The impact of the internal audit function on earnings management behavior in Vietnam

Abstract

Internal audit plays a crucial role within organizations and businesses by enhancing the effectiveness and efficiency of corporate governance systems, including earnings management. However, due to the inherent divergence in objectives and benefits between managers and owners, financial information is often subject to manipulation by management to maximize company value for personal gain. This study is conducted in the context following the issuance of Government Decree No. 05/2019/ND-CP on Internal Audit (IA) on January 22, 2019. Consequently, the article employs a combination of quantitative and qualitative research methods to examine the impact of the internal audit function on earnings management behavior within enterprises, and to assess the extent to which various factors influence this relationship. The findings indicate that four key internal audit factors significantly affect earnings management behavior. Based on these results, several recommendations are proposed to improve the effectiveness of the internal audit function in influencing earnings management behavior in the current context of Vietnam.