Research on factors affecting the quality of internal auditing activites in listed companies on Hanoi Stock Exchange

- When other factors do not change, variable of Qualification experiences 1 standard deviation increase, the variable of Quality of internal audit experiences 0.211 standard deviation increase. - When other factors do not change, variable of Law experiences 1 standard deviation increase, the variable of Quality of internal audit experiences 0.086 standard deviation increase. 580 In general, the standardized regression equation illustrates that “Independence” is the factor with the greatest impact on the quality of internal audit. The second factor is qualification of internal auditors. Next is factor with converse impact, which is related to relationshisp between internal and external auditors. The last two influencing factors are management assistance and law obligation. This is the conclusion for the research group to propose solutions and recommendations to improve the quality of internal auditing. 4. Recommendations 4.1. Raising “Independence of internal auditors” The research results show that “independence of internal auditors” has the strongest impact on the “quality of internal audit in companies listed on the stock exchange”. In particular, When other factors do not change, variable of Independence experiences 1 standard deviation increase, the variable of Quality of internal audit experiences 0.533 standard deviation increase. Although this factor recieves agreement in the survey, that level is not high. It is essential for the Ministry of Finance, enterprises and internal auditors ro establish a long-term and in-depth schedule to improve the ”independence of internal auditors”. Ministry of Finance: should issue ethical standard attached with ethical control regulations; specific rules on internal control system in general and internal audit in particular. For example, there should be requirement for each company to own charter capital of 5 billion, set up separated internal audit department, spend a fixed amount of money on annual activities of internal audit. At the same time, it is essential to launch appropriate punishment to deter unloyal and unethical actions when problems of internal auditors and internal audit department are identified. Enterprises: These are organizations with initial benefits from the enterprises’ internal audit. Thus, they should have the most practical solutions to improve “ Independence of internal audit”. Enterprises should make policies, set up regulations, procedures and give plans for department of internal audit in a specific basis through closely relying on standards issued by the Ministry of Finance and adding essential articles which match with the enterprises’ conditions. There should be attention to matters relating motivation for auditors like salary, allowance, benefits, other treatments, promotion, fesh working environment to compensate for working pressure and encouragement. Enterprises should have regulations on ethical issue to ensure its maintainance in the companies, establish mindset and lifestyle for the staff. Internal auditors - The department of internal auditing in the enterprises should have independent thinking from other departments - The department of internal auditing in the enterprises should have mutual regulations, in thier own unit to improve the independence - Each auditor should be aware of ethical necessity and importance - Each auditor should be self-equipped with skills to prevent themselves from seduction and obligation which reduce “ independence” 581 4.2. Enhancing “Qualification of internal auditors” Factor “Qualification of internal auditors” has an impact on the “quality of internal audit”. In particular, when other factors do not change, variable of Qualification experiences 1 standard deviation increase, the variable of Quality of internal audit experiences 0.211 standard deviation increase. However, during the survey, it is figured out that this factor is not highly appreciated, most participants hesitate. Acknowleding the urgent requirement for this factor, the research group propose solutions to enhance “Qualification of internal auditors” * Ministry of Finance: - It should cooperate with institutions and organization worldwide to run courses improving qualification of internal auditors - It should provide job certicate, training certificate ti improve the qualification of internal auditors - It should approve policies on qualification of internal auditors in enterprises - It should supplement regulations on working time in the areas of accounting, auditing, financial management and experience years in this sector for internal auditors. The head and deputy head of internal audit should have more experience than others * Enterprises: - They should cooperate with Ministry of finance to encourage internal auditors to take part in training courses, specialized courses, achieve international certificate to improve the qualification of internal auditors. - They should issue regulations on minimum training hourse in a year for the internal auditors to spend in order to motivate them to gain knowledge and skills which meet the requirement of the career. * Internal auditors - Each auditor should set the goal of 80 learning hours a year as the minimum time to get specialized knowledge. - Each auditor should continously acknowledge self study in terms of both knowledge and skills - Each audito should understand the requirement of specialization for himself/herself 4.3. Empowering “ Management assistance for internal audit” Internal audit is a component of any company. Then, the company should pay attention to and provide favorable conditions or this devision The board of directors and board of management should take care and prioritize internal auditing in terms of physical and human resources in order to set up, complete and develop this department. - Allow internal auditors to access to managing database and software 582 - Supply advantegous facilities for internal auditing - Create roadmap to set up organization model of internal auditing system of the company in general and that of internal audit in particular. This model should exclude ineffective and bulky control and investigate department, mobilize all resources to buid up a complete internal auditing system belonging to a professional one - Draw a specific roadmap (2-3 years) to set up, complete and develop professional internal audit which successfully accomplish its tasks. 4.4. Promoting “ Law obligation” “Law obligation” also contributes to the improvement of “Quality of internal audit”. Ministry of finance in Vietnam has experienced great transformation with specific attention to internal audit. Especially, in 2016, there was draft decree on internal audit for Government’s approval. Only when the internal audit system is good, ”risk management” can be good. Then, Vietnam’s enterprises can strongly develop and its economy can be better. Ministry of Finance should issue a series of relevant legislative documents to improve the quality of internal auditing. It should be more strict in managing the implementation of documents in lower levels in order to improve the quality of document application. These documents would directly influence auditors and enterprises in Vietnam. 4.5. Restricting “Relationship between internal and external auditors” The factor “relationship between internal and external auditors” is a converse impact on “quality of internal audit in companies listed on Hanoi stock exchange”. Although this relationship is unavoidable, its should be timely prevented if it negatively affects the audit quality. In this research, the authors propose certain measures to mitigate the converse impact of “relationship between internal and external auditors” - Enterprises should require confidentiality for their internal auditing information - They should keep secret results of external auditing from internal auditing - Internal auditors should maintain thier ethics 5. Conclusion The research “Factors affecting the quality of internal auditing in enterprises listed on Hanoi Stock Exchange” is carried out with the aim of identifying factors which have an impact on the quality of internal auditing in those enterprises. The research conducts emperical study by for each factor by gathering ideas of individuals in department of internal audit as well as managers here. This collection is completed thanks to a survey questionnaire designed by the research goup. The results show that in order to improve the quality of internal auditing, it is essential to improve ”independence of internal auditors”, ”qualification of internal auditors”, ”management assistance for internal auditors” and ”law obligation” as well as restrict ”relationship between internal and external auditors”. 583 6. 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