The Impact of Audit Quality Factors on Investor Confidence in Vietnamese Capital Markets: The Moderating Role of Financial Literacy

Abstract

This research examines the effects of audit quality
characteristics and the moderating effect of financial literacy on
the investor confidence in the capital market in Vietnam. This
study fills the gap in the existing literature by analyzing
perceptions of financially sophisticated investors on attributes
of audit quality like Reputation of the Audit Firm, Timeliness of
the Audit, Transparency of the Audit, and Compliance with the
Rules and Standards of Auditing. The primary objective of the
study is to determine whether investors, particularly those with
financial literacy, lower their confidence due to perceived lack
of control over finances and whose perceptions are shaped by
financial literacy. Using quantitative techniques, data was
gathered via questionnaires from 315 individual and
institutional investors in the Vietnamese financial market which
using three step hierarchical regression analysis (MRA) to
explore the relationship between the variables. The findings
indicated that audit quality attributes are critical to enhancing
investor confidence, while the enhanced knowledge of finance
mitigated the adverse influence of the Reputation of the Audit
Firm, Transparency of the Audit, and Compliance with Rules
and Standards of Auditing. The finding of this study, however,
is that there was no significant moderation effect discovered on
the timeliness of the audit. Based on the findings it can be
concluded that although audit quality is fundamental to trust in
the financial information of the company, it is clear that
financially literate investors do not tend to repose much trust in
the assurance of the results of the audit, but rather, on another
financial analysis conducted their own analyses independently.
For auditing firms and regulators in Vietnam, this statement
highlights the need to bolster the credibility of audits while
enhancing transparency and timeliness of reporting in order to
retain investor trust. This research helps in understanding the
relationships between the quality of audits and the actions of
investors, giving useful insights for developing financial markets
which have comparable circumstances as Vietnam.