Risk-based audit approach and audit quality in the public sector: empirical evidence from an emerging country

Thong Quoc Vu, Malik Abu Afifa and Ngan Kim Tran

Asian Review of Accounting, 2025, vol. 34, issue 2, 454-482

Abstract: PurposeRisk-based auditing (RBA) has become a standard practice in the private sector; however, its adoption in the public sector – particularly in developing countries like Vietnam – remains in its early stages. This research aims to examine the key factors that influence the adoption of RBA and its impact on audit quality within the State Audit of Vietnam (SAV). Such an investigation is vital, given the increasing complexity of public sector operations and the rising demand for more efficient and effective audit processes. By shifting the focus from traditional compliance-based audits to a more dynamic, risk-centered assessment, RBA presents a transformative approach to safeguarding public resources and enhancing audit outcomes.Design/methodology/approachA quantitative approach was employed, utilizing survey data from 211 state auditors. Structural equation modeling (SEM) with SmartPLS software was used to analyze the relationships between key variables, including RBA adoption, information technology (IT) support and audit quality.FindingsThe findings indicate a significant positive relationship between the audited entity’s inherent risk and the support of IT with the successful adoption of RBA. Additionally, the strong association between IT support and RBA adoption highlights the pivotal role of technology in advancing a risk-based approach. IT systems streamline data analysis, enhance risk identification and assessment and improve the overall efficiency and effectiveness of audit procedures. The study also identified a positive relationship between RBA adoption and enhanced audit quality. This aligns with the core principle of RBA, which emphasizes focusing audit resources on high-risk areas to better detect and address weaknesses in internal controls and financial reporting. Consequently, this approach promotes greater accountability and transparency in the use of public funds.Originality/valueThe study is original in its practical focus, offering actionable recommendations for enhancing IT infrastructure, training and capacity building to promote audit technology innovation. These contributions extend beyond academia, providing policymakers and practitioners with valuable strategies to modernize public-sector auditing and enhance accountability and transparency in the management of public resources.

Keywords: Risk-based auditing; Audit quality; State audit; Risk-based approach; Vietnam (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:arapps:ara-12-2024-0364

DOI: 10.1108/ARA-12-2024-0364

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