Abstract

This study investigates prediction of the auditor's going-concern uncertainties. Expulsion and bankruptcy have caused great loss to individual and society. Thus, the accurate prediction of the bankruptcy is required. This study has the following purposes. First, this study tries to find auditor's prediction accuracy difference between expulsed firms and bankrupt firms. Second, this study tries to examine financial ratio differences among expulsed firms, bankrupt firms and going firms. Prediction models are derived from financial ratios that show significant difference among those firms. Third, this study tries to verify prediction accuracy between auditors and models. This results of this study are as follows: First, auditor's bankruptcy prediction accuracy is significantly higher than their expulsed prediction accuracy. Second, financial ratios that show significant difference between expulsed firms and going firms are net profits on sales, current ratio, total capital turnover and total capital ordinary income ratio. Financial ratios that show significant difference between bankrupt firms and going firms are net profits on sales and total capita ordinary income ratio. Financial ratios that show significant difference between expulsed firms and bankrupt firms are current ratio and quick ratio. Third, model's bankruptcy prediction accuracy is significantly higher than auditor's bankruptcy prediction accuracy. In addition to this, model's expulsion prediction accuracy is significantly higher than auditor's expulsion prediction accuracy. The result of this study implies that compulsive and inconsistant expulsion of firms reduce auditor's predictability. Again, the impairment of auditor's predictability may reduce reliability of accounting information. In conclusion, firms need to be expulsed not by the outside political authorities but by the natural principles of market economy.

Keywords

• Auditor's Going-concern Predictability
• Bankrupt firms
• Expulsed firms

Related Articles

• Relationship between Frequency of External Auditors’ Communication with those Charged with Governance and Audit Quality

  Jonggeun Kim , Kapsoon Kim

  21(3) 29-48

  Abstract Full Text for PDF

• An Effect of Tax Avoidance and Industry Specialist Auditors on Stock Price Crash Risk

  Kim Kyung - Hwa , Kwon Soon - Chang , Kim Hyung - Kook

  19(1) 173-212

  Abstract Full Text for PDF

• Earnings Management to Avoid Losses and Earnings Decreases and the Auditor’s Response －Some Empirical Evidence on the Private Firms－

  Jong-Il Park

  15(6) 9-53

  Abstract Full Text for PDF

• An Empirical Study on Factors That Affect Firms’ Purchase of Auditor－provided Tax Services

  Seung-Myo Shin

  15(3) 47-72

  Abstract Full Text for PDF

• A Study on the Fulfillment of Company's Obligation on Preparing Financial Statements

  JEONGTAEBEOM

  11(4) 123-151

  Abstract Full Text for PDF