i

THE INFLUENCE OF AUDIT QUALITY, CASHFLOW TO TOTAL DEBT, DEBT TO TOTAL ASSETAND OPINION SHOPPING TO GOING CONCERN

AUDIT OPINION

STUDY IN MANUFACTURING COMPANIES LISTED IN IDX2011-2013

SKRIPSI

By

HESTY ANDRE HASAN

008201100060Presented to

The Faculty of Economics, President University

In partial fulfillment of the requirements

for

Bachelor Degree in Economics, Major in Accounting

PRESIDENT UNIVERSITY

CikarangBaru – Bekasi

Indonesia

2015

ii

PANEL OF EXAMINERSAPPROVAL SHEET

Herewith, the Panel of Examiners declares that the skripsi entitled “The

influence of Audit Quality, Cash Flow to Total Debt, Debt to Total Asset and

Opinion Shopping to Going Concern Audit Opinion” submitted by Hesty Andre

Hasan, Accounting Study Program, Faculty of Economics,has been assessed and

proved to pass the Oral Examination on January 29, 2015.

Chair, Panel of Examiner,

Dr. Joseph Ginting

Examiner 1

Misbahul Munir, MBA, Ak, CPMA

Examiner 2

Dr. Sumarno Zain, S.E., Ak., MBA

iii

SKRIPSI ADVISERRECOMMENDATION LETTER

The skripsi prepared and submitted by

N a m e : Hesty Andre Hasan_________________________________________________

Student ID : 008201100060_________________________________________________

F a c u l t y : Business_________________________________________________

Study Program : Accounting_________________________________________________

Field of Study : Auditing_________________________________________________

Skripsi Title : The Influence of Audit Quality, Cash Flow to Total Debt,Debt to Total Asset and Opinion Shopping to GoingConcern Audit Opinion________________________________________________

has been reviewed and found to have satisfied the necessities for Oral Defenseas

partial fulfillment of the requirements for Bachelor Degree in Economics - Major

in Accounting.

Cikarang, Indonesia, February 6th, 2015

Acknowledge Thesis Advisor,

Dr. Sumarno Zain, S.E., MBA, Ak Dr. Sumarno Zain, S.E., MBA, Ak

Head, Accounting Study Program Advisor

iv

DECLARATION OF ORIGINALITY

I hereby declare thattheskripsi entitled “The influence of Audit Quality, Cash

Flow to Total Debt, Debt to Total Asset and Opinion Shopping to Going Concern

Audit Opinion”is originally written by myself based on my own research and has

never been used for any other purpose before. I, therefore, request for Oral

Defense of the Skripsi.

Cikarang, Indonesia,February 6th, 2015

Researcher,

Hesty Andre Hasan

(008201100060)

v

THE INFLUENCE OF AUDIT QUALITY, CASHFLOW TO TOTAL DEBT, DEBT TO TOTAL ASSETAND OPINION SHOPPING TO GOING CONCERN

AUDIT OPINION

STUDY IN MANUFACTURING COMPANIES LISTED IN IDX2011-2013

ABSTRACT

The objective of this study is to determine the influence of audit quality,cash flow to debt, debt to asset and opinion shopping to going concern auditopinion. Sample in this research is 59 manufacturing companies listed in IDX forperiod 2011-2013. Audit quality is measured by the reputation of Auditor whetherit comes from Big Four or Non Big Four public accounting firm which auditedthe company. Cash flow to debt is proxied by cash flow to total debt ratio, cashflow from operation over total liabilities . Then, debt to asset is proxied by debt tototal asset ratio which is calculated by dividing total liabilities over total asset.Opinion shopping is measured by the changes of auditor into big four or non bigfour public accounting firm.

The result showed that audit quality and opinion shopping are notsignificantly affect the receiving of going concern audit opinion. For cash flow todebt and debt to asset are significantly affect going concern opinion with negativeand positive relationship respectively. This research is useful for the investor,management, further researcher, creditor and other external users of the financialstatement to determine the risk and provide solution to company’s going concernproblem.

Key word: Audit Quality, Cash Flow to Total Debt, Debt to Total Asset,

Opinion Shopping, Going Concern Audit Opinion.

vi

ACKNOWLEDGEMENT

First of all I would like to give a sense of gratitude to Allah SWTWho shower

me with His mercy and grace so that I was able to finish the study well. I pray

gratitude to the Prophet Muhammad SAW, who has always been a role model for

his people.In addition I would like to express my deepest gratitude to some

people who have helped and encouraged me during the research. They are as

follow:

1) Beloved Mom, Dad and family who always support me from the very

beginning, be my moodbooster whenever I feel down and never stop to

pray for me.

2) Head of Accounting study program , Dr. Sumarno Zain, S.E., MBA, Ak.

As my advisor in completing this research. With his guidance and

direction, I was able to complete this thesis.

3) Dean of faculty of business Mr. Misbahul Munir who has given a lot of

experinces and teaching me during my lecturing period at university. Also

to the entire faculty and staffs who have contributed a lot in helping me in

President University.

4) Kresno Setianto, thank you for always being there for me, suporting me to

go through ups and downs and being the best companion in the process of

completing this research.

5) Laras Hening, Anggia Shita, Zahra Indira, Desi Kurniasari, Tia Darlina,

Afriyanti, Agish Lamodi, Aprodio, Emanuel ario bimo, Dendi

Muhammad, Dwi Permana, Isa Andria, Muhammad Fikri, Rendy

Muhammad for being my bestfriends in this university and struggling

together with me in pursuit of bachelor degree.

6) All of Accounting family batch 2011, seniors, juniors and my partners in

organization for the experience and support.

vii

7) Also to all parties involved in conduct this research that cannot be

mentioned one by one.

Thank you for the prayer, support, help and advice. This research is still

considerably imperfect, therefore I would receive any kind of opinions, critics and

suggestions toward this research for the sake of its own improvement. Above all,

this research is hoped to benefit the readers.

Cikarang, Indonesia, February 6th, 2015

Researcher,

HESTY ANDRE HASAN

viii

TABLE OF CONTENTS

SKRIPSI TITLE ............................................................................................. i

PANEL OF EXAMINERSAPPROVAL SHEET......................................... ii

RECOMMENDATION LETTERSKRIPSI ADVISER ………………….... iii

DECLARATION OF ORIGINALITY ……………………………………... iv

ABSTRACT ………………………………………………………………… v

ACKNOWLEDGEMENT ………………………………………………….. vi

TABLE OF CONTENTS…………………………………………………… vii

LIST OF TABLES …………..………………………………………………viii

LIST OF EQUATIONS..……….………………………………………….. ix

LIST OF APPENDICES ………………………………………………......... x

CHAPTER I : INTRODUCTION………………………................................ 1I.1. Research Background......................................................................... 1I.2. Problem Identification........................................................................ 5I.3. Statement of Problem......................................................................... 6I.4. Research Objective............................................................................. 7I.5. Scope and Limitation of Research...................................................... 7I.6. Significances of Study........................................................................ 7

CHAPTER II : LITERATURE REVIEW.........................………………........ 9II.1. Theoretical Review............................................................................ 9

II.1.1. Agency Theory........................................................................ 9II.1.2. Going Concern....................................................................... 11II.1.3. Audit Opinion........................................................................ 13II.1.4. Going Concern Opinion......................................................... 16II.1.5. Audit Quality..........................................................................18II.1.6. Cash Flow to Debt..................................................................20II.1.7. Debt to total Asset.................................................................. 21II.1.8. Opinion Shopping................................................................... 22

II.2. Theoretical Framework......................................................................23II.2.1. Audit quality and going concern opinion........................................23

II.2.2. Cash flow to total debt and going concern opinion.................23

ix

II.2.3. Debt to total asset and going concern opinion........................24II.2.4. Opinion Shopping and going concern opinion.......................24

II.3. Hypotheses........................................................................................25II.4. Previous Research.............................................................................26

CHAPTER III : RESEARCH METHODOLOGY.............................................32III.1. Research Methodology.....................................................................32III.2. Variable Identification......................................................................33

III.2.1 Dependent Variable..................................................................33III.2.1.1 Going Concern Opinion (GCO)......................................33

III.2.2Independent Variable................................................................33III.2.2.1 Audit Quality (AQ).......................................................34III.2.2.2 Debtto Total AssetRatio (DAR).....................................34III.2.2.3 Cash Flow to Total Debt Ratio (CFTD)..........................34III.2.2.4 Opinion Shopping (OS)...................................................35

III.3. Research Instrument.........................................................................35III.3.1. Population and Sample...........................................................35III.3.2. Type and Source of Data........................................................38III3.3. Data Collection Method..........................................................39

III.4. Data Analysis....................................................................................39III.4.1. Descriptive Statistic...............................................................39III.4.2. Multicolinearity testing..........................................................40III.4.3. Logistic Regression Analysis.................................................40III.4.4 Hypotheses Testing.................................................................44

CHAPTER IV : RESULT...................................................................................45IV.1. Descriptive Statistic..........................................................................45IV.2.Result of Multicolinearity testing.....................................................46IV.3. Result of Logistic Regression Analysis............................................47

IV.3.1.Result of Feasibility Regression Model.................................47IV.3.2.Result of Classification matrix...............................................48IV.3.3.Result of Overall Model Fit...................................................49IV.3.4.Result of Coefficient of Determination..................................50IV.3.5.Result of Logistic Regression Model.....................................51

IV.4.Result of Hypothesis Testing...........................................................52

CHAPTER V : CONCLUSION AND RECOMMENDATION.......................55V.1. Conclusion........................................................................................55V.2. Recommendation..............................................................................57

BIBLIOGRAPHY ................................................................................................58

APPENDICES ………………………………………………………………......61

x

LIST OF TABLES

Table 2.1 Previous Research.................................................................................28

Table 3.1 Sample Criteria.....................................................................................34

Table 3.2 Sample Companies...............................................................................35

Table 4.1 Descriptive Statistics............................................................................44

Table 4.2 Correlation Matrix...............................................................................46

Table 4.3 Hosmer and Lemeshow Test...............................................................47

Table 4.5 Classification Table.............................................................................47

Table 4.6 Overall Model Fit Test.........................................................................48

Table 4.7Nagelkerke R square............................................................................49

Table 4.8 Variables in the Equation.....................................................................50

xi

LIST OF APPENDICES

Appendix 1. Grey Area Companies

Appendix 2. Diagram of Grey Area Companies

Appendix 3. Going Concern Audit Opinion

Appendix 4. Diagram of Going Concern Audit Opinion

Appendix 5. CFTD Calculation

Appendix 6. DAR Calculation

Appendix 7. Logistic Regression

1

CHAPTER I

INTRODUCTION

This chapter discusses about the background why researcher choose Audit

Going Concern opinion as the topic and what the statements of problem appear

from this topic. Furthermore, in this chapter will discuss about the purposes,

benefits, and limitation of the research.

1.1. Research Background

Nowadays, many companies both in Indonesia and International which

experiencing bankruptcy and stop its business. Bankruptcy is caused by several

things, such as failure in running the business and manipulation of accounting

done by company itself (Astuti 2012). As examples of international companies

that have failed are Enron, Worldcom, Xerox, etc. The most famous issue is

Enron, which also dragged a public accountant firm that audited Enron at that

time. It is one of the Big 5 in the world, Arthur Andersen. Arthur Andersen gave

an unqualified opinion in year before the bankruptcy and it becomes illogical

because the company gets a reasonable opinion without exception and suddenly

bankrupt without any prior sign. Auditor failing to provide an early warning, so

the stakeholders of the company did not prepare for the bankruptcy of Enron. This

case encourages auditors to give more attention to the going concern of a

company instead of audit the financial statement in order to prevent such Enron

case reoccurred. In Januarti (2009) stated that AICPA (1988) make regulation that

2

auditor must report explicitly whether the client can survive until one year a head

after the financial report period. Although auditor has no responsibility on going

concern of the client, auditor has to consider about client going concern before

giving audit Opinion.

Financial statement is prepared by the management as the accountability

and transparency of the activities done by company. Since the financial statement

is being prepared internally, the external users need to interpret the elements of

the financial statement. Thus, auditors have to assist the external users by giving

opinion for the financial statement of the company. Problems arise when many

errors made by the auditor regarding the opinion. Several causes, among others,

self-fullfing propechy feared if auditors give going concern opinion will accelerate

the bankruptcy of the company because of the large investors or creditors

canceling an attractive investment funds (Venuti, 2007). Nevertheless, the going

concern opinion must be disclosed to warn the company about the problems they

are experiencing. However, giving the going concern status is not an easy task

(Koh and Tan, 1999).

Modification opinion with going concern paragraph given by auditor is the

impact of doubtness of the auditor to the going concern of the client. This opinion

is a bad news to the users of financial statement. For shareholders who have to

decide whether they want to invest or continue investing the money in the

company or otherwise, they will see the going concern opinion as warning for

their investment decision. Without the going concern opinion then an entity is

considered able to sustain its operations in the long term and will not be

liquidated in the short term (Tamba 2009). For company, they will utilize this

3

opinion as warning. So that, the management which receives going concern

opinion has to think about the strategic to overcome the problem in order to

survive in the business.

Going concern audit opinion is released by the auditor, so the quality of

Audit also influences the result. Reputation of a public accountant firm is

considered when opinion does not correspond with the actual condition of the

company. The auditor is responsible for providing high quality information that is

useful for decision making. Reputable auditors are likely to issue a going concern

audit opinion if there is a problem related to the client company's going concern.

Some studies say the auditor's reputation is positively related to the size of the

auditors. As DeAngelo (1981) have theoretically analyzed the relationship

between audit quality and size of public accountant firm (KAP). DeAngelo argues

that large-scale auditors will have more clients and the total fee will be allocated

among the clients. Auditor with good reputation tends to maintain the audit

quality in order to maintain its reputation and the relationship with client

(Januarti, 2007). Junaidi and Hartono (2010) argues that large-scale auditors will

be more independent, and therefore, will provide a higher quality of an audit. In

research Junaidi and Hartono (2010), Rahayu (2007) and Fanny and Sylvia

(2005) found public accountant firm's reputation influences going concern audit

opinion. Public accountant firms which are affiliated with international tend to

give the going concern audit opinion on the auditee who have business continuity

problems when compared with accounting firm which is not affiliated with the

larger world. However, in research of Setyarno Rudyawan and Bandera et al

4

(2006) found no effect between public accountant firm with a reputation for

going-concern audit opinion.

Another element of the financial statement which can describe the

condition of the company is cash flow statement. Mills and Yamamura (1998)

stated that in order to understand the overall ability of company’s about going

concern, the Auditor need to concern about ratio from the cash flow statement.

From the cash flow statement, auditor can calculate cash flow to total debt ratio.

This ratio may describe the ability of the company to pay its debt with the cash

available for the current year. In other word, this ratio may help the auditor to

assess whether the company is able to continue its business. Mutchler (1985)

found that cash flow to total debt ratio is able to predict going concern opinion by

auditor.

From the financial point of view, we may analyze the leverage ratio of the

company to determine the possibility of the company got going concern audit

opinion. One of the ratio which may has strong relation with going concern

opinion is debt to total assets. Debt to total assets illustrates the extent to which

the debt can be covered by assets. To be safe corporate, debt portion owned by the

company should be smaller than the assets. This ratio was used Mutchler (1984)

in research and Nursetyo Manao (2002). Researcher wants to prove that debt to

total assets of the company will bring the same impact to the sample which is

manufacturing companies listed in IDX for period 2011-2013.

The intention of the company is to get the best opinion from their auditor.

Due to many difficulties in predicting the client going concern causing dilema

between moral and ethic for the auditors (Januarti, 2008). If the auditor will not

5

be able to give unqualified opinion without any modification, the company may

do another option such as switching the current auditor with the new auditor. This

phenomenon is called as opinion shopping. Opinion shopping is defined by the

security exchange commission (SEC), as the activity of searching for auditors

who want to support the accounting treatment proposed by the management to

achieve the purpose of reporting companies. Companies typically use a

replacement auditor to avoid receiving a going concern opinion. Company tends

to change auditor because of unsatisfaction with the services provided by

previous auditor or company have some kind of dispute with previous auditor.

Therefore, the company switched auditors in the last three years with the hope of

experiencing an increase in client satisfaction. Opinion Shopping has purpose to

manipulate the real financial condition of the company by avoiding going concern

opinion.

Many researches have been conducted in analysis the factors affecting

going concern opinion such as Mutchler (1985), Chen and Church (1992),

Januarti (2009), Tamba (2009), and Widyantari (2011). The difference of this

research with the previous researches is in time period of the populatioan which is

2011-2013 and independent variables used.

1.2. Problem Identification

There are several factors which may affect the auditor giving going

concern opinion to the company either it comes from the company, or the auditor

as the one who releases the opinion. This factors may vary, however in this

research there will be some variables those have possibility giving impact in

6

auditor producing going concern opinion. The variables are audit quality, cash

flow to total debt, debt to total asset, and opinion shopping.

Clients usually perceive that auditors from a large public accountant firm

and who have an affiliation with an international public accountant firm that has a

higher quality because the auditors have characteristics that can be associated

with quality, such as training, international recognition, as well as the peer review.

Thus, in this research the audit quality will be measured by the reputation of the

public accountant firm whether it is big 4 or non big 4 public accountant firm.

Company intends to change auditor to take safe way for the business. If

the current auditor cannot prevent giving going concern audit opinion,

Management hopes the new auditor can give them clear going concern opinion.

From financial point of view, going concern opinion may affect by ratio such as

debt to total asset and cash flow to debt.

1.3. Statement of Problem

From the background above, the researcher formulates the problem:

1. Does the audit quality affect the going concern opinion for client?

2. Does the cash flow to total debt ratio may affect company in receiving

going concern opinion?

3. Does the debt to total asset ratio affect the auditor to give going

concern opinion?

4. Does opinion shopping affect the receiving of going concern opinion?

7

1.4 Research Objective

The objectives of this research are:

1. To know whether the reputation of the auditor will impact going

concern opinion.

2. To know whether the cash flow to total debt ratio will impact going

concern opinion.

3. To know whether the debt to total asset ratio will impact going

concern opinion.

4. To know whether the opinion shopping will impact going concern

opinion.

1.5 Scope and Limitation of Research

The scope of this research is the elements financial statement of the

company that published in IDX such as statement of financial position, statement

of comprehensive income, notes to financial statement, cash flow statement. With

this scope, this research is limited only for manufacturing company.

1.6 Significances of Study

This research will give benefit for several group, such as:

1. For researcher

For Researcher, this research is able to add the knowledge and skill in

auditing especially for going concern. Researcher in the future has a plan

for being an auditor and have to be aware about going concern opinion.

2. For Investor and Potential Investor

Provide the investors and potential investors an information that useful in

8

investment decision. Where the they can obtain early warning about the

condition of the company which they want to invest their money.

3. For Credit Provider

For credit provider, instead of protecting their business by preventing

incompatible creditor, the credit provider can use this research as other

sources for credit decision.

4. For Academician

This research may useful for further researcher and academician who want

to do research or continue research about going concern opinion.

5. For Company

This research is useful for company as early warning in order to plan the

strategy for the continuity of the business. The strategy is hoped can be

able to save the company from the bankruptcy.

9

CHAPTER II

LITERATURE REVIEW

This chapter contains the theories are used as a research platform. In this

chapter also discussed previous research on factors affecting auditors in providing

the going concern audit opinion. The foundation of theory and previous research.

II.1 Theoretical Review

II.1.1 Agency Theory

Agency theory describes the relationship between one party, called

the principal, who delegates work to another, called the agent. It explains their

differences in behavior or decisions by noting that the two parties often have

different goals and independent of their respective goals may have different

attitudes toward risk. In Widyantari (2011), the efficient contract between agent

and principle is a contract that meets the two assumptions, which are:

1) Agents and principals have symmetric information means either agent and

principals have the quality and quantity of the same information that there

are no hidden information that can be used to advantage himself.

2) Risks associated with the return borne agency services is small means the

agent has a high certainty regarding remuneration receives

Not all of contract between agent and principle run well. The relationship

between principal and agent may lead to agency problem where arise from the

delegating decision-making authority from the owner to the manager. There are

10

three main agency problems. They are risk aversion, dividend retention and

horizon disparity.

1) Risk aversion

The definition of risk aversion is a problem caused by the relationship

between risk and return. According to the shareholders, it is generally accepted

that the higher the risk, the higher is the potentioal return. This view is quite

different from managers, as they are willing to take less risk of the company

because that is normally their key source of income. If managers continue to take

less risky project then this would lead to lower profits or return which is not what

the shareholders want.

2) Dividend retention

The second problem is called dividend retention which is the ability of

managers to pay out less of the company’s earning in dividends and retain more

so that they could invest in company’s growth which would benefit them in

return. This view is opposed by shareholders view because they would prefer

more in dividends so that they could invest further wherever thay want.

3) Horizon disparity

The third problem is horizon disparity and can be easily linked to long

term bonus incentives in order to overcome this problem. This is particularly a

problem if the manager expects to stay with the company while they manager it.

Based on this three possible agency problems which may happen in the

company, a company needs independent parties to evaluate the management and

financial accountability of the company. The independent party is Auditor, which

gives an opinion on the fairness of the financial statements presented by the

11

management.

As the independent party, auditors are required to perform monitoring of

the performance of the management whether it has acted in accordance with the

interest of the principal through financial statements. Principal expects auditors

provide early warning about the company's financial condition. The data

companies will be more easily trusted by investors and external users of the report

if it is reflected the real financial condition of the company which shown on the

audit opinion. Auditors release going concern opinion when there is doubt about

the survival ability of the company.

II.1.2 Going Concern

Going concern is the survival of a business entity and an assumption in the

financial reporting entity. This assumption requires that operationally the

company has the ability to survive (going concern) and will continue its efforts in

the future. According to Belkaouni (2006) in Widyantari (2011), going concern is

the proposition that states that an entity will run continously operating within the

long enough to realize the project, responsibility as well as its activities relentless.

The company does not intend or desire to liquidate or materially reduce its

business scale (Indonesian Institute of Accountants, 2007). That an entity is

required to maintain survival of all parties, especially the role of management in

managing the company so as not towards liquidation. Many reasons lead to the

liquidation of the company, such as financial difficulties that could affect the

survival of the company in the future, and this situation may affect the audit

opinion to be provided by the auditor. With the going concern on an entity

12

considered to be able to maintain and continue the business in the long run and

avoid liquidation direction in which a short time.

The following are examples of conditions and events that led to doubts over the

viability of the company (SA Section 341):

a. Negative Trend. The examples of negative trend are recurring

operating losses, working capital deficiencies, negative cash

flow from operations, bad financial ratio.

b. Another indication of the possibility of financial difficulties. For

example, failure to meet its debt obligations or similar

agreements, arrears of payment of dividends, the refusal by

suppliers to demand submission of regular credit purchases, debt

restructured, the need to find new funding sources or methods,

or sale of major assets.

c. Internal problem such as labor strikes or other labor relations

difficulties, greater reliance on a particular project successful,

long-term commitments that are not economical, the need to

significantly improve operations.

d. Outer problem that has occurred. The problems that may occur

such as complaint claims court, discharge statute, or other

problems that may jeopardize the ability of the entity to operate,

loss of franchise, license or essential patents, loss of a major

customer or supplier, losses from major disasters such as

earthquakes, floods, droughts, uninsured or insured but with

inadequate insurance coverage.

13

II.1.3 Audit Opinion

According to Public Accountants Professional Standards Section 110

paragraph 01 (SPAP, 2001), the purpose of audit of financial statements by

independent auditors in general is to express an opinion on the fairness, in all

material respects, the financial position, results of operations, changes in equity,

and the current cash in accordance with generally accepted accounting principles

in Indonesia. In conducting audit, the auditor must gather evidences by examining

the accounting records to support the audit opinion. Statement of auditor's opinion

must be based on an audit conducted accordance with auditing standards and on

its findings. Audit report which includes paragraphs, sentences, phrases, and

words used by the auditor to communicate the results of the audit to the audit

report users. Auditors express an opinion on the fairness of the financial

statements of the company in a statement. The auditor's opinion presented in a

written report that the audit report standard form. Standard form of the auditor's

report consists of three paragraphs below, namely:

paragraph 1

paragraph 2

paragraph 3

Introductory paragraph included in the first paragraph of the audit report

standard form. Auditor reveals three facts in the introductory paragraph which are

Introductory Paragraph

Scope of Audit

Opinion Paragraph

Audit Report Standard Form

14

disclosure of the type of services rendered auditors, object being audited and

disclosure of management's responsibility for the financial statements and the

auditor's responsibility for the opinion given on the financial statements based on

the audit results.

Scope of the audit paragraphs contain a concise statement of the scope of

the audit which will performed by the auditor. In addition, the scope of the audit

paragraphs also explained that the audit has been conducted based on the auditing

standards established by the professional organization of public accountants (IAI).

The audit conducted by the auditing standards provide an adequate basis for the

auditor to give an opinion on the audited financial statements.

The third paragraph in the audit report standard form in financial

statements used to express the auditor's opinion on the audited financial

statements. In the opinion paragraph, the auditor expressed an opinion on the

fairness of the financial statements and compliance with generally acceptable

accounting principles.

There are five types according to the auditor's opinion Mulyadi (2002),

which are unqualified opinion, unqualified opinion with explanatory paragraph,

qualified opinion, disclaimer opinion and adverse opinion.

(1) Unqualified Opinion

With an unqualified opinion, the auditor states that the financial

statements present fairly in all material respects in accordance with standards.

Audit report with an unqualified opinion issued by auditors will consist several

condition. Such as all element of the statements (balance sheet, income statement,

statement of changes in equity and cash flow statement) contained in the

15

financial statements, in the implementation of the engagement, has follow the

standard applied, enough evidence can be gathered by the auditor and the auditor

has conducted the engagement in a way that makes it possible to carry out the

three standards of field work, the financial statements are presented in accordance

with standard. The most essential is there is no state that requires the auditor to

add an explanatory paragraph or modified wording of the audit report.

(2) Unqualified opinion with explanatory paragraph

Under certain circumstances, the auditors add explanatory paragraph or other

explanatory language in the audit report, although it is not affect an unqualified

opinion on the financial statements audited. Main causes of the addition of an

explanatory paragraph or modification of words in the standard audit report are:

The inconsistency of the application of accounting principles generally

acceptable. Inconsistency occurs when there is a change of accounting

principles or accounting methods that have a material due to the

comparability of the financial statements of the company.

Considerable doubt about the survival of an entity (going concern).

Auditor agrees with a departure from accounting principles issued by the

Financial Accounting Standards Board.

Emphasis on a case.

Audit reports involving other auditors.

(3) Qualified Opinion

The other type of audit opinion is qualified opinion. The auditors give a qualified

opinion if the auditee's financial statements present fairly, in all material respects

in accordance with generally acceptable accounting principles in Indonesia,

16

except for several accounts. Opinions expressed in normal with the exception of

circumstances:

The lack of sufficient competent evidence or a limitation on the scope of

the audit.

Auditor believes that the financial statements contain departures from the

standard, which have a material impact, and concluded to not express a

unqualified opinion.

(4) Disclaimer Opinion

The auditor does not express an opinion if he did not carry out adequate audit

scope to allow the auditor to give an opinion on the financial statements. This

opinion is also given when there is decreasing of the level auditors independency.

Relating to going concern, if the auditor feels confident that there are doubts

about the company's going concern, the auditor should perform some of the

following (SPAP, 2001):

“obtain information on the management plan to reduce the impact

and establish the likelihood that the plan will be implemented. If

management does not have a plan auditor will give a disclaimer opinion.”

(5) Adverse Opinion

The Adverse opinion is published by the auditor if the auditee's financial

statements do not present fairly the financial statements in accordance with

standard.

II.1.4 Going Concern Opinion

Going concern audit opinion is an opinion issued by the auditor to evaluate

whether there is doubt about the entity's ability to maintain its survival (SPAP,

17

2001). According to IAI (2001), going concern audit opinion is modified audit

opinion that there is an inability or significant uncertainty over the viability of the

company in the operation. Auditors release a going concern audit opinion when

the conditions found in the audit process and the events that lead to doubts about

the survival of the company. Evaluation of the company's sustainability include

(SA section 341):

1. If the auditors believe there are doubts about the ability of a business to

maintain its viability within a reasonable time , the auditor should:

a. Obtain information about the management plan aimed at reducing the

impact of the conditions and events.

b. Establishes the possibility that the plan is implemented effectively.

2. If management has no plans to reduce the impact of such conditions and

events, the auditor considers to give disclaimer opinion.

3. If management has a plan to reduce the impact of the above conditions

and events, the auditor concludes (based on consideration) on the

effectiveness of the plan, and :

a. If auditor concluded that the plan is not effective, then the auditor's

disclaimer opinions

b. If the auditor concludes that the plan is effective and client reveals the

circumstances in the notes to the financial statements, the auditors

expressed an unqualified opinion.

c. If the auditor concludes that the plan is effective, but the client does

not express in the notes to the financial statements, the auditor

expressed the adverse opinion.

18

II.1.5 Audit Quality

Lennox (2002) in the Putra (2010) suggested a positive relationship

between the size of the public accountant firm with audit quality. DeAngelo

(1981) in Weiner (2012) defines quality of audit services as “the market-assessed

joint probability that the given auditor will both discover a breach in the client’s

accounting system and report the breach.” Clients usually think that auditors from

large audit firm and have affiliations with international has higher quality,

because the auditors have characteristics that can be associated with quality, such

as training, international recognition, as well as the peer review (Craswell et al,

1995).

CPA firms or public accoutant firms are comprised of auditors who

conduct both public and private audit engagements. Apart from the auditors CPA

firm usually consists of people at various levels in their accounting career. Hence,

CPA firm consist of staff accountants and seasoned accountants who are

experienced in all aspects of accounting. Most public accountant firms, are

auditing firms and seldom provide tax and accounting for the general public.

While remaining CPA firms provide only tax and accounting services.

The Big Four are the four largest international professional services

networks, offering audit, assurance, tax, consulting, advisory, actuarial, corporate

finance, and legal services. None of the Big Four firms is a single firm; rather,

they are professional services networks. Each is a network of firms, owned and

managed independently, which have entered into agreements with other member

firms in the network to share a common name, brand and quality standards. Each

network has established an entity to co-ordinate the activities of the network. In

19

one case (KPMG), the co-ordinating entity is Swiss, and in three cases (Deloitte

Touche Tohmatsu, PricewaterhouseCoopers and Ernst & Young) the co-ordinating

entity is a UK limited company. Those entities do not themselves perform

external professional services, and do not own or control the member firms.

In Indonesia there are large CPA firm affiliated with the international

accounting firm (big four) classified into big four and non big four CPA firm. At

the begnning, the big 5 auditors consist of Arthur Andersen, Ernst & Young,

Deloitte, KPMG, and PricewaterhouseCoopers. Five local CPA firms in Indonesia

affiliated with The Big Five Auditors namely:

KAP Prasetio Utomo & Co. affiliated with Arthur Andersen ,

KAP Hanadi, Sarwoko, and Sandjaja affiliated with Ernst & Young

KAP Hans Tuanakotta & Mustafa affiliated with Deloitte Touche

Tohmatsu,

KAP Siddharta Siddharta, and Harsono affiliated with KPMG ,

Drs. Hadi Susanto and Partners affiliated with PricewaterhouseCoopers .

However, since 2003 until now, after the Enron Scandal, the Big Five of

the Auditors changed into the Big Four Auditors. The local CPA firms affiliated

with Ernst & Young, Deloitte, KPMG, and PricewaterhouseCoopers. In the year

of 2003-2004 four local KAP affiliated with the Big Four Auditors these are :

KAP Prasetio, Sarwoko, Sandjaja affiliated with Ernst & Young,

KAP Hans Tuanakotta and Mustafa affiliated with Deloitte Touche

Tohmatsu,

KAP Siddharta Siddharta, and Harsono affiliated with KPMG,

20

Drs . Hadi Susanto and Partners affiliated with PricewaterhouseCoopers .

In 2009, four local Audit firms affiliated with the Big Four Auditors are:

KAP Purwantono, Sarwoko, Sandjaja affiliated with Ernst & Young,

KAP Osman Bing Satrio and Partners affiliated with Deloitte Touche

Tohmatsu,

KAP Siddharta and Widjaja affiliated with KPMG,

KAP Tanudireja Wibisana & Partners is affiliated with

PricewaterhouseCoopers.

II.1.6 Cash Flow to Debt

Mills and Yamamura (1998) stated that in order to understand the the

overall ability of the company to continue its efforts, the auditor should take into

account some simple ratio of cash flow statement data client. In the Statement of

Indonesian Financial Accounting Standards (PSAK) No. 2 is expressed that

information about a company's cash flow is useful for users financial statements

as an adequate basis for assessing the ability of enterprise to generate cash and

cash equivalents and assess needs company to use the cash flow. According to IAI

(2007), in making economic decisions, the users need to evaluate the the

company's ability to generate cash and cash equivalents and certainty acquisition.

Ross, Westerfield and Jafee (2001) in Widyantari (2011 ) states that if the

company has sufficient cash then the company can avoid the failure to comply

liabilities and financial distress that the company is not expected to receive going

concern audit opinion. Auditors need to understand how to use the ratio of cash

flow in perform the audit because the size will be considered by investors and

21

other users of financial statements. One of the ratio of cash flow which can be

used by auditors to assess the ability of the company in continue its business is

cash flow to total debt ratio. This ratio is measured by comparing the operating

cash flow to total liabilities.

2.1.7 Debt to total Asset

Debt to total asset is one of leverage ratio. According to Sartono (2001) in

Widyantari (2011) leverage indicates the proportion of the use of debt to finance

investment. It is proxied by dividing total liablities and total asset. This ratio

measures the percentage rate corporate debt to total assets owned or the extent of

the percentage of total assets are financed with debt. Higher debt to total asset

ratios cause doubt in the ability of company to maintain the continuity of their

business in the future because most of the funds raised by the company will be

used to finance the debt and funds for operation will be decreasing. Creditor

generally prefers a low debt ratio ratio numbers, then the greater the reduction of

losses suffered by creditors in the event of liquidation. The greater the debt ratio,

the greater the possibility of auditors to give a going concern audit opinion.

There are another leverage ratio which may reflect the going concern

opinion. It is Debt to Equity Ratio. DER is calculated by dividing its total

liabilities by stockholders' equity. It indicates what proportion of equity and debt

the company is using to finance its assets. However, in this research DER is not

included because from the previous researches this ratio shows that it is not

influence the going concern opinion.

22

2.1.8 Opinion Shopping

Opinion shopping is defined by the security exchange commission (SEC),

as the activity of searching for auditors who want to support the accounting

treatment proposed by the management to achieve the purpose of reporting

companies. Based on Syaifudin (2012), some of the factors that motivate

managers to conduct opinion shopping, including the desire to achieving the

target set, as well as the need to maintain continuity of company business (going

concern). Companies typically use a replacement auditor to avoid receiving a

going concern opinion. According to Teoh in Januarti (2009) found evidence that

the auditee can threaten to make the turn auditor and lead auditor's concerns will

be no longer independent. Companies are audited by the new auditor may be

satisfied with a few considerations. As a result, there is a strong push for the

auditors to prioritize client service in the first years after obtaining new clients

(Craswell, 1995). New clients may get special attention, and they may enjoy a

different perspective and outlook provided by the new auditor. A new auditor

would tend to demonstrate its performance in the first years of audit. New auditor

hopes the audit as well as possible, without compromising his professional

attitude as an auditor.

The purpose of the change is intended to manipulate the results of

operations or financial condition. Lennox (2002) stated that European countries

set rules for companies to retain an auditor for several years in order to avoid

change of auditor strategy. In the UK, the auditee can not change auditors without

good reason and can only be done when the General Meeting of Shareholders.

23

The reputation of the old and new auditor should be considered also.

According to Lennox (2000), theory of auditor reputation predicts a positive

relationship between the size of the public accountant firm to audit quality. The

bigger size or having affiliation with international, the lower possibility of

receiving going concern opinion. Therefore, the reputation of new auditor should

be one of the assessment whether the company change the Auditor with intention

of opinion shopping.

II.2 Theoretical Framework

Theoretical framework has purpose to explain, disclose and determine the

relationship between independent variables and dependent variables based on

literature review.

II.2.1 The Influence of Audit quality to Going Concern Opinion

The reputation big four or non big for accounting firm affects the audit

quality. It also affects the receiving of going concern opinion since the quality of

audit may be affected. Clients usually think that auditors from large Audit firm

and have affiliations with international has higher quality, because the auditors

have characteristics that can be associated with quality, such as training,

international recognition, as well as the peer review (Craswell et al, 1995).

Company which is audited by Auditor from big four has higher possibility to

receive going concern opinion rather than non big four.

II.2.2 The Influence of Cash flow to Total Debt to Going Concern Opinion

This ratio is one of the ratio of cash flow which can be used by auditors to

assess the ability of the company in continuing its business. Cash Flow from

Operation describes the cash earned or used by the company from its operation.

24

The positive cash from operation means the company gaining cash from the

operation. In contrast, if the cash flow from operation is negative means that the

company experiencing out of cash for its operation. Higher cash flow to total debt

ratio, lower possibility of the company to receive going concern opinion.

2.2.3 The Influence of Debt to Total Asset to Going Concern Opinion

This ratio measures the percentage rate corporate debt to total assets

owned or the extent of the percentage of total assets are financed with debt.

Higher debt to total asset ratios cause doubt in the ability of company to maintain

the continuity of their business in the future because most of the funds raised by

the company will be used to debt finance and funds to operate will wane. Chen

and Church (1992) stated that company which has less assets rather than

liabilities will face bankruptcy. Thus, the higher percentage of this ratio the

greater risk that the company may unable to meet its maturing obligations. In

consequence, the possibility of the company to receive going concern opinion is

increasing.

2.2.4 The Influence of Opinion Shopping to going concern opinion

Opinion shopping is the action taken by company by switching the auditor

with intention to prevent receiving going concern opinion from current auditor.

Opinion shopping may not the only reason from the company to change the

auditor. There are many reason why the company has to change its auditor. Thus,

researcher will measure this variable by looking at the new auditor being chosen

by the company whether it is big four or non big four public accountant firm. For

big four public accountant firm, it is important for them to maintain its reputation

and give the appropriate result to the client since they have many big clients. If

25

the company changes the auditor to big four public accountant firm, it may not

the opinion shopping action. Otherwise, if the company change the auditor to non

big four public acccounting firm, it may the company prevent going concern

opinion. Thus, opinion shopping action by changing the auditor will affect the

receiving of going concern opinion.

The relationship between independent variable and dependent variable

presented in below:

Figure 2.1 Theoretical Framework

Independent Variable Dependent Variable

2.3 Hypotheses

H1 : Audit quality affects the going concern opinion.

H2 : Cash flow to total debt has negative infuence with going concern

opinion.

H3 : Debt to total asset has positive influence with going concern opinion.

H4 : Opinion shopping affects the going concern opinion.

Audit Quality-

GoingConcernOpinion

-

+

Cash Flow toTotal Debt

Debt to Total Asset

Opinion Shopping

+

26

2.4 Previous Research

Many researches had been done to study the factors that affecting the

receiving of going concern audit opinion. Those researches has similarity and

difference with this research. The similarity is on the dependent variable which is

Going concern opinion. All the previous research tried to find the factors that may

affect the receiving of going concern opinion. The Independent variable used in

previous research are vary. It may come from the financial and non-financial

factors.

1) Jane F. Mutchler (1985) was done a research with title “a multivariate

analysis of the auditor’s going concern opinion decision”. Variables in this

research going concern audit opinion as dependent variable and six

financial ratios as independent variables. The result is models with

variables financial ratios and previous audit opinion have prediction

accuracy overall the tallest amounted 89.9% than another model. The

similarity of Mutchler research and this research is the dependent variable

used which is going concern opinion.

2) Chen and Church (1992) was done a research with title “Default on debt

obligations and the issuance of going concern opinion”. The variables in

this research are going concern as dependent variable and cash flow to

liabilities (CFTL), current ratio (CACL), longterm debt to asset (LDTA),

net income before taxes divided by net sales (NIBTS), changes of current

ratio (CCR), loss in 2 years (LOS2), company size (LTA), and debt default

status as indepndent variable. The result of Chen and Church research is

some of the ratio are significantly affect going concern opinion, however

27

debt default is more useful to predict going concern opinion rather than

financial ratios.

3) Setyarno (2006) was done a research with title “Pengaruh Kualitas Audit,

Kondisi Keuangan Perusahaan, Opini Audit Tahun Sebelumnya,

Pertumbuhan Perusahaan terhadap Opini Audit Going Concern”. The

variables in this research are going concern opinion, financial ratios and

non financial factors.

4) Tamba (2009) was done a research titled “Pengaruh debt default, kualitas

audit dan opini audit terhadap penerimaan audit going concern.” Variables

in this research are going concern opinion as dependent and debt default,

audit quality and audit opinion as independent variables.

5) Januarti (2009) conducted a reserch titled “Analisis pengaruh faktor

perusahaan, kualitas auditor, kepemilikan perusahaan terhadap

penerimaan opini audit going concern” with independent variables are

financial condition, debt default, company size, prior audit opinion, audit

lag, client tenure, audit quality, opinion shopping, ownership and

institutional management.

6) Widyantari (2011) was done a research titled “Opini audit going concern

dan faktor-faktor yang memengaruhi”. This research purpose is to analyse

the influence of the independent variables are liquidity, leverage,

profitability, cash flow, company size, company growth, audit quality,

audit lag, prior audit opinion and audit tenure to dependent variable which

is going concern opinion. The results showed leverage and prior year audit

opinion has positive influence to going concern audit opinion. Profitabily,

28

cash flow and company size has negative influence going concern.

Hypotheses testing shows that liquidity, company growth audit quality,

audit lag and client tenure do not influence the going concern audit

opinion.

The summary of previous researches are shown on table 2.1

29

No Researcher Title Sample Analysis Result

1Jane F.

Mutchler (1985)

A Multivariate analysis of

the auditor’s going

Concern opinion

decision

119 Manufacturing

companies

Multivariate

Regression

Models with variable ratios financial

and previous audit opinion have

prediction accuracy overall the tallest

amounted to 89.9 % than model

another.

2Kevin C. W.

Chen and Bryan

K. Church

(1992)

Default on Debt

Obligations and the

Issuance of Going-

Concern Opinions

127 companies Logistic

Regression

CFTL, CACl, LDTA, NIBTS, LTA, CCR

useful in the explain publishing

opinions going audit concern, Default

Status more useful in the explain

publishing opinions going audit concern

be compared financial variables.

3A.A.Ayu Putri

Widyantari (2011)

Opini Audit Going

Concern dan Faktor –

Faktor yang memengaruhi

300 manufacturing

companies

Logistic

Regression

Leverage and prior year audit opinion

has positive influence to going concern

audit opinion. Profitabily, cash flow and

company size has negative influence

going concern.

4Revol Ulung Bisara

Tamba (2009)

Pengaruh Debt Default,

Kualitas Audit, Dan Opini

63 manufacturing

companies

Logistic

regression

Variabel default, sales, audit client

Tenure, prior opinion, audit quality

30

audit terhadap

penerimaan opini going

concern

(specialization) affect the receiving of

going concern audit opinion. however,

financial distress although significant,

but the direction of the sign opposite to

that hypothesized. Variabel that does

not affect the going concern are audit

lag, Opinion shopping, managerial

ownership and institutional ownership.

To audit lag , Opinion shopping and

institutional ownership, the sign are the

same as hypothesized.

31

5Indira Januarti

(2009)

Analisis Pengaruh Faktor

Perusahaan, Kualitas

Auditor, Kepemilikan

Perusahaan Terhadap

Penerimaan Opini Audit

Going Concern

Manufacturing companies

listed in IDX 1997-2006

Logistic

regression

Variabel default, sales, audit client

Tenure, prior opinion, audit quality

(specialization) affect the receiving of

going concern audit opinion. however,

financial distress although significant,

but the direction of the sign oppisite to

that hypothesized. Variable that does

not affect the going concern are audit

lag, opinion shopping, managerial

ownership and institutional ownership.

For audit lag, opinion shopping and

institutional ownership, the sign are the

same as hypothesized.

6Setyarno (2009) Pengaruh Kualitas Audit,

Kondisi KeuanganPerusahaan, Opini AuditTahun Sebelumnya,Pertumbuhan Perusahaanterhadap Opini Audit GoingConcern

59 manufacturing

companie

Logistic

regression

Liquidity ratio and prior audit opinion

affect going concern opinion

significantly.

32

CHAPTER III

RESEARCH METHODOLOGY

III.1 Research Methodology

This research is conducted by using secondary data which provided in the

website idx.co.id and other related sources. Type of data which is accessed by

researcher is financial statement of the sample companies that has been

determined before. There 59 companies with 3 period of year (2011-2013) chosen

as the sample of this research. This sample is the companies which are in

manufacturing sector in idx.co.id. Researcher uses two kind of variables:

Dependent Variable which is going concern opinion, Independent Variables are

audit quality, cash flow to total debt ratio, debt to total asset ratio and opinion

shopping.

The data of this research is processed using the Statistical Package for

Social Science (SPSS) 20.0 for Windows. The anlaysis of the reasearch uses

logistic regression analysis. Logistic regression is a development of multiple

regression that has the added advantage of holding certain variables constant in

order to assess the independent influence of key variables of interest. It is suitable

for assessing the influence of independent variables on a dependent variable

measured in a nominal scale. This analysis is chosen as the method is because the

dependent variable of this research is dichotomous variable or dummy variable.

This statistic resulting is an odds ratio. The output of the analysis is used for

comparing the hypotheses made by researcher and the output.

33

III.2 Variable Identification

In this research, there are two types of variables which are Dependent and

Independent Variable. This Reasearch is purposed to find out whether the relation

between these variables are match with the hypotheses build by researcher.

III.2.1 Dependent Variable

Dependent Variable is the variable that is affected by the

independent variable (Sugiyono, 2007:33). The dependent variable in this

research:

III.2.1.1 Going Concern Opinion (GCO)

Opinion which is included in the going concern audit opinion are

unqualified or qualified with going concern opinion and going concern

disclaimer opinions. Non going concern audit opinion only to companies

that receive unqualified opinion without modified wording. Going concern

audit opinion is dichotomous variable. Going concern audit opinion was

coded 1 (one), while the non going concern audit opinion was coded 0

(zero).

III.2.2 Independent Variable

There are 4 independent variables in this research which are Audit

Quality, Cash Flow to Total Debt Ratio, Debt to total Asset Ratio and

Opinion Shopping.

34

III.2.2.1 Audit Quality (AQ)

Measurement of auditor reputation is measured by dummy

variable, which gives a score of 1 to auditees audited by big four, and 0 to

the auditee which is not audited by non big four.

III.2.2.2 Debt to Total Asset Ratio (DAR)

Debt to Total Asset Ratio measures the percentage of the total asset

provided by creditors. The formula for calculating this Ratio is:

= ....................................................(3.1)

Total Debt is the sum of current and long-term liabilities is balance sheet

of the financial statement. The total asset is the sum of current and non

current assets in the financial statement.

III.2.2.3 Cash Flow to Total Debt Ratio (CFTD)

Cash Flow to Total Debt Ratio is measured to know the ability of

the company to pay its debt with the cash that they earn from the

operation. The Formula of this ratio:

= ............ .........(3.2)

In Financial statement, Cash Flow from Operation is stated in the

Cash Flow Statement. The Total Debt is the total of current and non

current liabilities in the balance sheet section in company’s financial

statement.

35

III.2.2.4 Opinion Shopping (OS)

In this research, opinion shopping is measured with dummy

variable where the company that changes the auditor to non big four

company may has possibility to do opinion shopping will be signed with

one (1) and the company that changes the auditor to Big Four is zero (0).

III.3 Research Instrument

III.3.1 Population and Sample

The population chosen for this research is the manufacturing companies

listed in idx.co.id website for period 2011-2013. The are several classification of

business in manufacturing sector based on idx.co.id. Sample is part of the number

and characteristics possessed by the population (Sugiyono, 2007). To choose the

sample, researcher using simple random sampling.

Target Population in this research is 376 manufacturing companies listed

in IDX for period 2011-2013. The sample criteria is shown on table below:

Table 3.1 Sample CriteriaNo Criteria Amount

1 Manufacturing company listed in Indonesian

Stock Exchange for period 2011-2013.

403

2 Company which is not listed after January 1,

2011.

(23)

3 Delisting company for period 2011-2013. (4)

Total target population 376

36

Table 3.2 Sample Companies

No Code Name

1 ADES Akasha Wira International2 AISA Tiga Pilar Sejahtera Food3 AKKU Alam Karya Unggul4 AKPI Argha Karya Prima Industry5 ALKA Alakasa Industrindo6 ALMI Alumindo Light Metal Industry7 AMFG Asahimas Flat Glass8 APLI Asiaplast Industries9 ARNA Arwana Citramulia10 BATA Sepatu Bata11 BIMA Primarindo Asia Infrastructure12 BRAM Indo Kordsa13 BRPT Barito Pacific14 BTON Betonjaya Manunggal15 BUDI Budi Acid Jaya16 CEKA Cahaya Kalbar17 CPIN Charoen Pokphand Indonesia18 CTBN Citra Tubindo19 DPNS Duta Pertiwi Nusantara20 DVLA Darya Varia Laboratoria21 EKAD Ekadharma International22 FASW Fajar Surya Wisesa23 FPNI Titan Kimia Nusantara24 GDST Gunawan Dianjaya Steel25 GDYR Goodyear Indonesia26 GGRM Gudang Garam27 HDTX Panasia Indo Resources28 HMSP Hanjaya Mandala Sampoerna29 IKAI Intikeramik Alamasri Industri30 IKBI Sumi Indo Kabel31 IMAS Indomobil Sukses International32 INAF Indofarma33 INAI Indal Aluminium Industri34 INCI Intanwijaya Internasional35 INDR Indorama Synthetics36 INDS Indospring37 IPOL Indopoly Swakarsa Industry38 JECC Jembo Cable Company39 JKSW Jakarta Kyoei Steel Works40 JPRS Jaya Pari Steel

37

41 KBLI KMI Wire and Cable42 KDSI Kedawung Setia Industrial43 KLBF Kalbe Farma44 LION Lion Metal Works45 LMSH Lionmesh Prima46 MRAT Mustika Ratu47 MYTX Apac Citra Centertex48 NIKL Pelat Timah Nusantara49 POLY Asia Pacific Fiber50 PTSN Sat Nusapersada51 PYFA Pyridam Farma52 RICY Ricky Putra Globalindo53 SIPD Sierad Produce54 SRSN Indo Acidatama55 SULI Sumalindo Lestari Jaya56 TCID Mandom Indonesia57 TFCO Tifico Fiber Indonesia58 TIRT Tirta Mahakam Resources59 UNVR Unilever Indonesia

38

n sample is calculated using Slovin Formula. The Formula is:= ........................................................................................( 3.3)

Description:

N = Number of population

n = number of sample

α = level of trust (10%)

From this formula, the sample of this reasearch based on Slovin is 79

companies per year. The companies which receive unqualified with modified

word except going concern opinion are ommitted as Grey Area Sample in this

research. The grey area sample is taken out from the sample is because researcher

wants to focus to compare the Unqualified with no modified opinion and

Unqualified with Going Concern Opinion. The unqualified opinion with modified

wording may be caused by several factors. One of the factor is the application

IFRS in Indonesia since 2011. The companies in grey area are 20 companies, thus

the final sample for this research is 59 companies. With the total research period

is 3 years, so the total sample is 177 companies. The method for data gathering in

this research is data pooling with time series. The companies data will be

presented in the attachment. The diagram grey area will be shown on attachment.

III.3.2 Type and Source of Data

Type of data used is secondary Data. Secondary data is data that has been

processed and presented by primary data collector or other parties. Researcher is

using secondary data obtained from the website www.idx.co.id, an official

39

Indonesia Stock Exchange website. From the website, researcher is able to access

and download the financial statement of the sample. The financial statement

period is year 2011 until 2013. It will be used as the sources.

Audit opinion from the auditor in the financial statement provides

information about company receiving going concern audit opinion or not and the

public accountant firm which has done the Audit. If in the financial statement

there is additional paragraph stating about going concern of the company, so it

means the company receiving going concern opinion. The information about

auditor also stated in that page by looking at the signature in the bottom part of

the Audit Opinion.

The others are Cash flow statement and Statement of Financial Position or

Balance Sheet that provide information to calculate the Cash flow to Total Debt

Ratio and Debt to Total Asset.

III.3.3 Data Collection Method

The data collection method used in this research is documentation.

Documentation can be described as the process of tracing down evidences that

can be either internal or external of transactions or activities being researched.

The researcher obtains the data by downloading the Annual Financial Statement

of the sample which available in idx.co.id.

III.4 Data Analysis

III.4.1. Descriptive Statistic

Descriptive statistical analysis used to determine the characteristics

samples were used and describe the variables in the research. Analysis

40

Descriptive statistics include the number, the sample, the minimum value, the

value of maximum, average value (mean) and standard deviation .

III.4.2. Multicolinearity Testing

The purpose of the test is to test multicollinearity correlation between the

independent variables. Good regression model is the regression with no strong

correlation symptoms among the Independent variables. Multicollinearity testing

in Logistic Regression using a correlation matrix among independent variables.

With the tolerable error 5%, the corellation coefficient value among variable that

less than 0,95 means there is no serious multicolinearity issue between the

variables.

III.4.3. Logistic Regression Analysis

The analysis of the data using the IBM SPSS 20 software with method

chosen is Logistic Regression or Binary Logistic. This method is used because the

dependent variable of this research using dummy variable. So the equation will

use the odd ratio to calculate the probability of the model. Logistic Regressin

technique does not require Normality Assumption and Classic Assumption test to

the Independent Varibles (Ghozali, 2006). It also ignores Heteroscedacity

Assumption means the dependent variable does not require homoscedacity for

each independent variables (Gujarati, 2003). Classic Assumption test for this

research is using multicorrelation assumption to know whether there is any strong

relation among variables in this research.

Logistic regression model used in this research is shown in the equation

below:

41

= + + + + + .....................(3.4)

Description:= (0 < x < 1)===AQ = audit qualityCFTD = cash flow to total debt ratioDAR = debt to total asset ratioOS = opinion Shopping=

III.4.3.1 Feasibility Regression Model

Testing the feasibility model of logistic regression was performed with the

Goodness of Fit Test as measured by the value of Chi-Square at the bottom of the

Hosmer and Lemeshow test. According to Widyantari (2011), Hosmer and

Lemeshow’s Goodness of Fit Test tests H0 that the emprical data is fit or

appropriate with the model (there is no difference between model with the data,

so the model can be fit. Thus, in Nisa (2013), the basis for decision of Goodness

of Fit Test score is :

1) If the value of Hosmer and Lemeshow Goodness of fit test statistics

equal to or less than 0.05 (Sig. ≤ 0.05), the null hypothesis is rejected,

which means that there are significant differences between the models

42

with value observations so Goodess fit model is not good because the

model does not can predict the value of observation.

2) If the value of Hosmer and Lemeshow Goodness of fit test is greater

than 0.05 (Sig. > 0.05), the null hypothesis is accepted which means that

the model is able to predict the value of observations or models can be

said can accepted because it fits with the data observations.

III.4.3.2 Overall Model (Overall Model Fit)

The second analysis is to assess or test the overall model to the data. This

test is used to assess the model that has been hypothesized to have been fit or not

with the data. Hypotheses to assess model fit is :

H0 : the hypothesized model fit to the data

H1 : hypothesized model does not fit with the data

From this hypothesis explained that we would not reject the null hypothes

is so that the model fit to the data. The statistics are used by Likelihood.

Likelihood L of the model is the probability that the model hypothesized describe

the input data. Log Likelihood in logistic regression similar to the definition of

"Sum of Square Error" in the regression model, so decrease Log Likelihood

models show that the better the regression model (Ghozali , 2001).

Testing is done by comparing the values between -2 Log Likelihood at the

start (Block Number = 0) with a value of -2 Log Likelihood (-2LL) at the end

(Block Number = 1). Ghozali (2001) states that -2LL values decreased indicating

that the statistical model is fit to the data

43

III.4.3.3 Coefficient of Determination (Negalkerke R Square)

According to Ghozali (2006), The coefficient of determination in logistic

regression can be seen in Nagelkerke R Square value can be interpreted as the

value of R Square in the multiple regression. Negalkerke R Square value

indicated variablity of the dependent variable that can be explained by the

variability of the independent variables, while the rest is explained by other

variables outside research model (Ghozali, 2006). According to Ghozali (2011) in

Nisa (2013), The closer the value 1 then models considered getting goodness of

fit while getting closer to 0 then models increasingly not the goodness of fit.

III.4.3.4 Classification matrix

The classification matrix analysis will demonstrate the predictive power of

the regression model to predict the likelihood of going concern audit opinion on

the auditee. The matrix result is stated in percentage.

III.4.3.5 Logistic Regression Models Formed

Estimation of the parameters of the model can be seen in the output

variable in the Equation. Output variables in the equation shows the value of the

coefficient regression and the level of significance. Regression coefficient of each

variables which shows the shape of the relationship between the variables tested.

Examination of this hypothesis is one-sided tests were performed with by

comparing the level of significance (Sig) with level error () which is 5% . If sig

< , independent variables significant effect on the dependent variable.

44

III.4.4 Hypotheses Testing

Testing with logistic regression model used in this research is to determine the

effect of each independent variable on the dependent variable. Testing criteria are:

H1 : Audit Quality affects the Going Concern Opinion.

H0 : β1 = 0

Ha : β1 ≠ 0

H2: Cash Flow to Total Debt has negative influence with Going

Concern Opinion

Ho: β2 ≥ 0

Ha: β2 < 0

H3: Debt to Total Asset has Positive influence with Going Concern

Opinion

Ho : β3 ≤ 0

Ha : β3 > 0

H4: Opinion shopping affects the Going Concern Opinion.

Ho : β4 = 0

Ha : β4 ≠ 0

45

CHAPTER IV

RESULT

IV.1 Descriptive Statistic

The population sample is the manufacturing company listed in Indonesia

Stock Exchange website consistently for period 2011-2013. The total sample for

this research is 59 companies with 3 years period. The source of the data comes

from financial statement of the copmany. The descriptive statistic for the

dependent and independent variables in this research presented in:

Table 4.1 Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

DAR 177 ,0372 3,7026 ,600319 ,6257871

CFDR 177 -,4495 5,6082 ,244150 ,5313586

Valid N (listwise) 177

Sources : IBM SPSS.20

Based on table 4.1 can be explained the result below.

(1) The mean of Debt to total Asset Ratio (DAR) is 0,600319. The maximum

nuber of this variable is 3,7026 and the minimum is 0,0372. The ratio

shows that there are companies that have small number of liabilities so

that the ratio is 0,0372. For ratio more than 1 shows that the company has

big portion of liabilities compare to the total asset means that the asset of

the company is not able to cover the total liabilities. This indicates hogher

risk for the Creditor. However, the mean of the sample being reseacrhed

46

is less than 1 which means they still have positive equity and being

expected to be able to pay its liabilities.

(2) The mean of Cash Flow to Total Debt Ratio (CFTD) is 0.244150 with the

maximum and minimum number respectively are 5,6082 and -0,4495. The

mean of the sample which less than 1 shows that the cash from operation

earned by the company in current period is less than the total liabilities

they have. Thus, the company does not has sufficient cash from operation

to pay all its debt.

Besides those two variables above, there are there more variables which is

excluded in Descriptive statistic. Those variables are Going Concern opinion

(GCO), Audit Quality (AQ), and Opinion Shopping (OS). These variables are

excluded since the measurement using nominal scale. Nominal scale is a scale

measurement categories or groups. This figure only serves as a label category

with no intrinsic value and have no meaning. Therefore, it is not precisely

calculate the mean value and standard deviation on these variables (Ghozali,

2001).

IV.2. Result of Multicolinearity testing

Good regression model is the regression with no strong correlation

symptoms among the Independent variables. With the tolerable error 5%, the

corellation coefficient value among variable that less than 0,95 means there is no

serious multicolinearity between the variables. The result of the test shown in

table 4.7:

47

Table 4.2. Correlation Matrix

Constant AQ DAR CFTD OS

Step 1

Constant 1,000 -,110 -,887 ,585 -,100

AQ -,110 1,000 -,095 ,104 ,143

DAR -,887 -,095 1,000 -,700 -,057

CFTD ,585 ,104 -,700 1,000 ,116

OS -,100 ,143 -,057 ,116 1,000

Source : IBM SPSS.20

The matrix above shows that all the coeficient of the correlation among

variables is less than 0,95. The yellow coeficient is the coleration between the

variable itself, the number will be 1. So that, in this regression model there is no

serious multicolinearity among the independent variables.

IV.3 Result of Logistic Regression Analysis

The analysis in this reasearch is using Logistic Regression Analysis.

Ghozali (2006) stated that logistic regression is used to test whether the

probability of the dependent variable can be predicted by the independent

variables. Logistic regression does not need normality assumption to the

independent variables (Ghozali, 2006) and ignore heteroscedacity (Gujarati,

2003).

IV.3.1 Feasibility Regression Model

Goodness of fit test is measured with the value of Chi-Square at the

bottom of the Hosmer and Lemeshow test. If statistical value of Hosmer and

48

Lemeshow’s Goodness of Fit Test equals or less than 0,05, the H0 is rejected

which means there is no significant difference between the model with the

observation. Thus, the Goodness of fit of the model is not good because it cannot

predict the observation value. If the statistical value is more than 0,05, the H0

cannot be rejected which means the model is Fit with the data (Ghozali, 2006).

Hosmer and Lemeshow statistic value’s Goodness of Fit Test is 2,238 with

significance probability 0,937 whose value is far above 0,05. Thus, it can be

concluded that the model is able to predict the value of observations or can be

said to be acceptable because the model fits the data observation. Significance

value obtained is much greater 0,05 then the null hypothesis can not be rejected

(accepted). This means proper to uses regression model for further analysis

because there is no real difference between the classification predicted the

observed classification. The result of Hosmer and Lemeshow’s Goodness of Fit

Test presented in:

Table 4.3 Hosmer and Lemeshow Test

Step Chi-square Df Sig.

1 2,238 8 ,973

Sources : IBM SPSS.20

IV.3.2 Classification Table

The predictive power of the regression model to predict the likelihood of

dependent variable stated in percent. The result of classification table shown in

Table 4.5:

49

Table 4.5. Classification Table

Observed

Predicted

GO_Opinion

Percentage

Correct

Non Going

Concern

Opinion

Going

Concern

Opinion

Step 1GO_Opinion

Non Going Concern Opinion 153 2 98,7

Going Concern Opinion 11 11 50,0

Overall Percentage 92,7

Source : IBM SPSS.20

Table 4.5 above shows the predictive power of the regression model for

predict the likelihood of going concern opinion is 92,7% can be viewed from a

total of 22 samples that received going concern opinion there are 11 samples

(50%) are predicted deserves to receive going concern opinion (GCO) based on

predictive regression model. The power of this model to predict recipient of non

going concern opinion of 98,7%, which means that the regrssion model filed as

many as 153 companies that are predicted to receive non-going concern opinion

of total 155 companies who received non-ging concern opinion.

IV.3.3 Overall Model Fit

The value of -2LL decrease indicates that the statistical model is getting fit

with the data (Ghozali, 2006). From the output of this research, the value of initial

-2LL (Block Number= 0), where the constants are included in the model at

132.889. While at the end -2LL (Block Number = 1), where the constants and

50

independent variables are included in the model fall to 65.423. This means -2LL

(Block Number = 0) is greater than the value of -2LL (Block Number = 1 ). So, it

can be said that the hypothetical model is fit with the data or regression model is

feasible. The result is presented in:

Table 4.6 Overall Model Fit

Block 0 Beginning = Block Block 1 Method = Enter

132,889 65,423

Source : IBM SPSS.20

IV.3.4 Coefficient of Determination (Nagelkerke R square)

The coefficient determination on logistic regression can be viewed in the

Negalkerke R Square can be interpreted as the value of R-Square on multiple

regression (Ghozali, 2006).

Table 4.7 Nagelkerke R square

Step -2 Log

likelihood

Cox & Snell

R Square

Nagelkerke

R Square

1 65,423a ,317 ,600

Source : IBM SPSS.20

Table 4.6 shows the value Negalkerke R Square of 0,600 which means the

dependent variable can be explained by independent variables is equal to 60%

and the remaining 40% is explained by other variable outside the model. In other

word, audit quality, cash flow to total debt ratio, debt to total asset ratio and

opinion shopping are able to clarify the dependent variable which is going

51

concern opinion by 60%.

IV.3.5 Logistic Regression Model formed and Hypotheses Testing

Logistic regression model which is formed can be established by looking

at the estimated value parameters in the Variable in the Equation table 4.8 below:

Table 4.8 Variables in the Equation

B S.E. Wald df Sig. Exp(B)

Step 1a

AQ -1,384 ,902 2,351 1 ,125 ,251

DAR 4,090 1,040 15,475 1 ,000 59,726

CFDR -3,874 1,419 7,453 1 ,006 ,021

OS -,430 1,181 ,132 1 ,716 ,651

Constant -4,297 ,817 27,672 1 ,000 ,014

a. Variable(s) entered on step 1: AQ, DAR, CFDR, OS.

The equation formed from the variables above is:

− = − , − , − , + ,− , +Source : the data is processed by researcher

Where: ====AQ = audit qualityCFTD = cash flow to total debt ratio

52

DAR = debt to total asset ratioOS = opinion Shopping=

IV.4 Result of Hypothesis Testing

Hypotheses testing is done by comparing the level of significance (sig)

with the tolerable error (α) = 5%. Based on table 4.8 the interpretation as

explained below:

(1) H1 : Audit Quality affects the Going Concern Opinion.

The first hypotheses states that Audit Quality can influence the Going

Concern Opinion. The audit quaility is measured by the Public accountant firm

whether it is Big Four or Non-Big Four public accountant firm. The of this testing

has negative regression coeficient -1,384 with the significance level 0,125. The

level of significance of audit quality is far bigger than α (5%). From the result

audit quality is not significant or not affecting the receiving of the going concern

opinion. Thus, H1 is rejected.

As an audit accounting firm, the auditor must perform its professional service

to the client. Auditor must comply to the Standard Professional Akuntansi Publik

(SPAP), in this case it is stated in SPAP part 341 which regulates auditor

consideration for entity’s going concern. Either big four or non big four public

acounting firm, the auditor must give the appropriate opinion for the client that

can describe the actual condition of the client. So that the external users can trust

the financial statement published by auditor to help them in taking the decision.

The result of this research is consistent with the previous research by

53

Ramadhany (2004), Setyarno dkk. (2006), Praptitorini and Januarti (2007),

Santosa and Wedari (2007), Putra (2010), Astuti (2011) show that auditor’s

Reputation is not significantly affects to the probability of receiving going

concern opinion to the auditee. In Januarti (2007) found the evidence that public

accountant firm reputation is less considered by the auditor in giving the going

concern opinion.

(2) H2: Cash Flow to Total Debt has negative influence with Going

Concern Opinion.

The second hypotheses states cash flow to total debt ratio has negative

influence with going concern opinion. This variable is measured using cash flow

from operation devided by the total liabilities. The result shows that cash flow to

total debt has negative coeficient regression -3,874 with the level of significance

,006 which is less than α (5%). Based on the result, the conclusion is Cash flow to

total debt has negative impact to the going concern opinion and H2 is accepted.

The interpretation of this result is the bigger cash flow to total debt ratio of the

company, the probability of receiving going concern opinion is lower. So, the

company need to maintain its cash availability in order to prevent going concern

opinion. Debt as the element of this ratio formulation also will impact the going

concern. Thus, whether the debt is higher or lower, the risk can be managed if the

company capable to manage it by increasing or balancing it with the cash.

(3) H3: Debt to Total Asset has Positive influence with Going Concern

Opinion.

The third hypotheses is debt to total asset has positive influence with going

concern opinion. The result of hypotheses that measured by total liabilities

54

divided by total asset shows positive regression coeficient 4,090 with the level of

significance 0,000 far below α (5%). It means debt to total asset is significantly

affecting the receiving of going concern opinion and H3 is accepted. High DAR

ratio will lead the company more focused use of capital for pay obligations rather

than to fund its operations. This matter led to the company's ability to generate

profits will be reduced so as to threaten the survival of the company. Higher DAR

ratio also shows the smaller the company's assets are financed by so that the

owner is also the greater the risk of the company. It can raises doubt in the ability

of the company 's auditors continue its business.

The results of this research is consistent with the results of research by

Carcello and Neal (2000) and Masyitoh and Adhariani (2010) which showed that

leverage is positively related to the provision of going concern audit opinion .

(4) H4: Opinion shopping affects the Going Concern Opinion.

From the table 4.8, opinion shopping (OS) shows negative regression

coeficient -0,430 with level of significance 0,716 which is more than α (5%).

Opinion shopping is measured by the action of the company which changes its

auditor to prevent the going concern opinion. The reason to change the audior is

vary, so in this research the researcher focus to find out whether the company

change to big four or non-big four public accountant firm. The result means the

opinion shopping do not affect the receiving of opinion shopping because the

significance is bigger. Thus, H4 is rejected.

55

CHAPTER V

CONCLUSION AND RECOMENDATION

V.1 Conclusion

Based on the purpose, statement of problem and theoritical framework of

this research, there are some conclusions taken:

(1) Audit quality measured by the auditor, whether it affiliates with big four

or non big four, do not affect significantly to the going concern audit

opinion. This matter means that the public accountant firm affiliated with

the big 4 or are not affiliated with the big 4 together provide a good

quality of audits and act independently in issuing a going concern audit

opinion. Public accountant firm will try to defend his good name and as

much as possible to avoid the problems that would damage the image and

reputation which can damage the public accountant firm, so that a public

accountant firm will always be objective to work. If the company is

experiencing doubts about its survival, the opinion of the decision is

going-concern audit opinion, regardless of whether the firm is classified in

the big four firms or not. In SPAP section 341 which regulates auditor

consideration for entity’s going concern. Either Big Four or Non-Big Four

public acounting firm, the auditor must give the appropriate opinion for

the client that can describe the actual condition of the client.

56

(2) Cash flow to total debt negatifly affects going concern audit opinion.

Which means the higher cash flow to total debt ratio, the probability of

receiving going concern opinion is lower. Ross, Westerfield and Jafee

(2001) and in Widyantari (2012) stated that if the company has sufficient

cash then companies may shy away from the failure to meet liabilities and

financial distress that the company is not expected to receiving going

concern audit opinion.

(3) Debt to total assets positive effect on the going concern audit opinion. The

higher ratio of debt to total assets shows the smaller the company's assets

funded by the owner so that the risk of the company is also getting bigger.

This can lead to doubt of auditor about the ability of the company to

survive. It means high possibility that auditor gives Going Concern

Opinion to the auditee.

(4) Opinion shopping as measured by the change in Auditors become Big four

public accountant firms or non big four do not affect the acceptance of

going concern opinion. This result supports the H1 about audit quality with

the result shows that reputation of big four or non big four accounting firm

does not affect significantly to the going concern opinion. Thus, the

changing of auditor to the big four or non big four will not give significant

impact to the company receiving going concern audit opinion.

57

(5) From this research, the variables that significantly affect the Going

Cencern Opinion are Cash Flow to Total Debt and Debt to Total Asset.

Audit Quality and Opinion Shopping is not significantly affect to going

concern audit opinion.

5.2 Recommendation

From the result of the research and based on the cope and limitation of the

research, researcher suggests some recommendations:

(1) For Investor and potentital investor which have invested the money or

have had willingness to invest in company that receives unqualified

opinion with explanatory paragraph about going concern, better to

revaluate and replan the investment. This is useful to learn more about the

risk which will receive by the investor before the bad situation happen to

the company in the future.

(2) For the managements getting warning about going concern, should

identify the problem and provide immediate solutions in order to prevent

the bankruptcy and avoid the issuance of unqualified opinion with

explanatory paragraph about going concern from auditor.

(3) For further research can extend the number of years of research so that

they can see a trend of publishing trend going concern audit opinion in the

long term as well as expanding the research object. Also further

researcher can do the research on other group of companies beside

manufacturing.

58

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APPENDICES

Appendix 1. Grey Area Companies

No Code Name

1 ASII Astra International2 AUTO Astra Otoparts3 BRNA Berlina4 DLTA Delta Djakarta5 ETWA Eterindo Wahanatama6 GJTL Gajah Tunggal7 ICBP Indofood CBP Sukses Makmur8 IGAR Champion Pacific Indonesia9 INKP Indah Kiat Pulp & Paper10 JPFA Japfa Comfeed Indonesia11 KAEF Kimia Farma12 KBLM Kabelindo Murni13 KIAS Keramika Indonesia Assosiasi14 KRAS Krakatau Steel15 MAIN Malindo Feedmill16 PBRX Pan Brothers17 RMBA Bentoel International Investama18 SMCB Holcim Indonesia19 SMSM Selamt Sempurna20 VOKS Voksel Electric

62

Appendix 2. Diagram of Grey Area Companies

Unqualified withmodified word

(Grey Area)27%

Going ConcernOpinion (Red

Area)10%

62

Appendix 2. Diagram of Grey Area Companies

UnqualifiedOpinion (green

area)63%

Going ConcernOpinion (Red

Area)10%

Grey Area Sample

62

Appendix 2. Diagram of Grey Area Companies

UnqualifiedOpinion (green

area)63%

63

Appendix 3. Going Concern Audit Opinion

No Code Name1 AKKU_13 Alam Karya Unggul2 BIMA_11 Primarindo Asia Infrastructure3 BIMA_12 Primarindo Asia Infrastructure4 BIMA_13 Primarindo Asia Infrastructure5 IKAI_11 Intikeramik Alamasri Industri6 IKAI_12 Intikeramik Alamasri Industri7 IKAI_13 Intikeramik Alamasri Industri8 JECC_11 Jembo Cable Company9 JECC_12 Jembo Cable Company10 JECC_13 Jembo Cable Company11 JKSW_11 Jakarta Kyoei Steel Works12 JKSW_12 Jakarta Kyoei Steel Works13 JKSW_13 Jakarta Kyoei Steel Works14 MYTX_11 Apac Citra Centertex15 MYTX_12 Apac Citra Centertex16 MYTX_13 Apac Citra Centertex17 POLY_12 Asia Pacific Fiber18 POLY_13 Asia Pacific Fiber19 SULI_11 Sumalindo Lestari Jaya20 SULI_12 Sumalindo Lestari Jaya21 SULI_13 Sumalindo Lestari Jaya

64

Appendix 4. Diagram of Going Concern Audit Opinion

12%

88%

GCO

Going Concern Opinion

Non Going Concern Opinion

65

Appendix 5. CFTD Calculation

No Code 2011 2012 20131 ADES 0,3007 0,4849 0,22752 AISA 0,0169 0,0596 0,02963 AKKU -0,3332 -0,1148 0,06754 AKPI 0,1722 0,014 -0,0235 ALKA 0,1352 -0,0511 -0,00286 ALMI 0,1666 -0,0224 -0,34077 AMFG 0,8539 0,6245 0,81428 APLI 0,1781 -0,1242 0,72689 ARNA 0,413 0,7148 0,760410 BATA 0,4355 0,2485 0,157411 BIMA 1,9133 0,0494 0,033112 BRAM 0,3093 0,6454 0,182313 BRPT -0,0838 0,0764 0,075714 BTON 1,2623 0,8188 0,296815 BUDI 0,0564 0,0011 0,148416 CEKA 0,3018 0,2941 0,036217 CPIN 0,4047 0,4049 0,357218 CTBN 0,3302 0,0156 0,427619 DPNS 0,3432 0,2257 -0,020120 DVLA 0,3619 0,5113 0,388321 EKAD 0,1609 0,3489 0,219222 FASW 0,6097 0,112 0,050823 FPNI -0,0164 0,0137 0,05224 GDST 0,0887 0,9978 0,628225 GDYR 0,4423 0,1966 0,344126 GGRM -0,0062 0,2653 0,115827 HDTX 0,1788 0,0668 0,237328 HMSP 1,2086 0,3159 0,815329 IKAI -0,0038 0,0177 -0,043130 IKBI 0,6032 0,32 -0,122731 IMAS -0,1552 -0,2423 -0,150432 INAF 0,0581 -0,076 -0,2012

66

33 INAI 0,0453 -0,2058 0,121634 INCI -0,4495 0,2022 1,022535 INDR 0,1286 0,0666 0,08636 INDS -0,0517 0,1978 0,576537 IPOL 0,0421 0,1691 0,132538 JECC 0,0211 -0,0014 -0,10939 JKSW 0,0071 0,0011 0,000140 JPRS -0,3678 -0,201 5,608241 KBLI 0,2175 0,03 -0,060242 KDSI 0,1479 0,1982 0,171343 KLBF 0,8379 0,6726 0,329444 LION 0,6307 0,3413 0,634945 LMSH 0,125 0,3413 0,442446 MRAT 0,0178 0,1826 0,133147 MYTX -0,0025 -0,0211 0,012848 NIKL -0,2452 0,0952 0,039349 POLY 0,0089 0,361 0,00350 PTSN 0,1785 0,2484 0,231751 PYFA 0,0474 -0,0721 -0,009352 RICY 0,0541 0,0911 -0,3153 SIPD 0,0164 -0,0706 0,047654 SRSN 0,2727 -0,0561 0,356155 SULI 0,0147 -0,0139 -0,139856 TCID 0,6622 1,5202 0,897157 TFCO 0,2225 0,1751 -0,067958 TIRT -0,1042 0,0218 -0,03159 UNVR 0,8031 0,6476 0,6864

67

Appendix 6. DAR Calculation

No Code 2011 2012 20131 ADES 0,6021 0,4625 0,39972 AISA 0,4895 0,4742 0,53063 AKKU 0,4957 0,6308 0,94584 AKPI 0,5142 0,5083 0,50625 ALKA 0,8121 0,6293 0,75346 ALMI 0,7116 0,6876 0,76117 AMFG 0,2027 0,2113 3,36128 APLI 0,3359 0,3451 0,28289 ARNA 0,4189 0,3548 0,323110 BATA 0,3139 0,3251 0,41711 BIMA 3,0807 2,8763 2,728412 BRAM 0,2761 0,2623 0,318713 BRPT 0,489 0,5428 0,543714 BTON 0,224 0,22 0,211915 BUDI 0,618 0,6286 0,628516 CEKA 0,508 0,5491 0,506117 CPIN 0,3005 0,3379 0,367118 CTBN 0,41 0,4687 0,449619 DPNS 0,2388 0,1567 0,128520 DVLA 0,2159 0,2169 0,231421 EKAD 0,3786 0,2991 0,308222 FASW 0,635 0,6761 0,726323 FPNI 0,632 0,6687 0,657424 GDST 0,2374 0,3188 0,257725 GDYR 0,6393 0,5745 0,493726 GGRM 0,3719 0,359 0,420627 HDTX 0,4423 0,5335 0,697328 HMSP 0,4735 0,493 0,483529 IKAI 0,4736 0,5095 0,573930 IKBI 0,1874 0,2326 0,165531 IMAS 0,6068 0,453 0,701632 INAF 0,4536 0,4531 0,543633 INAI 0,8051 0,7889 0,8351

68

34 INCI 0,1108 0,1249 0,073835 INDR 0,5642 0,5693 0,594836 INDS 0,4453 0,3173 0,20237 IPOL 0,5614 0,5014 0,454738 JECC 0,7967 0,7985 0,880939 JKSW 2,3331 2,4323 2,554240 JPRS 0,2285 0,1282 0,037241 KBLI 0,3356 0,2725 0,336842 KDSI 0,5249 0,4462 0,58643 KLBF 0,478 0,0786 0,098644 LION 0,1743 0,2413 0,16645 LMSH 0,4164 0,2413 0,220446 MRAT 0,1516 0,1528 0,140647 MYTX 0,9655 1,0338 1,049448 NIKL 0,518 0,6144 0,654949 POLY 2,9934 3,7026 3,342150 PTSN 0,391 0,418 0,345251 PYFA 0,3019 0,3544 0,463852 RICY 0,4545 0,5644 0,57253 SIPD 0,5188 0,6129 0,592854 SRSN 0,3016 0,3305 0,252955 SULI 0,9758 1,0325 1,395356 TCID 0,0977 0,1306 0,19357 TFCO 0,2414 0,2133 0,191758 TIRT 0,801 0,8451 0,918459 UNVR 0,6488 0,6689 0,6813

69

Appendix 7. Logistic Regression

Case Processing Summary

Unweighted Casesa N Percent

Selected Cases

Included in Analysis 177 100,0

Missing Cases 0 ,0

Total 177 100,0

Unselected Cases 0 ,0

Total 177 100,0

a. If weight is in effect, see classification table for the total number of cases.

Dependent Variable Encoding

Original Value Internal Value

Non Going Concern Opinion 0

Going Concern Opinion 1

Block 0: Beginning Block

Iteration Historya,b,c

Iteration -2 Log likelihood Coefficients

Constant

Step 0

1 137,242 -1,503

2 132,964 -1,890

3 132,889 -1,951

4 132,889 -1,952

5 132,889 -1,952

a. Constant is included in the model.

b. Initial -2 Log Likelihood: 132,889

c. Estimation terminated at iteration number 5 because

parameter estimates changed by less than ,001.

70

Classification Tablea,b

Observed Predicted

GCO Percentage

CorrectNon Going

Concern Opinion

Going Concern

Opinion

Step 0GCO

Non Going Concern Opinion 155 0 100,0

Going Concern Opinion 22 0 ,0

Overall Percentage 87,6

a. Constant is included in the model.

b. The cut value is ,500

Variables in the Equation

B S.E. Wald df Sig. Exp(B)

Step 0 Constant -1,952 ,228 73,436 1 ,000 ,142

Variables not in the Equation

Score df Sig.

Step 0Variables

AQ 8,496 1 ,004

DAR 78,500 1 ,000

CFDR 1,887 1 ,169

OS ,835 1 ,361

Overall Statistics 81,019 4 ,000

71

Block 1: Method = Enter

Iteration Historya,b,c,d

Iteration -2 Log likelihood Coefficients

Constant AQ DAR CFDR OS

Step 1

1 93,945 -2,169 -,293 1,365 -,108 -,055

2 75,195 -3,011 -,639 2,143 -,621 -,125

3 67,993 -3,443 -,920 2,828 -2,125 -,276

4 65,723 -3,949 -1,203 3,603 -3,279 -,396

5 65,429 -4,246 -1,356 4,022 -3,792 -,427

6 65,423 -4,296 -1,383 4,088 -3,872 -,429

7 65,423 -4,297 -1,384 4,090 -3,874 -,430

8 65,423 -4,297 -1,384 4,090 -3,874 -,430

a. Method: Enter

b. Constant is included in the model.

c. Initial -2 Log Likelihood: 132,889

d. Estimation terminated at iteration number 8 because parameter estimates changed by less than ,001.

Omnibus Tests of Model Coefficients

Chi-square df Sig.

Step 1

Step 67,466 4 ,000

Block 67,466 4 ,000

Model 67,466 4 ,000

Model Summary

Step -2 Log likelihood Cox & Snell R

Square

Nagelkerke R

Square

1 65,423a ,317 ,600

a. Estimation terminated at iteration number 8 because parameter

estimates changed by less than ,001.

Hosmer and Lemeshow Test

Step Chi-square Df Sig.

72

1 2,238 8 ,973

Contingency Table for Hosmer and Lemeshow Test

GCO = Non Going Concern Opinion GCO = Going Concern Opinion Total

Observed Expected Observed Expected

Step 1

1 18 17,991 0 ,009 18

2 18 17,954 0 ,046 18

3 18 17,887 0 ,113 18

4 18 17,783 0 ,217 18

5 18 17,581 0 ,419 18

6 18 17,269 0 ,731 18

7 16 16,700 2 1,300 18

8 16 15,895 2 2,105 18

9 13 13,221 5 4,779 18

10 2 2,719 13 12,281 15

Classification Tablea

Observed Predicted

GCO Percentage

CorrectNon Going

Concern Opinion

Going Concern

Opinion

Step 1GCO

Non Going Concern Opinion 153 2 98,7

Going Concern Opinion 11 11 50,0

Overall Percentage 92,7

a. The cut value is ,500

Variables in the Equation

B S.E. Wald df Sig. Exp(B) 95% C.I.for EXP(B)

Lower Upper

Step 1a

AQ -1,384 ,902 2,351 1 ,125 ,251 ,043 1,470

DAR 4,090 1,040 15,475 1 ,000 59,726 7,784 458,250

CFDR -3,874 1,419 7,453 1 ,006 ,021 ,001 ,335

OS -,430 1,181 ,132 1 ,716 ,651 ,064 6,593

Const

ant-4,297 ,817 27,672 1 ,000 ,014

73

a. Variable(s) entered on step 1: AQ, DAR, CFDR, OS.

Correlation Matrix

Constant AQ DAR CFDR OS

Step 1

Constant 1,000 -,110 -,887 ,585 -,100

AQ -,110 1,000 -,095 ,104 ,143

DAR -,887 -,095 1,000 -,700 -,057

CFDR ,585 ,104 -,700 1,000 ,116

OS -,100 ,143 -,057 ,116 1,000

Descriptives

Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

DAR 177 ,0372 3,7026 ,600319 ,6257871

CFDR 177 -,4495 5,6082 ,244150 ,5313586

Valid N (listwise) 177