Going-concern Uncertainties in Pre-bankrupt Audit Reports: New Evidence Regarding Discretionary Accruals and Wording Ambiguity

2008 ◽  
Vol 12 (1) ◽  
pp. 25-44 ◽  
Author(s):  
Laura Arnedo ◽  
Fermín Lizarraga ◽  
Santiago Sánchez
Keyword(s):  
Discretionary Accruals ◽  
Going Concern ◽  
Audit Reports ◽  
New Evidence

scholarly journals Selected issues of using international standards of auditing when assessing the application of the going concern basis by management personnel of a company

2018 ◽  
pp. 96-100
Author(s):  
S. V. Selishchev
Keyword(s):  
Financial Reporting ◽  
Methodological Approach ◽  
International Standards ◽  
Audit Process ◽  
Investment Activity ◽  
Going Concern ◽  
Financial Reporting Standards ◽  
Management Personnel ◽  
Business Entities ◽  
Audit Reports

The article deals with selected issues of the application of international standards of audit in domestic practice. The source of the main problem, which hinders the development of a unified methodological approach to the application of international standards, is determined, and proposals for its solution are provided. Particular attention is paid to the methodological recommendations for reflecting the requirements of international standards in the auditor’s working papers. The investment activity of foreign partners in Ukraine is conditional on the financial statement clarity for domestic business entities and their trust in them. While the former can achieved by the application of International Financial Reporting Standards, the latter is dependent on the application of International Standards of Auditing (ISA). The purpose of the article is to develop a methodological approach to the application of ISA, based on clarification of their essence and nature. The study of audit practice and opinions of users of audit reports shows that one of the key issues is compliance with the going concern basis of accounting by management personnel in preparing financial statements. It can be concluded from the study that ISA do not conform to the definition of “standards”, being more similar with some kind of “rules”. It means that ISA constitute the rules for performing audit by focusing the auditor attention on a specific set of issues and objects. This approach allows for a certain extent of control over the completeness the audit process and for assuring selected aspects of quality.

UKURAN KANTOR AKUNTAN PUBLIK, DISCRETIONARY ACCRUALS DAN OPINI AUDIT GOING CONCERN

2019 ◽  
Vol 15 (1) ◽  
pp. 11
Author(s):  
Ravaela Amba Masiku ◽  
Christine Novita Dewi
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Stock Exchange ◽  
Discretionary Accruals ◽  
Audit Firm ◽  
Going Concern ◽  
Discretionary Accrual ◽  
Audit Firms ◽  
Going Concern Opinion ◽  
Positive Effect

The purpose of this study is to examine auditor’s concervatism in term of their reaction to client’s earnings management behavior and their limitations to issue the going concern opinions (GCO). The population of this study consists of 672 observations from 69 companies are listed on the Indonesia Stock Exchange (BEI) during 2012-2017. The author used the modified Jones model to measure discretionary accruals as a proxy of earnings management. The results of this study indicate that size of audit firm has a positive effect to discretionary accrual. Companies that have been audited by the Big4 tend to apply discretionary accrual in their financial reporting than companies audited by Non-Big4. Further, to strenghten the first hypothesis, we examine the effect of discretionary accruals and going concern opinion on companies that audited by audit firms Big4 lower than companies that audited by audit firms Non-Big4. We found that the result is consistent with the first hypothesis. Keywords : auditor reputation, discretionary accruals, going concern opinion, audit firm  ABSTRAK Tujuan dari penelitian ini adalah untuk menguji konservatisme auditor dalam hal reaksi auditor terhadap akrual diskresioner yang dilakukan oleh perusahaan dan keterbatasan auditor untuk menerbitkan opini Going Concern (GC). Populasi penelitian terdiri dari 672 pengamatan dari 69 perusahaan yang terdaftar di Bursa Efek Indonesia (BEI) selama tahun 2012-2017. Penulis menggunakan model modifikasi Jones untuk mengukur akrual diskresioner sebagai proksi manajemen laba. Hasil dari penelitian ini menjelaskan bahwa ukuran kantor akuntan publik berpengaruh positif terhadap akrual diskresioner, hal tersebut diperkuat dengan pengaruh akrual diskresioner dan opini audit going concern yang diaudit oleh kantor akuntan publik Big4 lebih rendah dari perusahaan yang tidak diaudit oleh kantor akuntan publik Non-Big4. Kata kunci : reputasi auditor, akrual diskresioner, opini audit going concern, kantor akuntan publik

Consequences of the implementation of expanded audit reports with key audit matters (KAMs) on audit quality

2020 ◽  
Vol 35 (8) ◽  
pp. 1095-1119
Author(s):  
Weerapong Kitiwong ◽  
Naruanard Sarapaivanich
Keyword(s):  
Design Methodology ◽  
Audit Quality ◽  
Discretionary Accruals ◽  
Regression Analyses ◽  
Content Type ◽  
Weak Evidence ◽  
Financial Restatements ◽  
Audit Reports ◽  
The Impact ◽  
Made In

Purpose This paper aims to ask whether the implementation of the expanded auditor’s report, which included a requirement to disclose key audit matters (KAMs) in Thailand since 2016, has improved audit quality. Design/methodology/approach To answer this question, the authors examined audit quality two years before and two years after its adoption by analysing 1,519 firm-year observations obtained from 312 companies. The authors applied logistic regression analyses to the firm-year observations. Findings The authors found some weak evidence that KAMs disclosure improved audit quality because of auditors putting more effort into their audits and audits being performed thoroughly after the implementation of KAMs. Interestingly, the number of disclosed KAMs and the most common types of disclosed KAMs are not associated with audit quality. Only disclosed KAMs related to acquisitions are more informative because the presence of this type of disclosed KAMs signals the greater likelihood of financial restatements being made in a later year. Originality/value Unlike previous studies on the impact of KAMs disclosure on audit quality, which used discretionary accruals as proxy for audit quality, this study used the occurrence of financial restatements.

Bank officers’ perceptions and uses of qualified audit reports

2014 ◽  
Vol 11 (3) ◽  
pp. 215-237 ◽  
Author(s):  
Nina Sormunen
Keyword(s):  
Financial Statements ◽  
Structured Interviews ◽  
Content Type ◽  
Factors Affecting ◽  
Going Concern ◽  
Other Information ◽  
Audit Reports ◽  
Going Concern Reports ◽  
Practical Implications

Purpose – The purpose of this study is to provide insights into the perceptions and uses of qualified audit reports in financial statements of small- and medium-sized enterprises (SMEs). As there is a long-standing debate on the usefulness of auditor’s going-concern reports, this study aims to provide insights into the factors that affect how banks perceive and use going-concern reports. Design/methodology/approach – Semi-structured interviews with bank officers were conducted. Findings – The study findings demonstrated that bank officers considered that the going-concern report provided information, although they did not regard the information as being particularly useful. The main factors affecting the usefulness of information are use of other information sources and bank officers’ perceptions of auditing. Other factors are also presented and discussed in the current research paper. Practical implications – Regulators have taken the action to improve the auditor’s reporting model, and the findings provided by this study are important because they provide a deeper understanding of the perceptions and uses of audit reports from smaller companies. The study also contributes knowledge about the role of audit reports in the context of SMEs finance. Originality/value – This is one of the first studies to use a qualitative approach to examine factors that affect the use of going-concern reports.

Justifications for the Modified Opinions and for Other Observations in the Audit Reports

2020 ◽  
Vol 18 (160) ◽  
pp. 785-800
Author(s):  
Costel ISTRATE ◽  
◽  
Ovidiu Constantin BUNGET ◽  
Irimie Emil POPA ◽  
◽  
...  
Keyword(s):  
Stock Exchange ◽  
Legal Issues ◽  
Global Crisis ◽  
Going Concern ◽  
Tangible Assets ◽  
Fixed Assets ◽  
Main Observation ◽  
Audit Opinions ◽  
Audit Reports

The purpose of this paper is to identify and to comment the main justifications of modified audit opinions and the main observations included in the emphasis of matter paragraphs from the audit reports of Romanian companies listed on the regulated market of Bucharest Stock Exchange (BSE). The authors analyze a sample of more than 1,000 observations-year for the 2007-2019 period. They found that 25% of these reports contain a modified opinion and the main explanations relate to the revaluations of fixed tangible assets, to the provisions, to the impairment of the fixed assets, to some legal issues, to items concerning the closing inventory and, to a lesser extent, to the going concern matters. In 30% of the reports analyzed, there was identified emphasis of matter paragraphs; the main observation is by far related to the going concern, followed by the financial and operating difficulties of companies and by the effects of different global crisis (financial or others).

Investor Reaction to Going Concern Audit Reports

2010 ◽  
Vol 85 (6) ◽  
pp. 2075-2105 ◽  
Author(s):  
Krishnagopal Menon ◽  
David D. Williams
Keyword(s):  
Institutional Investors ◽  
Institutional Ownership ◽  
Audit Report ◽  
Going Concern ◽  
New Information ◽  
Debt Covenant ◽  
Low Levels ◽  
Audit Reports ◽  
Investor Reaction ◽  
Larger Sample

ABSTRACT: The literature provides mixed evidence on whether investors find audit reports modified for going concern reasons to be useful. Using a substantially larger sample than previous studies, we observe negative excess returns when the going concern audit report (GCAR) is disclosed. We find that the reaction is more negative if the GCAR cites a problem with obtaining financing, suggesting that the GCAR provides new information to investors. Also, the reaction is more adverse if the GCAR triggers a technical violation of a debt covenant that restricts the firm from getting a GCAR. The evidence suggests that institutional investors drive the reaction to the GCAR, since there is no detectable reaction at low levels of institutional ownership. The market reaction gets more negative as the level of institutional ownership increases, and there is a decline in institutional ownership after the GCAR is issued. We attribute these results to sophisticated investors’ awareness of the firm’s financing needs and the covenants carried by the firm’s debt.

scholarly journals Pengaruh Leverage, Opini Audit Tahun Sebelumnya, Pertumbuhan Perusahaan, dan Ukuran Perusahaan terhadap Opini Audit Going Concern

Owner ◽  
2021 ◽  
Vol 5 (1) ◽  
pp. 164-173
Author(s):  
Kusuma Indawati Halim
Keyword(s):  
Stock Exchange ◽  
Company Size ◽  
Manufacturing Companies ◽  
Audit Opinion ◽  
Going Concern ◽  
Additional Information ◽  
Financial Condition ◽  
Going Concern Opinion ◽  
Audit Reports ◽  
Company Growth

Audit reports are used by auditors to inform the accuracy of the information in the financial statements. The auditor as an independent party has the competence to provide an opinion on the client's financial condition. If it is estimated that the company cannot continue its activities, it is likely that it will get a going concern audit opinion. Audit opinion can help investors and other stakeholders in assessing the status of the company's business continuity. The important thing from a going concern audit opinion is to provide additional information for investors in making investment decisions. This study analyzes the factors that determine going concern audit opinion on manufacturing companies listed on the Indonesia Stock Exchange. The factors tested in this study are leverage, initial opinion, company growth and company size. The study used a sample of 125 companies for the 2014-2018 period. The results of data analysis were obtained from logistic regression tests. The empirical results show that prior opinion and leverage increase the likelihood of receiving a going concern opinion. Meanwhile, company growth and company size have no effect on going concern audit opinion. Nagelkerke's R Square test shows the ability of the factors in this study to explain 63.1% of going-concern audit opinion, while 36.9% is explained by other factors outside the research model. The findings from this study are expected to help investors and other stakeholders to prevent losses if they invest in companies that have the potential to go bankrupt.

scholarly journals An Analysis of Auditors' Going-Concern Reporting Accuracy in Private Firms

2018 ◽  
Vol 32 (4) ◽  
pp. 117-132 ◽  
Author(s):  
Kris Hardies ◽  
Marie-Laure Vandenhaute ◽  
Diane Breesch
Keyword(s):  
Large Scale ◽  
Audit Quality ◽  
Private Firms ◽  
Reporting Accuracy ◽  
Public Firms ◽  
Going Concern ◽  
Big 4 ◽  
Cast Doubt ◽  
One Year ◽  
Audit Reports

SYNOPSIS The accuracy of audit reports is often viewed as a signal for audit quality. Prior research shows that in the context of going-concern reporting in audit markets dominated by public firms, some auditors are more accurate than others (e.g., Big N firms). This study is the first large-scale study that investigates going-concern reporting accuracy in an audit market dominated by private firms. The threat of reputation and litigation costs incentivizes auditors to report accurately in markets dominated by public firms, but such incentives are largely absent in markets dominated by private firms. Hence, reporting accuracy in such markets might not vary across auditors. Our main analysis is based on a sample of 1,375 Belgian firms that ceased to exist within one year from the financial statement date. Our results show that the frequency of Type II misclassification does not vary across auditor types (Big 4 versus non-Big 4, audit firm and partner industry specialists versus non-specialists, more experienced versus less experienced, and female versus male auditors). Overall, these results cast doubt on the existence of quality differences among auditors in audit markets dominated by private firms.

The Effect of Experience on the Use of Irrelevant Evidence in Auditor Judgment

1999 ◽  
Vol 74 (2) ◽  
pp. 217-224 ◽  
Author(s):  
Sandra Waller Shelton
Keyword(s):  
Relevant Information ◽  
Irrelevant Information ◽  
Auditor Judgment ◽  
Going Concern ◽  
The Impact ◽  
New Evidence

Auditors encounter both relevant and irrelevant information during the performance of audit tasks. Prior studies have shown that the presence of irrelevant information weakens the impact of relevant information on auditors' judgments. Such studies, however, have not considered whether experience moderates the diluting effect of irrelevant information on auditors' judgments. This study reports the results of an experiment in which the effect of irrelevant information on the going-concern judgments of less-experienced auditors—audit seniors—is compared to the effect of irrelevant information on the going-concern judgments of more-experienced auditors—audit managers and partners. The experiment reaffirms that irrelevant information does have a diluting effect on the judgments of audit seniors but provides new evidence that irrelevant information does not have a diluting effect on the judgments of audit managers and partners.

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