The Effect of audit quality offered by audit firms on client satisfaction

UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------

Hoang Thi Kim Thuan

THE EFFECTS OF AUDIT QUALITY OFFERED BY
AUDIT FIRMS ON CLIENT SATISFACTION

MASTER OF BUSINESS (Honours)

Ho Chi Minh City – 2014
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UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------

Hoang Thi Kim Thuan

THE EFFECTS OF AUDIT QUALITY OFFERED BY
AUDIT FIRMS ON CLIENT SATISFACTION

MASTER OF BUSINESS (Honours)
SUPERVISOR: Dr. Nguyen Thi Nguyet Que

Ho Chi Minh City – 2014
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INDEX
ACKNOWLEDGEMENTS ........................................................................................................... 6
LIST OF FIGURES ....................................................................................................................... 7
LIST OF TABLES ........................................................................................................................... 7
LIST OF ABBREVIATION ............................................................................................................... 8

ABSTRACT .................................................................................................................................... 9
CHAPTER 1: INTRODUCTION .................................................................................................. 10
1.1. Background to the research ............................................................................................. 10
1.2. Research motivation ........................................................................................................ 12
1.3. Research objective ........................................................................................................... 13
1.4. Research scope and methodology ................................................................................... 14
1.5. Structure of the study ...................................................................................................... 14
CHAPTER 2: LITERATURE REVIEW ....................................................................................... 15
2.1. Introduction ..................................................................................................................... 15
2.2. Audit quality .................................................................................................................... 15
2.2.1. Definition of audit quality........................................................................................ 15
2.2.2. Research on measurement of audit quality .............................................................. 16
2.3. Client satisfaction ............................................................................................................ 19
2.4. Research framework and hypothesis development ........................................................ 20
2.4.1. Audit quality dimensions and client satisfaction ..................................................... 20
2.4.1.1. Reputation and client satisfaction ................................................................... 21
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2.4.1.2. Capability and client satisfaction .................................................................... 21
2.4.1.3. Expertise and client satisfaction...................................................................... 22
2.4.1.4. Experience and client satisfaction ................................................................... 23
2.4.1.5. Responsiveness and client satisfaction ........................................................... 23
2.4.1.6. Client service and client satisfaction............................................................... 24

2.4.1.7. Empathy and client satisfaction ...................................................................... 24
2.4.2. Research framework ................................................................................................ 25
2.5. Conclusion ....................................................................................................................... 26
CHAPTER 3: METHODOLOGY ................................................................................................. 27
3.1. Introduction .................................................................................................................... 27
3.2. Research process ............................................................................................................. 27
3.3. Questionnaire development ............................................................................................. 28
3.4. Pilot study ........................................................................................................................ 32
3.5. Main study ....................................................................................................................... 33
3.5.1. Sampling method ..................................................................................................... 33
3.5.2. Sample size .............................................................................................................. 33
3.5.3. Questionnaire design and administration ................................................................. 34
3.6. Data analysis method....................................................................................................... 35
3.7. Conclusion ....................................................................................................................... 36
CHAPTER 4: DATA ANALYSIS ................................................................................................ 37
4.1. Introduction ..................................................................................................................... 37
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4.2. Sample description .......................................................................................................... 37
4.3. Reliability Analysis ......................................................................................................... 38
4.4. Exploratory factor analysis (EFA) .................................................................................. 40
4.5. Hypotheses testing ........................................................................................................... 42
4.5.1. Pearson Correlation Coefficient ............................................................................... 42
4.5.2. Testing assumptions of Multiple Regression ........................................................... 44
4.5.3. Regression analysis .................................................................................................. 45
4.6. Discussion of research findings ....................................................................................... 47
4.7. Conclusion ....................................................................................................................... 48
CHAPTER 5: CONCLUSION AND IMPLICATION .................................................................. 50
5.1. Conclusion ....................................................................................................................... 50

5.2. Managerial implications .................................................................................................. 50
5.3. Limitation and suggestion for future research ................................................................. 52
REFERENCES .............................................................................................................................. 53
APPENDIX .................................................................................................................................... 60
Appendix A: The findings of pilot study ....................................................................................... 60
Appendix B: Questionnaire (English version) ............................................................................... 65
Appendix C: Questionnaire (Vietnamese version) ........................................................................ 70
Appendix D: Descriptive Analysis ................................................................................................ 75
Appendix E: Total Variance Explained ......................................................................................... 77
Appendix F: Multiple Linear Regression Assumption testing results ...........................................78
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ACKNOWLEDGEMENTS
I would like to express my sincere gratitude to my supervisor, Dr. Nguyen Thi Nguyet
Que for her valuable guidance, insightful comments and continuous support to my thesis. I am
sure that this thesis would not have been possible without her supervision and constant help.
I would like to acknowledge with much appreciation to leaders, teachers, and staffs in ISB
who help me usefully all the subjects of my master course.
I would like to thank my dear colleagues and friends for their invaluable advice, help,
encouragement and support during the time I was doing this thesis.
Last but not least, a special thank goes to my husband who always stay with me in good
and bad times. His continuous support in pursuing my study is invaluable to me.
Ho Chi Minh City, February 22, 2014

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LIST OF FIGURES
Figure 2.1: Research model ...........................................................................................................25

Figure 3.1: Research Design Process .............................................................................................27
LIST OF TABLES
Table 3.1: Draft questionnaire to measure audit quality ................................................................29
Table 3.2: Deleted items in pilot study ..........................................................................................60
Table 3.3: Final questionnaire to measure audit quality ................................................................62
Table 3.4: Cronbach’s alpha reliability coefficient........................................................................35
Table 4.1: Sample characteristics ..................................................................................................75
Table 4.2: Cronbach’s alpha reliability of first analysis ................................................................38
Table 4.3: Cronbach’s alpha reliability of final analysis ...............................................................40
Table 4.4: EFA results ...................................................................................................................40
Table 4.5: Pearson Correlation ......................................................................................................42
Table 4.6: Coefficients ...................................................................................................................44
Table 4.7: Regression results .........................................................................................................45
Table 4.8: Hypotheses testing results.............................................................................................46
Table 4.9: The summary of hypotheses testing results ..................................................................49

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LIST OF ABBREVIATION
AAA: American Accounting Association
WTO: World Trade Organization
VACPA: Vietnam Association of Certified Public Accountants
CPA: Certificated Public Accountant
CFO: Chief Financial Officer
SSC: State Security Commission
AASC: Auditing and Accounting Financial Consultancy Services Limited Company
SPSS: Statistical Package Software for Social Science
EFA: Exploratory Factor Analysis

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ABSTRACT
Audit quality is crucial for financial market to function smoothly due to its effects on the
credibility of financial statements. The users of financial statements are more likely to feel secure
about the information presented in the financial statements if the audit of the financial statements
is perceived as high quality. The current financial crisis and competitive business environment
have brought on more challenges for audit firms. They have confronted with the increasing
pressure from financial statement’s users to improve audit quality. To be successful in this
environment, audit firms must continually strive to improve audit quality and hence, maximize
client satisfaction. This research aims at investigating the effects of audit quality provided by
audit firms on client satisfaction in Vietnam.
In this study, the author uses AUDITQUAL model (Duff, 2004, 2009) focusing on seven
dimensions of audit quality which were label Reputation, Capability, Expertise, Experience,
Responsiveness, Client Service and Empathy and test the effect of each dimension of audit quality
on client satisfaction. An survey of 380 responses was conducted in the convenient method in Ho
Chi Minh City, Dong Nai and Binh Duong Province. A statistical package for social sciences
(SPSS) version 20.0 was used to analyze the collected data. Results show that seven dimensions
of audit quality including Reputation, Capability, Expertise, Experience, Responsiveness, Client
Service and Empathy associated positively with client satisfaction and Experience has the most
influence on client satisfaction.
Keywords: Audit quality, AUDITQUAL, Client satisfaction.

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CHAPTER 1: INTRODUCTION
1.1. Background to the research
Service quality and client satisfaction are very important concepts that companies must

understand if they want to remain competitive and grow (Angelova and Zekiri, 2011). In today’s
global competitive environment, it is recognized that high quality service is essential for firms
that want to be successful in their business (Parasuraman et al., 1998; Rust & Oliver, 1994).
Therefore, service quality and client satisfaction become interesting research subjects in the
marketing literature as well as in the reality.
In the auditing context, it is the same as other service industries that audit quality and
client satisfaction are very important. Higher audit quality provided by audit firms will lead to
higher clients’ satisfaction and higher repurchase intentions. After many well-known audit
failures, such as: Arthur Andersen's audit failure at Enron, Deloitte and Touche’s audit failure at
U.S. Adelphia Communications, PricewaterhouseCoopers’s audit failures at Tyco, Ernst &
Young’s audit failure at Heath South Corporation, KPMG’s audit failure at Xerox Corporation…,
audit firms are more and more focusing on the audit quality in order to increase client satisfaction
and repurchase intentions.
In Vietnam, joining in the WTO has created a lot of opportunities to develop Vietnamese
economy. In this process, investors require the financial information more accurate and explicit
than ever before. Accordingly, audit and non-audit services offered by audit firms are in great
demand. However, in recent years, there are many scandals in Vietnam financial market that led
to the bankrupt of some listed companies and caused big losses for stakeholders, such as: cheating
on financial reports of Bach Tuyet Cotton Corporation, giving unfaithful information and crucial
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mistakes in the audited financial statement of Vien Dong Pharma JSC, Toan Cau insurance joint
stock company, Kinh Do Corporation…(Bich Loan and Gia Duong, 2013) Actually, audit firms
in Vietnam do not meet clients’ expectation of audit quality, the low audit quality decreases
clients’ satisfaction and many clients changed audit firms frequently. The Vietnam Association of
Certified Public Accountants’ (VACPA) annual inspection in late 2010 revealed that almost all
auditing firms under inspection more or less violated auditing standards. According to audit
quality assurance review result 2012, VACPA performed audit quality assurance reviews to 15
auditing firms in Vietnam. At the end of the reviews, 6 among 15 firms were rated as qualified, 8

as unqualified and one firm was not rated as subject to review under the specific request of the
Ministry of Finance. In a report sent to the Ministry of Finance, VACPA said several auditing
firms passed financial statements which contained mistakes reflecting the deficiencies of auditors
and board of directors on understanding current accounting standards. According to a State
Security Commission (SSC) representative, many auditing firms did not carefully assess the risk
of large amounts on clients’ financial statements. The auditors merely excluded those values from
their judgments, which could generate big differences between the actual and the on-paper
business results. In the financial year of 2012, there was a series of scandals relating to the
financial reports of listing companies, which involved big names like Quoc Cuong Gia Lai Corp.
and VietinBank…. Those re-checked reports revealed great differences between the actual
business results and announced ones. Bui Van Mai, VACPA general secretary said that many
auditing firms look for sales and do not invest adequately in their operations. Nguyen Thanh
Tung, deputy director for AASC – among the leading Vietnamese auditing firms, indicated that
some auditors might truncate auditing procedure and the truncating will lead to a low quality
auditing. Therefore, it is essential to measure audit quality offered by audit firms and test the
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effects of audit quality provided by audit firms on client satisfaction in Vietnam, where the audit
firms are still young and inexperienced.
1.2. Research motivation
It is unable to deny the important role of audit service in our economy that is to ensure the
accuracy and explicit financial information in the financial market; thus, it helps to protect the
health and stable development of the economy. However, in recent years, due to impacts of the
world financial and economic crisis, many enterprises have faced to difficulties in their business.
It causes a lot of pressure and challenges for audit firms to evaluate and give their opinion about
the financial statements. In particular, auditors will be faced with the challenge of evaluating the
effect of the credit crisis and economic downturn on a client’s ability to continue as a going
concern, the challenge of evaluating fair value of assets and whether these effects on the client
firm will be described or reflected in the financial statements (Gheorghe, 2009). Moreover, the

market and client firm require higher and higher service quality from audit firm. Thus, audit firms
must focus on audit quality to maximize client satisfaction and survive in the current difficult
environment.
Many studies have been devoted to investigate the effects of audit quality of audit firms on
client satisfaction, especially in the developing countries and several models were used to
measure audit quality provided by audit firms such as: SERVQUAL (Parasuraman, Zeithaml, and
Berry, 1991), AUDITQUAL (Duff, 2004, 2009), and models using audit quality attributes
(Schroeder et al., 1986; Carcello et al., 1992)… In terms of audit quality attributes models,
Schroeder et al. (1986) examined perceptions of 15 attributes (including 6 audit team factors and
9 audit firm factors) associated with audit quality. Carcello et al. (1992) identified 12 audit quality
factors from two aspects: audit firm and audit team. Both these studies confirmed that audit team
factors are more important to audit quality than audit firm factors. Related to SERVQUAL model,
Ismail (2006), Morton and Scott (2007), Turk and Avcilar (2009) examines the relationship
between audit service quality, client satisfaction, behavioural intentions and loyalty using five
dimensions of service quality and 22 items scales of SERVQUAL to measure audit quality.
Lately, Duff (2004) developed the AUDITQUAL in nine dimensions to assess audit quality. This
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specific-industry model named AUDITQUAL was empirically tested by some researchers, such
as: Butcher, Harrison, and Ross (2013)…. However, very little research was conducted in
Vietnam, where the audit and non-audit service is quite inexperienced. Thus, this study attempts
to investigate the effects of audit quality offered by audit firms on client satisfaction in Vietnam,
through the perception of the client firms. It was conducted for the purpose of giving benefits for
both audit firms and client firms. Regarding to benefits of audit firms, they can understand the
client requirements clearly, know what the most important factor influence client satisfaction. As
the results, audit firm can serve their client better, remain client loyalty as well as give their client
more additional value. Concerning benefits of client firms, through their opinion about the audit
quality as well as their level of satisfaction, they can help audit firm recognize and improve their
weaknesses and shortcomings. Therefore, in long-term, client firm can get the better audit service.

1.3. Research objective
The overall objective of this thesis is to determine the effects of audit quality on client
satisfaction in Vietnam, through the perception of client firms, using AUDITQUAL model.
Specifically, the study aims to:
•

Examine the relationship between reputation of the audit firm and client satisfaction.

•

Examine the relationship between capability of the audit firm and client satisfaction.

•

Examine the relationship between expertise of the audit firm and client satisfaction.

•

Examine the relationship between experience of the audit firm and client satisfaction.

•

Examine the relationship between responsiveness of audit firm and client satisfaction.

•

Examine the relationship between client service of the audit firm and client
satisfaction.

•

Examine the relationship between empathy of audit firm and client satisfaction.

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1.4. Research scope and methodology
For author’s convenience, the survey to collect data is conducted in Ho Chi Minh City,
Binh Duong and Dong Nai province. The subject of this study is CFO or chief accountant or
general accountant who had working experience with auditors. Collecting data process is
designed into two stages. First, in the pilot study, author interviews nine chief accountants and
general accountants using the draft questionnaire. Their feedbacks are used to revise to make up
the final questionnaire. In the second stage, main study is conducted with sample of 380
respondents. After collecting data process, author uses software SPSS version 20.0 to analyze the
obtained data. Cronbach’s alpha method is used to test reliability of the measurement scale.
Exploratory factor analysis (EFA) is used to test validity of the measurement scale. Multiple
linear regression is used to test the proposal hypotheses in this research.
1.5. Structure of the study
This study consists of five chapters. Chapter 1 is an overview of audit service and client
satisfaction, the facts of audit quality in Vietnam, research objective and significances of the
study. Chapter 2 represents some relative concepts such as: audit quality, client satisfaction and
relationship between them. The research model and proposal research hypotheses will be
introduced in this chapter. Next, chapter 3 presents the methodology including questionnaire
development, pilot study, and main study with the sample method, data analysis method. In
chapter 4, the collected data will be analyzed. Specifically, Cronbach’s alpha will be used to test
reliability of scales, EFA for testing validity of measurements, and hypotheses testing by multiple
regression. Chapter 5 summarizes the results of this study, and mentions the limitations as well as
suggestions for future research.

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CHAPTER 2: LITERATURE REVIEW
2.1. Introduction
This chapter reviews some relevant studies of audit quality, client satisfaction and the
relationship between them. Many perspectives were explored to measure audit quality, but this
study focuses on the AUDITQUAL. The research model and research hypotheses will be
presented in this chapter.
2.2. Audit quality
2.2.1. Definitions of audit quality
Many researchers (Kell et al., 1986; Defliese et al., 1988; Gil and Cosserat, 1996; Pound
et al., 1997; Gill et al., 1999; Gull et al., 1994; Gill et al., 2001) agree with the definition given by
American Accounting Association (AAA) (1973), which defines auditing as "a systematic process
of objectively obtaining and evaluating evidence regarding assertions about economic actions and
events to ascertain the degree of correspondence between those assertions and established criteria
and communicating the results to interested users”. In the similar vein, Arens et al. (1997) define
auditing as "the process by which a competent, independent person accumulates evidence about
quantifiable information related to a specific economic entity for the purpose of determining and
reporting on the degree of correspondence between the quantifiable information and established
criteria".
There have been a number of attempts to define audit quality in the past, and until today,
there is no consensus among researches on a specific definition of audit quality. According to
Sutton (1993), the reason for the absence of consensus of a single definition of audit quality is due
to the apparent conflicting roles of participants in the audit market. The major participants in the
audit market can be divided into three groups that are external users, the client and the auditors.
Audit quality means different things to different people and depends on the “eyes of the
beholder”. The author reviewed some definitions of audit quality as below:

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The widely used definition by DeAngelo (1981) defined audit quality as “the marketassessed joint probability that a given auditor will both detect material misstatements in the
client’s financial statements and report the material misstatements”. This definition considers
audit quality to be dependent of two components. The first component relates to auditors’
technical competence to discover existing misstatements and the second component links to
auditors’ objectivity to report the error in the audit report. Palmrose (1988) adopted DeAngelo’s
definition and defined audit quality in terms of level of assurance. Therefore, the main function of
audit is to provide assurance on financial statements that audited financial statements contain no
material misstatements and high audit quality is a compulsory requirement for users of financial
information.
Some researchers considered “poor audit quality” by identifying the adverse outcomes
from an audit, and then defined audit quality in terms of audit failure. For example: Casterella et
al. (2009) stated “…we believe poor audit quality is observable with hindsight if an engagement
results in litigation or a claim of malpractice against the audit firm”. In other words, an audit
failure occurs if the auditor fails to comply with legal and professional requirements.
In summary, there is still no consensus on a general accepted definition of audit quality.
The different perception of stakeholders in audit quality may have influence the type of indicators
used to access audit quality.
2.2.2. Research on measurement of audit quality
In the auditing literature, audit quality has been investigated within a variety of
perspectives, and some models were used to measure audit quality. Behavioural studies of audit
quality examined perceptions of attributes or factors associated with audit quality, typically
examined combinations of factors considered important in perceptions of audit quality (Kilgore,
2007). The review of behavioural studies in this section focused on three typical models to
measure audit quality. Firstly, this was the model using audit quality attributes (Mock and Samet,
1982, Schroeder et al., 1986, Carcello et al., 1992). Next, SERVQUAL (Parasuraman, Zeithaml,
and Berry, 1991) was used to measure audit quality in researches of Ismail et al., (2006), Morton

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and Scott (2007), Turk and Avcilar (2009)…. Lastly, the recent model named AUDITQUAL
(Duff, 2004) was used to assess audit quality in nine dimensions.
Mock and Samet (1982) identified a list of potential attributes from the literature and
surveyed auditors in US to develop 32-item questionnaire to evaluate audit quality. The findings
of the study identified five dimensions of audit quality including planning, administration,
procedures, evaluation and conduct.
Schroeder, Solomon and Vickery (1986) extended Mock and Samet’s (1982) investigation
by undertaking a study to examine the perceptions of audit committee chairpersons and audit
partners on factors that are perceived to affect audit quality. The participants were required to rate
the importance of each of 15 factors (including 6 audit team factors and 9 audit firm factors) to
overall audit quality. The team factors included level of partner/manager attention given to the
audit, planning and conduct of audit team work, communication between audit team and
management, independence exhibited by audit team members, mix of skills and depth of
experience of team, and communication between audit team and audit committee. The firm wide
factors were provisions to keep auditors up to date technically, quality control procedures used by
the firm, regulatory agency expertise, overall reputation, sizes and locations of offices, provision
for team rotation, litigation experience, recency and outcome of peer review and the relative
significance of total professional fees. The authors reported that the audit committee chairpersons
ranked audit team factors as more important to audit quality than firm wide factors. The audit
partners’ perceptions were consistent with those of the audit committee chairpersons.
Similarly, Carcello, Hermanson and McGrath (1992) attempted to measure audit quality
based on the perceptions of auditors, preparers of financial statements and users. Their study used
Schroeder et al. (1986) attributes of audit quality with some additional attributes to provide an
extensive examination of audit quality. They created a questionnaire based on 41 audit quality
attributes. According to exploratory factor analysis (EFA), a statistical data reduction technique,
they reduced these 41 audit quality attributes to 12 audit quality factors. The authors suggested
that four factors to be most important in determining audit quality, including audit team and firm
experience with the client, industry expertise (especially within the audit team), responsiveness to
client needs, and audit firm compliance with the generally accepted auditing standards (GAAS).

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Consistent with Schroeder et al. (1986), results indicated that three sampled groups of auditors,
preparers of financial statements and external users consider characteristics related to members of
audit team more important to audit quality than characteristics related to the audit firm. Beside,
the authors found significant differences between groups regarding individual aspects of audit
quality.
However, Duff (2009) noted that although prior models using audit quality attributes (such
as: Schroeder et al., 1986; Carcello et al., 1992) contain similar attributes, these models have been
developed and used in isolation from each other. The SERVQUAL and AUDITQUAL models
have removed this shortcoming by integrating the attributes from the prior audit quality literature
into multidimensional, structured models. The initial SERVQUAL model proposed by
Parasuraman et al. (1985) was suggested in ten dimensions of service quality, including:
reliability, responsiveness, competence, access, courtesy, communication, credibility, security,
understanding and tangibles. In the later study, Parasuraman et al. (1988, 1991), these ten
dimensions were reduced to five dimensions, consisting of reliability, assurance, tangibles,
empathy and responsiveness and 22 items scale were developed to measure these five dimensions.
In audit context, Ismail et al. (2006) adopted SERVQUAL (Parasuraman et al., 1991) to
assess the audit service quality and to examine the relationship between audit service quality,
client satisfaction and loyalty to the audit firms through the perception of Malaysian public listed
companies. In the other research, Morton and Scott (2007) assumed that audit quality is made up
of credibility (brand name), reliability (auditor competence), control (the auditor’s contribution to
internal control) and ancillary services (service and attitude of audit team members). In the study,
Morton and Scott (2007) developed a 28-item measure of audit quality based on the behavioral
audit literature and the SERVQUAL scale of Parasuraman, Zeithaml, and Berry (1985) to
measure four constructs of audit quality. In the same manner, Turk and Avcilar (2009) in their
research, indicated that the SERVQUAL consists of the five-factor construct is suitable for
measuring the perceived service quality of audit firms.
The most recent model to measure audit quality is AUDITQUAL suggested by Duff

(2004, 2009). Like the SERVQUAL model, Duff (2004, 2009) investigated the AUDITQUAL
model which integrates the attributes from the prior audit quality literature into a
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multidimensional, structured model. The AUDITQUAL model consists of nine distinct
dimensions which were labeled Reputation, Capability, Responsiveness, Independence, Non-audit
services, Empathy, Client service, Expertise, and Experience. These dimensions could be reduced
to create two distinct factors relating to technical quality and service quality. Specially, technical
quality, usually conceptualized as the competence and the objectivity of the auditor, is described
by five factors: Reputation, Capability, Independence, Expertise and Experience. Service quality
is described by four factors: Responsiveness, Provision of Non-audit services, Empathy and
Client service. Using a 56 scale questionnaire, he surveyed the three sampled groups of auditors,
auditees (entities that are being audited) and external users to capture perceptions of audit quality.
He found that the AUDITQUAL model fitted the data well for each of the three samples.
Many researchers used five-dimensional SERVQUAL to measure audit quality (e.g.
Ismail et al, 2006; Morton and Scott, 2007, Turk and Avcilar, 2009…) because the SERVQUAL
model was easy to use in service firms (Isa, 2005). However, there are some critics for
SERVQUAL, such as: a simple revision of the SERVQUAL items is not enough for measuring
service quality across different service sectors (Ladhari, 2008). In addition, auditing is a
professional service which is fundamentally different from other services, such as: hotel or
travel…It needs to be measured by a particular model in audit area. Ladhari (2008) also
confirmed that industry-specific measures of service quality might be more appropriate than a
single generic scale. Hence, the AUDITQUAL is very suitable to capture the audit quality
because it was set specifically for auditing service. This model has been empirically tested by
some researchers (e.g. Duff, 2004, 2009; Butcher, Harrison, and Ross, 2013). Due to these above
reasons, this study measured audit quality by using AUDITQUAL model in the Vietnamese
context.
2.3. Client satisfaction
In the marketing literature, the definition of client satisfaction has received much attention

because of its importance. Oliver (1980) argued that satisfaction is the emotional evaluation of
perceived discrepancy between expectations and performance of product or service. In the other
word, client satisfaction considered as after-purchase evaluation arises if the performance of the
products or services received higher than expectations. Hence, if performance and expectations
19


matches it will brings satisfaction to customer, and vice versus, if they do not match the customer
will feels disappointed. Zeithaml and Bitner (2000) defined that client satisfaction is the
evaluation of a product or service in terms of whether that service has met their needs and
expectations. The satisfied customer would remain loyal, required service more often, fewer price
sensitive and shall talk favorable things about the company.
In auditing context, it is the same as other industries that client satisfaction is very
important to achieve, because if the customer is not satisfied, they could change their auditor or it
could create a negative reputation for the auditor. Behn et al (1997) stated that audit quality can
affect the client satisfaction, the same thing is expressed by Carcello et al (1992) that there is a
significant, positive relationship between many of the audit quality attributes and client
satisfaction.
2.4. Research framework and hypothesis development
As noted in section 2.2.2, the original AUDITQUAL model consists of nine dimensions
which were labeled Reputation, Capability, Responsiveness, Independence, Non-audit services,
Empathy, Client service, Expertise, and Experience. However, this study just focuses on seven
dimensions that are Reputation, Capability, Responsiveness, Empathy, Client service, Expertise,
and Experience. Two dimensions called Non-audit service and Independence are not included in
the model because these factors were rated as least important dimensions by all three groups of
respondents according to Duff’s research (2004).
2.4.1. Audit quality dimensions and Client satisfaction
Many studies derived from the marketing literature investigate the relationships between
service quality and client satisfaction (e.g. Oliver, 1980; Bitner, 1990; Parasuraman, Zeithaml,
and Berry, 1988, 1991, 1996; Taylor and Baker, 1994; Ismail et al, 2006). Most researchers

agreed that service quality is vital to maintain client satisfaction and higher service quality may
lead to higher level of satisfaction. It is quite easy to find many researches to support for the
relationship between audit quality and client satisfaction in the auditing literature. Ismail et al
(2006) examined the relationship between audit quality and client satisfaction and indicated a
positive relationship between audit quality and client satisfaction. Similarly, other scholars (e.g.
20


Behn et al, 1997; Carcello et al, 1992; Samelson, Lowensohn and Johnson, 2006…) also indicated
that attributes of audit quality affect client satisfaction, and audit quality lead to client satisfaction.
The target of this research is to define how audit quality dimensions affect to client satisfaction.
2.4.1.1. Reputation and client satisfaction
Abd-El-Salam, Shawky and El-Nahas (2013) pointed out that corporation image and
reputation are considered to be critical factors in overall evaluation of any organization (cited in
Bitner, 1990, 1991; Gronroos, 1984; Gummesson and Gronroos, 1998; Andreassen and Lanseng,
1997; Andreassen and Lindestad, 1998; Kandampully and Hu, 2007; Sarstedt et al., 2012)
because of the strength that lies in the customers’ perception and mind when hearing the name of
the organization (cited in Fombrun, 1996; Hatch et al., 2003; Nguyen, 2006; Bravo et al., 2009).
A study of Nedal Sawan and Ihab Alsaqqa (2013) examined audit quality in the Libyan oil
industry and found that oil companies usually engaged audit firms with a good reputation. It was
easy to understand because good reputation audit firms (such as: Big Four) had greater resources,
technical knowledge, capabilities and global reach, which allowed them to conduct the audit
process more effectively, to publish more accurate information or to work with clients more
efficiently. These things led clients to more satisfactory. According to Chun (2005), a good
reputation for high quality means more customers, fewer dissatisfied customers and profitability
increases. Andreassen (1994) found that reputation is positively correlated with satisfaction and
loyalty. Helm et al. (2010) also analyzed the relationship between corporate reputation and
consumer satisfaction and declared corporate reputation as an antecedent of consumer
satisfaction. Based on these above literature, the hypothesis can be stated as follows:
H1: There is a positive relationship between reputation of the audit firm and client

satisfaction.
2.4.1.2. Capability and client satisfaction
DeAngelo (1981) stated that audit quality is the probability that the given auditor will both
discover material misstatements in the client’s financial statements and report the material
misstatements. Auditor is actively and directly involved in the whole audit process so the
probability of finding violations depends on the auditor's technical capability. According to Duff
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(2009), capability is the ability of auditor to conduct the work. Ismail (2010) indicated that level
of audit client satisfaction with the work of audit team increases when the team actively involves
in the engagement, conducts the audit field work in the proper manner, and adopts high ethical
standards and possesses good knowledge of accounting and auditing. The capability of auditor is
one of key factors to drive high audit quality and well audit performance and this increases the
level of client satisfaction. Thus, this study suggests the hypothesis as below:
H2: There is a positive relationship between capability of the auditor and client
satisfaction.
2.4.1.3. Expertise and client satisfaction
According to Kilgore (2007), audit firms with multiple clients in the same industry may be
argued to have a greater appreciation of the audit risks unique to that industry. Conversely, audit
firms with few clients in an industry may not have the incentive or ability to keep up-to-date with
changes and new developments in the industry. Dies and Giroux (1992) concluded that firms with
a higher concentration of clients in a particular industry will provide greater audit quality.
Similarly, Meyer (2009) mentioned that industry specialist auditors have developed industry
specific knowledge that may enable them to provide higher audit quality than non-specialist
auditors. The above findings shown that industry expertise enhances the performance of auditor
and audit firm that drives to higher audit quality and higher level of client satisfaction. Many
previous studies confirmed the relationship between industry expertise and client satisfaction.
Lowensohn, Johnson and Elder (2007) examined the relationship between auditor specialization
and auditee satisfaction in the local government audit market. Their study concluded that

expertise of auditors associate with higher levels of client satisfaction. The same thing was
expressed by Behn et al. (1997), Yuniarti and Zumara (2013) that there is a significant positive
relationship between industry expertise and client satisfaction. Hence, we have this hypothesis:
H3: There is a positive relationship between expertise of the audit firm and client
satisfaction.

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2.4.1.4. Experience and client satisfaction
Gul et al. (1994) stated that the audit should be performed and the report prepared with
due professional care by persons who have adequate training, experience and competence in
auditing. Similarly, Prachsriphum, Jantarajaturapath, Napat (2010) confirmed that knowledge and
experience both have important to work success in audit profession. In terms of auditing, the
experience was obtained from accumulate audit tasks as well as from training and learning
throughout their careers. Auditors who have more experience will have better performance. Ismail
(2010) shown that the client management is happy with auditors who have been with the same
client for a long time. Because the long time auditor who has the prior audit experience with their
client, can understand the clients’ accounting system and business environment clearly. Thus,
they serve client better. Ismail (2010) indicated the significant positive relationship between the
client satisfaction and the prior audit experience of the audit team. Other researchers also
confirmed this relationship, for example: Behn et al (1997), Yuniarti and Zumara (2013)… Based
on these literatures, the hypothesis is proposed as follows:
H4: There is a positive relationship between experience of the audit firm and client
satisfaction.
2.4.1.5. Responsiveness and client satisfaction
Parasuraman et al. (1991) defined responsiveness as the willingness to help customers and
provide prompt service. In auditing context, Duff (2009) modified a new concept to define
responsiveness. Accordingly, responsiveness is the ability of the auditor to tailor their service to
auditee needs. Audit client always has some given requirements related to audit service and

expects audit firm to meet them. For example: the auditor must meet deadline, release audit report
on time, or have effective communication to support client…. Hence, responsiveness to client
needs will contribute to the level of client satisfaction. Many prior studies confirmed the
significant, positive relation between responsiveness and client satisfaction in audit context, such
as: Behn et al. (1997), Ismail (2010), Yuniarti and Zumara (2013)…Therefore, we have the
following hypothesis:

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H5: There is a positive relationship between responsiveness of the audit firm and client
satisfaction.
2.4.1.6. Client service and client satisfaction
In AUDITQUAL model, Duff (2009) described client service as “those processes the
auditor has in place to assure a high quality audit”. We noted that client service was labeled
“assurance” as Duff (2009). The role of auditor is to provide an assurance that financial
statements free from material misstatements. It meant that client service (or level of assurance) is
one of key factors that drive high audit quality. Thus, client service will contribute to client
satisfaction. Yuniarti, Zumara (2013) noted the significant positive association between
commitment of audit quality and client satisfaction. Ismail (2010) also indicated the similar thing
that commitment of audit firm to quality is significantly related to client satisfaction. Accordingly,
we also hypothesize that there is a positive relationship between client service of the audit firm
and client satisfaction.
H6: There is a positive relationship between client service of the audit firm and client
satisfaction.
2.4.1.7. Empathy and client satisfaction
Empathy was related to care, attention and understanding of the specific needs by the firm
to its customers (Parasuraman et al, 1988, 1991). Similarly, in auditing context, Duff (2009)
defined empathy as the degree of understanding the auditor has with the challenges the audittee
faces. Client always expects the audit firm as well as auditor to make effort to understand their

needs and demands. Auditor can play a pro-active role and make a good contribution to
manager’s decision. For example: auditor can assist the client by helping gather information and
providing guidance or making recommendations that managers will use for making business
decision. Hence, empathy is an important feature of service quality and it can enhance the
relationship between audit firm and clients by increasing the level of client satisfaction. Aga,
Safakli (2007) stated a significant relationship between empathy aspect and client satisfaction in
professional accounting firms. Thus, in this study, we have the following hypothesis:

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H7: There is a positive relationship between empathy of the audit firm and client
satisfaction.
2.4.2. Research framework
Based on these above literatures, the relationship between dimensions of audit quality and
client satisfaction is briefly described in the Figure 2.1:
AUDIT QUALITY
Reputation

Capability

H1
H2

Expertise
H3
Experience

H4
H5

Responsiveness

Client Service

Client
Satisfaction

H6
H7

Empathy

Figure 2.1: Research model
The hypotheses are tested in this study as follows:
Hypothesis 1: There is a positive relationship between reputation of the audit firm and
client satisfaction.
Hypothesis 2: There is a positive relationship between capability of the audit firm and
client satisfaction.
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