*Corresponding author: [email protected]
The Influences of Company’s Growth, Cash Flow, and Debt Default on the Acceptance of Going Concern Audit Opinions
ANNISA NURBAITI*
SISKA DITYA MEI YANTI Telkom University, Indonesia
Abstract: A going concern audit opinion is a modified assumption given by the auditor for a company that represents material doubts or uncertainties about its ability to continue operations. This study intends to provide empirical evidence regarding the simultaneous and partial effects of company growth, cash flow, and debt default on acceptance of going concern audit opinions in coal subsector companies listed on the Indonesia Stock Exchange in 2016-2020. Sampling was selected using a purposive sampling technique, obtained 18 companies from 90 data that met the criteria.
Hypothesis testing was carried out using descriptive analysis and logistic regression.
The results showed that company growth, cash flow, and debt default simultaneously affected the acceptance of going-concern audit opinions. Partially, the company's growth does not affect the acceptance of going-concern audit opinions. Conversely, cash flow has a negative effect on receiving going-concern audit opinions, and debt default positively affects receiving going-concern audit opinions. This research is expected to provide further information regarding the factors influencing the receipt of a going concern audit opinion. These factors can be used by company management as evaluation material to avoid receiving a going concern audit opinion by paying more attention to the company's financial performance and soundness, especially cash flow and debt defaults. For investors, the research results can be used as a wiser consideration when investing in companies with poor cash flow and default status.
Keywords: Cash Flow, Company’s Growth, Debt Default, Going Concern Audit Opinions
Abstract: Opini audit going concern adalah asumsi modifikasi yang diberikan oleh auditor terhadap suatu perusahaan yang mempresentasikan adanya keraguan atau ketidakpastian material tentang kemampuannya untuk melanjutkan operasi. Penelitian ini bermaksud untuk memberikan bukti empiris mengenai pengaruh simultan maupun parsial dari pertumbuhan perusahaan, arus kas, dan debt default terhadap penerimaan opini audit going concern pada perusahaan subsektor batubara yang terdaftar di Bursa Efek Indonesia tahun 2016-2020. Pengambilan sampel dipilih dengan menggunakan teknik purposive sampling, diperoleh 18 perusahaan dari 90 data yang memenuhi kriteria. Uji hipotesis dilakukan dengan menggunakan analisis deskriptif dan regresi logistik. Hasil penelitian menunjukkan bahwa pertumbuhan perusahaan, arus kas, dan debt default secara simultan berpengaruh terhadap penerimaan opini audit going
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concern. Secara parsial, pertumbuhan perusahaan tidak berpengaruh terhadap penerimaan opini audit going concern. Sebaliknya, arus kas berpengaruh negatif terhadap penerimaan opini audit going concern, dan debt default berpengaruh positif terhadap penerimaan opini audit going concern. Penelitian ini diharapkan dapat memberikan informasi lebih lanjut mengenai faktor-faktor yang memengaruhi penerimaan opini audit going concern. Faktor-faktor tersebut dapat digunakan manajemen perusahaan sebagai bahan evaluasi untuk menghindari penerimaan opini audit going concern dengan lebih memperhatikan kinerja keuangan dan kesehatan perusahaan, khususnya arus kas dan debt default. Bagi investor, hasil penelitian dapat dijadikan sebagai bahan pertimbangan yang lebih bijak dalam berinvestasi pada perusahaan dengan status arus kas dan status default yang buruk.
Kata Kunci: Arus Kas, Debt Default, Pertumbuhan Perusahaan, Opini Audit Going Concern
1. Introduction
The success of the business operation in a company is reflected in how long the company can sustain the business continuity and how long the company can compete with other competitors in the same industry. Going concern is an opinion expressing hesitation on a company's capability to defend its life sustainability, which is estimated not to last (Putra & Purnamawati, 2021). When a company is faced with a situation that is not supposed to happen, it can be said that it is in trouble (Nurbaiti & Permatasari, 2019). Acquiring a going concern audit opinion is detrimental for the company because it could impact share price declines, investors' mistrust, creditors, clients, and staff, as well as the company's operational issues in obtaining loan capital.
The object of this inquiry is an Indonesian mining company that operates in the coal subsector and was listed on the Indonesia Stock Exchange from 2016-2020. By contributing part in national imports, generating foreign exchange through exports, facilitating electrification, and promoting national energy security, the coal subsector supports the development of various regional and national economic sectors (CDMI, 2020). In addition, in 2016-2020, there were four coal subsector companies experiencing delisting due to going concerns, namely PT Berau Coal Energy Tbk, PT Bara Jaya Internasional Tbk, PT Permata Prima Sakti Tbk, and PT Borneo Lumbung Energi & Metal Tbk.
361 As for the phenomenon found in companies operating in the coal industry and acquiring a going concern audit opinion, namely PT Atlas Resources Tbk. and PT Darma Henwa Tbk. in 2016-2020. The following information pertains to the company's growth of the respective companies:
Table 1
Profit Data (Loss) 2 (two) Coal Subsector Companies
PT Atlas Resources Tbk. PT Darma Henwa Tbk.
Year Profit (Loss) For The Year
Accept/Did Not Accept
Going Concern
Audit Opinions
Year Profit For The Year
Accept/Did Not Accept
Going Concern
Audit Opinions
2016 USD(25.482) Accepted 2016 USD549.890 Accepted
2017 USD(16.717) Accepted 2017 USD2.769.140 Accepted 2018 USD(28.258) Accepted 2018 USD2.565.336 Accepted
2019 USD(5.537) Accepted 2019 USD3.773.979 Accepted
2020 USD(16.404) Accepted 2020 USD1.647.892 Accepted Source: Annual Report from Indonesia Stock Exchange (Processed data, 2022)
Based on table 1, PT Atlas Resources Tbk. has a negative growth rate and has always experienced loss for 5 (five) consecutive years, from 2016-2020. Thus, it caused the company to acquire going concern audit opinions consistently. Meanwhile, PT Darma Henwa Tbk. has a positive growth rate and never experienced loss in 2016-2020.
However, during those 5 (five) years, the company always accepts going concern audit opinions.
The phenomenon described shows that such a company that experienced positive growth and never experienced loss also accepted going concern audit opinions. The phenomenon on the PT Darma Henwa Tbk. is not in line with the statement in SA 570 paragraph A2 (2013) regarding the going concern. It is stated that the facets that may prompt the corporation to acquire a going concern audit opinion out of an independent auditor are the corporation's badly financial performance, for instance, encountering a current year’s loss, negative operation of cash flow, and the inability to pay off creditors on the due date (debt default). In response to this phenomenon, the researcher argues that there are still many discrepancies or inconsistencies in giving audit opinions.
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One of the factors that the auditor needs to consider when evaluating an entity's financial statements to determine whether there is a going concern is the company’s growth (Byusi & Achyani, 2018). Rudyawan & Badera (2009) state that a company's growth reflects its industry competitiveness and capacity to sustain business continuity.
The research conducted by Krissindiastuti & Rasmini (2016), Wardayati et al. (2017), and Katrian & Nurbaiti (2021) stated that a company's growth negatively influences the going concern audit opinions. Contrary to Mukhtaruddin et al. (2018), Byusi & Achyani (2018), and Putra & Purnamawati (2021) discovery accomplished, the company's growth has no substantial consequence on the going concern audit opinions.
According to Chen & Church (1992), A high cash flow ratio proves that the company has the liquidity to meet its existing debt and continue operating. The research conducted by Anita (2017) and Alamsyah (2018) stated that the cash flow negatively influences the going concern audit opinions. Conversely, according to results acquired by Yani et al. (2018), Rahmadia & Sutrisno (2019), and Tridevy & Bambang (2020), stated that the cash flow ratio is not significantly influencing the going concern opinions.
Debt default is when a company fails to pay off debts or obligations by the date the interest is due (Chandra et al., 2019). If a company has an immense debt, most of the cash flow in the company is being used to repay the loans. Per the research carried out by Alifiah et al. (2020), Puspaningsih & Analia (2020), and Simbolon & Andriyanto (2020) stated that debt default positively influences the going concern audit opinions.
Conversely, research undertaken by Rizky & Triyanto (2021) and Andrian et al. (2019) stated that debt default has no substantial influence on going concern opinions.
Based on the outlined background, including phenomena and existing research gaps, there are still differences in research results or inconsistencies in research results to date. The researcher is interested in and motivated to conduct more research on the factors that auditors consider when deciding to give going concern audit opinions. This research concentrates on the company's growth, cash flow, and debt default. This study's primary goal is to analyze the simultaneous and partial influences that a company's growth, cash flow, and debt fault have on the acceptance of going concern
363 audit opinion on companies of the coal subsector listed on the Indonesia Stock Exchange in 2016-2020.
2. Theoretical Framework and Hypothesis Development 2.1. Agency Theory
Jensen & Meckling (1976) interpreted agency theory as an agreement whereby one or more parties (the principal) request that other parties (the agent) do specific tasks for the principal, including giving agents delegation of decision-making authority. Agency theory explains agency problems caused by conflicting interests between principals and agents, resulting in asymmetric or unbalanced information between the two parties (Izazi & Arfianti, 2019). As a corollary, an auditor is essential in the principal-agent relationship to monitor the agent's compliance with the principal's instructions and ensure that the agent carries out those instructions as directed (Rahmat et al., 2016).
As an independent and credible third party, the auditor should guarantee that the financial statements that the agent submitted to the principal is correct (Putra &
Purnamawati, 2021). Auditors' opinions must be of high quality, proved by more objective and transparent company financial information.
2.2. Audit Opinion
An audit opinion is an independent auditor's appraisal of the reliability of the financial reports submitted by the company (Sari & Triyani, 2018). The objective of an audit is to boost the confidence of financial statement users, which is accomplished through the audit statement or opinion that such financial statements are presented in all material facts by established accounting standards (Hery, 2017). Yani et al. (2018) explained that investors might evaluate the company's condition before making investment selections based on the provided opinion. Just as creditors decide to grant credit facilities, the creditors require supplementary information and relevance when making business decisions.
Hery (2017) identifies the following five categories of audit opinions, namely:
1) Unqualified Opinion
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If all audit requirements are met, there are no substantial misstatements, and the financial statements are presented fairly according to accounting principles; thus, an unqualified opinion will be delivered by auditors.
2) Unqualified Opinion with Explanatory Language
This report is an unqualified opinion, and the financial statement has been presented fairly, but the auditor is principled in providing further information.
3) Qualified Opinion
The auditor assesses that the financial statements are reasonably prepared.
However, there are restrictions in the audit's scope and non-compliance with accounting requirements.
4) Adverse Opinion
The auditors considered that such financial statements had material misstatements or were misleading since they did not accurately portray the financial condition, operational performance, and cash flows as required by accounting rules.
5) Disclaimer of Opinion
Auditors cannot guarantee that the financial statement of the auditee is presented precisely. A disclaimer opinion is necessary if the scope of the audit is materially constrained, raising doubts on the righteousness of the financial statements, or if there is a non-independent relationship mids the auditor and the auditee, regardless of the degree of materiality.
2.3. Going Concern Audit Opinion
The going concern refers to the business unit's capability to defend its existence for a specific term, indicating that there would be no future insolvency (Nugroho et al., 2018). Going concern is an opinion asserts casts hesitancy on the continuation of a company's performance, meaning that no company exists (Putra & Purnamawati, 2021).
Financial statement users may utilize the going concern audit opinion as an early indicator for avoiding decision-making failure (Alifiah et al., 2020).
365 Arens et al. (2015) posited that if there is massive hesitation from the auditors regarding the company's maintaining its life sustainability, the auditor should convey an unqualified audit opinion with an explanatory paragraph. The auditor's granting of a going concern audit opinion may have substantial consequences for the company, as all parties concerned will base their actions on the report (Putra & Purnamawati, 2021).
Arens et al. (2015) concluded that there are one or more of four factors that cause an entity of a company cannot to continue the business, namely:
1) Recurrent and significant operational losses or inadequacy of working capital.
2) The company's ineptitude in repaying debts due.
3) Loss of primary customers, uninsured natural calamities such as earthquakes or floods, or unexpected business complications.
4) Courts, laws, or other comparable issues may impede the company entity's potential to modify its operations.
2.4. The Influences of a Company's Growth on the Acceptance of Going Concern Audit Opinion
Based on agency theory, auditors will monitor management performance based on financial reports to maintain the interests of principals and agents, one of which evaluates company growth. Munawir (2010) explained that a company's growth demonstrates its capacity to finance its business activities, which shows that the company can maintain its viability. Company growth is reflected in the level of sales or company revenue from year to year (Krissindiastuti & Rasmini, 2016).
A company's positive sales growth rate insinuates that it can preserve its economic standing and carry on its business operations. Meanwhile, companies with negative sales growth are more likely to experience a substantial profit decline, necessitating preventative action from management to afloat the business.
Given this rationale, the researcher contends that a company's growth was negatively correlated to the accepting going concern audit opinion. This is due to the relation between the company's growth and going concern that audit opinion is heading in the opposite direction or inversely proportionate. Namely, the greater the sales
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growth ratio, the more likely the enterprise would generate positive profits. This reduces the odds that the enterprise would secure a going concern audit opinion. Vice versa, if a company's sales growth ratio to lower, it is more likely to make negative profits and be susceptible to insolvency. As a result, the likelihood of the enterprise accepting going concern audit opinion would increase.
H1: The company’s growth negatively correlated with the acceptance going concern audit opinion.
2.5. The Influence of Cash Flow on the Acceptance of Going Concern Audit Opinions Munawir (2010) explained that cash is ready money to finance company operations. When making economic verdicts, financial statement users (the principal) must assess the company's (the agent) potential to earn cash and make decisions concerning the acquisition of that cash (Yani et al., 2018). Mills & Yamamura (1998) explained that for an auditor to fully comprehend a company's capacity to carry over as a going concern, it is vital to consider a few fundamental ratios from the auditee's statement of cash flows.
Operating cash flow reveals a company's capability to pay off debt, distribute dividends, and generate fresh investments without needing external capital (Tridevy &
Bambang, 2020). Auditors can use the cash flow to total debt ratio as a component of the cash flow ratios to gauge a company's ability to safeguard business continuity (Aji
& Sari, 2019).
The higher a company's sales, the higher cash produced from the activities of the company's operations. Positive operating cash flow indicates that a company can settle its long-term debt, finance investment, and fund activities from the results of operating activities, hence reducing the probability of liquidation. Conversely, a low cash flow ratio signifies that the company can't satisfy its obligations using operational cash.
Based on this justification, the researcher contends that cash flow has been negatively correlated to the accepting going concern audit opinion. This is due to a relation between cash flow and going concern audit opinion in the opposite direction or inversely proportionate. The higher the cash flow ratio, the healthier the company's
367 circumstances. This reduces the odds that the company would secure a going concern audit opinion. Inversely, if the cash flow ratio were to reduce, the company's opportunities of securing going concern audit opinion would increase.
H2: The cash flow negatively correlated with the acceptance of going concern audit opinions.
2.6. The Influence of Debt Default on the Acceptance of Going Concern Audit Opinions Debt default occurs when a company cannot repay the principal or interest when it is due. It concerns the company's financial position (Harris & Merianto, 2015).
Companies that fail to satisfy their principle and interest due tend to experience hiccups since the distribution of funds to meet their debt obligations is a priority (Andrian et al., 2019). The company (the agent), as a presenter of financial statements, may manipulation of data regarding the state of the company. Meanwhile, financial statement users (the principal) would like the transparency of company results following existing facts. Therefore, a third-party auditor has required to assess the company's financial accounts.
If a company owes a substantial amount, the majority of its cash flow is utilized to settle down the debt. Thus, it disrupts the company's operations, as an excess of total debt over total assets can lead to a lack of cash or a negative equity balance. A creditor may declare a company in default if it cannot settle its debts.
The researcher believes that debt default positively influences the securing going concern audit opinion due to the unidirectional nature of the relations between debt default and going concern audit opinion. Thus, the greater the company's debt, the more chance would gain a going concern audit opinion. On the flip side, a company with little debt is less chance to be obtained a going concern audit opinion.
H3: The debt default positively influences the accepting going concern audit opinions.
368 Figure 1.
Research Model
Source: Processed data (2022)
Description:
: Simultaneously influence : Partial influence 3. Research Method
This research gathers data utilizing a quantitative approach and secondary sources.
Secondary data is data that can be a reference for information collected from existing sources (Sekaran & Bougie, 2017). This research uses the annual reports and independent auditor reports of companies in the coal subsector published on the Indonesia Stock Exchange in 2016-2020 as its secondary data.
3.1. Population and Sample
The companies listed on the Indonesia Stock Exchange that operated in the coal subsector in 2016-2020 comprise the study population. Purposive sampling is the approach that is utilized for sample selection. Purposive sampling is picking samples with particular criteria or considerations (Sujarweni, 2020).
369 Table 2
Sampling Criteria
No Criteria Total
1 Companies in the coal subsector listed on the Indonesia Stock Exchange in
2016-2020. 28
2 Companies in the coal subsector did not consistently list on the Indonesia
Stock Exchange in 2016-2020. (9)
3 Companies in the coal subsector that did not submit annual reports
consistently in 2016-2020. (1)
The total of companies used in the research period 18
The total of samples used in the research (5 years) 90
Source: Processed data (2022)
According to predetermined criteria, the total of samples of coal subsector companies that meet the requirements is 18. This research was conducted from 2016- 2020, resulting in 90 sample data.
3.2. Operational Variables and Measurement Definition 3.2.1. Going Concern Audit Opinions
When there is substantial uncertainty about the company's capacity to proceed with its enterprise or substantial indecision regarding its viability, an independent auditor will furnish a modified opinion known as a going concern (Puspaningsih & Analia, 2020). This research uses dummy variables to examine going concern audit opinion variables refers to Alifiah et al. (2020). The audit opinion for a going concern garners code 1, whereas the opinion non-going concern garners code 0. The going concern audit opinion is conveyed in the explanation paragraph.
3.2.2. Company’s Growth
As proven by its annual sales increase, the company's growth reveals whether it can retain its existence (Septiana & Khatimah, 2021). This research employs the sales growth ratio as an of the company's growth, which corresponds to the study by Mukhtaruddin et al. (2018).
𝑆𝑎𝑙𝑒𝑠 𝐺𝑟𝑜𝑤𝑡ℎ = 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 𝑡 − 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 t − 1 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 t − 1
370 Note:
Net sales t : The current year's net sales Net sales t-1 : The prior year's net sales 3.2.3. Cash Flow
A high cash flow ratio shows that a company has enough funds fulfilled its obligations and continues its business in the future (Rahmadia & Sutrisno, 2019). In this research, cash flow is proxied by comparing operating cash flow to the total debt ratio, which refers to the study conducted by Alamsyah (2018).
𝐶𝑎𝑠ℎ 𝐹𝑙𝑜𝑤 = 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝑎𝑠ℎ 𝐹𝑙𝑜𝑤 𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡 3.2.4. Debt Default
Auditors frequently utilize the nonpayment of debt and/or interest as one of the markers of a company's continuing sustainability (Alifiah et al., 2020). The leverage or solvency ratio is utilized as a debt default measurement, referring to the research conducted by Rizky & Triyanto (2021). The solvency or leverage ratio determines the breadth to which a company's activities are funded by debt. There are 5 (five) types of leverage ratios, one of which is the debt-to-equity ratio (DER). Wardiyah (2017) presented that the debt-to-equity ratio is an indicator for quantifying how often creditors fund a company compared to its capital, including its capacity to satisfy its debt obligations.
𝐷𝑒𝑏𝑡 𝑡𝑜 𝐸𝑞𝑢𝑖𝑡𝑦 𝑅𝑎𝑡𝑖𝑜 = 𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡 𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦 3.2.5. Data Analysis Method
This research data analysis approach uses descriptive statistics and logistic regression analysis using SPSS version 26. Descriptive statistics explain a data set based on its mean, median, standard deviation, variant, maximum value, minimum value, sum, range, kurtosis, and skewness (Ghozali, 2018). Logistics regression analysis is a
371 technique for evaluating if an independent variable could be used to estimate the probability of a dependent variable (Ghozali, 2018).
The forms of logistic regression analysis equations in this study are:
𝑳𝒏 𝑶𝑨𝑮𝑪
𝟏−𝑶𝑨𝑮𝑪= 𝜶 + 𝜷1PP + 𝜷2KAS + 𝜷3DD + 𝜺 Note:
𝑳𝒏 𝑶𝑨𝑮𝑪
𝟏−𝑶𝑨𝑮𝑪 : Going Concern Audit Opinion
𝜶 : Constant
𝜷1PP : Company’s Growth 𝜷2KAS : Cash Flow
𝜷3DD : Debt Default
𝜺 : Error
4. Results and Discussion 4.1. Descriptive Statistic Table 3
Nominal-Scale Descriptive Statistical Analysis
Frequency Percent Valid Percent
Cumulative Percent The companies did not accept a
GCAO 75 83,3 83,3 83,3
The companies accept a GCAO 15 16,7 16,7 100,0
Total 90 100,0 100,0
Source: Processed data (2022)
Based on table 3, of the 90 coal subsector companies listed on the Indonesia Stock Exchange 2016-2020, 83.3%, or 75 samples, did not obtain the going concern audit opinion. That remainder, equal to 16.7% or 15 samples, shows the companies accepting going concern audit opinion. Descriptive research reveals that from 2016-2020, the vast majority of coal subsectors companies listed on the Indonesia Stock Exchange did not accept going concern audit opinion.
372 Table 4
Ratio-Scaled Descriptive Statistical Analysis
Items N Minimum Maximum Mean Std. Deviation
Company’s Growth 90 -,60 67,66 ,8620 7,13342
Cash Flow 90 -,34 2,10 ,4169 ,46527
Debt Default 90 -2,11 34,06 2,0991 4,80962
Valid N (listwise) 90 -,60 67,66 ,8620 7,13342
Source: Processed data (2022)
Based on table 4, the average value (mean) for the company's growth variable is 0.8620, less than the standard deviation of 7.13342. It showcases that the data for the company's growth variable are various. In 2016, PT Atlas Resources Tbk. owned a minimum value of -0.60 for the company's growth variable. It happened because the company experienced a significant decrease in revenue by 59%. In 2018, PT Bumi Resources owned a maximum value of 67.66 for the company's growth variable. It was due to a significant increase in revenue of 6,302.04%.
Based on table 4, the average value (mean) of the cash flow variable is 0.4169, less than the standard deviation of 0.46527. It showcases the diversity of the data for the cash flow variable. The cash flow variable has a minimum value of -0.34, possessed by PT TBS Energi Utama Tbk. in 2019. It was due to cash from operating activities being used to pay for the construction of the company's power plant, cash receipts from customers decreased by 19.0%, interest payments, bank administration expenses, and finance expenses increased by 40.8% from the previous year. At the same time, the maximum value of the cash flow variable is 2.10, possessed by PT Samindo Resources Tbk. in 2020. It was due to a significant increase in net cash flow from operating activities up to 167.55%.
Based on table 4,the average value (mean) of the debt default variable is 2.0991, less than the standard deviation value of 4.80962. It shows that the debt default variable has varied data. In 2016, PT Bumi Resources Tbk. owned a minimum value of -2.11 for the debt default variable. It happened because the company had negative equity and low liabilities. At the same time, the maximum value of debt default is 34.06, possessed by PT Atlas Resources Tbk. in 2018. It is because the company has positive equity and high liabilities.
373 4.2. Assessing the Feasibility of the Regression Model
Table 5.
Hosmer and Lemeshow Test
Step Chi-square df Sig.
1 1,890 8 ,984
Source: Processed data (2022)
Table 5 shows the Chi-square value of 1.890, with a level of significance value of 0.984, which is grander than α = 0.05. These findings indicate that the utilized regression model might be examined further.
4.3. Assessing the Overall Model Table 6.
Overall Fit Test Model
Overall Fit Test Model
-2 Log Likelihood block number 0 81,101 -2 Log Likelihood block number 1 43,110 Source: Processed data (2022)
Based on table 6, the value of the initial -2Log Likelihood of 81.101, and the value of the final -2Log Likelihood value of 43.110. These results show a decrease of 37.991, which implies that the regression model has formed agreeably. Therefore, the hypothesized model is presently suitable.
4.4. Coefficient of Determination Table 7.
Coefficient of Determination
Model Summary Step -2 Log
likelihood
Cox & Snell R Square
Nagelkerke R Square
1 43,110 a ,344 ,580
Source: Processed data (2022)
Based on table 7, Nagelkerke R Square presents a coefficient of determination of 0.580. It showcases that such a company's growth, cash flow, and debt default are independent variables that can exemplify 58% of the total variance in the dependent variable, namely, going concern audit opinion. The remaining data, which is 42% of the
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total, could be explained by other aspects or factors that were not the focus of this research.
4.5. Simultaneous Hypothesis Testing (F-test)
The F test was conducted to establish if the independent variable influenced the dependent variables and how substantial that effect was (Ghozali, 2018). Below are the F-test outcomes:
Table 8.
Omnibus Test of Model Coefficients
Chi-square df Sig.
Step 1 Step 37,991 3 ,000
Blok 37,991 3 ,000
Model 37,991 3 ,000
Source: Processed data (2022)
Table 8 shows that all variables: company growth, cash flow, and debt default, have a simultaneous relationship in accepting a going concern audit opinion.
4.6. Partial Hypothesis Testing (t-test)
The function of the t-test is to figure out the degree of influence of each independent variable in interpreting alterations in the dependent variable (Ghozali, 2018). Below are the F-test outcomes:
Table 9.
Variables in the Equation
B SE. Wald df Sig. Exp(B) Step 1a Company’s Growth ,039 ,132 ,089 1 ,765 1,040
Cash Flow -5,498 2,272 5,856 1 ,016 ,004
Debt Default ,374 ,160 5,462 1 ,019 1,454
Constant -1,567 ,609 6,620 1 ,010 ,209
Source: Processed data (2022)
The logistic regression equation utilized for this research is based on the outcome of the partial regression analysis, specifically:
𝑳𝒏 𝑶𝑨𝑮𝑪
𝟏−𝑶𝑨𝑮𝑪= -1,567 + 0,039PP – 5,498KAS + 0,374DD + 𝜺
375 The company's growth possesses a significant value of 0.765, greater than = 0.05.
This research contradicts H1, which asserted a negative correlation between the company's growth and the accepting going concern audit opinions. This research revealed that the acceptability of going concern audit opinions is unaffected by the company's growth.
Cash flow possesses a significance value of 0.016, smaller than α = 0.05. This research agreed with H2, which presumes a negative correlation between cash flow and acceptability of going concern audit opinions. It exhibits that cash flow negatively influences the accepting going concern audit opinions.
Debt default possesses a significant value of 0.019, smaller than α = 0.05. This research concurred with H3, which assumes that debt default positively influences the acceptability of going concern audit opinion. It exhibits that debt default influences the accepting going concern audit opinions positively.
4.7. Discussion
4.7.1. The Influence of a Company’s Growth on the Acceptance of Going Concern Audit Opinions
Sales growth may be used to quantify the growth of a company. The value of the company's growth regression coefficient is 0.039, with the significance level being 0.765, greater than α = 0.05. Therefore, the outcomes of the hypothesis test reveal that the accepting going concern audit opinions are unaffected by the company's growth for companies of the coal subsector listed on the Indonesia Stock Exchange in 2016-2020.
Indonesian coal companies' sales reduction in 2016-2020 was not attributable to the company's productivity but rather to the reduction in coal prices throughout the globe. The decline in sales growth will indeed complicate the financial situation.
However, if the company benefits from the proceeds of shares, investors' funding, and creditors' loans, it can continue operations, enabling it to earn positive profits.
One of the pieces of evidence can be found in PT Baramulti Suksessarana Tbk. In 2020, sales decreased by 20.72%. However, the company still generated a net profit of 0.17% higher than the previous year. Despite this, the company was not given the going
376
concern audit opinion. It is due to that a company's efficiency strategy leads to a significant drop in the cost of goods sold.
The outcomes of this research are congruent with research carried out by Byusi &
Achyani (2018), Mukhtaruddin et al. (2018), and Putra & Purnamawati (2021), which claimed that the accepting going concern audit opinion is unaffected by a company's growth. The going concern audit opinion is unaffected by whether or not the company is showing greater or lowly growth. However, as a third party, the auditor should examine the whole monetary position of the company, not only the level of sales.
4.7.2. The Influence of a Cash Flow on the Acceptance of Going Concern Audit Opinions
The cash flow may be computed by comparing operational cash flow to total debts.
The value of the cash flow regression coefficient is -5.498, with the significance level being 0.016, smaller than = 0.05. Therefore, the hypothesis test findings show that the cash flow negatively correlates with the accepting going concern audit opinions of coal subsector companies listed on the Indonesia Stock Exchange in 2016-2020.
One of the pieces of evidence can be found in PT Darma Henwa Tbk. In 2017, operational cash flow decreased by 102.1% compared to the prior year, and the company acquired a going concern audit opinion. This occurred due to lesser customer revenue, higher employee payments, and higher payments to suppliers, subcontractors, and other operational activities.
Other evidence can be found in PT Mitrabara Adiperdana Tbk. In 2017, the operating cash flow increased significantly by 94.72%, and the company was not acquiring going concern audit opinion. This rationale is the increase in receipts generated from customers. The explanation demonstrates that companies with high cash flows do not secure going concern audit opinions. Their capacity to fulfill their duty will be estimated to increase as cash flows increase.
Based on the research outcomes, the auditor may evaluate cash flow when rendering a going concern audit opinion. Greater operational cash flow suggests the company's healthy financial status since it demonstrates its ability to defend operating
377 capacity while concurrently managing its total debt. The finding of this research is in line with Anita (2017) and Alamsyah (2018), which found that cash flow negatively influences accepting the going concern audit opinion.
4.7.3. The Influence of a Debt Default on the Acceptance of Going Concern Audit Opinions
The debt-to-equity ratio is the measure that is used in the analysis of the amount of funding that a company earns from its creditors. This ratio is used as a proxy for debt default. In addition, it may appraise the capability of the company to meet its debt repayments. The debt default regression coefficient value is 0.374, with the significance level being 0.019, smaller than α = 0.05. Therefore, the hypothesis test findings show that the debt default positively influences accepting going concern audit opinions for coal subsector companies listed on the Indonesia Stock Exchange in 2016-2020.
PT Bumi Resources Tbk. is evidence that demonstrates a company has defaulted on its debts and acquired the going concern audit opinion. In 2016, PT Bumi Resources Tbk. successfully negotiated debt restructuring with the majority of its creditors. This phenomenon states that if a company cannot repay its maturing debt and interest, it will disrupt its normal business activities. It will be taken into consideration by the auditor when rendering an opinion on the going concern audit.
The findings agree with those acquired from the prior investigation conducted by Alifiah et al. (2020), Puspaningsih & Analia (2020), and Simbolon & Andriyanto (2020), the acceptability of going concern audit opinions is positively influenced by debt default. Suppose a company goes into default or does not pay its principal and interest when it's due. In that case, it could cause much uncertainty about the company's chances of staying in business, which is required the auditor to spend a going concern audit opinion (Simbolon et al., 2020).
378
5. Conclusion, Implication, and Limitation 5.1. Conclusion
In light of the presented research and testing, it is possible to declare that the company's growth, cash flow, and debt default simultaneously influenced the accepting going concern audit opinions in coal subsector companies listed on the Indonesia Stock Exchange in 2016-2020. While according to the partial testing, the company's growth does not influence the accepting going concern audit opinions of the coal companies subsector listed on the Indonesia Stock Exchange in 2016-2020. The cash flow has negatively influenced the accepting going concern audit opinions of the coal companies subsector listed on the Indonesia Stock Exchange in 2016-2020. The debt default positively influences the accepting going concern audit opinions of the coal companies subsector listed on the Indonesia Stock Exchange in 2016-2020.
5.2. Implication and Limitation
Implications for the academic field, which can be used as additional information on science related to auditing, especially going concern and as learning material for further research. In addition, this study provides implications for auditors, company management, and investors. Auditors will have more information to consider when issuing a going concern audit opinion, such as cash flow and debt default factors.For the company's management, it can be used for the evaluation materials to prevent the admission of a going concern audit opinion by paying extra attention to the performance and health of the company's finances, particularly cash flow and debt default. For investors, it can be used as a cleverer consideration material in investing in a company with a genuinely awful cash flow and default status. The research suggests that the accepting going concern audit opinion may be affected by many factors, such as cash flow and debt default.
This study has limitation, namely limited to coal subsector companies with an observation period of only five years (2016-2020), so the results may differ from other sectors. Based on the limitation, it is recommended that future researchers prolong the
379 research period, expand it to other sectors, and select or utilize other variables to better explain the situation towards going concern audit opinion acceptance.
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