Impacts of tax enforcement and independent audit on financial reporting quality through the internal control effectiveness: Evidence from Vietnam enterprises

Based mainly on agency theory, this research examines the impacts of tax enforcement and independent audit on the internal control effectiveness and financial reporting quality in Vietnam enterprises. The data analysis is applied to PLS-SEM. The survey method was carried out on a sample of 341 enterprises with headquarters mainly in the three largest cities of Vietnam (Hanoi, Hochiminh and Danang cities) from April to June 2021. The result findings showed that all three factors: independent audit, tax enforcement, and internal control effectiveness, have significant impacts on the financial reporting quality; particularly, tax enforcement has a negative effect while the other two factors have a positive impact. This research's main contribution is the negative relationship between tax enforcement and financial reporting quality. This result shows the contractionary view with other existing research. The difference in this research's findings compared to other existing research was explained in theoretical and practical perspectives. In addition, the mediating role of internal control in the relationship between tax enforcement, independent audit and financial reporting quality was confirmed through results. The findings of this research are very important in proposing regulations and policies related to implementing the monitoring mechanism from both inside (internal control system) and outside the enterprise (independent audit, tax enforcement) to increase the quality of financial reports.