We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Predicting Audit Qualifications with Financial and Market Variables.
- Authors
Dopuch, Nicholas; Holthausen, Robert W.; Leftwich, Richard W.
- Abstract
ABSTRACT: This paper investigates the extent to which models based on financial and market variables predict auditors' decisions to issue qualified audit reports in situations involving contingencies or uncertainties. A probit model is developed with the dependent variable indicating whether the firm received a qualified opinion, and the independent variables representing publicly available financial and market variables. The estimated model distinguishes between unqualified (clean) opinions and first-time qualifications and between types of qualifications (e.g., going concern, litigation, asset realizing, and multiple qualifications) in the year of the qualification, for both an estimation sample and a holdout sample. The predictive accuracy of the estimated model is evaluated in terms of misclassification costs for alternative costs of type I and type II errors and for specific prior probabilities of qualified and clean opinions.
- Subjects
AUDITING of corporations; BUSINESS valuation; AUDIT departments; CORPORATE finance; ACCOUNTING firms; STOCK exchanges; MARKETS; PROBABILITY theory; FINANCIAL performance
- Publication
Accounting Review, 1987, Vol 62, Issue 3, p431
- ISSN
0001-4826
- Publication type
Article