The Impact of Auditor Switching

Oct 13, 2025 by magicalceylontours.com 69 views

The Influence of Audit Quality, Company Financial Condition, Auditor Switching, and Previous Year's Audit Opinion on the Going Concern Audit Opinion on Manufacturing Companies Listed on the Indonesia Stock Exchange

Introduction

In the business world, especially in the manufacturing sector, attention to the going concern audit opinion is very important. This opinion is an indicator of the company's financial health and its ability to survive in the market. The going concern audit opinion is a critical component of the audit report, as it provides stakeholders with an assessment of the company's ability to continue operating as a going concern. This study aims to explore the effect of audit quality, company financial condition, switching auditors, and previous year audit opinion on the Going Concern audit opinion on companies listed on the Indonesia Stock Exchange between 2013 and 2016.

Background

The going concern audit opinion is a critical component of the audit report, as it provides stakeholders with an assessment of the company's ability to continue operating as a going concern. The audit opinion is based on the auditor's assessment of the company's financial health and its ability to survive in the market. The going concern audit opinion is typically expressed in the audit report as a positive or negative opinion, depending on the auditor's assessment of the company's financial health.

Research Methodology

This study involved 148 manufacturing companies that were traced through financial statements and auditor reports available on the official website of the Indonesia Stock Exchange (www.idx.co.id). From this population, researchers used the purposive sampling method, which produced 52 sample companies for three years of observation (2014-2016), with a total of 156 units of analysis. The data analysis method applied is logistical regression, which allows researchers to assess the relationship between independent and dependent variables.

Research Result

Through data processing using SPSS software, it was found that two variables, namely the company's financial condition and the previous year's audit opinion, had a significant influence on the going concern audit opinion at a significance level of 5%. This shows that companies with better financial conditions tend to get positive going concern audit opinions. In addition, a good audit opinion in the previous year also contributed to a positive assessment in the following year.

However, this study also shows that the quality of audit and auditor switching does not show a significant effect on the going concern audit opinion at the same level of significance. This implies that although the quality of the audit is important, other factors such as financial conditions and history of audit opinion are more dominating in auditor decision making.

Additional Analysis

The importance of financial conditions and the previous year's audit opinion in determining the Going Concern audit opinion can be understood in the context of trust. When the auditor sees strong financial statements, they may be more confident in the survival of the company. Conversely, poor financial conditions can trigger serious questions about the company's ability to survive, thus leading to negative going concern opinions.

Auditor switching factors are also worthy of attention. Although not statistically proven in this study, auditor changes can cause doubt among investors and other stakeholders. Many parties believe that new auditors need time to understand the company's business and financial statements, which might affect the accuracy of their audit opinion.

The Role of Audit Quality

Audit quality is an essential factor in determining the Going Concern audit opinion. A high-quality audit is one that is conducted in accordance with the relevant auditing standards and is free from any material weaknesses. However, this study found that audit quality does not have a significant effect on the Going Concern audit opinion. This may be due to the fact that other factors such as financial conditions and history of audit opinion are more dominating in auditor decision making.

The Impact of Auditor Switching

Auditor switching is another factor that can affect the Going Concern audit opinion. This study found that auditor switching does not have a significant effect on the Going Concern audit opinion. However, this does not mean that auditor switching is not important. Auditor switching can cause doubt among investors and other stakeholders, as they may not be familiar with the new auditor's audit opinion.

Conclusion

This study confirms that the company's financial condition and previous year's audit opinion played an important role in determining the Going Concern audit opinion in manufacturing companies listed on the Indonesia Stock Exchange. Although the quality of audit and switching auditors does not have a significant impact, the results of this study provide valuable insights for stakeholders in understanding the factors that affect company stability. Therefore, greater attention to financial conditions and previous audit reports is highly recommended to maintain the confidence of investors and other stakeholders.

Recommendations

Based on the findings of this study, the following recommendations are made:

Financial Condition: Companies should focus on maintaining a strong financial condition, as this is a critical factor in determining the Going Concern audit opinion.
Previous Year's Audit Opinion: Companies should pay attention to their previous year's audit opinion, as this can have a significant impact on the Going Concern audit opinion.
Audit Quality: Companies should ensure that their audit is conducted in accordance with the relevant auditing standards and is free from any material weaknesses.
Auditor Switching: Companies should minimize auditor switching, as this can cause doubt among investors and other stakeholders.

Limitations

This study has several limitations, including:

Sample Size: The sample size of this study is relatively small, which may limit the generalizability of the findings.
Data Collection: The data used in this study is based on financial statements and auditor reports available on the official website of the Indonesia Stock Exchange, which may not be comprehensive.
Methodology: The methodology used in this study is based on logistical regression, which may not be the most appropriate method for analyzing the data.

Future Research Directions

Future research should focus on the following areas:

Audit Quality: Further research is needed to understand the impact of audit quality on the Going Concern audit opinion.
Auditor Switching: Further research is needed to understand the impact of auditor switching on the Going Concern audit opinion.
Financial Condition: Further research is needed to understand the impact of financial condition on the Going Concern audit opinion.
Previous Year's Audit Opinion: Further research is needed to understand the impact of previous year's audit opinion on the Going Concern audit opinion.
Frequently Asked Questions (FAQs) on the Influence of Audit Quality, Company Financial Condition, Auditor Switching, and Previous Year's Audit Opinion on the Going Concern Audit Opinion

Q: What is the going concern audit opinion?

A: The going concern audit opinion is an indicator of a company's financial health and its ability to survive in the market. It is a critical component of the audit report, as it provides stakeholders with an assessment of the company's ability to continue operating as a going concern.

Q: What are the factors that influence the going concern audit opinion?

A: The factors that influence the going concern audit opinion include audit quality, company financial condition, auditor switching, and previous year's audit opinion.

Q: How does audit quality affect the going concern audit opinion?

A: Audit quality is an essential factor in determining the going concern audit opinion. A high-quality audit is one that is conducted in accordance with the relevant auditing standards and is free from any material weaknesses. However, this study found that audit quality does not have a significant effect on the going concern audit opinion.

Q: How does company financial condition affect the going concern audit opinion?

A: Company financial condition is a critical factor in determining the going concern audit opinion. Companies with better financial conditions tend to get positive going concern audit opinions.

Q: How does auditor switching affect the going concern audit opinion?

A: Auditor switching is another factor that can affect the going concern audit opinion. This study found that auditor switching does not have a significant effect on the going concern audit opinion. However, this does not mean that auditor switching is not important. Auditor switching can cause doubt among investors and other stakeholders, as they may not be familiar with the new auditor's audit opinion.

Q: How does previous year's audit opinion affect the going concern audit opinion?

A: Previous year's audit opinion is another factor that can affect the going concern audit opinion. This study found that a good audit opinion in the previous year also contributed to a positive assessment in the following year.

Q: What are the implications of this study for stakeholders?

A: The findings of this study have implications for stakeholders, including investors, creditors, and other parties who rely on the going concern audit opinion. The study suggests that companies should focus on maintaining a strong financial condition and paying attention to their previous year's audit opinion.

Q: What are the limitations of this study?

A: This study has several limitations, including a relatively small sample size and a limited data collection method. Future research should focus on addressing these limitations and exploring the impact of audit quality, auditor switching, and previous year's audit opinion on the going concern audit opinion.

Q: What are the future research directions for this study?

A: Future research should focus on the following areas:

Audit Quality: Further research is needed to understand the impact of audit quality on the going concern audit opinion.
Auditor Switching: Further research is needed to understand the impact of auditor switching on the going concern audit opinion.
Financial Condition: Further research is needed to understand the impact of financial condition on the going concern audit opinion.
Previous Year's Audit Opinion: Further research is needed to understand the impact of previous year's audit opinion on the going concern audit opinion.

Q: What are the practical implications of this study for companies?

A: The findings of this study have practical implications for companies, including the need to maintain a strong financial condition and pay attention to their previous year's audit opinion. Companies should also focus on ensuring that their audit is conducted in accordance with the relevant auditing standards and is free from any material weaknesses.

Q: What are the practical implications of this study for auditors?

A: The findings of this study have practical implications for auditors, including the need to consider the company's financial condition and previous year's audit opinion when forming their going concern audit opinion. Auditors should also focus on ensuring that their audit is conducted in accordance with the relevant auditing standards and is free from any material weaknesses.