IDEAS home Printed from https://ideas.repec.org/a/aic/journl/y2011vsep41-53.html
   My bibliography  Save this article

""Going Concern"" And The Effects Of The Operational Cycle Management. An Empirical Study Concerning The Usage Of Financial Analysis For Obtaining Preliminary Proofs In The Task Of Financial Audit

Author

Listed:
  • Marilena Mironiuc

    (Faculty of Economics and Business Administration, "Al. I. Cuza" University, Iasi, Romania)

  • Ioan-Bogdan Robu

    (Faculty of Economics and Business Administration, "Al. I. Cuza" University, Iasi, Romania)

  • Mihaela-Alina Robu

    (Faculty of Economics and Business Administration, "Al. I. Cuza" University, Iasi, Romania)

Abstract

In the financial audit engagement, the auditor’s objective is to express an independent and professional opinion regarding the accuracy of financial statements, in agreement with the accounting reference. Also, the auditor will ensure that financial statements have been drawn in compliance with the principle of the “going concern”. This paper aims at setting the foundation of a basic mathematical model, based on the correlations established between a set of variables capable of characterizing the changes in the operating activity, which helps obtaining audit proofs regarding the (non-) compliance with the principle of going concern of the audited entities. Designing this model implies a study of the financial statements belonging to a sample made up of 80 quoted companies, following the benchmark of financial audit standards. The suggested model will be tested through a sensitivity analysis using the Monte Carlo method. For processing the information, for the regression analyses, and for the multiple correlations implied by the foundation of the model, the statistic instrument SPSS 15.0 will be used.

Suggested Citation

  • Marilena Mironiuc & Ioan-Bogdan Robu & Mihaela-Alina Robu, 2011. """Going Concern"" And The Effects Of The Operational Cycle Management. An Empirical Study Concerning The Usage Of Financial Analysis For Obtaining Preliminary Proofs In The Task Of," Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice (1954-2015), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 2011, pages 41-53, july.
    • Handle: RePEc:aic:journl:y:2011:v:se:p:41-53
    as

    Download full text from publisher

    File URL: http://anale.feaa.uaic.ro/anale/resurse/2011SEctb4mironiuc.pdf
    Download Restriction: no
    File URL: http://anale.feaa.uaic.ro/anale/ro/Arhiva%202011SE-Mironiuc_Robu/431
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ella Mae Matsumura & K.R. Subramanyam & Robert R. Tucker, 1997. "Strategic Auditor Behavior and Going-Concern Decisions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(6), pages 727-758.
    2. Sam Sugiyama, 2008. "Monte Carlo Simulation/Risk Analysis on a Spreadsheet: Review of Three Software Packages," Foresight: The International Journal of Applied Forecasting, International Institute of Forecasters, issue 9, pages 36-41, Spring.
    3. Jinn‐Yang Uang & David B. Citron & Sudi Sudarsanam & Richard J. Taffler, 2006. "Management Going‐concern Disclosures: Impact of Corporate Governance and Auditor Reputation," European Financial Management, European Financial Management Association, vol. 12(5), pages 789-816, November.
    4. Asad Kausar & Richard J. Taffler & Christine Tan, 2009. "The Going‐Concern Market Anomaly," Journal of Accounting Research, Wiley Blackwell, vol. 47(1), pages 213-239, March.
    5. Kathleen Herbohn & Vanitha Ragunathan & Robert Garsden, 2007. "The horse has bolted: revisiting the market reaction to going concern modifications of audit reports," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 47(3), pages 473-493, September.
    6. R. Elliott & Michael Highfield & Mark Schaub, 2006. "Contagion or Competition: Going Concern Audit Opinions for Real Estate Firms," The Journal of Real Estate Finance and Economics, Springer, vol. 32(4), pages 435-448, June.
    7. Bhimani, Alnoor & Gulamhussen, Mohamed Azzim & Lopes, Samuel, 2009. "The effectiveness of the auditor's going-concern evaluation as an external governance mechanism: Evidence from loan defaults," The International Journal of Accounting, Elsevier, vol. 44(3), pages 239-255, September.
    8. Max Bessell & Asokan Anandarajan & Ahson Umar, 2003. "Information content, audit reports and going‐concern: an Australian study," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 43(3), pages 261-282, November.
    9. Ella Mae Matsumura & K.R. Subramanyam & Robert R. Tucker, 1997. "Strategic Auditor Behavior and Going‐Concern Decisions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(6), pages 727-758, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sandro Brunelli & Francesco Venuti & Thomas Niederkofler & Camilla Falivena, 2024. "Financial distress, auditors’ going concern modification (GCM) and investors’ reaction in a concentrated ownership environment: new evidence from the Italian stock market," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 21(2), pages 313-339, June.
    2. repec:mth:ijafr8:v:9:y:2019:i:1:p:135-151 is not listed on IDEAS
    3. Rúben Miguel Torcato Peixinho, 2011. "Are analysts misleading investors? The case of goingconcern opinions," CEFAGE-UE Working Papers 2011_22, University of Evora, CEFAGE-UE (Portugal).
    4. Dennis M. O'Reilly, 2010. "Do investors perceive the going-concern opinion as useful for pricing stocks?," Managerial Auditing Journal, Emerald Group Publishing, vol. 25(1), pages 4-16, February.
    5. Beatriz García Osma & Belén Gill de Albornoz Noguer & Elena De las Heras Cristobal, 2016. "Opinion shopping: Partner versus firm-level evidence," Working Papers. Serie EC 2016-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    6. Benoît Pigé, 2000. "Audit quality and Corporate governance : an analysis of French audit regulations [Qualité de l'audit et gouvernement d'entreprise : le rôle et les limites de la concurrence sur le marché de l'audit," Post-Print halshs-03425760, HAL.
    7. Sandro Brunelli & Chiara Carlino & Rosella Castellano & Alessandro Giosi, 2021. "Going concern modifications and related disclosures in the Italian stock market: do regulatory improvements help investors in capturing financial distress?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 25(2), pages 433-473, June.
    8. Luís M. S. Coelho & Rúben M. T. Peixinho & Siri Terjensen, 2012. "Going concern opinions are not bad news: Evidence from industry rivals," Working Papers Department of Economics 2012/16, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    9. Elizabeth Carson & Neil Fargher & Yuyu Zhang, 2016. "Trends in Auditor Reporting in Australia: A Synthesis and Opportunities for Research," Australian Accounting Review, CPA Australia, vol. 26(3), pages 226-242, September.
    10. Pei-Gi Shu & Tsung-Kang Chen & Wen-Jye Hung, 2015. "Audit duration quality and client credit risk," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 22(2), pages 137-162, June.
    11. Charles J. Coates & Robert E. Florence & Kristi L. Kral, 2002. "Financial Statement Audits,a Game of Chicken?," Journal of Business Ethics, Springer, vol. 41(1), pages 1-11, November.
    12. Nirosh Karuppu, 2009. "Evidence on Auditors Use of Business Continuity Models as an Analytical Procedure," Accounting & Taxation, The Institute for Business and Finance Research, vol. 1(1), pages 63-74.
    13. Dong, Bei & Robinson, Dahlia & Robinson, Michael, 2015. "The market's response to earnings surprises after first-time going-concern modifications," Advances in accounting, Elsevier, vol. 31(1), pages 21-32.
    14. Waymond Rodgers & Andrés Guiral & José Gonzalo, 2009. "Different Pathways that Suggest Whether Auditors’ Going Concern Opinions are Ethically Based," Journal of Business Ethics, Springer, vol. 86(3), pages 347-361, May.
    15. García Osma, Beatriz & Mora, Araceli & Porcuna-Enguix, Luis, 2019. "Prudential supervisors’ independence and income smoothing in European banks," Journal of Banking & Finance, Elsevier, vol. 102(C), pages 156-176.
    16. Barnes, Paul, 2013. "The effects on financial statements of the litigation cost rule in a civil action for negligence against the auditor," Journal of Contemporary Accounting and Economics, Elsevier, vol. 9(2), pages 170-182.
    17. Tara Ioan Gheorghe, 2011. "The Going Concern - Theory And Practice In The Financial Audit," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 631-635, December.
    18. Dody Hapsoro & Tulus Suryanto, 2017. "Consequences of Going Concern Opinion for Financial Reports of Business Firms and Capital Markets with Auditor Reputation as a Moderation Variable - An Experimental Study," European Research Studies Journal, European Research Studies Journal, vol. 0(2A), pages 197-223.
    19. Hsiang-Tsai Chiang & Shu-Lin Lin, 2012. "Effect Of Auditor’S Judgment And Specialization On Their Differential Opinion Between Semiannual And Annual Financial Reports," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 6(4), pages 1-22.
    20. Ali A. Al-Thuneibat & Basheer Ahmad Khamees & Nedal A. Al-Fayoumi, 2008. "The effect of qualified auditors' opinions on share prices: evidence from Jordan," Managerial Auditing Journal, Emerald Group Publishing, vol. 23(1), pages 84-101, January.
    21. Kathleen Herbohn & Vanitha Ragunathan & Robert Garsden, 2007. "The horse has bolted: revisiting the market reaction to going concern modifications of audit reports," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 47(3), pages 473-493, September.

    More about this item

    Keywords

    Going concern; audit opinion; audit evidence; financial analysis; regression analysis;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aic:journl:y:2011:v:se:p:41-53. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sireteanu Napoleon-Alexandru (email available below). General contact details of provider: https://edirc.repec.org/data/feaicro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.