The Impact of Audit Quality, the Company's Financial Condition,

Previous Year's Audit Opinion, Company Growth and Company

Size towards Going Concern Audit Opinion in manufacture in
Indonesia Stock Exchange (2015-2017)

SKRIPSI

Presented in partial fulfillment of the requirements for

The Bachelor’s Degree in Accounting

by
Isac Lewis H.
008201500054

FACULTY OF BUSINESS
ACCOUNTING STUDY PROGRAM
PRESIDENT UNIVERSITY
CIKARANG, BEKASI
2019
PLAGIARISM CHECK RESULT

II
III
IV
V
 TABLE OF CONTENTS

COVER PAGE ..................................................................................................... II

PLAGIARISM CHECK RESULT ..................................................................... II

DECLARATION OF ORIGINALITY ............................................................. VI

PANEL OF EXAMINERS APPROVAL ........................................................ VII

ACKNOWLEDGMENT.................................................................................. VIII

RECOMMENDATION LETTER FROM THESIS ADVISOR .......................X

TABLE OF CONTENT ................................................................................... XIV

LIST OF FIGURES ......................................................................................... XIV

LIST OF TABLES ............................................................................................. XV

ABSTRACT ...................................................................................................... XVI

INTISARI .........................................................................................................XVII

CHAPTER I - INTRODUCTION ....................................................................... 1

1.1 Research background................................................................................ 1

1.2 Research problem ..................................................................................... 3

1.3 Research Questions .................................................................................. 5

1.4 Research Objectives ................................................................................. 5

1.5 Research scope and limitation .................................................................. 6

1.6 Research benefits ...................................................................................... 6

CHAPTER II – LITERATURE REVIEW ......................................................... 8

2.1 Foundation Review and Research ............................................................ 8

2.1.1 Agency Theory .................................................................................. 8

2.1.2 Audit Opinion.................................................................................... 9

2.1.3 Audit Opinion Going Concern ........................................................ 12

2.2 Hypothesis Development........................................................................ 20

XI
 2.2.1 Effect of audit quality on The tendency of Going Concern audit
opinion 20

2.2.2 Effect of financial conditions on the Tendency of Going concern

audit opinion .................................................................................................. 21

2.2.3 The effect of the going concern audit opinion of the previous year
on the tendency of going concern audit opinion ............................................ 22

2.2.4 The influence of company growth on the tendency of going concern

audit opinion .................................................................................................. 23

2.2.5 Effect of company size on the tendency of going concern audit

opinion 24

2.3 Research Framework .............................................................................. 25

CHAPTER III – RESEARCH METHOD ....................................................... 25

3.1 Data Colllecting and Processing ............................................................. 26

3.1.1 Population and Samples .................................................................. 26

3.1.2 Variable Measurement .................................................................... 27

3.2 Secondary Data ....................................................................................... 28

3.3 Variables and Measurements.................................................................. 28

3.3.1 Dependent Variable (Y) .................................................................. 28

3.3.2 Independent Variables (X) .............................................................. 29

3.4 Research Model ...................................................................................... 32

3.4.1 Descriptive Statistics Analysis ........................................................ 32

3.4.2 Inductive Statistics Analysis ........................................................... 32

CHAPTER IV – RESULT ANALYSIS, DISCUSSIONS AND

IMPLICATIONS................................................................................................. 37

4.1 Data Description ..................................................................................... 37

4.1.1 Descriptive Statistics ....................................................................... 37

XII
 4.1.2 Goodness of Fit Test ....................................................................... 41

4.1.3 Overall Model Fit Test .................................................................... 42

4.1.4 Simultaneous Test (F- Test) ............................................................ 43

4.1.5 Partial Test (T- Test) ....................................................................... 45

4.2 Result and Discussion............................................................................. 48

4.2.1 The Influence of Audit Quality on Audit Going Concern Opinion 48

4.2.2 The Influence of company financial condition on Audit Going

Concern Opinion ............................................................................................ 49

4.2.3 The Influence of Previous audit opinion on Audit Going Concern

Opinion 50

4.2.4 The Influence of Company growth on Audit Going Concern

Opinion 50

4.2.5 The Influence of company size on Audit Going Concern Opinion 51

CHAPTER 5 ........................................................................................................ 53

5.1 Conclusion .............................................................................................. 53

5.2 Limitations.............................................................................................. 54

5.3 Recommendations .................................................................................. 55

REFERENCES .................................................................................................... 56

APPENDICES ..................................................................................................... 59

XIII
 LIST OF FIGURES

Figure 2.3 1 ........................................................................................................... 25

XIV
 LIST OF TABLES

Table 2.11.............................................................................................................. 17

Table 3.1.12........................................................................................................... 26

Table 3.1.23........................................................................................................... 27

Table 3.3.2.24........................................................................................................ 31

Table 4.1.1 5.......................................................................................................... 37

Table 4.1.26........................................................................................................... 42

Table 4.1.37........................................................................................................... 42

Table 4.1.48........................................................................................................... 44

Table 4.1.59........................................................................................................... 45

Tabel 4.1.610......................................................................................................... 46

XV
 ABSTRACT

This study aims to determine the effect of the relationship of audit quality, company

financial conditions, previous year's audit opinion, company growth and company

size towards the tendency of going concern audit opinion acceptance. The

population in this study are manufacturing companies listed on the Indonesia Stock

Exchange (IDX) in the period 2015-2017 that have been audited and published.

Sample selection was done by purposive sampling. Based on certain criteria

determined by the author, 66 samples were obtained. The method used to analyze

the relationship between variables is the logistic regression method. After analyzing

the data based on the Altman model, it was found that the audit quality variable, the

previous year's audit opinion, the company's financial condition did not

significantly influence the acceptance of going concern opinion using the Altman

Model. While company growth and company size have a positive effect on the

acceptance of the going concern audit opinion on the Altman model.

Keywords : Altman Model, audit quality, financial condition, audit opinion prior
year, company growth, company size, going concern audit opinion.

XVI
 INTISARI

Penelitian ini bertujuan untuk mengetahui pengaruh hubungan dari kualitas audit,

kondisi keuangan perusahaan, opini audit tahun sebelumnya, pertumbuhan

perusahaan dan ukuran perusahaan terhadap kecenderungan penerimaan opini audit

going concern. Populasi dalam penelitian ini adalah perusahaan manufaktur yang

terdaftar di Bursa Efek Indonesia (BEI) pada periode tahun 2015 – 2017 yang telah

diaudit dan dipublikasikan. Pemilihan sampel dilakukan dengan purposive

sampling. Berdasarkan kriteria – kriteria tertentu yang ditentukan penulis, maka

diperoleh 66 sampel . Metode yang digunakan untuk menganalisis hubungan antar

variabel adalah metode regresi logistik. Setelah dilakukan analisis data berdasarkan

model altman, maka didapatkan hasil penelitian bahwa variabel kualitas audit, opini

audit tahun sebelumnya, kondisi keuangan perusahaan tidak berpengaruh signifikan

terhadap penerimaan opini going concern dengan menggunakan Altman Model.

Sedangkan pertumbuhan perusahaan dan ukuran perusahaan berpengaruh positif

terhadap penerimaan opini audit going concern pada model altman.

Kata Kunci : Altman Model, kualitas Audit, kondisi keuangan, opini audit tahun
sebelumnya, pertumbuhan perusahaan, ukuran perusahaan, opini audit going
concern.

XVII
 CHAPTER I
INTRODUCTION

1.1 Research background

Going concern is the survival of an entity. Going is also a basic assumption in

the preparation of financial statement, a company is not intent or want to liquidate

or reduce business scale materially (Financial Accounting Standard, 2009)

Going concern used as an assumption in reporting the company’s financial

statement as long as there is no contrary information which could not support going

concern assumption. According to Peryataan Standar Akuntansi No.30 about

auditor's consideration of entities ability in maintaining its living, information that

is significantly considered contrary to the assumption that the survival of the

business unit is related with the inability of the business unit to fulfill obligations

when they fall tempo without selling most of the assets to outside parties through

ordinary business, debt restructuring, repairs to operations imposed from outside

and other similar activities.

Izquierdo et al. (2019) conducted a study that identified reactions of investors

to audit opinions that contain information on the company's survival based on

disclosure of the results of financial statement analysis. The study find evidence

that when investors will invest, they need to find out the financial condition of the

company, by looking at the auditor's report especially concerning the survival of

the company. Related to the importance of the audit opinion issued by the auditor,

1
then the auditor must be responsible for issuing the going concern audit opinion

consistent with the actual conditions. There are several factors that can be assessed

as a factor that influences the acceptance of going-concern audit opinion, which are

audit quality, company financial condition, previous year's audit opinion, company

growth and company size.

Good audit quality will produce useful information for users of financial

statements in terms of decision making. Auditors who have good audit quality tend

to issue a going concern audit opinion if the client has a going problem concern. As

expressed by William (2015) found research evidence that Top 4 Public Accounting

Firm were more likely to issue going concern audit opinions on companies that

experienced financial distress than non-Top 4 Public Accounting Firm. Large scale

auditors could provide better audit quality than small scale auditors, including in

expressing going concern problems. The greater the auditor scale, the more likely

the auditor to issue an audit opinion going concern.

The financial condition of the company describes the level of the company’s

health condition. Jamaluddin (2016) states that the more the condition of the

company is disrupted or worsens, the more likely the company will receive an audit

opinion going concern. Conversely, in companies that have never experienced

difficulties financial auditor never issues a going concern audit opinion. The going

concern audit opinion that has been received by the auditee in the previous year will

be an important consideration factor for the auditor in issuing the going concern

audit opinion for the current year if the auditee's financial condition does not show

2
signs of improvement or the absence of a management plan to improve the

company's condition.

A company with a positive sales growth ratio gives an indication that the

company is better able to maintain its survival and the possibility of the company

against bankruptcy is small. Therefore, the higher the company's sales growth ratio,

the less likely it is for the auditor to issue an audit going opinion concern. While

companies with negative sales growth ratios indicate a greater tendency towards

bankruptcy so that if management does not immediately take corrective action, the

company may not be able to maintain its survival.

William (2015) states that auditors more often issue going concern audit

opinions on small companies, because the auditor believes that large companies can

resolve the difficulties of the financial difficulties he faced from a small company.

In 2015, William conducted a study of the factors that influence audit reports on

companies that go bankrupt. The results provide empirical evidence that there is a

negative relationship between company size and acceptance of audit going opinion

concern.

1.2 Research problem

The researcher assumes that the research on going concern audit opinion

in Indonesia is still an important and interesting object of research because

considering that the going concern audit opinion of a business entity is one thing

that underlie investors in making investment decisions and also creditors in lending

funds with the aim of making a profit from the activity of the entity. In addition, the

3
audit opinion is going concern frequently linked to the company's management

capabilities for more maintain the viability of its business.

Based on the previous research that has been done by Badrun (2010) that

financial conditions, audit quality, previous year audit opinion, company growth,

and company size are not significant to going concern audit opinion. On the other

side, Alicia (2013) found that financial conditions, audit quality, previous year audit

opinion, company growth, and company size are not significant to going concern

audit opinion.

Based on no uniformity in the results of the study, researchers want to

explore and modify the previous research by adding several variables. The research

that will be conducted this time refers to the research that has been done by Tuttle

and Vandervelde in 2012 which entitled “Consequences of Going Concern Opinion

for Company”. The variables used in this study are audit quality, company financial

condition, previous year's audit opinion, growth company and company size. The

population used in this study is a manufacturing company listed on the Indonesia

Stock Exchange in the period 2015 - 2017. The reason for choosing a manufacturing

company is to avoid there is an industrial effect that is different industry risk among

an industrial sector one with another (Setyarno et al. 2006). The researcher would

like to propose the title of this research is “The Impact of Audit Quality, The

Company's Financial Condition, Previous Year's Audit Opinion, Company

Growth, snd the Size of The Company Towards The Tendency of Going Concern

Audit Opinion.”

4
1.3 Research Questions

Based on the background description described earlier, then the formulation of

the problem in this study are consist of the following questions:

1. Does audit quality affect the tendency of audit going concern opinion?

2. Does the company's financial condition affect trends acceptance of going

concern audit opinion?

3. Does the previous year's audit opinion affect trends acceptance of going

concern audit opinion?

4. Does the company's growth affect the possibility acceptance of going

concern audit opinion?

5. Does the size of the company affect the possibility of acceptance going

concern audit opinion?

1.4 Research Objectives

In accordance with the formulation of the problem above, the objectives of this

study are:

1. To find empirical evidence whether audit quality factors are influential

towards the tendency of going concern audit opinion.

2. To find empirical evidence on the factors in the company's financial condition

affect the tendency of going concern audit opinion.

3. To find empirical evidence on the previous year's audit opinion factor affect

the tendency of going concern audit opinion.

5
 4. To find empirical evidence on the growth factor of the company affect the

tendency of going concern audit opinion.

5. To find empirical evidence on the size factor of the company affect the

tendency of going concern audit opinion.

1.5 Research scope and limitation

1.1.1 Research Scope

The scope of this research is manufacturing companies listed in Indonesia

Stock Exchange, for the period 2015-2017.

1.1.2 Research Limitation

Due the limitation of time, the researcher only focused on companies

related data for three years (2015-2017) and focus for several variable. This

research also did not contain any mediating or moderating variable, for the

future the researcher may add moderating or mediating variable to see the

research in another point of view. The future researcher might add new

variables that can be taken into consideration of factors that affect the tendency

of going concern audit opinion.

1.6 Research benefits

The results of this study are expected to provide benefits to:

1. Investor

The results of this study can provide information to investors regarding financial

condition of a public company listed on the Stock Exchange Indonesia,

6
moreover it can be used as consideration before the investors decide to invest

their money in one company.

2. Practitioners of Public Accountants, especially Auditors

This research can be useful for auditors especially in provide a going concern

audit opinion assessment to the auditee.

3. Future Researcher

The results of this study are expected to be used as reference material or

consideration in subsequent research and adding scientific discourse in auditing

and accounting is mainly concerned with factors that influence the tendency to

accept audit going opinion concern.

7
 CHAPTER II
LITERATUR REVIEW

2.1 Foundation Review and Research

This section will explain the theory regarding going-concern audit opinion.

Besides this section also describes various aspects of research - previous research

especially research on going-concern audit opinion which is then explained as

follows.

2.1.1 Agency Theory

Susanto (2012) describe agency relations as a contract under one or more

principals involve agents to carry out some services for them with delegate decision

making authority to the agent. Well the principal and agent are assumed to be

rational and solely economic people motivated by personal interests. Shareholders

or principals delegate making decisions about the company to the manager or agent.

However, managers do not always act according to the wishes of shareholders,

partly because of moral hazard.

An independent third party is needed as a mediator in the relationship

between principal and agent. This third party functions to monitor the behavior of

the manager (agent) whether it has acted according to the principal's wishes. The

auditor is parties that are able to bridge the interests of the principal (shareholders)

with the manager (principal) in managing the company's finances (Setiawan, 2011).

The auditor performs the function of monitoring the manager's work through a

means, namely annual report. The auditor's job is to provide opinions on financial

8
statements about the reasonableness. In addition, the current auditor must also

considering the survival of the company.

2.1.2 Audit Opinion

The auditor's general objective is to provide unqualified opinionson the

financial statements of an entity. Unqualified opinion states that financial

statements have presented fairly within all material matters concerning financial

position, operating results and cash flow

in accordance with GAAP (Guy et al., 2003).

The audit opinion is stated in an audit report. Audit report consists of three

paragraphs, including: opening paragraph (opening paragraph), paragraph

paragraph and scope of opinions (opinion paragfraph). The opening paragraph

(opening paragraph) identifies the report audited financial statements and states that

the financial statements are responsibility of the entity's management. In the scope

paragraph The auditor describes the explicit nature of the audit and explicitly states

that the audit conducted has provided an adequate basis for expressing an opinion

on financial statements. And in the opinion paragraph (opinion paragfraph), the

auditor communicate the results of the audit.

There are five types of audit opinions according to Mulyadi (2002), namely:

1. Unqualified opinion. With unqualified opinions, the auditor states that the

financial statements present fairly in all matters that are material in

accordance with generally accepted accounting principles in Indonesia.

9
 Audit reports with unqualified opinions are issued by the auditor if the

following conditions are met:

a. All balance sheet reports, profit and loss statements, changes in equity

reports, and cash flow statements contained in financial statements.

b. In carrying out the engagement, all general standards can be met by the

auditor.

c. Sufficient evidence can be collected by the auditor and the auditor has

carried out the engagement in such a way that it is possible to carry out

three standards of field work.

d. The financial statements are presented in accordance with generally

accepted accounting principles in Indonesia.

e. There are no circumstances that require the auditor to add explanatory

paragraphs or modify words in the audit report.

2. Unqualified opinion with an explanatory language added in an unqualified

opinion with explanatory language The situation that is the main cause of

adding an explanatory paragraph or modification of words in the standard

audit report is:

a. Inconsistency in applying general accepted accounting principles.

b. Great doubt about the survival of the entity.

c. The auditor agrees with a deviation from the accounting principles

issued by the Financial Accounting Standards Board.

d. Emphasis on something.

e. Audit report involving other auditors

10
3. Fair opinion with an exception (qualified opinion) Through reasonable

opinions with exceptions, the auditor stated that financial statements present

fairly, in all material respects, the financial position, results of operations,

and cash flows of an entity in accordance with generally accepted

accounting principles in Indonesia, except for the effects of excluded

matters. Fair opinions with exceptions are stated in the circumstances:

a. There is insufficient competent evidence or restrictions on the scope of

the audit.

b. The auditor believes that the financial statements contain deviations

from the generally accepted accounting principles in Indonesia, which

have a material impact, and he concludes not to express unreasonable

opinions.

4. Adverse opinions An unfair opinion is given by the auditor if the auditee's

financial statements do not fairly present financial statements in accordance

with general accepted accounting principles.

5. Not giving a opinion (disclaimer of opinion) With a statement not giving an

opinion, the auditor stated that he did not express an opinion on the client's

financial statements. A statement not giving an opinion is given by the

auditor if he does not carry out an audit that is sufficiently adequate to allow

the auditor to give an opinion on the financial statements. A statement not

11
 giving an opinion can also be given by the auditor if he is in a condition that

is not independent in relation to the client.

2.1.3 Audit Opinion Going Concern

Going concern is the survival of a business entity. Going concern is also

used as an assumption in financial reporting insofar as it is not proven that

information indicates the contrary information. Usually information that is

significantly considered contrary to the assumption of business unit survival is

related to the inability of the business unit to fulfill obligations at maturity without

selling most assets to outside parties through ordinary business, debt restructuring,

improvement of operations imposed from outside and activities similar to others.

(Pernyataan Standard Akuntan No.30)

SPAP (Pernyataan Standard Akuntan No.30) states that the auditor must

evaluate whether there is deep doubt about the ability of the business unit to

maintain its survival within a reasonable period of time, not more than one year

from the date of the audited financial statements in the following manner:

a. The auditor considers whether the results of the procedures carried out when

planning an audit, gathering evidence, and completing an audit identify

conditions and events that, if thoroughly considered, indicate the reason for

deep doubt about the entity's ability to continue business during a reasonable

period. Additional information about conditions and events may be needed

12
 similarly, the following evidence is suitable to support information that can

help reduce auditor doubts.

b. If the auditor believes that there is doubt about the business unit in

maintaining its survival within a reasonable period of time, it must:

1. obtain information about management plans aimed at reducing the

impact of these conditions and events.

2. establish the possibility that the plan is held effective.

c. After the auditor evaluates the management plan, he concludes whether he

has doubts about the ability of the business unit to maintain its survival

within a reasonable period of time. If management does not have a plan that

reduces the impact of conditions and events on the ability of the business

unit to survive, the auditor considers giving a statement not giving an

opinion.

d. If management has the plan, the next step that the auditor must do is to

conclude the effectiveness of the plan.

1. If the auditor concludes that the plan is ineffective, the auditor stated not

giving opinion.

2. If the auditor concludes the plan is effective and the client disclose in

the financial statement notes, the auditor expresses an unqualified

opinion.

3. If the auditor concludes that the plan is effective but the client does not

disclose in the financial statements, the auditor gives an inappropriate

opinion.

13
 In carrying out the going concern audit procedure, the auditor can identify

information about certain conditions that indicate great doubt about the ability of

the business unit to maintain its viable viability, ie no more than one year from the

date of the financial statements being audited (Standar Profesional Akuntan Publik,

2011). The significance of the condition or event will depend on the circumstances

and some including the possibility of only being significant if reviewed together

with other conditions or events. Here are some examples, but not limited to these

conditions or events:

1. Negative trends, for example, repeated operating losses, lack of working

capital, negative cash flow from business activities, important bad financial

ratios.

2. Other instructions regarding possible financial difficulties, such as failure to

fulfill debt obligations or similar agreements, delinquent payment of

dividends, refusal by suppliers to submit requests for ordinary credit

purchases, debt restructuring, non-compliance with capital requirements

such as Article 47 KUHD (Kitab Undang Undang Hukum Dagang, 2015),

the need to find new sources or methods of spending or sale of most assets.

3. Internal problems for example, work strikes or other difficulties in labor

relations, large dependence on the success of a particular project, long-term

commitments that are not economical, the need to significantly improve

operations.

External problems that have occurred as an example of complaint filing

court, issuance of law, or other problems that might endanger the ability of the

14
business unit to operate; franchise loss, licenses, or important patents; loss of major

customers or suppliers; losses due to major disasters such as earthquakes, floods,

droughts that are not insured or insured but with low coverage.

Research on going concern audit opinion including William (2015) in

Harjito (2016) conducted a test by designing the relationship between going

concern opinion and the availability of public information. Discriminant analysis is

used to test the going concern opinion decision model by using a sample of

manufacturing companies that accept going concern opinion and samples of

manufacturing companies that show potential difficulties in going concern

problems but do not accept going-concern opinions.

The first step, William uses a model of 6 financial ratios ranked by auditors.

The six ratios are: Cash Flow / Total Liabilities, Current Assets / Current Liabilities,

Net Worth / Total Liabilities, Total Long-term Liabilities / Total Assets, Total

Liabilities / Total Assets, and Net Income Before Tax / Net Sales. The second step,

entering items contrary to information and mitigating factors as described in

Statement of Auditing Standards (Statement of Auditing Standards No. 34). The

final step, William added measurements of trend and type of opinion the previous

year.

The findings indicate that the model with financial ratios and audit opinion

types of the previous year had the highest overall prediction accuracy of 89.9%

compared to other models. These results indicate that knowledge of financial ratios

15
and types of previous year's audit opinion are very useful in predicting going-

concern audit opinion decisions.

Harjito (2016) examines the effect of variable audit committee existence,

debt default, financial condition, previous year's audit opinion, company size and

auditor scale on the possibility of receiving going concern audit opinion on

companies that are experiencing financial distress. The study proves that the default

debt variable, financial condition, previous year's audit opinion significantly

influence the acceptance of going-concern audit opinion.

Kurniati (2012) examined four prediction models of bankruptcy and the

influence of company growth and KAP's reputation on going concern opinion. This

study uses 54 manufacturing companies listed on the IDX in 2008-2010. The results

of this study indicate that the Altman prediction model is the best prediction model

among the other three models in predicting corporate bankruptcy. The company's

growth and auditor's reputation do not affect the acceptance of going-concern audit

opinion.

Badrun (2010) examined the influence of audit audit quality, company

financial condition, previous year's audit opinion, company growth on going-

concern audit opinion. This study uses all manufacturing companies listed on the

Indonesia Stock Exchange (IDX) during 2005 - 2007. The results of this study

indicate that the variable audit quality, company growth, company financial

condition and company sie does not significantly influence the acceptance of going-

16
concern audit opinion. While the variable opinions of the previous year had a

significant effect.

Suharti (2015) examined how the influence of financial ratios and non-

financial ratios in providing a going concern audit opinion to the auditee. The results

of the study provide evidence that only one financial ratio (liquidity ratio) and two

non-financial ratios (previous year's audit opinion and audit lag) have a significant

influence on the issuance of the going concern audit opinion by the auditor at the

auditee at a 5% significance level while other variables not significant

Table 2.1 1

Summary of Previous Research

No Researcher Sample Independent Analytic Result of

(Year) Variable Tool Research
1 Badrun All -Audit quality Logistic Audit
(2010) manufacturing - financial Regression quality,
companies conditions financial
(which -audit opinion condition,
experience the previous audit
financial year opinon,
distress) -company company
size size and
-company company
growth growth are
not
significant,
while audit
opinion
previous
year had
significant
effect

17
2 Kurniati 54 -Auditor Logistic Auditor
(2012) manufacture Reputation Regression Reputation,
company -Company Company
(which Growth Growth is
experience -Models of does not
financial Bankruptcy have
distress) -Audit significant
Opinion influence,
Going while model
Concerns of
bankruptcy
had
significant
influence
3 Alichia 88 manufactur -audit opinion Logistic audit
(2013) company the previous Regression opinion the
year previous
-company year had a
size significant
-company influence,
growth while
company
size and
company
growth does
not have
significant
influence
4 Aisiah 37 manufactur -Audit quality Logistic financial
(2012) company - financial Regression conditions
conditions has
-audit opinion significant
the previous influence
year while Audit
-company quality,
size audit
-company opinion the
growth previous
year,
company
size and
company
growth does
not have
significant
influence

18
5 Khotimah 108 -Audit quality Logistic audit
(2015) manufacturing - financial Regression opinion the
company conditions previous
-audit opinion year had
the previous significant
year influence
-company while Audit
growth quality,
financial
conditions
and
company
growth does
not have
significant
influence

6 Sherlita 55 - financial Logistic company

(2015) manufacturing condition of Regression size has
company the company significant
- company influence
growth while
- audit quality financial
-opini audit condition of
the previous the
year company,
- company company
size growth,
audit
quality
and opini
audit the
previous
year does
not have
significant
influence

7 Indira et al. 282 - liquidity Logistic Only one

(2008) manufactur liquid Regression financial
company -Roof ratio
profitability (liquidity
- rhythm ratio) and
activity two non-
- leverage financial
leverage ratios

19
 - sales growth (previous
ratio year's audit
- market opinion and
value ratio audit lag)
- company have a
size significant
- Public influence on
accountant the issuance
firm of going-
reputation concern
-opini audit audit
going opinion,
concern the while other
previous year variables
- Auditor are not
client tenure significant.
audit lag

2.2 Hypothesis Development

In this section several hypotheses and arguments will be proposed

underlying this hypothesis.

2.2.1 Effect of audit quality on the tendency of going concern audit opinion

Good audit quality will produce information that is very useful for users of

financial statements in terms of decision making. Therefore, the auditor is

responsible for providing quality audit services. Auditors who have good audit

quality are more likely to issue a going concern audit opinion if the client has a

going concern problem.

Harjito (2016) found univariate evidence that big four auditors were more

likely to issue going concern audit opinions on companies that experienced

financial distress than non big four auditors. Large scale auditors could provide

20
better audit quality than small scale auditors, including in expressing going concern

problems. The greater the auditor scale, the more likely the auditor to issue a going-

concern audit opinion.

Setyarno et al. (2006) states that large-scale auditors have more incentives

to avoid criticism of reputation damage compared to small-scale auditors. Large-

scale auditors are also more likely to reveal problems that exist because they are

more

strong risk of litigation. The statement means that large-scale auditors have a greater

likelihood than small-scale auditors in reporting the business continuity problems

of their clients if it is proven that their clients have problems in the continuity of

their business. Based on the description above, the first hypothesis proposed is as

follows:

H1: Audit quality has a positive effect on the tendency of going concern audit

opinion.

2.2.2 Effect of financial conditions on the tendency of going concern audit

opinion

The health level of a company can be seen from the company's financial

condition. Companies that have good financial conditions, the auditor will not issue

a going concern audit opinion (Harjito, 2016).

Research Setyarno et al. (2006) using logistic regression shows that the

financial condition variables proxied by The Altman Model have a significant effect

21
on the acceptance of going-concern audit opinion. The results of this study are

consistent with previous studies conducted by Harjito (2016) which provide

evidence that auditors almost never give going concern audit opinions to companies

that do not experience financial distress (financial distress)

Refers to research conducted by Fanny et al. (2005), in this study

bankruptcy prediction models were used to measure the company's financial

condition are The Altman Model. Some previous studies concluded that bankruptcy

prediction models using financial ratios are more accurate than auditors' opinions

in classifying companies bankrupt and not bankrupt (Altman and McGouch, 1974;

Koh and Killough, 1990, Koh, 1991) in Setyarno et al. (2006).

Based on the description above, the second hypothesis proposed is as follows:

H2: The company's financial condition as measured by The Altman Model

(1968) has a negative effect on the tendency of going concern audit opinion.

2.2.3 The effect of the going concern audit opinion of the previous year on

the tendency of going concern audit opinion

The going concern audit opinion that has been received by the auditee in the

previous year will be an important consideration factor for the auditor in issuing the

going-concern audit opinion in the current year if the auditee's financial condition

does not show signs of improvement or the absence of a management plan to

improve the company's condition .

22
 Setyarno (2006) examined the effect of the availability of public

information on the going concern audit opinion, namely the type of audit opinion

the company has received. The results show that the discriminant analysis model

that includes the type of audit opinion in the previous year has the highest overall

prediction accuracy of 89.9 percent compared to other models.

Santosa et al.(2007) analyze the factors that influence the tendency of going

concern audit opinion. The results show that the previous year's audit opinion

variable has a positive effect on the acceptance of going-concern audit opinion. So

that if the auditee receives the going concern audit opinion in the previous year,

then the possibility of the auditee to receive the going concern audit opinion back

the following year will be even greater.

Consistent with previous research, the third hypothesis proposed is:

H3: Previous year's audit opinion has a positive effect on the tendency of going

concern audit opinion.

2.2.4 The influence of company growth on the tendency of going concern

audit opinion

In this study the company's growth is proxied by the ratio of sales growth.

Setyarno et al. (2006) suggest that this ratio measures how well the company

maintains its economic position both in its industry and in overall economic

activity. Sales are the company's main operating activities. A company with a

positive sales growth ratio gives an indication that the company is better able to

maintain its survival and the possibility of the company against bankruptcy is small.

23
Therefore, the higher the growth ratio of the company's growth, the less likely the

auditor to issue a going-concern audit opinion.

Petronela (2012) suggests that companies with negative growth indicate a

greater tendency towards bankruptcy so that companies that profit will not

experience bankruptcy because bankruptcy is one of the bases for auditors to

provide going-concern audit opinions, companies that experience growth in the

company the negative will be the higher the tendency to accept going concern

opinion.

Based on the description above, the fourth hypothesis proposed is as follows:

H4: Company growth has a negative effect on the tendency of going concern

audit opinion

2.2.5 Effect of company size on the tendency of going concern audit opinion

Santosa et al. (2007) conducted a study of the factors that influence the

tendency of going concern audit opinion. The results of the study provide evidence

that the size of the company influences the acceptance of going-concern audit

opinion. This result is in accordance with the research of William J. Read et al.

(2015) which provides empirical evidence that there is a negative relationship

between company size and the acceptance of going-concern audit opinion.

Harjito (2015) states that large companies offer higher audit fees than those

offered by small companies. In relation to the significant audit fee, the auditor may

hesitate to issue a going concern audit opinion to a large company.

24
Based on the description above, the fifth hypothesis proposed is as follows:

H5: Firm size has a negative effect on the tendency of going concern audit

opinion

2.3 Research Framework

This study seeks to examine the effect of audit quality, conditions company

finance, previous year's audit opinion, company growth, and company size towards

the tendency of going concern audit opinion acceptance. The proposed framework

is as follows:

INDEPENDENT VARIABLE

AUDIT QUALITY (H1+)

COMPANY FINANCIAL DEPENDENT VARIABLE

CONDITION (H2-)
ADMISSION OF
PREVIOUS YEAR AUDIT GOING
OPINION (H3+) CONCERN
AUDIT OPINION
COMPANY GROWTH (H4-)

COMPANY SIZE (H5-)

Figure 2.3 1
Research Framework Scheme

25
 CHAPTER III
RESEARCH METHOD

3.1 Data Colllecting and Processing

3.1.1 Population and Samples

Population defines as the generalization area to be studied

which has the certain quality and characteristics settled by researcher.

In this research, the population includes manufacturing companies

listed in the Indonesia Stock Exchange (IDX). From that population,

the researcher takes samples from manufacturing companies’

financial statements from year 2015-2017 listed on Indonesia Stock

Exchange (IDX). The determination of company in selecting sample

for this study will be done by purposive sampling method which is

chosen based on the following criteria:

1. The Auditee was registered on the Indonesia Stock Exchange

before January 1, 2017 because the year of observation was 2015
- 2017.
2. Publish financial statements as of December 31 from the year
(2015 - 2017)
3. Published the independent auditor's report the previous year
(2015-2017)
4. Having net income after tax which is negative at least one
financial statement period during the observation period.

26
 No. Sample Criteria Total
1 Manufacturing companies listed in the 144
Indonesia Stock Exchange (IDX) for the
period of 2015-2017
2 Manufacturing companies are de-list (7)
during the research period (2015-2017)
3 Manufacturing companies are always (110)
experience positive after-tax net income
during financial statements during the
research period (2015-2017)
4 Manufacturing companies with audit (5)
reports
Sample per year 22
Total Sample (x3) 66
Table 3.1.1 2

3.1.2 Variable Measurement

Table 3.1.2 3

Variable Indicator Scale Data Source Instrument

Audit Quality Big 4 / non big Dummy Secondary Audit Report
4
Company Altman Ratio Secondary Financial
Financial Statement
Condition
Previous GCO/non- Dummy Secondary Audit Report
year’s audit GCO
opinion
Company Sales Growth Ratio Secondary Financial
Growth Ratio Statement
Company size Total Assets Ratio Secondary Financial
Statement

27
3.2 Secondary Data

This research uses secondary data as the main resource.The

secondary data is any information that has been obtained from previous

researches, articles,books, journals and competent website such as

Indonesia Stock Exchange (IDX). The data collected is practical as it

provides the researcher any established study in order to broaden the area of

research itself. The researcher use the data that have been issued by

Indonesia Stock Exchange (IDX, 5 may 2019).

3.3 Variables and Measurements

3.3.1 Dependent Variable (Y)

Dependent variable is a variable that evolves into the primary

concern of research which is properly specified as the Y variable. This

variable is dependent on the effect of any other factors. The dependent

variable is also referred as the result variable. In this study, the dependent

variable is going concern audit opinion. Going concern is a change in auditor

carried out by the client company without any regulation that require client in

transferring its auditor. Currently, Going concern is dummy variable. If the

company receive going concern audit opinion, there will be given a value of

1, whereas value of 0 will be given if the company does not given going

concern audit opinion.

28
3.3.2 Independent Variables (X)

3.3.2.1 Audit Quality

Audit quality variables in this study are proxied using the

auditor scale. This variable is measured using dummy variables,

where category 1 for auditors is incorporated in a large scale and

category 0 is for auditors on a small scale

Based on research by Sarah Butcher (2017), the big 4 KAP

Indonesia in 2015-2017, namely:

1. KAP Delloite Thouch Tohmatsu (Affiliated with KAP Hans

Tuanakotta and Mustofa)

2. KAP Price Waterhouse Coopers (Affiliated with KAP Drs.

Hadi Susanto and partners)

3. KAP Ernts & Young ( Affiliated with KAP Hanadi,

Sarwoko, and Sandjaja)

4. KAP Klynveld Peat Marwick Goerdeler/KPMG (Affiliated

with KAP Sidharta, Sidharta and Harsono)

3.3.2.2 Company Financial Condition

In the research on going concern audit opinion, Fanny and Saputra

(2005) used one bankruptcy prediction models to measure the

company's financial condition, namely The The Altman Model.

1. The Altman Model (1968)

29
Altman (1968) in Setyarno et. al. (2006) found that low probability

and solvency had the potential to experience bankruptcy. Altman

developed a bankruptcy model using 22 financial ratios classified

into five categories, namely liquidity, profitability, leverage, market

test ratios and activities. Altman developed a bankruptcy model

using the Altman model as follows:

Z = 1.2 Z1 + 1.4 Z2 + 3.3 Z3 + 0.6Z4 + 0.999 Z5

Where :

Z1 = Working capital/total asset

Z2 = Retained earning/total asset

Z3 = Earnings before interest and taxes/total asset

Z4 = Market capitalization/book value of debt

Z5 = Sales/total asset

To calculate Z Score can be done by calculating the fifth number of

ratios taken from financial statements. By multiplying these numbers

with the Altman derived coefficient, the results are summed

(Solikhah, 2007). Research conducted by Altman for companies that

are bankrupt and not bankrupt shows a certain value.

30
 Table 3.3.2.2 4

Criteria for the cut off point of the Z Score Model

Criteria Nilai Z
Not Bankrupt / healthy if Z more 2,99
than (>)
Bankrupt if Z less than (<) 1,81
Bankrupt Zone (grey area) 1,81-2,99

3.3.2.3 Previous Year Audit Opinion

Setyono et al. (2006) defines audit opinion received by the

auditee in the previous year. This variable is measured using a

dummy variable. If the company receives a going concern audit

opinion (GCAO) in the previous year it will be coded 1 while if the

company receives a non going concern audit opinion (NGCAO) it

will be coded 0.

3.3.2.4 Company Growth

The sales growth ratio is used to measure the ability of the

auditee in company-level growth. The ratio is as follows:

𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 𝑡 − 𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 𝑡 − 1

𝑆𝑎𝑙𝑒𝑠 𝐺𝑟𝑜𝑤𝑡ℎ =
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 𝑡 − 1

31
 3.3.2.5 Company Size

Company size is a variable used to measure the size of a

sample company. Measurement of variables is calculated using the

natural logarithm of total assets.

3.4 Research Model

3.4.1 Descriptive Statistics Analysis

Descriptive statistical analysis is used to describe the

variables in the study which include the number of samples, the

average value, the maximum value, the minimum value and the

standard deviation

3.4.2 Inductive Statistics Analysis

Inductive statistical analysis is used to test the proposed

hypothesis. In this study, hypothesis testing was carried out by

multivariate analysis using logistic regression, the independent

variable being a combination of metric and non metric (nominal).

This analysis technique does not require more normality tests and

classic assumption tests on the independent variables (Ghozali,

2011). Gujarati (2003) in Setyarno et al. (2006) states that logistic

regression ignores heteroscedasity, meaning that the dependent

variable does not require homoscedacity for each of its independent

variables.

32
 Because the financial condition variable has four different

proxies, the feasibility testing of the regression model is carried out

with the analysis model as follows:

1. Altman Model (1968)

OGC = + 1 AUDIT + 2Z68 + 3 OPINI + 4GROWTH +

5 SIZE +

Where:

OGC = Dummy variable, audit opinion (category 1

for auditee with going concern audit opinion (GCAO)

and 0 for auditee with non going concern audit opinion

(NGCAO)

α = Constant

AUDIT = Audit quality is proxied by a dummy

variable (1 for auditors who are joined on a large scale

and 0 for non-auditors)

XZMIN,Z68,Z93,S78 = The company's financial

condition is proxied by using four bankruptcy prediction

models.

33
OPINION = Previous year's audit opinion (category 1 if

the going concern audit opinion (GCAO), 0 if not

(NGCAO))

GROWTH = Company Growth Ratio

SIZE = Company size

Testing of the hypothesis in this study is carried out

with the following stages:

a. Assessing the Feasibility of the Regression Model

The feasibility of the regression model was assessed

using Hosmer and Lemeshow's Goodness of Fit Test.

This model is to test the null hypothesis that empirical

data is in accordance with the model (there is no

difference between the model and the data so that the

model can be said to be fit). As for the results (Ghozali,

2011):

1. If the statistical value of Hosmer and Lemeshow's

goodness of Fit Test is equal to or less than 0.05 then

the null hypothesis is rejected. This means that there

is a significant difference between the model and the

value of the observation so that the Goodness fit

model is not good because the model cannot predict

the value of its observations.

34
2. If the statistical value of Hosmer and Lemeshow's

Goodness of Fit Test is greater than 0.05, then the

null hypothesis cannot be rejected and means the

model is able to predict the value of its observations

or it can be said that the model is acceptable because

it is in accordance with the observational data.

b. Assessing the Fit Model (Overall Fit Test Model)

This test is used to assess models that have

been hypothesized to have been fit or not with data.

The hypothesis for assessing fit models is:

H0: The model hypothesized to be fit with data

H1: The hypothesized model is not fit with the data

From this hypothesis, so that the model is fit

with the data, H0 must be supported. Statistics used

are based on Likelihood. The Likelihood L of the

model is the probability that the hypothesized model

describes the input data. To test the null hypothesis

and alternative, L is transformed into -2 LogL. The

SPSS output provides two LogL -2 values, one for

models that only include constants and one model

with constants and additions free. The reduction of

the value between the initial -2LLL and the value of

35
 -2LogL in the next step shows that the model is

hypothesized to be fit with the data (Ghozali, 2011).

The Likelihood log in logistic regression is similar to

the definition of "Sum of Square Error" in the

regression model, so that the decrease in the

Likelihood Log model shows an increasingly better

regression model.

c. Parameter Estimates and Interpretations

Parameter estimates can be seen through regression

coefficients. Regression coefficients of each tested

variable show the form of the relationship between

variables with one another. Hypothesis testing is

done by comparing between probability values (sig).

If you see a significant number smaller than 0.05 then

the regression coefficient is significant at the level of

5%, meaning that H0 is rejected and H1 is supported,

which means that the independent variable

significantly influences the occurrence of the

dependent variable. Vice versa, if the significance

number is greater than 0.05, it means that H0 is

accepted and H1 is not supported, which means that

the independent variable does not significantly

influence the occurrence of the dependent variable.

36
 CHAPTER IV
RESULT ANALYSIS & DATA INTREPETATION

4.1 Data Description

4.1.1 Descriptive Statistics

Descriptive statistics are a primary component of biometric

analysis and a requirement for the statistical evaluation. Descriptive

statistics present the conception of variable characteristics that have

been observed based on the SPSS version 25. Variables in

descriptive statistics that used in this research can be seen in Table

4.1.1.

Table 4.1.1 5

Descriptive Statistics
N Minimum Maximum Mean Std. Deviation

X1 66 .00 1.00 .5152 .50360

X2 66 .00 1.00 .7727 .42228

X3 66 513.00 727.00 615.2273 55.82577

X4 66 1080645161.0 601.00 222425980.0606 140614301.62290

X5 66 248.00 1746935201.00 52082927.4242 29692215.9735

Y 66 .00 1.00 .6364 .48473

Valid N 66

(listwise)

37
 Table 4.1.1 above presents any statistic value including

minimum, maximum, mean, and standart deviation for each

independets variables and dependent variable as well. There are 66

samples that will be used in this research. Y is the proxy for Audit

Going concern opinion, while the independent variables include X1

(Audit Quality), X2 (Previous Audit Opinion), X3 (Company

Financial Condition), X4 (Company Growth) and X5 (Company

size).

Audit going concern opinion as a dependent variable which

if the company receive going concern audit opinion, there will be

given a value of 1, whereas value of 0 will be given if the company

does not given going concern audit opinion. In the table, the

minimum value equals to 0. It refers to the company which did not

receive auditor opinion going concern. The maximum value that

equals to 1 refers to the company which receive auditor opinion

going concern. The mean value of company that receive auditor

opinion going concern is 0.6364. It means the percentage of mean

value for company that receive auditor opinion going concern in

manufacturing company listed on Indonesia Stock Exchange (2015-

2017) is 63,64% while the standard deviation is 0.4847 or around

48.47%. In conclusion, the mean value is greater than the standard

deviation. It means the error standard is substantively low.

38
 Audit quality as the first independent variable is a proxy

which referred based on whom did the audit to the company (Big 4

Public Accounting Firm or non Big 4 Public Accounting Firm) Table

4.1.1 The maximum value that equals to 1 refers to the company

audited by Big 4 Public Accounting Firm which belongs to Charoen

Pokphand Indonesia Tbk in 2015, whereas , the minimum value

equals to 0 will be given if the company is getting audited by non

Big 4 Public Accounting Firm is held by Bentoel International

Investama Tbk in 2017. The mean value is 0.5152 while the standard

deviation is 0.50360. It means the error standard is substantively

low.

Previous audit opinion as the second independent variable is

a proxy referred based on the companiy’s audit report that nominated

.going concern audit opinion (GCAO) or non going concern audit

opinion (NGCAO). The maximum value that equals to 1 refers to the

the companiy’s audit report that nominated going concern audit

opinion (GCAO) 1 which belongs to Indomobil Sukses Internasional

Tbk in 2015, while the minimum value equals to 0 will be given if

the company non going concern audit opinion (NGCAO) which held

by Barito PasificTbk in 2017. The mean value of company

nominated GCAO or NGCAO is 0.7727. It means the percentage of

mean value of company nominated GCAO or NGCAO in

manufacturing company listed in Indonesia Stock Exchange (2015-

39
2017) is 77.27% while the standard deviation is 0.42228 or around

42.228%. In conclusion, the mean value is greater than the standard

deviation. It means the error standard is relatively low.

Company financial condition as the third independent

variable is a proxy referred based on the company bankrupt

prediction percentage. In the table, the minimum value equals to

513.00, It refers to the company which had a lower bankrupt

prediction percentage which held by Wilmar Cahaya Indonesia Tbk,

PT in 2016. The maximum value that equals to 727.00 refers to the

company which had a higher bankrupt prediction percentage which

belongs to Siearad Produce Tbk in 2016. The mean value of bankrupt

prediction percentage of company is 615.2273. It means the

percentage of mean value for company 615.2273 in manufacturing

company listed in Indonesia Stock Exchange (2015-2017) is

615.2273% while the standard deviation is 55.82577 or around

55.82577%. In conclusion, the mean value is greater than the

standard deviation. It means the error standard is relatively low.

Company growth as the fourth independent variable is a

proxy referred based on the company sales growth ratio. In the table

above, the minimum value equals to -1080645161.00 , It refers to

the company with lower sales growth ratio which belongs to

Kedawung Setia Industrial Tbk in 2015. The maximum value that

equals to 601.00 refers to the company with higher sales growth

40
ratio, and it held by Alumindo Light Metal Industry Tbk in 2017.

The mean value of company sales growth ratio is 222425980.0606,

while the standard deviation is 140614301.62290. In conclusion, the

mean value is greater than the standard deviation. It means the error

standard is relatively low.

Company Size as the fifth independent variable is a proxy

referred based on the size of the company. In the table above, the

minimum value equals to -248.00, It refers to the company with

smaller size which belongs to Indocement Tunggal Prakasa Tbk in

2017. The maximum value that equals to 1746935201.00 refers to

the company with the large size, and it held by Wilmar Cahaya

Indonesia Tbk, PT in 2017. The mean value of company size

52082927.4242, while the standard deviation is 29692215.9735. In

conclusion, the mean value is greater than the standard deviation. It

means the error standard is relatively low.

4.1.2 Goodness of Fit Test

The goodness of fit test is used to determine the risk

prediction of models. In chi-square goodness of fit test, the null

hypothesis determines there is no critical difference between the

observed and expected value.

41
 Table 4.1.26

Hosmer and Lemeshow Test

Step Chi-Square Df Sig.

1 2.315 7 .940

Table 4.1.2 show the result of hosmer and lemeshow test, which

indicate the p value is 0.940. This reflects the proportion of p-value

is higher than the significance level of 0.50. Meanwhile, H0 is

accepted; it means that the regression model is acceptable for the

analysis because there is no difference between the observed and

expected value.

4.1.3 Overall Model Fit Test

The overall model fit test is conducted based on the -2LL

statistic value or LR value. This testing is done by comparing the

difference in -2LL value called chi-square. If the chi square is bigger

than the chi-square table, it reflects that there is any simultaneous

influence among independent and dependent variable. The result as

the following:

Table 4.1.3 7

Overall Model Fit TesT

Iteration -2 Log Coefficients

Likelihood Constant

42
 Step 0 1 86.527 .545
2 86.524 .560
3 86.524 .560

Iteration -2 Log Constant Coeffiecients X5

Likelihood X4
Step 1 1 80.510 .624 -.002 .001
2 76.657 .271 -.002 .002
3 72.510 -,601 -,003 .004
4 72.140 -.832 -.003 .006
5 72.133 -.869 -.003 .006
6 72.133 -.870 -.003 .006

Table 4.1.3 presents the beginning value of -2 log

likelihood (-2LL) and ending value of -2 log likelihood (-2LL).

The beginning value is 86.524, while the ending value is 72.133.

There is a decreasing value among those -2LL which is 14.391. It

can be concluded that the declining value in this test represent the

hypothesis fits the data.

4.1.4 Simultaneous Test (F- Test)

F-test defines as the statistical test that measure the data is

normally distributed by assuring all independent variables

simultaneously influence the dependent variable. This can be used

in logistic regression analysis and interpreted by the Omnibus Test

43
 of Model Coefficient.The result of Omnibus Tests of Model

Coefficientsis conducted on the table below:

Table 4.1.4 8

Omnibus Tests of Model Coefficients

Chi-Square df Sig.
Step 1 Step 14.391 2 .001
Block 14.391 2 .001
Model 14.391 2 .001

Table 4.1.4 presents the Omnibus Test of Model Coefficient

which indicates the calculated Chi-square of 14.391 and F-test value

of 0.001. In point of fact, F-test value is lower than 0.05 level of

confidence. Hence, the null hypothesis is accepted. It interprets

independent variable including audit quality, previous audit opinion,

company financial condition, company growth and company size

simultaneously influence the dependent variable which is voluntary

Audit going concern opinion

4.1.4 Coefficient of Determination (R2)

Coefficient of determination defines as the statistical test

which measures the extent of independent variable by using the

Nagelkerke R Square. Nagelkerke R Square is performed in order to

consider the ability of independent variables in explaining and

44
describing the dependent variables. The range value of

determination is 0 < R2< 1. Hereby the result of the Nagelkerke R

Square is formed on the table below:

Table 4.1.5 9

Determination Coefficient (R2)

Step -2 Likelihood Cox & Snell Nagelkerke R

R Square Square
1 72.133a .196 .268

Table 4.1.5 presents the result of Nagelkerke R Square value is

positive 0.268.This test indicates the value of Nagelkerke R Square

is closer to 0. Thus, independent variables have less competence in

explaining the dependent variable. In other words, the percentage of

26.8% of Nagelkerke R Square indicates that only 26.8% of audit

quality, previous audit opinion, company financial condition,

company growth and company size which explains the audit going

concern opinion out of 100%. Nonetheless, the residual percentage

of Nagelkerke R Square value which is 85.6% indicates that there

are other variables that also have significant effects towards audit

going concern opinion.

4.1.5 Partial Test (T- Test)

Partial test (t-test) is intended to recognize The influence

of audit quality, company financial condition, previous year's audit

45
 opinion, company growth and company size on the tendency of

going concern audit opinion acceptance. This test can be used in

logistic regression analysis and interpreted by the Wald test. Hereby,

the result of the Wald test is formed on the table below:

Tabel 4.1.6 10

Partial test (t-test)

B S.E. Wald df Sig. Exp(B)
Step 1a X4 -.003 .001 4.680 1 .031 .997
X5 .006 .002 7.088 1 .008 1.006
Constant -.870 .712 1.492 1 .222 .419

Hypothesis 1 (Audit Quality)

H1 : Audit quality has a positive effect on the tendency of going

concern audit opinion.

From the result, it shows that audit quality has an

insignificant influence toward audit going concern opinion. This

result is in accordance with the researcher’s first hypothesis that is

already created based on the theory.

Hypothesis 2 (Company Financial Condition)

H2 : The company's financial condition as measured by The

Altman Model (1968) has a negative effect on the tendency of

going concern audit opinion.

46
 From the result, it shows that company financial condition

opinion has an insignificant influence toward audit going concern

opinion. This result is in accordance with the researcher’s second

hypothesis that is already created based on the theory.

Hypothesis 3 (Previous Audit Opinion)

H3 : Previous year's audit opinion has a positive effect on the

tendency of going concern audit opinion.

From the result, it shows that previous audit opinion has an

insignificant influence toward audit going concern opinion. This

result is in accordance with the researcher’s third hypothesis that is

already created based on the theory.

Hypothesis 4 (Company Growth)

H4 : Company growth has a negative effect on the tendency of

going concern audit opinion

Based on the Table 4.1.6 presented above, the company

growth has the significant value of 0.031 with 0.05 level of

confidence. The result indicates that the value is smaller than alpha

5% (0.031 < 0.05). This concerns shows that the value for the

company growth variable is positively significant at 5% level, which

supports H4.

47
 Hypothesis 5 (Company Size)

H5 : Firm size has a negative effect on the tendency of going

concern audit opinion

Based on the Table 4.1.6 presented above, the company size has the

significant value of 0.008 with 0.05 level of confidence. The result

indicates that the value is smaller than alpha 5% (0.008 < 0.05). This

concerns shows that the value for the company size variable is

positively significant at 5% level, which supports H5.

4.2 Result and Discussion

4.2.1 The Influence of Audit Quality on Audit Going Concern

Opinion

Audit quality variables that are proxied with accounting firms

affiliated with big four and those not affiliated with big four

accounting firm shows a positive coefficient of 0.179 with a

significance of 0.398 and greater than 0.05 (5%), meaning that this

variable has a directional direction and does not significantly

influence the acceptance of going-concern audit opinion. Based on

the previous description, it was explained that audit quality has an

effect on the acceptance of going-concern audit opinion. However,

this research is in line with the research conducted by Aiisiah (2012),

Pandiangan (2013) and Khotimah (2015) who found evidence that

audit quality proxied by big four accounting firms does not

48
significantly influence the acceptance of going-concern audit

opinion. However, these results are not consistent with the studies

of Januarti (2008), Tamba (2009) and Noverio (2011), which are

proxied by the size of big four accounting firm which proves that

audit quality affects the acceptance of going-concern audit opinion

4.2.2 The Influence of company financial condition on Audit

Going Concern Opinion

The variable financial condition shows a negative coefficient

of 0.190 with a significance level of 0.530> 0.05 which means H2

cannot be supported, thus it can be concluded that the financial

conditions measured by the Revised Altman do not significantly

influence the going concern audit opinion. In giving a going concern

opinion, an auditor should pay attention more to the financial

condition of the company. Financial statements that do not have

serious financial problems, have no liquidity problems, have

sufficient working capital, and do not experience an equity deficit,

so they do not accept going concern opinion. While companies that

experience problems finance, liquidity difficulties, lack of working

capital, as well as continuous losses that have a high chance of

receiving going concern opinion.

49
4.2.3 The Influence of previous audit opinion on Audit Going

Concern Opinion

The results of hypothesis testing the previous audit opinion

did not support the third hypothesis which there is an influence of

previous audit opinion Going Concern Audit Opinion on

Manufacturing Companies listed on the IDX in 2015-2017. This

result is indicated by the regression coefficient of 0.806., which

means that each increase in Company Size by 0.806 unit will

increase the Going Concern Audit Opinion on Manufacturing

Companies listed on the Stock Exchange in 2015-2017 by 0.006

units. Based on the results of testing the profitability variable

produces a significance value of 0.118 and smaller than 0.05. Based

on these significance values indicate that the Company Size

influences Going Concern Audit Opinion. So that it can be stated

that the Company Size influences and is significant towards Going

Concern Audit Opinion on Manufacturing Companies listed on the

Stock Exchange in 2015-2017

4.2.4 The Influence of company growth on Audit Going

Concern Opinion

The company growth with a significance of 0.031. This

means that the research hypothesis is accepted, because the

significance value is <0.05. Thus it can be said that company growth

50
(sales growth ratio) has a significant effect on the acceptance of

going-concern audit opinion. The results of this study are consistent

with the research conducted by Kristiana (2012), Rahman and

Siregar (2012).

This condition is reinforced by the data in this study, the

sample of this study was 22 companies, in 2015-2017 there were 9

companies that received going-concern audit opinions while the

number of companies experiencing negative company growth was

12 companies. Thus, if compared to more number of companies

experiencing negative company growth than the number of

companies that get going concern audit opinion. This means that not

only companies that get going-concern audit opinions experience

negative company growth, but companies that do not get going-

concern audit opinions are also not closed to face the possibility to

experience negative company growth.

4.2.5 The Influence of company size on Audit Going Concern

Opinion

The results of hypothesis testing the Company Size variable

support the fifth hypothesis which there is an influence of Company

Size on Going Concern Audit Opinion on Manufacturing

Companies listed on the IDX in 2015-2017. This result is indicated

by the regression coefficient of 0.006., which means that each

51
increase in Company Size by 1 unit will increase the Going Concern

Audit Opinion on Manufacturing Companies listed on the Stock

Exchange in 2015-2017 by 0.006 units. Based on the results of

testing the profitability variable produces a significance value of

0.008 and smaller than 0.05. Based on these significance values

indicate that the Company Size influences Going Concern Audit

Opinion. So that it can be stated that the Company Size influences

and is significant towards Going Concern Audit Opinion on

Manufacturing Companies listed on the Stock Exchange in 2015-

2017

52
 CHAPTER 5

CONCLUSION, LIMITATION AND RECOMMENDATION

5.1 Conclusion

The conclusions of audit quality, company financial condition, previous

audit opinion, company growth, and company size influence towards going concern

audit opinion in manufacturing companies that listed in Indonesia Stock Exchange

Year 2015 - 2017 are summarized as the following:

1. The first hypothesis indicates audit quality has no significant influence

towards going concern audit opinion, it shows a positive coefficient of 0.179

with a significance of 0.398 and greater than 0.05 (5%), meaning that this

variable has a directional direction and does not significantly influence the

acceptance of going-concern audit opinion.

2. The variable financial condition shows a negative coefficient of 0.190 with

a significance level of 0.530> 0.05 which means this hypothesis is rejected,

thus it can be concluded that the financial conditions measured by the

Revised Altman do not significantly influence the going concern audit

opinion3. The third hypothesis indicates that financial distress variable has

negative influence toward voluntary auditor switching since it has the

significant value of 0.159 that is greater than alpha 5% (0.159>0.05).

3. The results of hypothesis testing the previous audit opinion did not support

the third hypothesis which there is an influence of previous audit opinion

53
 Going Concern Audit Opinion on Manufacturing Companies listed on the

IDX in 2015-2017.

4. The company growth with a significance of 0.031. This means that the

research hypothesis is accepted, because the significance value is <0.05.

Thus it can be said that company growth (sales growth ratio) has a

significant effect on the acceptance of going-concern audit opinion.

5. The results of hypothesis testing the Company Size variable support the fifth

hypothesis which there is an influence of Company Size on Going Concern

Audit Opinion on Manufacturing Companies listed on the IDX in 2015-

2017. This result is indicated by the regression coefficient of 0.006.

5.2 Limitations

This research has limitation that might be weaken the results of the study.

There are several limitations such as;

1. This research population only uses manufacturing companies that listed in

Indonesia Stock Exchange.

2. The period time uses in this research from 2015-2017. The study period was

only 3 years so that it was unable to determine the trend of using going-

concern audit opinion by the auditor in the long term.

3. This study only uses 6 variables, which are; audit quality, company financial

condition, previous audit opinion, company growth, company size to audit

going concern opinion.

54
5.3 Recommendations

Based on research above there are several recommendations which are:

1. For the future research can use other independent which does not exist in

this study, and uses more than five independent variables so that the results

of the study will be more develop in identifying the acceptance of the audit

going concern opinion more accurately.

2. The observation of period be extended by more than three years so that you

can see the trend of audit going concern opinion acceptance by the auditor

in the long run.

3. For the research can use other sectors in the IDX such as Banking and

Finance, Real State, and mining so that you can see the audit going concern

opinion acceptance trend widely.

55
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58
APPENDICES

59
 Std.
N Minimum Maximum Mean Deviation
X1 66 .00 1.00 .5152 .50360
X2 66 .00 1.00 .7727 .42228
X3 66 513.00 727.00 615.2273 55.82577
X4 66 - 601.00 222425980.0 140614301.6
1080645161. 606 2290
00
X5 66 248.00 1746935201. 52082927.42 29692215.97
00 42 35
Y 66 .00 1.00 .6364 .48473
Valid N 66
(listwise)

60