The going-concern opinion and the adverse credit rating: an analysis of their relationship

Purpose The purpose of this study is to examine the relationship between going-concern (GC) opinions issued by the Big 4 audit firms and adverse credit ratings from the two largest credit rating agencies (CRAs) – Standard & Poor’s (S&P) and Moody’s. This question is relevant because there have been suggestions that auditors and CRAs should become more similar to each other, and because the two largest CRAs have different ownership structures that could affect their ratings. Design/methodology/approach Univariate and multivariate analyses are performed using a sample of firms that filed for bankruptcy between January 1, 2002 and December 31, 2013 that also had an audit opinion signed during the 12 months prior to bankruptcy, along with a credit rating issued by either or both S&P and Moody’s. Both influence each other. The likelihood of an auditor issuing a GC opinion is related to the credit rating issued by both S&P and Moody’s in the month prior to the audit report signing. The results also show differences between the CRAs. S&P reacted in the month after an auditor issued a GC opinion by downgrading its ratings 68% of the time. However, Moody’s did not react as strongly as S&P, downgrading its ratings only 24% of the time. Findings Both audit reports and credit ratings influence each other. The likelihood of an auditor issuing a GC opinion is related to the credit rating issued by both S&P and Moody’s in the month prior to the audit report signing. The results also show differences between the CRAs. S&P reacted in the month after an auditor issued a GC opinion by downgrading its ratings 68% of the time. However, Moody’s did not react as strongly as S&P, downgrading its ratings only 24% of the time. Originality/value Auditors are more likely to issue GC opinions when there is a downgrade to the credit rating, and CRAs are more likely to downgrade their ratings when there is a GC opinion. The study highlights that CRAs with different ownership structures provide different credit rating outcomes.

Turnaround Initiatives and Going Concern Opinion

The main purpose of this study is to examine the role of Statement on Auditing Standards (PSA) No. 30 which requires an independent auditor to evaluate management actions to overcome the financial distress of the company to reduce the possibility of going concern opinion acceptance. Implementation of turnaround initiatives consists of additional capital, borrowing and debt restructuring, asset sales and cost reduction activities. The population of this research is 454 manufacturing companies listed on Indonesia Stock Exchange during 2011-2013. This study finds that borrowing and debt restructuring are positive information which reduces the probability of receiving going concern opinions. Whereas, cost reduction is the negative information that increases the probability of receiving going concern opinion. That shows there is no significant effect of withdrawal of capital and asset sales activities on the probability of going concern opinion acceptance.

Pengaruh Rasio Profitabilitas, Rasio Likuiditas, Pertumbuhan Perusahaan Terhadap Opini Audit Going Concern

The problems that will be discussed in this journal are regarding the relationship between Profitability Ratios, Liquidity Ratios and Company Growth on Audit Delay. The research method used in this study uses secondary data. The population in this study is all Real Estate companies and the Property sub-sector registered on the BEI which are listed on the Indonesia Stock Exchange in 2017, 2018, 2019 and 2020. The sampling method in this study is purposive sampling. The criteria for companies that are sampled are companies that publish audited financial statements for four consecutive years and use the rupiah currency, so that the total number of samples in this study is 165 data. The independent variables in this study are Profitability Ratios, Liquidity Ratios and Company Growth. The dependent variable in this study is audit delay. The data analysis technique used is the Logistics Regression Test with the use of Software Eviews 10. The results of the analysis show that profitability has no significant effect on going concern audit opinion. Meanwhile, company growth and liquidity have no effect on going concern audit opinion. Keywords: Going Concern Opinion, Profitability, Liquidity, and Company Growth

Corporate Innovation and the Auditor's Assessment of Going Concern

In this study, we examine whether external auditors assess corporate innovation activities when considering a financially distressed client's ability to continue as a going concern. Using patent count, patent market value, and patent citation to measure the firm-level innovation output, we document that higher quantity and quality of innovation activities are associated with a lower likelihood of going concern opinions. The association between innovation and going concern opinions is more pronounced for audit offices with high exposure to corporate innovation and clients operating in R&D-intensive industries. In additional analyses, we confirm that innovation is associated with future business value, as measured by future profitability and intellectual property licensing agreements. We conclude that corporate innovation represents a mitigating factor when auditors consider whether a going concern opinion is appropriate for a financially distressed client.

ANALISIS PENGARUH UKURAN PERUSAHAAN, KUALITAS AUDITOR, PROFITABILITAS, DAN LIKUIDITAS TERHADAP OPINI GOING CONCERN PADA PERUSAHAAN JASA YANG TERCATAT DI BURSA EFEK INDONESIA PERIODE 2016-2018

ABSTRACT The purpose of this study is to analyse the effects of company size, auditor’s quality, profitability and liquidity on going concern opinion of the service companies listed on Indonesia Stock Exchange in the period of 2016 to 2018. This study is a quantitative research with causal comparative method and used secondary data. The population in this study covers all sectors of the service companies listed on Indonesia Stock Exchange which amounted 417 companies. There are 33 (thirty three) companies used as samples in this study, with the purposive sampling as the sampling technique and logistic regression for the data analysis. The results of this study indicates that auditor’s quality and liquidity have negative effect and significant on acceptance of going concern opinion with the significance level are 0,014 and 0,010. Meanwhile, company size has positive effect but not significant and profitability has negative effect but not significant to the acceptance of going concern opinion with the significance level are 0,555 and 0,431. And simultaneously independent variables such as company size, auditor’s quality, profitability, and liquidity are all having significant affect on dependent variable which is going concern opinion with the significance level of 88% with the rest of 12% affected by other variables apart from the research.

FAKTOR-FAKTOR YANG MEMPENGARUHI PERUSAHAAN MANUFAKTUR TERDAFTAR DI BEI MELAKUKAN VOLUNTARY AUDITOR SWITCHING

Auditor’s Independence issue is the main cause why companies must do auditor switching mandatorily. Many questions rise when actually there were some companies did voluntary auditor switching outside the rule of auditor switching KMK No. 359/KMK.06/2003 which has been revised to be PMK No. 17/PMK.01/2008. This research is purposed to find empirical evidences about the factors that influence manufacturing companies which are listed in BEI to do voluntary auditor switching. Variables that are used in this research are going concern opinion (OGC), management changes (PM), auditor’s reputation (RA), financial distress (KK), auditor’s fee (LNFEE), and voluntary auditor switching (SWITCH).The data being used is from manufacturing company which is listed in BEI in 2007-2010 period. Data collecting method which used in this research is method purposive sampling, that based on criteria which has been determined before. Based on the method purposive sampling, research sample total is 276 companies. Hypothesis in this research are tested by logistic regression analytical method.Result of this research indicates that variable having which significantly effect the voluntary auditor switching is auditor reputation. On the other hand,other variables like going concern opinion, management changes, financial distress, and auditor’s fee do not have significant effect on company decision to do voluntary auditor switching.

Management’s Undue Influence over Audit Committee Members: Evidence from Auditor Reporting and Opinion Shopping

Audit committee members must be independent of management to protect shareholder interests. While current regulations restrict audit committee members from holding management positions (i.e., affiliations), studies find that management’s preferences continue to impact audit committee decisions. This motivates analysis of independence threats beyond affiliations. We apply the American Institute of Certified Public Accountants’ conceptual approach to independence and examine the threat of management’s undue influence over audit committee members. Examining the relative tenure of executives and audit committee members, we find that greater management influence is associated with a lower propensity of the auditor to issue a modified going concern opinion to a distressed client. We also find that greater management influence is associated with increased opinion shopping behavior. These findings are consistent with an undue influence threat to audit committee independence. Our results extend the academic literature and inform regulatory concerns on audit committee independence.

Faktor yang Mempengaruhi Opini Going Concern (Studi pada Industri Dasar dan Kimia yang Terdaftar di Bursa Efek Indonesia)

This study aims to examine and analyze the influence of leverage, earnings management, and company growth to audit going concern opinion on the basic and chemical industries listed on the Stock Exchange for the period 2012-2016. As an explanatory research, this research used descriptive quantitative approach. The study population was 65 financial statements of basic industrial and chemical companies, with a purposive sampling technique. The research samples were 22 basic and chemical industry financial statements for the period of 2012-2016. The method of data analysis in this study is logistic regression analysis. The results of this study indicate that simultaneously leverage, earnings management, and company growth have a significant effect on the going concern audit opinion on the Basic and Chemical Industries listed on the IDX for the period 2012-2016. Partially leverage, earnings management, and company growth have no effect on going concern audit on Basic and Chemical Industries listed on the Stock Exchange for the period 2012-2016 with a significant value> 0.05. The results of Nagelkerke's R Square value in this study are 0.042 which can state that the dependent variable variability (going concern audit) can be explained by the variability of independent variables (leverage, earnings management and company growth) 42% while the remainder equals 58% explained by independent variables others. Keywords: Leverage, Earnings Management, Growth of Company, Audit, Going Concern Opinion

The Influences of Solvency, Cash Flow Ratio and Profitabiliy toward Going Concern Opinion

<p>In providing an audit opinion, some assumptions must be met, one of which is that it will continue. In terms of corporate sustainability accounting, this is called a going concern. To evaluate whether the company has a going concern, an auditor can look at several indicators. These indicators include solvency, cash flow, and profitability. This study attempts to investigate the effect of these three variables towards audit going concern. Multiple linear regression statistical methods are used to link them with the going concern level. Based on the research results on 56 companies listed on the Indonesia Stock Exchange from 2017 to 2019, it can be concluded that solvency, cash flow, and profitability significantly affect the company.</p>