Analysis of Financial Distress Model and Altman Bankruptcy Prediction Model on Exceptional Reasonable Audit Opinion with Modification of Going Concern Explanation Paragraph (Survey on Manufacturing Companies Listed on The Stock Exchange for The Period 200

Abstract

An entity's going concern assessment is an assessment that must be carried out by the auditor, but this assessment is not an easy assessment to be done. When uncertain economic conditions, investors expect the auditors to warn corporate finance finances failure. The opinion issued by the auditor is one of the considerations for investors to make investment decisions. The purpose of this study is to find out how the effects of financial ratios (profitability ratios, solvency ratios, and liquidity ratios) partially and simultaneously on unqualified audit opinions by modifying the going concern explanatory paragraph, forming a financial distress prediction model, and testing the Altman Z bankruptcy prediction model score, and compare the prediction models of financial distress with the bankruptcy prediction model Altman Z Score. The research sample is the manufacturing company listed on the Stock Exchange in a row from 2008-2013 so that the sample size of the analysis is 588 units. Multiple discriminate analysis of 588 analysis samples produced a discriminant function as a financial distress prediction model. There are four significant independent variables in differentiating/discriminating between the two groups, namely, Debt Equity Ratio (DER), Return on Equity (ROE), and Return on Assets (ROA). Besides, the results of the study show that the Debt Ratio (DR) is the most dominant financial ratio affecting the opinion of unqualified audits by modifying the going concern explanatory paragraph, followed by the Debt Equity Ratio (DER) and Return on Equity (ROE). Using a cut-off value = 0,000326531, a company with a Z-score > 0,000326531 is classified as a company that gets a going concern opinion. Companies that have a Z-score < 0,000326531 are grouped as companies that get a non-going concern opinion. While the value of Z-score = 0,000326531 is on the verge of getting a going concern opinion. The validity/accuracy of the analysis used is the correct number of classifications (actual = prediction is 97.5%. The accuracy of this discriminant model is very accurate / just to be accounted for.