The Effect of Financial Distress, Profitability, Leverage, and Previous Year Audit Opinion on Going Concern Audit Opinion
DOI:
https://doi.org/10.24036/wra.v14.i1.14Keywords:
Going concern audit opinion, financial distress, profitability, leverage, and previous year audit opinion.Abstract
Purpose – This study aims to empirically test the effect of financial distress, profitability, leverage, and the previous year audit opinion on the going concern audit opinion.
Design/methodology/approach – The population for this study includes all non-primary consumer goods sector companies listed on the Indonesian Sharia Stock Index (ISSI) for the period 2021-2023. Financial distress is measured using a dummy variable, profitability is measured using return on asset (ROA), leverage is measured using debt to asset ratio (DAR), and previous year audit opinion is proxied using dummy variables.
Findings – The results of this study found that financial distress and previous year audit opinion have a positive effect on the going concern audit opinion. Whereas, profitability has a negative effect on going concern audit opinion. Meanwhile, leverage has no effect on the going concern audit opinion.
Originality/value – This study provides a new contribution to the literature on the influence of financial distress, profitability, leverage, and the previous year audit opinion on going concern audit opinions, particularly in non-primary consumer goods companies listed on the Indonesia Sharia Stock Index (ISSI).
Research limitations/implications – This research only examines non-primary consumer companies, so the results of the study cannot yet represent all companies listed on the Indonesia Sharia Stock Index. Therefore, future researchers are advised to try using a more comprehensive object. In addition, a suggestion for future researchers is that in assessing leverage, it is recommended to use the calculation with debt to equity ratio (DER) formula. This ratio provides a different perspective by comparing total debt to shareholders' equity.
Article Type: Research paper
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