scholarly journals The indirect verification of the going concern assumption by analysing the threat of bankruptcy

2020 ◽  
Vol 25 (2) ◽  
pp. 25-40
Author(s):  
Michal Karas ◽  
Mária Režňáková
Keyword(s):  
Cash Flow ◽  
Financial Distress ◽  
Financial Constraints ◽  
Business Value ◽  
Necessary Condition ◽  
Potential Influence ◽  
Short Term ◽  
Going Concern ◽  
Doing Business ◽  
Viable Business

The generally accepted aim of doing business is to maximize the business value. The value of a business strongly depends on its ability to generate future cash flow for its owners. A necessary condition is that the business remains financially viable or in other words, the business should meet the assumption of going concern principle. Verifying such an assumption, however, remains an issue. We suggest that this could be indirectly verified as an absence of threat of imminent financial distress. For this purpose, we analysed a set of cash flow and profit based ratios along with a set of other ratios with a potential influence on the business value. In terms of sample, we focus on Czech manufacturing SMEs that were selected, due to their specific features resulting from the financial constraints. The F-test and t-test were employed as a method of identifying the typical signs of risk of financial distress or rather obstacles in accepting the going concern principle. We found that only four of the analysed ratios could serve effectively for this purpose. The best results were achieved when employing ratios describing the operational cash flow or short-term debt, where the gap between viable business and those with limited prospects is the widest.

scholarly journals KEMAMPUAN PERGANTIAN AUDITOR DAN PRIOR OPINION MEMODERASI PENGARUH POTENSI FINANCIAL DISTRESS TERHADAP OPINI GOING CONCERN

2017 ◽  
pp. 3259
Author(s):  
Putu Yudha Asteria Putri ◽  
Ida Bagus Putra Astika ◽  
Made Gede Wirakusuma
Keyword(s):  
Empirical Evidence ◽  
Financial Distress ◽  
Stock Exchange ◽  
Secondary Data ◽  
Manufacturing Companies ◽  
Potential Influence ◽  
Going Concern ◽  
Going Concern Opinion ◽  
Prior Opinion ◽  
Contingency Approach

This study aimed to get empirical evidence the auditor's ability to change and prior opinion in moderating influence on the potential financial distress Award going concern opinion. There’s a going concern opinion because the company indicated no longer able to carry out its life. The results of previous studies get inconsistent results in terms of the potential influence on the provision of financial distress going concern opinion. The existence of a contingency approach can be completed in this study, where the variables change of auditor and prior opinion allegedly moderating influence on the potential financial distress Award going concern opinion. This study uses secondary data. Manufacturing companies listed in Indonesia Stock Exchange period 2009-2015 the population in this study by the amount total of the samples are 77 samples were selected by purposive sampling.

PENGARUH OPERATING CAPACITY, ARUS KAS OPERASI DAN BIAYA VARIABEL TERHADAP FINANCIAL DISTRESS PADA PERUSAHAAN MANUFAKTUR SUBSEKTOR TEXTIL DAN GARMENT YANG TERDAFTAR DI BURSA EFEK INDONESIA (BEI) TAHUN 2009-2016

2018 ◽  
Vol 5 (1) ◽  
pp. 34-49
Author(s):  
Dean Subhan Saleh
Keyword(s):  
At Risk ◽  
Cash Flow ◽  
Financial Distress ◽  
Stock Exchange ◽  
Variable Cost ◽  
Flow Variable ◽  
Analysis Method ◽  
Short Term ◽  
Operating Capacity ◽  
Operating Cash Flow

This research aims to determine the influences of operating capacity, operating cash flow and variable cost to the possibility of companies experiencing financial distress. Currently, we can see the textile and garment industries, were all having profit descreased year by year. If its left constantly and continously, then the company will be at risk of facing financial distress condition. Financial distress is a condition that describes the downturn of corporate performance, so that they are having financial trouble full filling their short term liabilities. Population of this research are manufactured companies on textile and garment’s sectors listed on the Indonesian’s Stock Exchange 2009-2016 periods. By sampling defined with purposive sampling’s methods, there are 10 companies, selected as the research’s samples. And this research using regretions logistics analysis method on SPSS version 23. This research finally conclude that operating capacity significantly by positive having affects to the possibility of companies to suffer financial distress. Operating cash flow significantly by negative having affect to the possibility of companies to suffer financial distress and variable cost significantly by positive having affect to the possibility of companies to suffer financial distress.   Keywords : operating capacity, operating cash flow, variable cost, financial distress.  

scholarly journals The Factors Affecting the Acceptance of Going Concerned Audit Opinion (Empirical Study on Registered Agricultural Sector Companies in Indonesia Stock Exchange 2013-2019)

2022 ◽  
Vol 9 (1) ◽  
pp. 189-200
Author(s):  
Nanda Anugerah ◽  
Erlina . ◽  
Sirojuzilam .
Keyword(s):  
Cash Flow ◽  
Firm Size ◽  
Environmental Performance ◽  
Financial Distress ◽  
Agricultural Sector ◽  
Stock Exchange ◽  
Flow Ratio ◽  
Audit Opinion ◽  
Going Concern ◽  
Agriculture Sector

The study aimed to determine and analyze the effect of financial distress, firm size, profitability, cash flow ratio, leverage, and environmental performance on going concern audit opinion. The research object is the agriculture sector company listed on the Indonesia Stock Exchange (IDX). The population in this study were all companies listed in the agricultural sector on the Indonesia Stock Exchange for the 2013-2019 period. The total population in this study was 21 companies. The method used in determining the sample using the purposive sampling technique. The sample in the study was 17 companies with 119 data analyzed. The study used secondary data and used multivariate analysis. The results of this research state that financial distress, profitability, cash flow ratio, environmental performance do not affect the acceptance of going concern audit opinion. The firm size has a negative effect on the acceptance of going concern audit opinions. In contrast, leverage positively affects the acceptance of going concern audit opinions in the agriculture sector listed on the Indonesia Stock Exchange (IDX) for 2013-2019. Keywords: financial distress, firm size, profitability, flow ratio cash, leverage, going concern audit opinion.

Auditor Differentiation, Mitigating Management Actions, and Audit-Reporting Accuracy for Distressed Firms

2011 ◽  
Vol 30 (1) ◽  
pp. 1-20 ◽  
Author(s):  
Liesbeth Bruynseels ◽  
W. Robert Knechel ◽  
Marleen Willekens
Keyword(s):  
Financial Distress ◽  
Manufacturing Industries ◽  
Short Term ◽  
Industry Specialization ◽  
Reporting Accuracy ◽  
Going Concern ◽  
Management Actions ◽  
Audit Firms ◽  
Going Concern Opinion ◽  
Distressed Firms

SUMMARY: In this paper we examine whether there is auditor differentiation through industry specialization and audit methodology in judging the adequacy of mitigating management actions as implemented by financially distressed companies. Using a sample of U.S. companies from manufacturing industries (SIC 20–39) that went bankrupt between 1999–2002, we find evidence that specialist auditors are more likely to issue a going-concern opinion for soon-to-be bankrupt companies when management undertakes strategic turnaround initiatives, relative to non-specialist auditors. Interestingly, and counter to our expectations, we find that audit firms that use a business risk audit methodology are less likely to issue a going-concern opinion for a firm that subsequently goes bankrupt if the client has undertaken operating initiatives to mitigate financial distress. Finally, we also find very strong evidence that all auditors, irrespective of type, are less likely to issue a going-concern opinion for clients that subsequently go bankrupt when the client has plans to raise cash in the short term.

scholarly journals DETERMINASI FINANCIAL DAN NON FINANCIAL FAKTOR TERHADAP KEPUTUSAN OPINI AUDIT MODIFIKASI GOING CONCERN (PREDIKSI KEBANGKRUTAN PERUSAHAAN YANG TERDAFTAR DI BEI)

2019 ◽  
Vol 21 (2) ◽  
Author(s):  
Indra Saputra
Keyword(s):  
Cash Flow ◽  
Capital Market ◽  
Financial Distress ◽  
Going Concern ◽  
Comprehensive Income ◽  
Audit Fee

AbstractTujuan penelitian ini adalah untuk menguji faktor financial dan non financial terhadap keputusan auditor dalam memberikan opini audit modifikasi going concern yang dijadikan sebagai prediksi kebangkrutan perusahaan. Opini audit modifikasi going concern yang diterima oleh perusahaan menunjukkan suatu peristiwa dan kondisi yang menimbulkan keraguan auditor akan kelangsungan hidup perusahaan yang dapat digunakan sebagai peringatan awal bagi pengguna laporan keuangan guna menghindari kesalahan dalam pengambilan keputusan. Penelitian ini menggunakan data data panel secara kuantitatif berupa data sekunder yaitu laporan tahunan perusahaan selama 2013-2016. Data tersebut diperoleh dengan cara mengakses website www.idx.co.id dan Indonesia Capital Market Directory (ICMD). Pengujian ini dilakukan dengan menggunakan analisis regresi logistik. Hasil penelitian faktor financial dalam model (i) menunjukkan financial distress berpengaruh negatif signifikan terhadap keputusan pemberian opini audit modifikasi going concern, comprehensive income dan cash flow perusahaan berpengaruh positif tidak signifikan terhadap keputusan pemberian opini audit modifikasi going concern. Sedangkan faktor non financial dalam model (II) Audit tenure dan reputasi auditor berpengaruh negatif tidak signifikan terhadap keputusan pemberian opini audit modifikasi going concern. Sedangkan audit fee dan opini audit sebelumnya berpengaruh positif signifikan terhadap keputusan pemberian opini audit modifikasi going concern. Dan umur perusahaan berpengaruh positif tidak signifikan terhadap keputusan pemberian opini audit modifikasi going concern.

FAKTOR - FAKTOR YANG MEMPENGARUHI FINANCIAL DISTRESS PADA INDUSTRI MANUFAKTUR YANG TERDAFTAR DI BEI

2021 ◽  
Vol 5 (1) ◽  
Author(s):  
Yunita - Putri
Keyword(s):  
Cash Flow ◽  
Financial Distress ◽  
Sampling Method ◽  
Stock Exchange ◽  
Intangible Asset ◽  
Test Results ◽  
Manufacturing Companies ◽  
Short Term ◽  
Current Ratio ◽  
Asset Value

The purpose of this study was to determine the effect of current ratios, cash flow, leverage, intangible assets and profitability on financial distress. The population and sample in this study are manufacturing companies listed on the Indonesia Stock Exchange for the period 2014-2018. The sampling method in this study using purposive sampling method and obtained 95 companies. The results showed that the Current Ratio had an effect on Financial Distress. The greater the Current Ratio, the lower the Financial Distress. Because when the Current Ratio has a high value, the company has the ability to meet its short-term obligations by using available current assets. The test results between the Cash Flow (CF) variable and the Financial Distress (FC) variable show that Cash Flow has an effect on Financial Distress. The higher the company's cash flow, the more likely the company will experience financial distress. For the test results between the leverage variable and the financial distress variable, it shows that the leverage variable has an effect on financial distress. The test results between the Intangible Asset variable and the Financial Distress variable show that the Intangible Asset variable has an effect on Financial Distress. If the Intangible Asset value increases, the Financial Distress value (Z-score) decreases. The results of testing the profitability variable with the Financial Distress variable show that the profitability variable has an effect on Financial Distress. Companies with high profitability will reduce the risk of financial distress.). Keywords: Financial Distress, Current Ratio, Cash Flow, Leverage, Intangible Asset, Profitability.

The Impact of Going Concern on Financial Reporting Quality: Evidence from Vietnam

2018 ◽  
Vol 34 (3) ◽  
Author(s):  
Phung Anh Thu ◽  
Nguyen Vinh Khuong
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Financial Distress ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Viet Nam ◽  
Listed Firms ◽  
Going Concern ◽  
Debt Covenant

The investigation was conducted to contribute empirical evidence of the association between going concern and financial reporting quality of listed firms on the Vietnam stock market. Based on data from 279 companies listed on the HNX and HOSE exchanges in Vietnam for the period 2009-2015, the quantitative research. Results found that the relationship between the going concern and financial reporting quality of listed firms. Research results are significant for investors, regulators to the transparency of financial reporting information. Keywords Going concern, financial reporting quality, listed firms References Agrawal, K., & Chatterjee, C. (2015). Earnings management and financial distress: Evidence from India. Global Business Review, 16(5_suppl), 140S-154S.Bergstresser, D., & Philippon, T. (2006). CEO incentives and earnings management. Journal of Financial Economics, 80(3), 511–529.Burgstahler, D., & Dichev, I. (1997). Earnings management to avoid earnings decreases and losses. Journal of Accounting and Economics, 24(1), 99–126.Charitou, A., Lambertides, N., & Trigeorgis, L. (2007a). Earnings behaviour of financially distressed firms: The role of institutional ownership. Abacus, 43(3), 271–296.Chen, Y., Chen, C., & Huang, S. (2010). An appraisal of financially distressed companies’ earnings management: Evidence from listed companies in China. Pacific Accounting Review, 22(1), 22–41Dechow, P., & Dichev, I. (2002). The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors. The Accounting Review, 77, 35-59.DeFond, M., & Jiambalvo, J. (1994). Debt covenant violation and manipulation of accruals. Journal of Accounting and Economics, 17(1), 145–176.DeFond, M.L., & Park, C.W. (1997). Smoothing income in anticipation of future earnings. Journal of Accounting and Economics, 23(2), 115–139.Dichev, I., & Skinner, D. (2004). Large sample evidence on the debt covenant hypothesis. Journal of Accounting Research, 40(4), 1091–1123.Đinh Thị Thu T., Nguyễn Vĩnh K. (2016). Tác động của hành vi điều chỉnh thu nhập đến khả năng hoạt động liên tục trong kế toán: Nghiên cứu thực nghiệm cho các doanh nghiệp niêm yết tại Việt Nam, Tạp chí phát triển khoa học và công nghệ, Quí 3, tr.96-108.Đỗ Thị Vân Trang (2015). Các mô hình đánh giá chất lượng báo cáo tài chính, Tạp chí chứng khoán Việt Nam, 200, tr 18-21.Habib, A., Uddin Bhuiyan, B., & Islam, A. (2013). Financial distress, earnings management and market pricing of accruals during the global financial crisis. Managerial Finance, 39(2), 155-180.Jaggi, B., & Lee, P. (2002). Earnings management response to debt covenant violations and debt restructuring. Journal of Accounting, Auditing & Finance, 17(4), 295–324.Kasznik, R., (1999). On the association between voluntary disclosure and earnings management. Journal of accounting research, 37(1), pp.57-81.Lu, J. (1999). An empirical study of earnings management by loss-making listed Chinese companies. KuaijiYanjiu (Accounting Research), (9), 25–35.McNichols, M.F. and Stubben, S.R., (2008). Does earnings management affect firms’ investment decisions?. The accounting review, 83(6), pp.1571-1603.Selahudin, N.F., Zakaria, N.B., & Sanusi, Z.M. (2014). Remodelling the earnings management with the appear- ance of leverage, financial distress and free cash flow: Malaysia and Thailand evidences. Journal of Applied Sciences, 14(21), 2644–2661.Skinner, D.J., & Sloan, R. (2002). Earnings surprises, growth expectations, and stock returns or don’t let an earnings torpedo sink your portfolio. Review of Accounting Studies, 7(2/3), 289–312.Sweeney, A.P., (1994). Debt-covenant violations and managers' accounting responses. Journal of Accounting & Economics, 17(3): 281-308.Trần Thị Thùy Linh, Mai Hoàng Hạnh (2015). Chất lượng báo cáo tài chính và kỳ hạn nợ ảnh hưởng đến hiệu quả hoạt động của doanh nghiệp Việt Nam, Tạp chí phát triển kinh tế, 10, tr.27-50.Trương Thị Thùy Dương (2017). Nâng cao chất lượng báo cáo tài chính công ty đại chúng, Tạp chí tài chính, 1(3), tr.55-56.Uwuigbe, Ranti, Bernard, (2015). Assessment of the effects of firm’s characteristics on earnings management of listed firms in Nigeria, Asian Economic and Financial Review,5(2):218-228.

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