The impact of audit quality on firm performance: empirical evidence in Vietnam

Abstract

This study empirically examines the impact of audit quality on firm performance in Vietnam. Audit quality is considered as an external monitoring factor which objectively affects firm performance. In this thesis, audit quality is measured by three variables including audit rotation, audit reputation and audit experience whereas firm performance is proxied by accounting profits (ROA), market value (Tobin’s Q) and risk of bankruptcy (Z-score). The dataset includes 268 listed non-financial companies in Vietnam over the period from 2010 to 2015. The results show that there is no relationship between audit rotation, audit reputation and audit experience on Tobin’s Q and Z-score. However, audit reputation and audit experience are insignificantly correlated with firm profitability. The effect of audit rotation on ROA is positive, suggesting that companies which have audit rotation are more likely to have higher profits. This implies that the change of audit firm increases the independence of auditors as well as enhances audit quality and hence positively affects firm performance.