The Effect Of Good Corporate Governance, Leverage, and Previous Year Audit Opinion Towards Going Concern Audit Opinion
The Effect of Good Corporate Governance, Leverage, and
Previous Year Audit Opinion Towards Going Concern
Audit Opinion
(Empirical Studies on Real Estate and Property Companies Listed in Indonesia Stock Exchange Period 2013-2015)
by: YUSUF ADIKA
1111082100009
ACCOUNTING DEPARTMENT
INTERNATIONAL CLASS PROGRAM
FACULTY OF ECONOMICS AND BUSINESS
SYARIF HIDAYATULLAH STATE ISLAMIC UNIVERSITY
JAKARTA
(2)
(3)
(4)
(5)
(6)
vi
CURRICULUM VITAE
Personal Identities
Name : Yusuf Adika
Gender : Male
Religion : Islam
Place of birth : Lanai, September 08th 1992, West Sumatera
Address : Binubu Baru, Kab. Pasaman, West Sumatera
Phone/Mobile : 085263585590
E-mail Address : dhikalubis@gmail.com
Formal Education
Collage : UIN Syarif Hidayatullah Jakarta
Senior High School : SMAN 1 Lubuk Sikaping
Junior High School : SMPN 1 Padang Gelugur
(7)
vii
The Effect of Good Corporate Governance, Leverage, and Previous Year Audit Opinion Towards Going Concern Audit Opinion
(Empirical Studies on Real Estate and Property Companies Listed in Indonesia Stock Exchange Period 2013-2015)
Yusuf Adika
ABSTRACT
The purpose of this research is to investigate the effect of good corporate governance, leverage, and previous year audit opinion towards going concern audit opinion on real estate and property companies that listed in Indonesia Stock Exchange period 2013-2015. In this research the indicator of good corporate governance includes: Board of Commissioner change, Board of Director change, Independent commissioner, leverage and previous year audit opinion. Based on purposive sampling method and established criteria, then there are 40 real estate and property companies selected as sample. So there are 120 sample units. The method to test hypothesis is logistic regression. The result in this research show that previous year audit opinion have an effect toward going concern audit opinion. In the other hand, board of commissioner change (BOC), board of director change (BOD), independent commissioner, and leverage does not effect towards going concern audit opinion.
Keywords: Good Corporate Governance, Leverage, Previous Year Audit Opinion, Going Concern.
(8)
viii
Pengaruh Good Corporate Governance, Leverage dan Opini audit Tahun Sebelumnya Terhadap Opini Audit Going Concern
(Studi Empiris Pada Perusahaan Real Estate dan Properti yang Terdaftar di Bursa Efek Indonesia Tahun 2013 – 2015)
Yusuf Adika
ABSRAK
Penelitian ini bertujuan untuk menguji pengaruh good corporate governance, leverage, dan opini audit tahun sebelumnya terhadap opini audit going concern pada perusahaan real estate dan properti yang terdaftar di Bursa Efek Indonesia periode 2013 – 2015. Dalam penelitian ini, indikator good corporate governance terdiri dari: perubahan dewan komisaris, perubahan dewan direksi, komisaris independen. Variabel keuangan yaitu leverage dan variable control hasil audit tahun sebelumnya. Berdasarkan metode purposive sampling dan kriteria yang telah ditetapkan, maka terdapat 40 perusahaann real estate dan properti yang terpilih menjadi sampel penelitian. Sehingga terdapat 120 unit sampel. Metode yang digunakan uji hipotesis dalam penelitian ini adalah regresi logistik. Hasil penelitian ini menunjukkan bahwa opini audit sebelumnya perpengaruh terhadap opini audit going concern. Di samping itu perubahan dewan komisaris (BOC), perubahan dewan direksi (BOD), komisaris independen, dan leverage tidak berpengaruh terhadap opini audit going concern.
Keywords: Corporate Governance, leverage, opini audit tahun sebelumnya dan going concern.
(9)
ix FOREWORD
Asslamu’alaikum Wr. Wb.
All praise to Allah SWT, the Most Gracious and the Most Merciful, the Cherisher and Sustainer of the worlds; who always gives the writer all the best of this life and there is no doubt about it. Shalawat and Salaam to the Prophet Muhammad SAW and his family. With blessing and mercy from Allah SWT, the writer can complete this thesis to fulfill one of the requirements in accomplishing bachelor degree.
The writer is also well-aware that without advice and support from various parties, this thesis will not be realized properly. Therefore, the writer would like to take his opportunity to express his deep and sincere gratitude to the following:
1. Beloved parents and brother, my father Kutarzen, my lovely mother Jermiana Siregar and also my young brother Izan Ismail who have given all their efforts morally and material to my college study. For also being such a great parents and brother that always give me support and advice to finish this thesis. Thank you for your love and prayers that never end I believe I am nothing without each one of you who has helped me to finish this thesis, All this efforts is dedicated to you all. May Allah SWT always give His blessing for us.
2. Dr. Arief Mufraini, Lc., M.si. as the Dean of Economic and Business Faculty.
3. Yessi Fitri, SE., Ak., M.Si and Hepi Prayudiawan,SE ,Ak ,MM., as the Lead and Secretary of Accounting Department.
4. Atiqah, SE, MS. Ak as the thesis supervisor . Also by her advice, direction, and guidance I can write this thesis properly. Thank you so
(10)
x
much for your precious time and kindness to help me in finishing this thesis. May Allah reward your kindness.
5. All the lectures who have taught me many things patiently. Thank you for all the knowledge that will lead me to a better future. May your charity and deeds are always recorded by Allah SWT.
6. All the staffs in Economic and Business Faculty. Especially to Mr. Bonyx who always reminds me to finish my thesis and provide me all the procedures I need in making this thesis.
7. My beloved family, oppung, bujing, uda, tulang, nantulang, and to all my big family in Binubu Baru village who always give spirit, motivation, prays for every single things I do I can get the best and cheers me up, always beside me to pick me up when Im getting down, love you to the moon and back.
8. Bang edi, who always remind by asking every week when I will finish my thesis, do we can finish our college, saying maybe we will get old in campus as mahasiswa abadi, and all your ridicule and joking, although
some time it’s very annoying and make bored, but no doubt it because you
love us you care to us, you don’t want us failed. And also kak tata, thanks for your kindly.
9. To my best friend Erwin, together in one class since junior high school.so
many story that can’t be expressed in this opportunity. Sadness, happiness
and madness we have face together I can say we more like brother than
friend but I don’t meaning blood brother because you have sister, haha you
got the point?. And also to Didit have spent your precious time to be great friend since we met. Thanks for your support guys, nice moment, memories and many story that proudly I will tell to my child later haha. 10.All my dear friends in Accounting International Program 2011 for every
foolish things and jokes that you have done, and you made my day full of laugh. My ilegal kostan member Agung the bandit, that play ps with me until my laptop collapse. My gang kubur mate, And also my high school mate, bodom and gidom. Senior and junior thank you for support an help
(11)
xi
me in write this thesis, and all of you that I cannot mention one by one. Thank you for sharing joy moments.
11.All friends in Ciputat, my friends from ikmm and also my friends from Sumut.
12.All of the people who always asked “When will you graduate?” or “I
thought you have graduated” to me every time they saw me. Thank you for
your teasing. Your words finally motivated me so much.
The writer realizes that this thesis is still far from perfection due to limited knowledge of the writer. All the suggestions and constructive criticism are welcomed in order to make this thesis better. Hope, this thesis will be useful for any researcher or reader. May Allah SWT always bless every step in our life and guide us to the true way jannah way. Amin Ya Robbal A’lamin.
Wassalamua’laikum Wr. Wb.
Jakarta, July 2016
The writer
(12)
xii
TABLE OF CONTENTS
INFORMATION PAGE
Cover ... i
Certifivation From Supervisor ... ii
Certification of Comprehensive Exam Sheet ... iii
Certification of Thesis Exam Sheet ... iv
Sheet Statement Authenticity Scientific Work ... v
Curriculum Vitae ... vi
Abstract ... vii
Abstrak ... viii
Foreword ... ix
Table of Content ... xii
List of Tables ... xvi
List of Figures ... xvii
List of Appendix ... xviii
Chapter I INTRODUCTION A. Background Issues ... 1
B. Problem Formulation ... 9
C. Research Objectives ... 9
(13)
xiii Chapter II LITERATURE REVIEW
A. Basic of Theoretical ... 12
1. Agency Theory ... 12
2. Signaling Theory ... 13
3. Corporate Governance ... 14
a.Board of Commissioner ... 18
b. Board of Directors ... 20
c. Independent Commissioner ... 21
4. Audit ... 23
a. Definition of Audit ... 23
b. Objectives of Audit ... 25
c. Types of Audit ... 26
d. Standard of Audit ... 27
e. Audit Opinion ... 29
f. Going Concern ... 33
g. Going Concern Audit Opinion ... 34
h. Benefit of Going Concern Audit Opinion ... 37
i. Auditors Responsibilities ... 39
5. Leverage ... 42
6. Previous Year Audit Opinion ... 43
B. The Result of Previous Research ... 44
C. Theoritical Framework ... 47
(14)
xiv Chapter III RESEARCH METHODOLOGY
A. Scope of Research ... 53
B. Sampling Method ... 53
C. Data Collection Method ... 54
D. Method of Data Analysis and Hypothesis Testing ... 55
1. Descriptive Statistical Analysis ... 56
2. Logistic Regression ... 56
3. Overall Model Fit Test ... 56
4. Coefficient of Determination (Nagelkerke R Square) ... 57
5. Testing Feasibility of Regression Models ... 58
6. Classification Table ... 58
7. Regression Models ... 58
E. Variable Operational Research ... 59
1. Independent Variable ... 59
2. Dependent Variable ... 62
Chapter IV ANALYSIS AND DISCUSSION A. General Description of Research Object ... 64
B. Analysis ... 66
1. Descriptive statistic ... 66
2. Logistic Regression ... 68
a. Overall Model Fit Test ... 68
b. Coefficient of Determination ... 70
(15)
xv
d. Classification Table ... 73
e. Result of Regression and Hypothesis Test ... 74
C. Discussion and Interpretation ... 76
Chapter V CONCLUSIONS AND RECOMMENDATIONS A. Conclusion ... 82
B. Implication ... 83
C. Recomendation... 83
REFERENCE ... 85
APPENDIX I ... 90
APPENDIX II ... 92
APEENDIX III ... 96
(16)
xvi
LIST OF TABLE
NO DESCRIPTIONS PAGE
2.1 Table Relevant Previous Research ... 44
3.1 Operational Variable Summary ... ... 63
4.1 Sample of Selection ... 65
4.2 Descriptive Statistic ... 66
4.3 Iteration History 0 ... 69
4.4 Iteration History 1 ... 70
4.5 Model Summary ... 71
4.6 Hosmer and Lameshow Test ... 72
4.7 Classification Table ... 73
4.8 Variable in Equation ... 74
(17)
xvii
LIST OF FIGURE
No DESCRIPTION PAGE
(18)
xviii
LIST OF APPENDIX
NO DESCRIPTIONS PAGE
APPENDIX 1 List of Company Sample ... 90
APPENDIX II List of Data ... 92
APPENDIX III Additional Explanation Regarding the Establishment of Going
Concern ... 96
(19)
1
CHAPTER I INTRODUCTION
A. Research Background
The global financial crisis experienced by the world after the first
world war, or rather in the 1920s as a result of post-war conditions.
Furthermore, the global crisis with a scale varying also still occur on an
ongoing basis. In fact, the world economy has experienced a crisis bubble
that is the crisis in the dotcom firms and other technology companies in
North America and the European Union which resulted in the bankruptcy
of large corporations in the US such as Worldcom, Enron, Lehman
Brothers, and so on. In addition, the firm Arthur Anderson also
participated in the public eye over the collapse of Enron.
The monetary crisis that hit countries in Asia Pacific in 1997 had
an impact on the economic fundamentals of Indonesia. The financial crisis
has devastated the Indonesian economy. Rupiah has depreciated in levels
beyond the threshold of reasonableness. The impact of deteriorating
economic condition in Indonesia is the lack of liquidity and high interest
rates, and rising costs of operating companies (Isaac, 1998: 1).
The economic crisis that hit Indonesia followed by a political crisis
in 1997 led to the economic slump Indonesia. The Indonesian economy
experienced a fundamental change, where the ability of business units to
maintain their life (going concern) are at an alarming rate. As a result, at
(20)
2 and large corporations. That means the company's survival is a
consideration for investors to take a decision whether to invest or not.
One company that is experiencing the impact of the economic
crisis this is a company engaged in real estate and property sector. In
general, since 1998, industrial real estate in Indonesia decreased sales
levels significantly because of the declining purchasing power of
customers, lower average occupancy rate, termination or delay the
development of construction projects in particular, and the increasing
availability of property (PT. Sentul City Tbk, 2005).
Before the crisis, the development of real estate and property is
relatively high. According to the data obtained, it is known that in 1996
the number of members of the real estate in Indonesia (REI) reached 2,434
national companies while REI Jakarta reached 736 member companies. As
a result of the economic crisis that hit Indonesia in 1997, that number
continued to decline up to REI amounted to 645 national companies and
218 companies for REI members Jakarta in 2002 (DPP-REI, 2002) as cited
(Tulung, 2004: 13).
Environmental risk is the impact of deteriorating economic
conditions caused the financial crisis in 1997, resulting in ever increasing
Qualified opinion Disclaimer Going Concern and for the assignment in
1998 (Praptitorini and Januarti, 2007: 4). Some things that trigger
problems going concern for the year are generally the companies have debt
(21)
3 immediately due, decreased capital (capital deficiency) significant
financial loss (financial losses) due to exchange rate losses, bear the brunt
of the financial, operational losses and the absence of clear action plans of
management (Juniarti, 2000 cited Praptitorini and Januarti, 2007: 4).
Tjager, Alijoyo, Djemat, and Soembodo (2003) in Petronila (2007:
128) argues that the financial crisis that hit Asia is seen as a weakness of
the practice of Good Corporate Governance (GCG) in these countries. To
be able to manage a good company and in order to achieve good corporate
governance (GCG), then management needs to uphold the principles of
transparency, accountability, liability (responsibility), independence, and
fairness.
The existence of an entity reflects the existence of an economic
environment. Interest in long-term existence of the entity is able to
maintain the viability of its business (going concern) through the
assumption of going concern (Praptitorini and Januarti, 2007: 2). The
survival of the business is always associated with the ability of
management to manage the company in order to survive (Praptitorini and
Januarti, 2007: 2). When the economy is something uncertain, investors
expect the auditors give an early warning of financial failure (Chen and
Chruch: 1996: 118).
Going concern is the survival of a business entity and an
assumption in an entity's financial reporting so that if an entity has a
(22)
4 46). Going concern assumption means an entity is considered to be able to
maintain its business operations in the long term and will not be liquidated
in the short term (Hani, Cleary, and Mukhlasin, 2003: 3).
The assumption of going concern directly affect the financial
statements. The financial statements were prepared using the going
concern basis will have structural differences in the financial statements
are not prepared using the going concern basis. Ratings are based on the
going concern over the company's ability to continue its operations within
a period of one year to the next. To come to the conclusion whether the
company will have a going concern or not, the auditor should perform a
critical evaluation of the management plans (Praptitorini and Januarti,
2007: 4).
To be able to manage the company well so that the company can
maintain its viability, then the company needs a mechanism. The
mechanism of corporate governance is the means or procedures or rules
and a clear relationship between the parties that take decisions by the
parties will carry out supervision of the decision (Petronila, 2007: 127).
Corporate governance mechanism geared to ensure and oversee the
corporate governance system in a company (Syakhroza, 2002a, 2002b;
World Bank, 1999; Kim and Nofsinger, 2004) in Petronila (2007: 127).
If viewed in terms of control, corporate governance mechanism
according Syakhroza (2005: 14) is divided into two types, namely
(23)
5 governance mechanism. According Gunarsih (2003: 160), internal
corporate governance mechanisms designed to align the interests of
managers and shareholders. Meanwhile, external corporate governance
mechanism is performed by the corporate control market.
Another factor that proxy of corporate governance mechanism is
the ownership structure. According Januarti (2009: 12) in the company's
ownership structure, as measured by the ownership of board members can
increase the value of the company, thereby reducing the risk of financial
difficulties. If the possibility of the smaller companies in financial
difficulty, it will reduce the potential bankruptcy of the company and the
company can continue to maintain its survival.
Their ownership of shares by board members to minimize conflicts
of interest between management and investors. Managerial ownership is
closely related to the agency theory. Agency theory describes the
relationship between the principal to the agent, which is the principal
investing and agent is the management or those who manage the funds.
Agent got the trust of the principal to manage embedded capital. If the
agent has some shares of the company, which in this case the agent acting
as principal, it will eliminate the conflict of interest between managers and
shareholders as stated Jensen and Meckling (1976: 11) that the greater the
proportion of management ownership in a company, the management will
(24)
6 The presence of independent directors is one of the requirements or
devices within the enterprise in order to achieve good corporate
governance. Independent commissioner has the responsibility of the
principal to encourage the implementation of the principles of good
corporate governance (GCG) in the company through the empowerment of
the board of commissioners in order to perform the task of monitoring and
providing advice to the board of directors effective and provide added
value for the company (Task Force Committee national Corporate
Governance Policy, p.4). If the independent directors can perform their
duties properly, firm performance will increase. The increased
performance of the company may indicate that the company can survive
for a long time and regardless of the going concern.
In addition to corporate governance mechanisms, the financial
condition of the company can determine the viability of the business
entity. This is because the company's financial condition illustrates the
soundness of the company. If the level of an entity's financial health is
low, then it is likely that entity bankrupt and cannot be a going concern is
high.
Research conducted by Wibisono (2013) that the going concern
audit opinion was influenced by the bankruptcy prediction, leverage, audit
opinion the previous year, and the size of the company. Hypothesis testing
(25)
7 audit opinion, while the leverage does not affect the going concern audit
opinion.
Going concern audit opinion is the opinion issued by the auditor to
determine whether the company can maintain its survival (PSA 341).
Financial statement users find that spending going concern audit opinion
as predictions of bankruptcy of a company (Santosa and Wedari, 2007:
142). The auditor shall be responsible for going concern audit opinion that
is issued because it will affect the decision of users of financial statements
(Setiawan, 2006: 66). The audit opinion on the financial statements
became one of the important considerations for investors in making an
investment decision. Therefore, information about the viability of a
company, especially for companies that have gone public, the information
is very valuable for investors, both investors in the capital markets and the
banks that lend to companies (Setiawati and Agoes, 2005: 9).
Based on the background described, researchers interested in
conducting research with the title; "The Effect of Good Corporate Governance, Leverage, and Previous Year Audit Opinion Towards Going Concern Audit Opinion (Empirical Study On Real Estate and Property Company Listed in Indonesia Stock Exchange)".
Reason writer interested to researching this company, because Real
Estate and Property sector has developed very rapidly, and this sector has a
promising future. By looking at the number of people who continue to
(26)
8 and office buildings that make investors interested to invest their funds, so
that, the prospect of trading is expected to continue to rise in the future. On
the other hand, Real Estate and Property is one alternative investment that
attractive to investors because it is a long-term investment, thus requiring a
high capital structure and good management insurance.
This research was development from research doing Ni Putu P
Aryantika and Ni ketut Rasmini (2015), regarding the profitability,
leverage, and the audit opinion the prior year on going concern audit
opinion. The results showed that profitability does not influence the going
concern audit opinion, leverage, prior audit opinion and leverage have an
influence the going concern opinion. The research population is using
purposive sampling which take the population of manufacture companies
listed in Indonesia Stock Exchange period 2010 – 2013. The difference of this research with previous research, namely:
1. Years observed in this research is in 2013-2015. These reason
researchers use the year 2013 to 2015, because for the period shows
the actual conditions associated with the problem under research.
2. This research focus on one industry that is real estate and property
companies. The goal is to avoid bias caused by differences in the
research.
3. In this research added corporate governance indicators which are
Change on Board of commissioner, Board of Directors change,
(27)
9
B. Problem Formulation
Referring to the background that has been presented above, the
formulation of the problem in this research are:
1. Does the Board of Commissioner changes effect the going concern
audit opinion?
2. Does the Board of Director changes effect the going concern audit
opinion?
3. Does the independent commissioner effect the going concern audit
opinion?
4. Does the leverage effect on the going concern audit opinion?
5. Does the Previous Year Audit Opinion effect the going concern audit
opinion?
C. Research Objectives
As explaining in problem formulation, The objectives of this research
are:
1. To analyze the effect of Board of commissioner changing on going
concern audit opinion.
2. To analyze the effect of Board of Director changing on going concern
audit opinion.
3. To analyze the effect of independent directors on going concern audit
opinion.
(28)
10 5. To analyze the effect of Previous Year Audit Opinion on going
concern audit opinion.
D. Benefits of Research
The benefits of this research are:
1. For the Companies
The results of this research is expected to be a source of useful
information as well as input and can contribute ideas about the
influence of good corporate governance (change of BoC, BoD
changes, and independent commissioner), leverage, and the prior year's
audit opinion on going concern audit opinion.
2. For Investors
This research can be used as input for investors who want to invest, in
order to have a material consideration in investing.
3. For Auditors
This research can be used as an input in its assessment decisions audit
opinion which refers to survival (going Concern) of the company in
the future.
4. For Auditing
Adding literature and especially for researchers who want to do further
(29)
11 5. For Other Parties
For additional information, and knowledge that is useful in the
preparation of financial statements and can be used as reference
material for future research.
6. For Researchers
This research can increase knowledge, especially about the factors that
affect the going concern audit opinion. And also can be used as basic
(30)
12
CHAPTER II LITERATURE REVIEW A. Basic of Theoretical
1. Agency Theory
Jensen and Meckling (1976) describe the agency relationship as a
contract under one or more principal involving an agent to perform
some service for them by delegating authority in taking decisions on
the company manager or agent. Both principal and agent is assumed as
a rational economic man and solely motivated by personal interests
(Praptitorini and Januarti, 2007: 5).
Agency theory is the basis of the theory underlying the company's
business practices are used for this. The theory stems from the synergy
of economic theory, decision theory, sociology and organization. The
main theory principle states their working relationship between the
parties that gave the (principal) is investor and a party receiving
authority (agency) is the manager, in cooperation contract form called
nexus of contract (Elqorni, 2009).
Agency theory assumes that all individuals acting on their own
interests. Shareholders as principal assumed to be only interested in the
financial result increased or their investment in the company. Being the
agents are assumed to receive gratification in the form of financial
(31)
13 Because of these differences in interests, each party trying to
increase the benefits for themselves. Principal wants maximum return
on investment as soon as possible and that one of them is reflected by
the increase in the portion of the dividend for each share owned.
Agents want their interests accommodated by providing compensation,
bonuses, incentives, or adequate remuneration for its performance.
Principal assess the achievements agent based on its ability to
maximize profits allocated to dividend. The higher the earnings, the
stock price and dividend, then the agent is considered successful in
increasing the performance so well that it deserves a high incentive
(Elqorni, 2009).
To minimize the conflict of interest between the agent and the
principal, it takes an independent third party as a mediator in the
relationship between principal and agent. This third party is used to
monitor the behavior of the manager (agent) is already acting in
accordance with the wishes of the principal. Auditor is deemed capable
of bridging the interests of the principal parties (stakeholders) with the
manager (agent) in managing the corporate finance (Setiawan, 2006:
62).
2. Signaling Theory
Theory suggests how should a company gives a signal to the
(32)
14 been done by management to realize the wishes of the owner. The
signal can be information states that the company is better than the
other companies and other information (Subraminiam, et al., 2009).
Signaling theorystated that a good quality manufacturing company
would deliberately give a signal to the market, so the market is
expected to distinguish a quality company bad. In order for the signal
to be effective, it must be captured the market and perceived as good,
and not easily imitated by companies that are of poor quality (Lianto,
2010).
Signaling theory is rooted in the pragmatic accounting theory
which focuses on the influence of information on changes in user
behavior information. One of the information that can be used as the
signal is the announcement made by an issuer. This announcement will
be able to affect the price fluctuations of securities company issuers
that do announcements. Companies that have a belief that the company
has good prospects in the future will tend to communicate the news to
the investors (Lianto, 2010).
3. Corporate Governance
Corporate Governance was first introduced by the Cadbury
Committee in 1992 in a report that became known as the Cadbury
Report. This report will then be a decisive turning point in the world of
(33)
15 Definition of corporate governance issued by the Forum for
Corporate Governance in Indonesia (FGCI) (2001), namely:
“a set of rules that define the relationship between shareholders, management, creditors, government, employees and stakeholders internal and external parties related words, the rights and obligations or in other words the system that directs and controls the company. The purpose of corporate governance is to create value for the stakeholders”.
According to the Organization for Economic Cooperation and
Development (OECD) in the Study of Application of the OECD
Principles of 2004 in Bapepam Regulation on Corporate Governance
(2006), corporate governance is:
“Corporate governance is the system by which business corporation are directed and controlled. The corporate governance structure specifies the distribution of right and responsibilities among different participant in the corporation such as boards, manager, shareholders, and other stakeholders and spells out the rules and procedures for making decisions corporate affair. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those
objectives and monitoring performance.”
Objectives achieved from corporate governance is the creation of
Good Corporate Governance (GCG) is good corporate governance.
The principle contained in GCG that should be applied and held in
each company in order to achieve sustainability (sustainability)
companies by taking into account the stakeholders (stakeholders)
according to the National Committee on Governance (NCG) (2006: 5),
(34)
16 1. Transparency
To maintain objectivity in doing business, companies must provide
material and relevant information in a way that is easily accessible
and understood by stakeholders. Companies must take the initiative
to express not only the problem that required by legislation, but
also important for decision-making by shareholders, creditors, and
other stakeholders.
2. Accountability
Companies must be accountable for performance in a transparent
and fair. Therefore, the company must be properly managed,
scalable, and according to the company while taking into account
the interests of shareholders and other stakeholders. Accountability
is a necessary precondition for achieving continuous performance.
3. Responsibility
Companies must comply with legislation and to implement
responsibilities towards society and the environment so that it can
maintain the continuity of the business in the long term and to be
recognized as a good coporate citizen.
4. Independency
To accelerate the implementation of the GCG principles, the
company must be managed independently so that each organ of the
company does not dominate the other and can not be interfered
(35)
17 5. Fairness
In conducting its activities, the company must always take into
consideration the interests of shareholders and other stakeholders based on
the principles of fairness and equality.
According to the Forum for Corporate Governance in Indonesia
(2011), the delivery of good corporate governance, should be supported by
the availability of:
1. The number of independent directors is at least 30% of the total
number of commissioners.
2. Importance formed audit committee.
3. Need formed corporate secretary.
In order to achieve good corporate governance, we need a way or
mechanism. Corporate governance mechanism is the way a company or
applied to achieve good corporate governance. According Syakhroza
(2005: 14), in the area of controlling, corporate governance mechanism is
divided into two, namely internal corporate governance mechanism and
external corporate governance mechanism.
Corporate governance mechanism is internal is an interaction
between the parties to the decision makers in the company that includes
the Board of Directors, Board of commissioner, executive management
that includes audit committee, and the General Meeting of Shareholders
(36)
18 designed to align the interests of managers and shareholders. The board of
directors of public companies responsible for the development and
implementation of this mechanism (Gunarsih, 2003: 160). Kim and
Nofsinger (2004) in Petronila (2007: 127), states that the internal
mechanism starting from accounting units that generate financial reports
and internal auditors who assess the financial reporting process.
External control mechanism is the control of the company
conducted by the market (Gunarsih, 2003: 160). Corporate governance
mechanism that is external is the interaction between the parties which
oversees the performance of the company, among other stakeholders
(employees, customers, suppliers, creditors, communities) and reputational
agents (accountants, lawyers, rating agency credit, investment manager)
(Kim and Nofsinger 2004 in Petrolina, 2007: 127).
a. Board of Commissioners (BoC)
According to Law No. 40 of 2007 on limited liability companies,
the company's board of directors is the organ that is in charge of
supervising both generally and specifically in accordance with the
statutes and provide advice to the board of directors. Board of
commissioner (BoC) as the organ in charge of the company and is
collectively responsible for overseeing and advising the Board of
Directors and ensuring that companies implement Good Corporate
Governance. However, the board should not be participating in making
(37)
19 commissioners including commissioner is similar. The main task of the
commissioner as primus inter pares is to coordinate the activities of the
board of commissioners. Commissioners for the implementation of the
task can run effectively, it should be filled with the following
principles:
a. The composition of the board of commissioners should enable
effective decision making, precise and fast, and to act
independently.
b. Board members must be professional, namely the integrity and
capability so that it can perform its functions properly, including
ensuring that directors have the interests of all stakeholders.
c. The function of supervision and advisory board of commissioners
include preventive measures, improvement, until the dismissal of
temporary (KNKG in guidelines GCG di Indonesia, 2006: 13).
Base on KNKG (2006: 12), management of a limited liability
company in Indonesia adheres to a system of two bodies (two board
system) that the board of commissioners and directors who have the
authority and responsibility clearly in line with their respective
functions as mandated by the statutes and regulations (fiduciary
responsibility). However, they have a responsibility to maintain the
company's sustainability in the long term. Therefore, the board of
commissioners and directors should have the same perception of the
(38)
20 In the Limited Liability Company Act (PT) Article 100
provides for the duty and authority relations commissioners (BoC) and
the board of directors (BoD) (Petronila, 2007: 130), namely:
a. The Articles of Association can be specified giving authority to the
boss to give consent and assistance to the BoD in performing
certain legal actions.
b. Based Statutes or GMS, BoC may perform acts of management of
the Company in certain circumstances for a certain period of time.
c. For the boss who in certain circumstances for a certain period of
time perform acts of management referred to in point (b) applies to
all the rights, powers and obligations of the Company's BoD
against third parties.
b. Board of Directors (BoD)
According to KNKG (2006: 17), Board of Director (BoD) as a
company organ in charge and responsible collegial in managing the
company. Each member of the board of directors can perform their
duties and make decisions in accordance with the division of duties
and responsibilities. However, the implementation of tasks by each
member of the board of directors remains a shared responsibility.
Position each of the directors, including the managing director is
similar. The main task of the director as a primus inter pares is to
(39)
21 duties of directors can run effectively, it should be filled with the
following principles:
a. The composition of the board of directors should be such so as to
enable effective decision making, precise and fast, and to act
independently.
b. The Board of Directors shall professionals that possess the
integrity and have the experience and skills required to carry out
their duties.
c. The Board of Directors is responsible for the management of the
company to generate profits and ensure the company's
sustainability.
d. Directors accountable for its staff in the General Meeting in
accordance with the legislation in force.
The board of directors is a party that is involved in controlling the
application of internal governance mechanism. Hofer and Whetten
(1997) in Parker et. al. (2005), expressed his view that the management
is the party that has a significant share when the company is facing
problems. The research was supported by Hofer (1980) in Petronila
(2007: 132), which states that the replacement of management is a
precondition to reflect a successful business turnaround.
c. Independent Commissioner
Independent commissioner is a member of board of directors who
(40)
22 controlling shareholders, as well as free of a business relationship or
other relationship that could affect its ability to act independently or
act solely in the interest of the company (Task Force National
Committee Corporate Governance Guidelines of the Independent
Commissioner, p.2)
According to Bapepam Regulation No. Kep. 29 / PM / 2004 dated
24 September 2004, the board of the Independent Commissioners are:
a. Comes from outside the Issuer or a Public Company,
b. There are no shares either directly or indirectly in the Issuer or a
Public Company,
c. There are no affiliated with publicly listed companies, directors, or
major shareholder of the issuer or public company, and
d. Does not have a business relationship, directly or indirectly related
to the business activities of the Issuer or a Public Company.
The tasks to be carried out by an independent board is:
a. Ensure that the company has an effective business strategy,
including monitoring the schedule, the budget and the
effectiveness of the strategy.
b. Ensure that the company raised the executives and managers of
professional managers.
c. Ensure that the company has the information, control systems,
(41)
23 d. Ensuring that the company complies with applicable laws and
regulations as well as the values set by the company in running
its operations.
e. Ensuring risks and potential crisis is always identified and
managed properly.
f. Ensuring the principles and practices of good corporate
governance are adhered to and implemented well among other
things include:
1) To ensure transparency and openness of the company's
financial statements.
2) The treatment is fair to minority shareholders and other
stakeholders.
3) Disclosure of transactions which contain conflict of interest
in a reasonable and fair.
4) Compliance firm on legislation and regulations.
5) Ensure accountability organ of the company.
4. Audit
a. Definition of Audit
Definition audit by Arens and Loebbecke (2010: 4) are as
follows:
“Auditing is the process by which a competent, independent person accumulates and evaluates evidence about quantifiable information related to a specific economic entity for the purpose
(42)
24
of determining and reporting on the degree of the correspondence between the quantifiable information and established criteria.”
Boyton and Johnson (2006: 6) state that The Report of The
Committee on Basic Auditing Concept of The American
Accounting Association (Accounting Review, Vol.47) stated
auditing as :
“Auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and event to ascertain the degree of correspondence between those assertions and established criteria and communicating the result to interested users.”
Definition of auditing according Agoes (2008: 3) are:
“suatu pemeriksaan yang dilakukan secara kritis dan sistematis, oleh pihak yang independen, terhadap laporan keuangan yang telah disusun oleh managemen, beserta catatan-catatan pembukuan dan bukti-bukti pendukungnya, dengan tujuan untuk memberikan pendapat mengenai kewajaran laporan keuangan tersebut.”
Meanwhile, according to Mulyadi (2010: 9), the definition of
auditing is:
“suatu proses sitematik untuk memperoleh dan mengevaluasi bukti secara objektif mengenai persyaratan-persyaratan tentang kegiatan dan kejadian ekonomi, dengan tujuan untuk menetapkan tingkat kesesuaian antara persyaratan-persyaratan tersebut dengan kriteria yang telah ditetapkan, serta penyampaian hasil-hasilnya kepada pemakai yang berkepentingan.”
Based on the description above definition of auditing, it can
be concluded that auditing is a process of examination of the
systematic of the evidence relating to the events of economic
(43)
25 achieve the degree of correspondence and compare it with the
standards and criteria that exist with goal to provide opinion on the
fairness of the financial statements and then communicating the
results to the users of financial statements auditee.
b. Objectives of Audit
Public Accountants Professional Standards (SPAP), PSA
02 (SA 110), (IAI, 2001: 110.1), stated that the purpose of the audit
of financial statements by an independent auditor general is to
express an opinion on the fairness, in all material respects, the
financial position , results of operations, changes in equity and cash
flows in accordance with generally accepted accounting principles.
Meanwhile, according to Boynton et. al. (2006: 231) specific audit
objectives are the assertions of management, management's
assertions as a guideline auditor to plan the audit evidence
collection.
The five management's assertions outlined in Generally
Accepted Auditing Standards (GaAs) are as follows:
1. Existence and Occurance
2. Completeness
3. Right and Obligation
4. Valuation or Allocation
(44)
26
c. Types of Audit
According to Boynton et. al. (2006: 8-9), there are three
types of audit, namely financial audit, compliance audits, and
operational audits. Types of audits are generally demonstrate as
key characteristics included in the definition of auditing. An
explanation of the types of audits will be described as follows:
1. Financial Statement of financial statements (financial statement audits) related to obtaining and evaluating evidence about the
reports of entities with a view to be able to give an opinion
whether these reports have been presented fairly in accordance
with predetermined criteria, namely the principles generally
acceptable accounting or Generally Accepted accounting
Principles (GAAP). In addition, the audit logic developed for
the financial statement audit is the basis by which the auditor of
further developing compliance audits, operational audits, as
well as a number of attestation services and assurance services.
2. Audit Compliance Audit compliance (compliance audits) related to the activity to obtain and examine the evidence to
determine whether financial or operating activities of an entity
complies with the requirements, conditions and specific rules.
The criteria set out in the audit of this kind comes from various
(45)
27 provisions concerning conditions of employment, participation
and pension programs, as well as conflicts of interest.
3. Operational Audit activities related to obtaining and evaluating evidence about the efficiency and effectiveness of the
operations of the entity in relation to the achievement of certain
goals. Audits of this type sometimes called a performance audit
or management audits. In a business enterprise, the scope of
this audit may include all activities of a department, branch, or
division.
d. Standards of Audit
According to (SPAP SA Section 150: PSA no.1) in the
audit process there are three standards that must be met in order to
carry out their professional standards, the general standards,
standards of field work and reporting standards. Here are
description of the three standards:
1. General standards
a. Audits should be carried out by one or more persons who
have the skills and technical training quite enough as an
auditor.
b. In all matters relating to the engagement, independence in
(46)
28 c. In the implementation of the audit and the preparation of its
report, the auditor must use the professional skills carefully
and thoroughly.
2. Field Work Standards
a. Work must be planned well and if assistants should be
properly supervised.
b. Sufficient understanding on internal control must be
obtained to plan the audit and determine the nature, timing,
and extent of testing to be done.
c. Sufficient competent audit evidence to be obtained through
inspection, observation, inquiry and confirmation as a
reasonable basis for an opinion on the audited financial
statements.
3. Reporting standards
a. The auditor's report must state whether the financial
statements are prepared in accordance with generally
accepted accounting principles in Indonesia.
b. The auditor's report should indicate or represent, if any,
inconsistencies in the application of accounting principles
in the preparation of financial statements of the current
period as compared with the application of the accounting
(47)
29 c. Informative disclosures in the financial statements should
be considered sufficient, unless otherwise stated in the
auditor's report.
d. he auditor's report must include a statement of opinion on
the financial statements as a whole, or an assertion that
such a statement can not be given. If the overall opinion can
not be given, then the reason must be stated. Name of the
auditor is associated with financial statements, the auditor's
report should contain a clear indication of the nature of the
audit work performed, if any, and the level of responsibility
carried by the auditor.
e. Audit Opinion
Auditors have an obligation to provide an opinion on the
financial statements which have been audited. According to (SPAP
SA Section 508), there are five types of the auditor's opinion,
namely:
1. Unqualified Opinion (Pendapat Wajar Tanpa Pengecualian) Unqualified Opinion stated when, according to the auditor's
judgment, the overall financial statements are presented fairly
in accordance with generally accepted accounting principles in
(48)
30 will affect the users of the financial statements in the decision
making.
2. Unqualified Opinion with Explanatory Paragraph (Pendapat Wajar Tanpa Pengecualian dengan bahasa penjelasan yang ditambahkan dalam laporan keuangan auditor bentuk baku)
Unqualified with Explanatory Paragraph Opinion stated when,
according to the auditor's judgment, where the conditions or
specific circumstances often require that the auditor add an
explanatory paragraph (or other explanatory language) in the
financial statement auditor raw form. These circumstances
include are:
a. The auditor's opinion is partly based on the reports of other
independent auditors.
b. Financial Statements presented deviate from an accounting
principles issued by the Indonesian Institute of Accountants
(IAI).
c. If there are conditions and events that originally caused the
auditor confident about their distrust about the survival of
the entity (going concern), but after considering the
management plan, the auditor concludes that management
plans can be effectively implemented and disclosure of it is
(49)
31 d. Among the accounting period there is a material change in
the use of accounting principles or in the method of
application (inconsistency).
e. Certain circumstances relating to the auditor's report on
comparative financial statements.
f. Certain quarterly financial data required by Bapepam, but
not presented or reviewed yet.
g. Additional information required by the Indonesian
Accountants Association (IAI) - Financial Accounting
Standards Board (DSAK) has been removed, the
presentation deviate much from the guidelines issued by the
council, and the auditor is unable to complete the audit
procedures relating to such information.
h. Other information in a document containing audited
financial statements are materially inconsistent with the
information presented in the financial statements.
3. Qualified Opinion (Pendapat Wajar Tanpa Pengecualian) Qualified Opinion stated when, in the judgment of the auditor,
the financial statements present fairly, in all material respects,
the financial position, results of operations, and cash flows of
certain entities in accordance with generally accepted
accounting principles in Indonesia, except for the impact of
(50)
32 This opinion was stated when:
a. The absence of sufficient competent evidence or restrictions
on the scope of the audit result the auditor concludes that he
is unable to express an unqualified opinion and he has
concluded that does not states an opinion.
b. Auditor believe on the basis of the audit, that the financial
statements contain departures from generally accepted
accounting principles in Indonesia, which have a material
impact, and he concluded to not express opinions
unreasonable.
4. Adverse Opinion (Pendapat Tidak Wajar)
Adverse opinion stated when, in the judgment of the auditor,
the financial statements does not present fairly the financial
position, results of operations and cash flows in accordance
with generally accepted accounting principles in Indonesia.
5. Disclaimer (Tidak Memberikan Pendapat)
Disclaimer stating that the auditor does not express an opinion
on the financial statements. Auditors does not express an
opinion when he can not formulate or does not formulate an
opinion on the fairness of financial statements in accordance
with generally accepted accounting principles. If the auditor
expressed no opinion, the auditor's report should give all the
(51)
33 auditor facing significant doubts about the viability of the
entity (going concern issues) the auditor may does not give an
opinion.
f. Going Concern
According Belkaoui (2006: 271), the argument of business
continuity (going concern postulate), or the arguments of
continuity, assume that the business entity will continue to operate
quite enough to realize the project, commitment and sustained
activity. This argument assumes that the entity does not expected
to be liquidated in the future or the entity will continue until the
period that can not be determined. Need for a continued and
sustainable operation to create a consequence of financial
statements were published in the period has a temporary nature
because they constitute a series of sustainable financial statements.
Going concern assumption used in financial reporting as far as
not proved the existence of information that suggests the opposite
(Contrary information). Usually the information is significantly
considered contrary to the assumption survival of business units is
related to the inability of business units to meet obligations at
maturity without selling major assets to outside parties through
(52)
34 imposed from outside and another similar activities (IAI, 2001:
Section 341, PSA 30).
Going concern issue is divided into two, namely the financial
and operating problems. Financial problems include a shortage
(deficiency) liquidity, deficiency of equity, debt delay in payment,
and the difficulty of obtaining funds. While the problem of
operations include operating losses continuously, prospecting
dubious income, operating capability is threatened, and weak
controls over operations (Altman and McGough, 1974 in Setiawan,
2006: 61).
g. Going Concern Audit Opinion
Auditor as an independent party in the examination of the
company's financial statements and will provide an opinion on the
financial statements audited. The audit opinion given by the auditor
through several stages of the audit so the auditor can give
conclusions on opinions must be given to the financial statements
audited (Petronela, 2004: 47). Going concern audit opinion is
modified audit opinion in the auditor's judgment there is an
inability or significant doubt on the viability of the company to run
(53)
35 Mutchler (1984), in Yusnitasari and Setiawan (2003: 69),
shows the going concern decisions taken through the following
three-step process:
1. Identification of entity with potential going concern issue.
2. Determine whether the entity with the issue of going concern
must accept the audit report of the going concern.
3. Choosing between the two types of audit reports going concern,
namely reasonable modifications to the audit report without
reservation or disclaimer.
Meanwhile, Ellingsen et. al. (1989) in Yusnitasari and
Setiawan (2003: 71), suggesting the decision-making procedures of
going concern is based on SAS 59:
1. Are the results of audit procedures indicate substantial doubt
about the company's ability to keep alive in business during the
reasonable period of time? If the answer is no, then the auditor
has met its responsibilities in accordance with SAS 59. If the
answer is yes, then the auditor will conduct the next stage.
2. Analyzing the management plan and assess the ability of the
plan can be implemented effectively.
3. Does the substantial doubt still exist? If not, then no need to
make modifications to the audit report. If yes, then step four (4)
(54)
36 4. Consider the effect that may occur in the financial statements
and the disclosure of going concern issues.
5. Adding an explanatory paragraph (following the opinion
paragraph) audit reports on going concern.
Whereas in (IAI, 2001: Section 341, PSA 30) provides
guidance to auditors about the impact the ability of the business
unit continued survival of the auditor's opinion as follows:
1. If the auditor believes that there are doubts about the ability of
the business unit continued survival in a reasonable period of
time, he must:
a. Obtain information about the management plan aimed at
reducing the impact of conditions and events.
b. Stipulates the possibility that the plan is effectively
implemented.
2. If the management does not have a plan that reduces the impact
of conditions and events on the ability of the business unit
continued survival, the auditor considers does not give an
opinion (disclaimer).
3. If the management has the plan, the next step should be done
by the auditor concludes (at its discretion) the effectiveness of
(55)
37 4. If the auditor concluded the plan is not effective, the auditor
expressed no opinion (disclaimer).
5. If the auditor concluded the plan would effectively but the
client did not disclose situation as mentioned in the notes to
financial statements, the auditors expressed an unqualified
opinion.
6. If the auditor concluded the plan is effective but the client did
not disclose the situation in the financial statements, the auditor
expressed the opinion unreasonable (adverse opinion).
h. Benefits of Going Concern Information
Bankruptcy information can be useful for some parties as
follows:
a. Creditors
Bankruptcy information can be useful to take a decision who
will be granted a loan, and then helpful to monitor existing loan
policy.
b. Investors
Investor shares and bonds issued by a company would be very
interested in seeing the possibility of bankruptcy or failure of
the company that sold the securities. Investors who hold an
(56)
38 signs of bankruptcy as early as possible and then anticipate the
possibility.
c. Government
In some sectors, government agencies have a responsibility to
supervise enterprises (SOEs) should always be supervised. A
government agency has an interest to show the signs of
bankruptcy early in order to carry out actions that need to be
done early.
d. accountants
Accountants have an interest in the survival of a business
information for accountants will look at the ability of a
company's going concern.
e. Management
Bankruptcy means the rise of the costs associated with
bankruptcy and the cost is quite large. One research showed the
cost of bankruptcies could reach 11% - 17% of the value of the
company. For example, the cost of direct bankruptcy is the cost
accountants and attorneys' fees. While examples of indirect
bankruptcy cost is the loss of sales opportunities and profits for
a few things like the restrictions that may be imposed by the
court. If management can detect this bankruptcy early, then the
(57)
39 financial restruction so that the cost of bankruptcy can be
avoided.
i. Auditor's Responsibilities
Auditor's responsibility to evaluate whether there is substantial
doubt on the entity's ability to maintain its viability in a reasonable
time period, not exceeding one year from the date of the financial
statements being audited (hereinafter the period will be referred to
the appropriate period of time). Evaluation auditor based on
knowledge of the conditions and events that exist at or have
occurred before the field work is completed. Information on
conditions and events obtained by the auditor of the application of
audit procedures are planned and implemented to achieve the
objectives of the audit is concerned with management's assertions
contained in the financial statements being audited (IAI, 2001:
Section 341, PSA 30, Par.02).
Examples of conditions and events are as follows:
1. The negative trend, for example, recurring operating losses
occur, lack of working capital, negative cash flows from
operations, the key financial ratios are bad.
2. Another indication of the possibility of financial difficulties,
for example, failure to meet debt obligations or similar
(58)
40 request by the supplier to purchase ordinary credit, debt
restructuring, the need to find new funding sources or methods,
or the sale of some great asset.
3. The internal problems, for example, work strikes or other labor
relations difficulties, large dependence on certain projects
successful, long-term commitments that are not economic, the
need to significantly improve operations.
4. The problems that have occurred outside, for example, the
court filing, the release of the legislation or other problems that
may compromising the ability of the entity to operate, 48 losing
franchise, license or essential patents, a major loss of customers
or suppliers, large disaster losses, such as earthquakes, floods,
droughts, that are not insured, but the insurance is not adequate.
Auditor has the responsibility to assess whether there is
substantial doubt on the ability of the business unit continued
survival (Isaac, 1998: 3). The auditor's assessment was based on
knowledge of the conditions and events that exist at or have
occurred before the field work is completed. However, the auditor
is not responsible for the condition or predict future events (Isaac,
1998: 3).
According to SAS No. 59 in Akers et. al. (2003) as cited
(59)
41 client's ability to continue its business (going concern). The terms
contained in SAS No. 59 is as follows:
1. The auditor's responsibility is to evaluate whether the entity
going concern for a period of not more than a year from the
date of the audited financial statements.
2. The Auditor is not responsible for predict or forecast of future
events.
3. The bankruptcy by a company that did not receive reports
going concern, although one year from the balance sheet date,
does not require the auditor of insufficient performance.
4. The auditor does not have to carry out a specific procedure to
determine the going concern entity. Audit procedures for audit
purposes the other considered sufficient.
5. The auditor is required to evaluate management's plan to
reduce the incidence and circumstances that indicate
considerable doubt of the company's going concern.
6. If the auditor concludes that there is doubt, the auditor should
consider the effect of financial reporting and disclosure, to
(60)
42
5. Leverage
Harahap (2010) suggested that leverage describes the
relationship between the company's debt to equity and assets. This
ratio measures how much the company was financed by debt or
creditors with the ability of the company described by capital. A
good company should have a larger capital composition of the
debt. However, the company's funding obtained largely through
debt can improve enterprise performance due to faster turnover
company.
The leverage ratio which used for this research is the Total
Liability to Total Assets. This ratio shows the ratio between debt
and equity (capital) in the funding of the company and
demonstrates the ability of the company's capital to cover the entire
debt. The lower Leverage of the company, it’s mean the better condition of the company.
Leverage formula is as follows:
Leverage = �� � �� ��� �� �� � � �
(61)
43
6. Previous Year Audit Opinion
The audit opinion previous years is the audit opinion that
auditee received in the previous year or one year before the
research of the independent auditor. The audit opinion can be
divided into 2 of the going concern audit opinion and non-going
concern audit opinion.
Going concern audit opinion previous years can be considered
to reissue the auditor's opinion on the audit next year. Mutchler
(1984) states that "the company which receiving going concern
audit opinion on the previous year were more likely to receive the
same opinion in the current year". This is because when the
auditors give going concern audit opinion on the previous year, the
company is is considered have problems in going concern so that
auditors tend to give a going concern audit opinion back in the
(62)
44
B. The Results of Previous Research
Research on the going concern audit opinion has been widely
applied, by modifying the different variables. The following is a summary
of previous research on the factors that affect the going concern audit
opinion. These studies has provided feedback as well as an additional
contribution to analyze the factors that may affect the going concern
opinion. The following is a summary of previous research on the factors
that affect the going concern audit opinion:
Table 2.1 Previous Research
No Researcher (Year)
Tittle of Research
Research Methods
Research Result Variables Difference
1. Susan Parker; Gary F Peters; Howard FTuretsky (2005) “Corporate Governance Factors and Auditor Going Concern Assessments” Variabel Independen : - Changes of BoD
- leverage - company size - institutional ownership -Method: Cox Regression -population: financial companies distress in USA -Observation Period: 1988-1996
Changes CEO, Board independence,
change of directors, the number of audit committee members, leverage, interest coverage ratio, the ratio operating risks, current ratio, company size affect the going concern audit opinion. Block ownership, ownership of board members, has no effect.
(63)
45 Table 2.1 (Continued)
No Researcher (Year)
Tittle of Research
Research Methods
Research Result Variables Difference
2. Arum Ardianings ih (2012) “Analysis of Good Corporate Mechanism To Going Concern Audit Opinion Variable Independent: - change Boc
- change Bod - Committee audit - Quality of KAP Observation period: 2004-2006 Population: of Companies manufacture listed on the Stock Exchange
Boc change does not affect going concern audit opinion. Bod change significantly affect the going concern audit opinion. Audit Committee does not significantly affect going concern audit opinion. Quality of KAP significantly affect the going concern audit opinion.
3. Ema Diandra Adjani, Surya Raharja (2013) The Analysis of Influence Corporate Governance to Going Concern Audit Opinion by Independent Auditor Variable independent : - Independent Commissioner - Managerial Ownership - Institutional Ownership The population in this study are manufacture company listed on the Stock Exchange in the year (2009-2011)
Managerial
Ownership is affect to going concern audit opinion by the independent auditor. Independent
Commissioner and Institutional
Ownership are does not affect the going concern opinion by independent auditor.
4. Edward Akiko Wibisono (2013) Bankruptcy prediction, the previous year's audit, size of the company towards going concern audit opinion Variable leverage, and the results of the previous year's audit. -bankruptcy prediction - Company size The population in this study are manufacture company listed on the Stock Exchange in the year (2009-2011)
Leverage does not affect the reception of going concern audit. The audit opinion previous years partially have a significant impact on the going concern audit opinion.
(64)
46 Table 2.1 (Continued)
No Reseacher (Year)
Tittle of Research
Research Methods
Research Result Variables Difference
5. Yashita Putri Alicia (2013) Effect of company size, growth, and previous year opinion on going concern opinion. Empirical studies on manufacture companies listed on the Stock Exchange. Variable Independent - company size - company growth - previous year audit opinion. -Variable Good corporate Governance, and leverage. -Population used is the manufacture company listed on the Stock Exchange in the year (2009-2011).
Company Size positive effect on the going concern audit opinion, audit opinion previous years positive significant effect on the going concern audit opinion, which means that companies that receive accept the audit opinion previous years it had the greater the probability of getting going concern audit opinion.
6. Yunseung Hsu, Chi-Chen Wang, Tzeu-Chen Han (2014) The Impacts of Corporate Governance, Audit system to Business Failure of Going Concern Firms Variable profitability - director’s
pledging ratio - shareholder ratio - audit system - company age - company size - liquidity - operation fund to total asset ratio - operation cash flow to total asset ratio - leverage - economic prosperity The population used in this research include Taiwan listed Companies which have been issued gong concern suspect report.
Base on analysis result using log logistic model conducted that
director’s pledging
ratio, shareholding ratio, audit system, company age have a significant level to going concern. Company size, liquidity ratio, operation fund to total asset ratio, operation cash flow to total assets ratio, leverage ratio, economic prosperity does not have a significant level to going concern.
(65)
47 Table 2.1 (Continued)
No Researcher (Year)
Tittle of Research
Research Method
Research Result Variables Difference
7. Ni Putu P Aryantika, Ni Ketut Rasmini (2015) Profitability, Leverage, Prior Opinion and Auditor Competency to Going Concern Audit Opinion Variable profitability - leverage - prior opinion - auditor competency -Variable Good corporate Governance, -Population used is the manufacture company listed on the Stock Exchange in the year (2010-2013).
Base on analysis result using logistic regression conducted that profitability negatively not influence on going concern audit opinion, leverage and prior opinion influence on going concern audit opinion, auditor competency also influence on a going concern audit opinion.
Sources various of research journals
C. Theoretical Framework
Theoretical framework is networking of association that
organized. As logically elaborate between variables which relevant with
situations and problems identified trough processes such as interviews,
observation, and literature, survey, (Sekaran, 2009: 127). The conceptual
framework will connect the independent variables that accompany the role
of the variable to be explained.
In this research, which is the independent variable are change
on board commissioner, change on board director, independent
commissioner, leverage, previous year audit opinion and the dependent
(66)
48 Variabel Independen Variabel Dependen Based on the description above, it can be explained as the following framework:
Figure 2.1
Indonesia stock exchange (BEI)
Change on BoC (X1)
Audit Opinion Previous Year (X5)
Change on BoD (X2) Good
Corporate Governance
Going
Concern Audit Opinion (Y) Leverage (X4)
Real Estate and Property Companies
Independent Commissioner (X3)
Effect of Good Corporate Governance, Leverage, and Previous Year Audit Opinion Towards Going Concern Audit Opinion
Analysis of Results
Conclusions, implications and suggestions 1. Descriptive Analysis
2. Overall model fit 3. Nagelkerke R square 4. Hosmer and lemeshow test 5. The classification table
6. The result of logistic regression and hypothesis test
�� � � ��� :
(67)
49
D. Variables and Hypothesis Formulation
1. BoC Towards Going Concern Audit Opinion
Research on the effects of changes to the central bank going concern
audit opinion conducted by Petronila (2007). In Petronila research
(2007), showed that the central bank changes significantly influence
the going concern audit opinion and have a positive parameter values.
This means that if an entity making a change or replacement of Board
of Commissioner, it is possible that the entity obtaining high going
concern audit opinion than there are no change of (BoC) in the entity.
H01: BoC changes does not affect the going concern audit opinion.
Ha1: BoC changes affect the going concern audit opinion.
2. BoD Towards Going Concern Audit Opinion
Research on the BoD changes previously made by Petronila (2007)
and Parker et. al. (2005). Based on the research results Petronila
(2007), BoD changes affect the going concern audit opinion, but its
parameters are negative. If there is a change in an entity BoD, then the
possibility of obtaining entity going concern audit opinion is smaller if
the entity does not change BoD. Parker et. al. (2005) suggested that
auditors have a tendency two times more likely to give a going concern
audit opinion in case of replacement of Chief Executive Officer (CEO)
or the Board of Directors. With the replacement of CEO will reduce
the chance of the company to survive during periods of financial
(1)
101
Case Processing SummaryUnweighted Casesa N Percent
Selected Cases Included in Analysis 120 100.0
Missing Cases 0 .0
Total 120 100.0
Unselected Cases 0 .0
Total 120 100.0
a. If weight is in effect, see classification table for the total number of cases.
Dependent Variable Encoding
Original Value Internal Value
NGCAO 0
GCAO 1
Categorical Variables Codings
Frequency
Parameter coding
(1)
PYAO NGCAO 103 .000
GCAO 17 1.000
BOD no change 42 .000
change 78 1.000
BOC no change 66 .000
(2)
102
Block 0: Beginning Block
Iteration Historya,b,c
Iteration -2 Log likelihood
Coefficients Constant
Step 0 1 89.833 -1.533
2 86.525 -1.950
3 86.455 -2.022
4 86.455 -2.024
5 86.455 -2.024
a. Constant is included in the model. b. Initial -2 Log Likelihood: 86.455
c. Estimation terminated at iteration number 5 because parameter estimates changed by less than .001.
Classification Tablea,b
Observed
Predicted
GCAO Percentage
Correct
NGCAO GCAO
Step 0 GCAO NGCAO 106 0 100.0
GCAO 14 0 .0
Overall Percentage 88.3
a. Constant is included in the model. b. The cut value is .500
Variables in the Equation
B S.E. Wald df Sig. Exp(B)
(3)
103
Variables not in the EquationScore df Sig.
Step 0 Variables BOC(1) .944 1 .331
BOD(1) 1.283 1 .257
Com_Indd 2.180 1 .140
Lev .044 1 .834
PYAO(1) 54.065 1 .000
Overall Statistics 54.791 5 .000
Block 1: Method = Enter
Iteration Historya,b,c,d
Iteration
-2 Log likelihood
Coefficients
Constant BOC(1) BOD(1) Com_Indd Lev PYAO(1)
Step 1 1 62.095 -1.573 .137 -.050 -.004 -.387 2.458
2 50.173 -2.000 .328 -.118 -.013 -.876 3.362
3 47.975 -1.950 .529 -.175 -.025 -1.296 3.895
4 47.774 -1.769 .625 -.185 -.034 -1.442 4.087
5 47.771 -1.720 .640 -.182 -.037 -1.457 4.111
6 47.771 -1.718 .640 -.182 -.037 -1.457 4.112
7 47.771 -1.718 .640 -.182 -.037 -1.457 4.112
a. Method: Enter
b. Constant is included in the model. c. Initial -2 Log Likelihood: 86.455
(4)
104
Omnibus Tests of Model CoefficientsChi-square df Sig.
Step 1 Step 38.684 5 .000
Block 38.684 5 .000
Model 38.684 5 .000
Model Summary
Step -2 Log likelihood
Cox & Snell R Square
Nagelkerke R Square
1 47.771a .276 .537
a. Estimation terminated at iteration number 7 because parameter estimates changed by less than .001.
Hosmer and Lemeshow Test
Step Chi-square df Sig.
1 7.390 8 .495
Contingency Table for Hosmer and Lemeshow Test
GCAO = NGCAO GCAO = GCAO
Total Observed Expected Observed Expected
Step 1 1 12 11.882 0 .118 12
2 11 11.802 1 .198 12
3 12 11.749 0 .251 12
4 12 11.711 0 .289 12
5 11 11.669 1 .331 12
6 12 11.622 0 .378 12
7 12 11.554 0 .446 12
8 11 11.467 1 .533 12
9 10 8.862 2 3.138 12
(5)
105
Classification TableaObserved
Predicted
GCAO Percentage
Correct
NGCAO GCAO
Step 1 GCAO NGCAO 101 5 95.3
GCAO 3 11 78.6
Overall Percentage 93.3
a. The cut value is .500
Variables in the Equation
B S.E. Wald df Sig. Exp(B)
Step 1a BOC(1) .640 .891 .515 1 .473 1.896
BOD(1) -.182 1.020 .032 1 .858 .834
Com_Indd -.037 .055 .446 1 .504 .964
Lev -1.457 2.264 .414 1 .520 .233
PYAO(1) 4.112 .832 24.447 1 .000 61.051
Constant -1.718 2.296 .560 1 .454 .179
(6)
106
Step number: 1Observed Groups and Predicted Probabilities 40 +
+
I I
I N I
F I N
I
R 30 + N +
E I N
I
Q I N
I
U I NN
I
E 20 + NNN +
N I NNN
I
C I NNN
I
Y I NNN
I
10 + NNNN + I NNNN I INNNNNN I INNNNNNN
G G I Predicted
---+---+---+---+---+---+---+---+---+---
Prob: 0 .1 .2 .3 .4 .5
.6 .7 .8 .9 1
Group:
NNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNGGGGGGGGGGGGGGGG GGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG
Predicted Probability is of Membership for GCAO The Cut Value is .50
Symbols: N - NGCAO G - GCAO