given auditor will both discover a breach in the client’s accounting system, and report the breach" the researcher represents the view is Titman & Trueman (1986), Palmrose (1988), Beatty (1989), Knechel (2009), Defond & Zhang (2014); (ii) Opinion that Audit quality is the Level of Compliance with auditing standard In the early 1990s, from impact of the economic - financial crisis and auditing scandals, some researchers suggest that the definition of DeAngelo does not fully grasp the potential conflicts of various persons in the audit market. Moreover, this definition is limited to specialization, not considering the aspects of the independence and influence of customers to the opinion of Auditor (Sutton, 1993). According to the researcher protecting this perspective, the suitable level of Auditing standard reflects the degree of Audit quality. Typical representative of this view is McConnell & Banks (1998), Aldhizer & et al (1995), Krishnan & Schauer (2001). 1 (iii) Opinion combining level of compliance with standards and the level of assurance about the ability to detect and report on essential errors in the financial statement. Recently, the global economy faces more and more challenges related to financial markets. Besides the intervention of the State, the responsibility of the auditor has been extended to ensure Audit quality (Defond & Zhang, 2014). The researchers have reviewed Audit quality based on the combination of Auditing standard levels of compliance and the ability to detect errors, report misstatement on financial statement as Skinner & Srinivasan (2012), Tritschler (2013). (2) The tendency to research the factors affecting Audit quality Although there are many different studies about Audit quality and factors affecting Audit quality, these studies generally can be grouped into the following major trends: (i) Audit quality research based on directly measurement methods from the results of the audit (Dechow et al, 1996), (Krishnan & Schauer, 2000), (Geiger & Raghunandan, 2002) or indirectly measurement through sizes of Auditing firms, audit fees, (DeAngelo, 1981), (Wooten, 2003), (Lawrence et al, 2011). (ii) Research based on Source of Differentiation: differences between national institutions, the audit office and the specialized level (Francis, 2004), (Ettredge et al, 2008). (iii) Research relies on output, process and input, context and interaction between objects related to this process (Duff, 2004), (Francis, 2011), (Defond & Zhang, 2014). (iv) Research based on Organizational Aspects as Auditing firms, audit groups. Audit quality firms belong to Big Four and non - Big Four. (Schroeder et al, 1986), (Carcello et al, 1992), (Sun & Liu, 2011). (v) Research based on Behavioral Perspectives and Auditor Quality, characters of leaders and auditor staff (Rayburn & Rayburn, 1996), (Carcello et al, 1992), (Daniels & Booker, 2011). (vi) Research based on Different Perception of Audit Quality (Warming - Rasmussen & Jensen, 2001), (Duff, 2004). (3) The research results have made about factors affecting Audit quality  The models researching Audit quality published In the research of factors affecting Audit quality in the past decades, the model of findings that affect the change of the regulations on Independent auditing in many countries and used as platform for research on Audit quality. Typically: Audit quality model of Wooten (2003), Audit quality Model of Duff (2004), Globe of Audit quality model of Tritschler (2013). In addition to the above models, the researchers evaluating Audit quality 2 according to the audit process involve three issues: technology, quality of Auditors and organizational characteristics of Auditing firms (Manita & Elommal, 2010). Based on the review Audit quality through input and output of the audit process, Defond & Zhang (2014) presented an Audit quality Framework that shows the relationship between demand and capacity of customers, capacity to supply of Auditing firms, intervene and regulate of functional agencies.  Results of research on the factors affecting Audit quality through previous studies As stated above, in the past 3 decades, many research results on Audit quality have been published in multiple views and different perspectives, but high achievement can be categorized and aggregated by affective subjects as follows:  Group of factors on part of Auditors/ Auditor Groups: Methodology and personality of the Auditor; Qualifications, the professional in Auditing; Independence; Auditing tenure.  Group of factors on part of Auditing firms: Size; Industry, client/audit experience.  Group of external factors: Audit fees; Legal liability, learning & education, external quality control. 1.1.1.2. The national studies on factors affecting Audit quality Compared with countries with developed Independent auditing activities, the Independent auditing in Vietnam is still quite young. Therefore, the research of Audit quality, factors affecting Audit quality is not much, and has just appeared in recent years. Factors affecting Audit quality mentioned in their research works of Vietnamese researchers are listed as follows: + Group of factors on part of Auditors includes 5 Factors: Methodology and personality of the Auditor; Professional skepticism; Auditor's perception about compliance standards of professional ethics; The independence of the Auditors; The experience and the professional of the Auditors; The tenure of the auditor. + Group of factors on part of Auditing firms includes 4 factors: Auditing fees; Size, professional degree of Auditing firms; Strategy of Auditing firms; Internal Quality Control. + Group of external factors includes 4 factors: The cost of the auditing; The impact of the legal system; Audit quality personnel training; External Quality Control. 1.1.2. The researches carried out on the factors effect on the Competitive capability of Auditing firms 1.1.2.1. The foreign researches on the factors affecting the Competitive capability of Auditing firms  The foreign researches on the factors affecting the Competitive capability of Auditing firms Compared with the "explosion" of studies of the Competitive capability of Auditing Firms in Independent auditing, the research of factors affecting the Competitive capability of Auditing firms as well as the impact of the factors of Audit quality to the Competitive capability of Auditing Firms still limited. The typical studies of the Competitive capability of Auditing firms include: 3 Findings of Maijoor & Witteloostuijn (1996) show that imperfections of AccountingAuditing services market create high penetration of the external Auditing firms to the Auditing market in countries with the restrictions on the ability and quality of audit services. Therefore, the quality of audit services is a competitive factor affecting the Competitive capability of Auditing firms. Lian Kee et al (2011) have developed the research of Newbert (2008) and made five key resources that can create Competitive capability of Auditing firms including financial resources, human resources, intellectual resources, and organizational Source and material resources. Lian Kee et al also suggested that in order to improve the Competitive capability of small and medium Auditing firms, it needs to make the connection with the other international Auditing firms through network of member firms or associations, which takes the experience, technology and training by the international auditing firm. 1.1.2.2. The national researches on the factors impact on the Competitive capability of Auditing firms Compared to the long-term development of the Independent auditing on the world, the Independent auditing of Vietnam still is young. Views on competition in the field of auditing still have different recognitions. In Vietnam, there are only a few studies on the impact on the Competitive capability of the Audit Firms in Vietnam. The research has set out a number of factors creating the Competitive capability of Auditing firms such as business strategy, business size, the qualifications to hold executive business management, leadership, ability of information capture, the ability to cooperate with relevant businesses, maintain the integrity of business, quality of workforce and manager staff, the cost of business and entrepreneurial culture in the auditing firms. 1.1.3. The researches on the impact of Audit quality to the Competitive capability of Auditing Firms As per Cronin & Taylor's research (1994), Taylor & Baker (1994) showed a positive impact of Audit quality on the Competitive capability. Audit quality relates positively with customer’s satisfaction. Higher Audit quality services can bring greater customer’s loyalty, attract new customers, employee engagement, enhance auditing firms’ image and increase business efficiency. Therefore, commitment to quality service has clear benefits for the Competitive capability of Auditing firms. Research on aspects of Audit quality of Duff (2004) showed that the quality of service can be a source of Competitive Advantages, a sustainable means to provide customers what they want or need, better and more effectively. In Vietnam, some researches on Audit quality of Pham, H., Amaria, P., Bui, T., & Tran, S. (2014) also found that competition affects Audit quality, besides impact of auditing tenure, change of senior personnel; competitive factors also affect negatively to Audit quality of Audit Firms in Vietnam. 4 1.2. The results obtained from previous studies and further research issues - The results obtained from previous studies: Overall, in recent years the researchers have made many efforts in identifying the factors that affect Audit quality and Competitive capability of Auditing firms to provide solutions to improve Audit quality and Competitive capability of Auditing firms under many different angles and have achieved some positive results, especially for the research of Audit quality and factors affecting Audit quality. Audit quality, Competitive capability is a multifaceted concept, difficult to measure. Depending on the difference in economic conditions as well as the characteristics of Independent auditing activities in each country, there still exist some problems that need to be further researched and done in the thesis.  The issues that need further research and made in thesis Firstly, there is no consensus on definition and views on over the world about Audit quality. Therefore, there should be views, definition of Audit quality matching characteristics and conditions of each particular country. Secondly, there is not any qualitative research that was conducted to explore the factors affecting Audit quality, Competitive capability and their impact on the Competitive capability of Auditing firms in the conditions of Vietnam. Therefore, qualitative research on the factors affecting audit quality is needed as foundation for further studies. Thirdly, In Vietnam there is not quantitative research measuring the impact of Competitive capability and Audit quality based on findings of factors affecting Audit quality, Competitive capability in conditions of the market economy and characteristics of auditing firms of Vietnam. Hence research in special conditions is needed in order to see the difference and select an appropriate orientation. Fourthly, no study at home and abroad about Audit quality aims to improve the Competitive capability of Audit Firms in Vietnam in the process of economic integration. Therefore research towards business goals of auditing firms is especially needed to meet the needs of the current economic integration. Last but not least, previous studies tend to focus on Audit quality in Financial statement listed by an auditing firms or auditing firms in general, regardless of domestic and overseas as the Big Four. While Audit quality of these two objects has a big difference, it affects the objectivity of the research results. On the other hand, the scope and surveyed subjects of previous studies usually focus on a certain area and surveyed people mainly Auditors while Independent auditing in general and Audit quality in particular related to many other objects. The restriction of the scope and object of this survey also somewhat affect the objectivity of the research results. Therefore, there should be research on each subject in a full range of perspectives related to the objects. 5 Conclusion of Chapter 1 In Chapter 1, the author has systematized previous studies on the factors affecting Audit quality, Competitive capability, and the impact of these factors to Auditing firms. The summary of the researches on the factors affecting current Audit quality shows there are still many different views on a definition of Audit quality. The impact of Audit quality and Competitive capability to the Auditing firms has also been shown through research results of the author. Through a system of prior studies have done in this chapter, the thesis determines gaps in research gap is the lack of research to discover and measure factors affecting Audit quality, Competitive capability conditions in the Audit Firms in Vietnam. In Vietnam, there are not research on the impact of factors to Audit quality and Competitive capability of auditing firms of Vietnam. Therefore, it is necessary to conduct research exploring combinations and measurement of impact factors of the Audit Firms in Vietnam oriented enhance Competitive capability conditions in world economic integration, in order to answer the question of urgency is in place today. The results of Chapter 1 will be preconditions for the next research step of the thesis. 6 CHAPTER 2 THEORETICAL BASIS OF THE FACTORS AFFECTING AUDIT QUALITY OF AUDIT FIRMS IN VIETNAM ORIENTED TO STRENGTHEN COMPETITIVE CAPABILITY IN INTERNATIONAL INTEGRATION CONDITIONS This chapter presents a number of general issues of auditing, Audit quality, Competitive capability and some provisions of the International Federation of Accountants (IFAC) on Audit quality such as: the International Standards on Quality Control (ISQC1), the International Auditing and Assurance Standards Board (IAASB) on Audit quality. Next, the thesis will introduce theoretical basis related to the factors affecting Audit quality: Agency theory, theory of supply and demand, competition theory and the basic theory for explaining the effects of Audit quality to Competitive capability of audit firms such as competitive theory, competitive theory on anticipatory future; Competitive theory based on enterprise’s resources; The theory based on the enterprise’s capacity, to introduce the concept Audit quality, Competitive capability and determine models used in the research. 2.1. Overview and theoretical basis related to factors affecting Audit quality 2.1.1. Some general issues on Auditing and Audit quality  Definition of auditing  Characteristics of auditing  The quality and characteristics of quality  The Audit quality According to DeAngelo (1981), Audit quality is the evaluation of the market on the possibility of an auditor to detect essential misstatements and report them. According to Titman & Trueman (1986), Beatty (1989), Davidson & Neu (1993), Audit quality is the accuracy of information provided by the auditor. Meanwhile, According to Dopuch & Simunic (1982), Simunic & Stein (1987), Audit quality is a degree of assuring a probability that the Financial statement which is audited will not contain omissions or misstatement. According to the International Auditing Standards Committee: Audit quality is a complex issue. Up to now, there is no definition or analysis that is commonly recognized. 7 Audit quality terminology includes the key elements to create an environment that maximizes the ability that Audit quality is made based on a consistent basis (IAASB, 2011). According to Defond & Zhang (2014), due to Audit quality being a multidimensional concept, Audit quality should be observed under many different aspects, as well as a combination of methods, different criteria to measure levels of Audit quality. Based on the definitions of Audit quality from previous studies, combined with economic characteristics and management requirements for Audit Firms in Vietnam Audit quality, according to the author, Audit Firms in Vietnam’ Audit quality is the degree of compliance with Auditing standards and degree of insurance to detect errors, report them in the Financial statement.  International Standard of Quality Control (ISQC1)  IAASB about Audit quality 2.1.2. Basic theories of factors affecting Audit quality 2.1.2.1. Agency theory and factors affecting to Audit quality According to Healy & Palepu (2001), the audit is an essential element in monitoring relations of authorization and disclosure of information arising from the asymmetry of information and conflicts of interest between the principal and The agent. Starting from disagreement over the authorization, the higher the conflict of authorization, the higher the demand on levels of guarantee for third parties, Audit quality requirements will also be higher, this requirement is an important direction for the needs of customers on Audit quality showed via choosing auditing firms who are large, reputable, with qualified, experienced and highly specialized auditors. In response to this need, audit fees also have an impact on the selection of auditors who are qualified and professional, planning and performing work to detect critical errors in the Financial statement, especially also affect the independence of the auditor in reporting errors (Wooten, 2003). The above statement shows that the Agency theory not only explains auditing needs, it also is a basis for explaining the need for Audit quality as well as research on the factors that affect Audit quality. 8 2.1.2.2. Theory of Supply and Demand and factors affecting Audit quality The Impact of relationship of demand and supply in Audit quality between auditing firms and customers has set out a requirement for audit firms must improve Audit quality to satisfy customer needs and the ability to provide of the Auditor, auditing firms. Needs and abilities influenced by factors both on the supply side (Auditing firms and Auditor) and demand side (customers). 2.1.3. Research model of factors affecting Audit quality used in thesis Authors select Globe Model of factors affecting Audit quality of Tritschler (2013). This model was developed based on research model of Wooten (2003) explains quite adequate and reasonably about the factors affecting Audit quality. + + Learning & Education Audit tenure + + Industry/client/ audit experience + Non – audit Services + Audit firm size + Accounting and audit knowledge + Independence + Audit Quality + - + - + Audit methodology & tools + Legal liability + Audit fees + + Audit effort & resource mix + + Figure 2.2: Globe of Audit quality Source: Tritschler (2013) 9 The choice of Globe of Audit quality model of factors impacting Audit quality is from the fact that the model can give an overview of all factors affecting Audit quality which were identified in previous researches. This outlines the directions of different factors affecting Audit quality of Auditing firms. This will help to observe and enhance Audit quality for better outcomes. In addition, the model shows the sources of factors impacting Audit quality, and this will help to analyze, evaluate the roles of each factor in a series of factors that can make an impact on Audit quality. 2.2. Overview and theory basis relating to factors affecting to Competitive capability of Auditing firms 2.2.1. Overview relating to Competence and Competitive capability  Definition of Competence  Characters of Competence  Competitive capability According to Henricsson et al (2004), the concept of Competitive capability is still much debated among policy planners, the economists, and the researchers in many countries. Although there are many different views, but it can be understood that the Competitive capability is the ability to maintain and expand market share in order to achieve high profitability of the auditing firms. Peters defined Competitive capability ans an integration of capabilities and internal resources to maintain and grow market share, profitability and positioning the competitive advantage of firms in the market (Peters, 1995). According to Sanchez & Heence (1996, 2014), Competitive capability of an auditing firms is the ability to combine the resources. Derived from the definition of Competitive capability of previous studies and combined with practical work independent auditing in Vietnam, according to the author, the Competitive capability of auditing firms is an ability to use and combine resources effectively, capture and respond promptly to the needs of customers with high efficiency and high quality. 2.2.2. Theoretical basis related to the impact on the Competitive capability and their impact to Competitive capability of auditing firms In the market economy, competition is a common phenomenon with important implications for economic development in the world. The research of the phenomenon of 10 competition is long-standing and competition theory also appeared very early with many different views. Within the scope of the thesis, the theoretical basis for the research includes: Competitive theory, Competitive theory on anticipatory future; Competitive theory based on enterprise’s resources (RBV); The theory based on the enterprise’s capacity (CBV). 2.2.3. Model of factors affecting Competitive capability used in thesis The author selects Model APP of Flanagan et al (2005) as a research model for the research of factors affecting the Competitive capability of auditing firms. This model is shown in Figure 2.6: Figure 2.6: Main factors of APP Model Source: Flanagan et al. (2005) 2.2.4. Research model in Audit quality and factors affecting Competitive capability The Author selects Motive-Capacity Model of Teece (2014) as research model in Audit quality and factors affecting Competitive capability of the thesis. Figure 2.7: Model of Motive-capacity Source: Teece (2014) 11 Conclusion of Chapter 2 Chapter 2 presents a number of general issues and theoretical basis related to the Audit, Audit quality and Competitive capability of Auditing firms: the necessity, objective and role of the audit, the concept and characteristics of auditing, audit quality and Competitive capability. Therein, the author has focused on analyzing the relationship between the Agency theory, theory of demand and supply with needs on Audit quality and factors affecting Audit quality, Competitive theory, Theory of Competition anticipatory future with Competitive capability and factors affecting Competitive capability, competitive theory based on enterprise resources (RBV), competitive theory Based on business capabilities (CBV) with the impact of Audit quality and factors of Audit quality affecting Competitive capability, as the basis for determining the factors affecting Audit quality and Competitive capability of Auditing firms. Besides researching the theories, the research platform requires the provisions on principles, framework and Audit Standards for Audit quality also mentioned to clarify the role and importance of Audit quality and Competitive capability. From the results of analyzing theoretical platform combining with the results from previous studies in experimental models which are published in conjunction with economic characteristics, management requirements and characteristics of the Audit Firms in Vietnam, author gave definition of Audit quality, Competitive capability, effect of Audit quality to the Competitive capability of Audit Firms in Vietnam. Findings in this chapter are basis for building models and research methods in Chapter 3: "Research Method". 12 CHAPTER 3: RESEARCH METHOD This chapter describes the chosen research method which is presented in acknowledgment. Firstly, this chapter introduces research methods and sources to select research methods. Next, this chapter presents process of data collection and data analysis in step of qualitative and quantitative research. Finally, introducing models and generalized regression equation which will be applied in the research. 3.1. Research method and process 3.1.1. Research method Research method used in the thesis is discovery mixed method; the first approach is qualitative research to explore factors of Audit quality and Competitive capability, then quantitative research to measure the impact of factors of Audit quality and Competitive capability. 3.1.2. Research process On the basis of discovering mixed methods, research process in the thesis includes the following steps: Step 1: Review of previous studies related to Audit quality, Competitive capability Step 2: Qualitative research methods using in-depth interviews in the form of one-on-one interviews with experts Step 3: Check the results of qualitative research Step 4: Collect data and perform quantitative research 3.2. Data sources and methods of collecting and analyzing data in qualitative research  Data for research includes secondary data and primary data: - Secondary data: from the final reports, journals, thesis, scientific studies published. - Primary data: from analysis, synthesis, results obtained through in-depth interviews with experts specialized in auditing who are divided into 4 groups: State Management Agency, vocational association, Directors of Auditing firms/ Auditor and researchers, teachers in the field of auditing. 13  Process of analyzing qualitative data Step 1: Arrange and prepare data Note, analyze data collected from interviews.  Step 2: Re-read all data This process should be done many times. Then, plan idea formed from interviews.  Arrange data in paragraph as per idea and connect to a concept, term. Arrange concepts, terms to each Step 3: Encode data theme similar with factors in the applied research model. These factors will be encoded and arranged to column appropriate with degree of general: a factor explain for a factor or a group of factors.  Step 4: Synthesize factors Synthesize all encoded data.  Present all interviewed ideas appropriate with each group which is encoded in step 3 to connect all Step 5: Connect all factors discovered factors to make model.  Step 6: Analyze and explain factors in model Compare all discovered factors with previous studies and results obtained in actual research.  Step 7: Test the reliability of result Test the reliability of quantitative research by a questionnaire related to discovered factors and assess via statistics method with large sample and vary objects. Figure 3.2: Process of analyzing qualitative data Source: Author’s development  Method of analyzing qualitative data Analytical format method is used to determine the level of factors that have an impact on Audit quality and Competitive capability. Depending on the information of data provided and the nature of these factors, the data will be sorted to extract, classify and encrypt to three levels: Group of factors (level 1), Factor (level 2), and elements constituent factor (level 3). In which, each level encrypted will be detailed by the lower level. 3.3. Database and data collection methods in quantitative research Database used in quantitative research: the data are collected directly, via letter or email from the survey has been cleaned. Processes and methods of quantitative data analysis: Step 1: Design a questionnaire Step 2: Select survey samples and determine surveys’ format Step 3: Send questionnaire and get answers Step 4: Handling of raw data Step 5: Accredit size (Cronbach's alpha) Step 6: Explore factors Analysis EFA Step 7: Recommend research model and method for multiple regression analysis Step 8: Model regression Assessment (MRA) 14