CHAPTER I

INTRODUCTION

1.1 STUDY BACKGROUND
The survival of an entity, is always connected with the ability of
management to bring the business unit to survive as long as possible. Therefore,
it is natural if the first allegation viability of an entity is devoted to management.
But it also has great potential accusation extend to the auditor. through which
summarized his opinion in the audit report, is initially requested his
responsibility to reveal the continuity of business entities.
In general assignment, the auditor assigned to give an opinion on the
financial statements of a business. The opinions provide a statement of fairness, in
all material respects, the financial position, results of operations, and cash flows in
accordance with generally accepted accounting principles (GAAP, 1994: 410.2).
Based on this statement, in carrying out the audit, auditors are required not only
limitedly see the things in the financial statements, but also have look to other
things such as: the problem of existence and continuity of the entity, for all
activities or transactions that have taken place and what will happen implicitly
contained in the financial statements. Therefore, the auditor should be carefull to
consider any disturbance of the viability of the entity (going concern) for a period
that results in opinions to be qualified public accountants as the main product.
Going-concern audit opinion issue an opinion in that the auditor
determines whether the company can sustain its survival (GAAP, 2001). The
financial statement users consider spending going-concern audit opinion as a
corporate bankruptcy prediction. The auditor shall be responsible for the issued
going-concern audit opinion, because it will affect the decisions of users of
financial statements (Setiawan, 2006).
1. Expenditure going concern opinions are very useful for the users of financial
statements to make right decisions in investing, because they need to know the
financial condition of the company, particularly with respect to the company's
survival. This makes the auditor has a great responsibility to issue going
concern opinions that are consistent with the actual situation of the company.
Some research suggests that the factors driving the auditors to issue going
concern opinions vary and the results are not conclusive.
2. Reputation of a public accounting firm given stake when opinions were not
in accordance with the actual conditions of the company. Auditors must have
the courage to express concerns about the viability of (going concern) client
companies. Problems of going concern should be given by the auditor and
the audit opinions should be included in the audit opinion at the time it
published. Providing going concern status is not an easy task because it is
closely related to the auditor's reputation. Judgment against public
accountants is often done, both by the public and the government to see
whether or not the condition of bankrupt companies is audited. That means
that it now seems to stake the fate of public accountants on the ups and downs
bisnis their companies client (Purba, 2006). This indicates that the auditor's
reputation is at stake when providing audit opinion.
3. The financial condition of the company is the real company's soundness, and
the company discovers the problem of more or less going concern
(Ramadhany, 2004). According to Mckeownet al. (1991), the company is likely
in a disturbed or deteriorated condition when the company receives a going
concern audit opinion. In contrast to companies that have never experienced
financial hardship, auditors never issue going concern audit opinion.
4. The company's growth can be seen from how well the company maintains its
economic position in the industry and overall economic activity (Setyarno et.
al, 2006). Companies that have high earnings growth tend to have a
reasonable report, so the potential for a favorable opinion will be greater.
Altman (1968) in Petronela (2004) argue that companies that profit will not go
bankrupt, because bankruptcy is one of the reasons for the auditor to give a
going concern audit opinion. Companies with negative growth indicate greater
tendency towards bankruptcy.
5. Setyarno et.al. (2006) states that the auditor issue a going concern audit
opinion would consider going concern audit opinion received by the auditee in
the previous year. The study provides empirical evidence that the audit opinion
of the previous year has significant effect on revenues of going concern audit
opinion.
6. By McKoewn (1991) states that larger companies offer higher audit fees than
those offered to small firms. In relation to the loss of significant audit fee, the
auditor may hesitate to issue a going concern audit opinion on the company.
According to Mutchler (1985), the auditors more frequently issue going
concern opinions in smaller companies, because it can resolve the financial
difficulties faced by smaller companies. The research results of Santoso and
Wedari (2007) proved that the size of the company has a significant negative
effect on the going concern audit opinion. But research by Ramadhany (2005)
and januarti and fitrianasari (2008) prove that company size has no significant
effect on the reception going concern audit opinion.
7. The company's inability to meet its obligations as they mature reflects the
trouble condition of the company. The ratio of Debt to Equity Ratio can be
used to determine the capacity of the company to meet both short-term and
long term liabilities. Leverage ratios are generally measured using the debt
ratio that compare the total liabilities to total assets. The amount of the debt
that exceeds the total assets is caused by the company capital deficiency or
negative equity balance. The higher leverage ratio shows that a company's
financial performance is getting worse and can cause uncertainty about the
viability of the company. Companies that have assets less than liabilities will
face the danger of bankruptcy (chen and Chruch, 1992). However, Rudyawan
and Badera (2008) state that the ratio Levarage has no significant effect on the
possibility of acceptance of Going-concern audit opinion.
This study is a replication of the study conducted by setyarno and Juniarti
(2006) on the factors that influence opinion going concern, to distinguish the
variables of the study. This study adds the audit client tenure during the
research year from 2006 to 2010. Based on the explanation above, the title of
the study is FACTORS INFLUENCING THE TENDENCY OF GOI NG
CONCERN AUDIT OPINION ACCEPTENCE ON MANUFACTURING
COMPANIES LISTED IN THE INDONESIA STOCK EXCHANGE


1.2 PROBLEM IDENTIFICATION
Based on the above information, the issue in this study is "What is the
influence of audit quality , the financial condition of the company, the company's
growth, the previous year's audit opinion, the size of the company, Debt to Equity
ratio and the audit client tenure relating to the going concern audit opinion?".

1.3 PROBLEM FORMULATION
Regarding from the problem identification , this research focus on
influence of the quality audit, the financial condition of the company, the
company's growth, the previous year's audit opinion, the size of the company,
Debt to Equity ratio and the audit client tenure. So the problem formulation is
follows:
1. Does the audit quality of companies positively influence the
acceptance going concern audit opinion?
2. Does the financial condition of companies negatively influence the
acceptance going concern audit opinion?
3. Does the companies Growth negatively influence the acceptance going
concern audit opinion?
4. Does the previous year audit opinion positively influence the acceptance
audit going concern opinion ?
5. Does the size of companies negatively influence the acceptance audit
going concern opinion?
6. Does debt to equity ratio positively influence the acceptance audit going
concern opinion?
7. Does the audit client tenure negatively influence the acceptance audit
going concern opinion?
1.4 RESEARCH OBJECTIVE
From the formulation of the problem formulation above, the purposes of
this study are as follow:
1. To test the influence of the audit quality on acceptence of going concern
audit opinion
2. To test the influence of the finacial condition on acceptence of going concern
audit opinion
3 .To test the influence of the companies growth on acceptence going-concern
audit opinion
4. To test the influence of the previous year's audit on acceptance going
concern audit opinion
5. To test the influence of the size of the company on going concern audit
opinion
6. To test the influence of the debt to equity ratio of the going concern audit
opinion
7. To test the influence of the audit client tenure of the going concern audit
opinion.


1.5 RESEARCH BENEFIT
The benefits that can be derived from the results of this study include the
following:
1.Academic benefit
These results are expected to contribute to the development of theory in
Indonesia, especially on the issue of going concern. this study is also expected
to increase the repertoire of knowledge and understanding and that can be used as
reference knowledge, discussion, and further study materials for readers on issues
related the audit opinion Going Concern.
2. Practical benefits
a. For investors and prospective investors
This research is expected to be useful to provide information and consideration
of the going concern (business continuity of a company) so that investors and
potential investors can make decisions in investing.
b. For independent auditors
This study can be useful as a guide, consideration and reference materials for
auditors in performing the audit process, especially in terms of providing an audit
opinion on the issue of providing clients regarding going concern audit opinion.
c. For the Company's management
The researchers hope that the study can be a reference for determining the
discourse and policies of the company and can be used as a material
consideration in decision making by the management of company.

d. For the government
This study can be useful as a material consideration in the making of economic
policy.
















CHAPTER ll
REVIEW REALATED LITERATURE

2.1 Agency theory
Jensen and Meckling (1976) define an agency relationship as a contract in
one or more persons (principal) to ask the other party (the agent) to perform some
work on behalf of the principal which involves delegating some decision-making
authority to the agent. If the two parties involved in the contract want to
maximize their utility, it is possible that the agent will not always act in the best
interests of the principal. With the aim of motivating agents, the principal design
contract in such a way so as to accommodate interests of the parties involved in
the contract agency. Efficient contract is a contract that satisfies the two
assumptions, which are as follows:
1. Agents and principals have symmetric information. It means that both the agent
and the principal have similar quality and quantity of information so there is no
hidden information that can be used for his own gain.
2. Risks associated with the returns that received services agency are little, which
means that agents have a high certainty regarding his reward.
Eisenhardt (1989) states that there are three assumptions related to agency
theory of human nature, namely:
1. General human selfishness (self-interest)
2. Humans have a limited power of thought regarding the future perception
(bounded rationality), and
3. Humans always avoid risk (risk-averse)
Based on the assumption, naturally human will tend to act as managers
opportunistically, by prioritizing personal interests. This triggers the agency
conflict that fairness requires the financial statements to be presented by
management.
Auditor as an independent party is needed to oversee the performance of
management whether or not it has acted in accordance with the interest principial
through financial statements. Principals expect auditors to provide early warning
about the company's financial condition. Company data will be more easily
trusted by investors and other users of financial statements, if the financial
statements that reflect the company's performance and financial condition have
got a reasonable statement of the auditor (Komalasari, 2004). Auditor's duty is to
provide an opinion on the fairness of the company's financial statements, and
disclose going concern issues that the companies face when auditors doubt the
company's ability to survive.
Research on the demand for audit quality has been described using the
literature and the contracting agency. Watts and Zimmermann state that the higher
the agency costs (cost of the conflict), the greater the demand for higher quality
audits, either by the manager or by the shareholders (1986). In the contracting
literature, it is mentioned that accounting is often used in contracts, such as debt
contracts, compensation planning, and others. The contracts also often include
restrictions that must be complied with by the parties involved in the contract.
Therefore, there are demands to perform the calculation and report the figures
before the start of the contract.
Auditors that function in this case are parties which give assurance of the
integrity accounting numbers produced by the auditee accounting technology.
Then, these figures are used as the basis for contracting agents and principals
(DeFond, 1992), (Francis and Wilson, 1988), and (Palmrose, 1984). Auditing also
plays an important role in monitoring contact. Auditor's report serves breach of
contract by the debtor's debt. In addition, the audited earnings figures are also
used in the bonus plan.
Further contracting or agency theory can be extended to explain the audit
brand name and industry specialization as a function of increasing cost agency.
Previous studies showed that the cross-sectional variation may affect the
company's cost agency. Factors of extensive industry are also expected to affect
the boarding industry agency. Characterisctics that may affect a company is
greater than in other companies. The existence of these differences requires a
certain skill to be able to better detect how much influence it has. Thus, this
condition indicates the need for auditor specialization.
Setiawan (2006) in Praptitorini and January (2007) states that, it takes an
independent third party as a mediator in the relationship between principal and
agent. These third parties are used to monitor the behavior of managers (agents) if
it is acting in accordance with the wishes of the principal. Auditors are those who
are considered being capable of bridging the interests of the principals
(shareholders) with the manager (agent) in managing the company's finances.
Auditors to monitor the work of managers through an annual report. Auditor's
duty is to give the opinion about the fairness of the financial statements. In
addition, the auditor should also consider the going concern of it companys
If accounting is an important part of the contracting process and cost
agency and accordance with the type of contract that is different, then the
accounting procedures affect firm value and compensation manager. Based on
agency theory, which assumes that man is always self-interest, then the presence
of an independent third party as a mediator in the relationship between principal
and agent is necessary, in this case it is the independent auditor. Agency theory
states that a conflict of interest between the agent and the principal requires the
presence of an independent third party to mediate the conflict between the
two parties.

2.2 Audit Quality
As in the United States, the emergence of accounting manipulation cases
trigger the issuance of Bapepam Kep-20/PM/2002 numbers as on 12 November
2002 and the Decree of the Minister of Finance no. 423/KMK-06/2002. In the
attachment, the Chairman of Bapepam Regulation numbers are Kep-20/PM/2002
containing VIII.A.2 number of them restrict the auditee and the auditor's
relationship during a certain period, the issuer must replace accounting firms
every 5 year and every 3 year for auditors . Moreover, the provision of non-audit
services are provided by, for example, a tax consultant and management
consultant.
Palmrose (1998) suggests that auditors from the accounting firm of non-
Big Eight are more often faced with litigation risk than auditors from the Big
Eight accounting firms. On the other hand, than the auditors of the Big Eight
accounting firm is more accurate than the auditors of the accounting firm non-Big
Eight. However, the reality of which seems late in involving large accounting
firms (Big Eight).
Some cases of accounting scandal are the length of client relationships and
audit the auditor to be the cause of failure. Knapp (1991) suggests that the length
of the relationship between the auditee and the auditor can interfer auditor
independence and accuracy to perform auditing tasks. Research results indicate
that auditors who have a service life of more than 20 years and less than 5 years
can not find fault reporting material.
St.Pierre and Anderson (1984) find that audit failure auditors are
apparently common in that era assignment having less than 3 years. Metcalf
Committee (US.senate, 1997) states that the long relationship between the auditor
and the client may impair the quality of professional accounting firms such as the
case in several countries including Indonesia. To overcome these problems, a
mandatory rotation policy among auditors is important. However, some research
results show that the change of auditors that are mandatory provide negative result
(Lennox, 2011).
Measurement of audit quality is something that is still not clear, but
regular users of financial statements relate to the auditor's reputation. Teoh &
Wong, (1993) and Craswell et al. (1995) state that clients generally perceive that
auditors are derived from a large accounting firm that has affiliation with the
international accounting firm which will have higher quality, because the auditor
has characteristics that can be attributed to the quality of such training,
international recognition, and the peer review. Auditors who have a good
reputation will tend to maintain their reputation of quality audit to awake and not
lose clients.
De Angelo (1981) concludes that the larger the firm can generate higher
audit quality that have a greater incentive to avoid criticism reputational damage
than small scale KAP, KAP large scale are more likely to reveal the problems that
exist because they are more robust in the face of court process risk . this
Argumen shows that a large accounting firm has more incentive to ditection and
report on business continuity issues the client .Palmrose (1988) proved in his
research that the group auditor litigation big 8 has a low level compared to non-
big 8. It shows that the auditor big 8 provides a higher quality because it has the
motivation to maintain his reputation.
Prior to 2003, there were five major accounting firms in the world called
The Big Five Auditors namely Arthur Andersen, Ernst & Young, Deloitte
Tohmatsu toucher, KPMG, and Price water house Coopers. Five local accounting
firms affiliated with The Big Five Auditors are:
1.KAP Prasetio Utomo & Co afiliated with Arthur Andersen
2. KAP Hanadi, Sarwoko, dan Sandjaja afiliated with Ernst & Young,
3. KAP Hans Tuanakotta & Mustofa afiliated with Deloitte Touche Tohmatsu,
4. KAP Siddharta, Siddharta, dan Harsono afiliated with KPMG, dan
5. KAP Drs. Hadi Susanto dan Rekan afiliated with Price water house coopers.
But since 2003, the Big Five Auditors became the Big Four Auditors. The
fourth KAP is Ernst & Young, Deloitte Touche Tohmatsu, KPMG, and Price
water house coopers. In 2003-2004 four local accounting firms affiliated with
The Big Four Auditors are:
1. KAP Prasetio, Sarwoko, Sandjaja affiliated with Ernst & Young,
2. KAP Hans Tuanakotta and Mustafa affiliated with Deloitte Touche
Tohmatsu,
3. KAP Siddharta, Siddharta, and Harsono affiliated with KPMG, and
4. KAP Drs. Hadi Susanto and Partners affiliated with Price water house
coopers.

In 2005, four local accounting firms affiliated with The Big Four Auditors are
as follows:
1. Purwantono, Sarwoko, Sandjaja affiliated with Ernst & Young,
2. KAP Satria Ramli Osman and colleagues affiliated with Deloitte Touche
Tohmatsu,
3. KAP Siddharta, Siddharta, and Harsono affiliated with KPMG, and
4. KAP Drs.Hadi Susanto and Fellow affiliated with Price water house
coopers.

In 2006-2008, four local accounting firms affiliated with The Big Four Auditors
are as follows:
1. Purwantono, Sarwoko, Sandjaja affiliated with Ernst & Young,
2. KAP Satria Ramli Osman and colleagues affiliated with Deloitte Touche
Tohmatsu,
3. KAP Siddharta, Siddharta, and Harsono affiliated with KPMG, and
4. KAP Haryanto Sahari affiliated with Price water house coopers.

In 2009, four local accounting firms affiliated with The Big Four Auditors are:
1. Purwantono, Sarwoko, Sandjaja affiliated with Ernst & Young,
2. KAP Satria Ramli Osman and colleagues affiliated with Deloitte Touche
Tohmatsu,
3. KAP Siddharta, Siddharta, and Harsono affiliated with KPMG, and
4. KAP Tanudireja Wibisana and Partners affiliated with Price water house
coopers.

2.3 Financial condition of the companies
Most of the previous studies have used financial ratios to identify the
company's going concern problem (Koh and Tan, 1999), (Chen and Church,
1992), and (Mutchler, 1985). Alman and McGought (1974), Levitan and Knoblett
(1985), Mutchler (1985), and Menon and Scwarchtz (1987), investigate the
importance of financial variables in explaining the going concern modification to
the opinion received by the company. Altan and McGough (1974), Koh and
Killought (1990), and Koh (1991) conclude that a bankruptcy prediction model
using financial ratios are more accurate than the auditor's opinion in classifying
whether the company bankrupt and not bankrupt.
McKeown et al. (1991) find evidences that auditors almost never issued a
going concern opinion on companies that are not experiencing financial distress.
Going concern opinion is unwanted result in falling share prices (Fleak and
Wilson, 1994). This shows symptoms of the company's bankruptcy (Chen and
Church, 1996) and will lead the company to difficultly obtain capital (Firth,
1980).
Soundness of the company can be seen from the company's financial
condition. On the company which has good financial condition auditors tend to
not issue a going concern audit opinion (Ramadhany, 2004). This is supported by
Carcello et al. (2000) which states that the company's financial condition is
compromised, then the company is likely to receive a going-concern audit
opinion. Opinion was also supported by Setyarno et al. (2007), and Wedari
Santoso (2007) and Rudyawan and Badera (2009) stating that, the better the
financial condition of the company, the less likely the auditor going concern audit
opinion.
SA Section 341 paragraph 06 states that the auditor can identify
information about certain conditions or events that indicate a big doubt about the
entity's ability to maintain its viability within a reasonable time (not more than
one year from the date of the financial statements being audited).
Arens and Lobbecke (1996:52) states several factors that cause
uncertainty about the viability of the company is (1) substantial operating losses
over and over or shortage of working capital, (2) the company's inability to pay its
obligations as they mature in the short term, (3 ) loss of key customers, occured
unusual disaster, and (4) litigation, lawsuits or similar problems that often occur.

2.4 Auditor opinion
In doing general assignment, the auditor is assigned to provide an opinion
on the financial statements of the company. Opinion given a statement of fairness
in all material respects, the financial position and results of operations, and cash
flows in accordance with accounting principles AISPE (Auditing information
system profession ethic ) which is generally acceptable (SPAP, 2001). In
performing the audit process, the auditor is required not only to see the things
revealed in the financial statements but also to wary of things that could
potentially interfere with survival (going concern) of a company. This is the
reason why the auditor is asked to evaluate the viability of the company within a
certain time limit (SPAP SA 341).
PSA 29, paragraph 11, letter d, states that great doubts about the ability of
the business unit continued survival (going concern) is a condition that requires
the auditor to add an explanatory paragraph (or other explanatory language) in the
audit report. While not affecting the unqualified opinion expressed by the auditor,
the term is used to encompass language paragraphs, sentences, phrases, and when
used by a public accountant to communicate the results of its audit report to the
user.
McKeown et al. (1991) found that the auditor may fail to give an opinion
on the indication of the bankruptcy of a company that turned out to be bankrupt in
the next few years. This is because the company is in a position between the
threshold of bankruptcy by the continuity of his own efforts (for example, it is in
the process of debt restructuring). PSA 30 and SA Section 341 provide guidance
to auditors about the impact the ability of the business unit continued survival of
the auditor's statement of opinion.
According to the Public Accountants Professional Standards (SPAP) SA
Section 110, the purpose of an audit of financial statements by the independent
auditor in 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 accounting principles commonly applied in Indonesia. Opinion
of the auditor (audit opinion) is part of the audit report which is the main
information of the audit report. Audit opinion is given by the auditor through
several stages of the audit so that the auditor can give a conclusion that opinion
should be given in the financial statements that was audited. There are five types
according to the auditor's opinion Mulyadi (2002), namely:
1. Unqualified opinion
With an unqualified opinion, the auditor states that the financial statements
present fairly in all material respects in accordance with generally acceptable
accounting principles in Indonesia. Audit report with an unqualified opinion is
issued by auditors if the following conditions are met:
a. All balance sheet, income statement, statement of changes in cash flows
and statements contained in the financial statements
b. In the implementation of the engagement, all common standards can be
met by auditors
c. Enough evidence can be gathered by the auditor, and the auditor has
conducted the engagement in order to make it possible to carry out the
field work standards.
d. The financial statements are presented in accordance with generally
acceptable accounting principles in Indonesia
e. No state requires the auditor to add an explanatory paragraph or
modification of words in the audit report.

2. Unqualified opinion with explanatory language
In certain circumstances, the auditor adds an explanatory paragraph or
other explanatory language in the audit report, although it does not affect an
unqualified opinion on the financial statements being audited. Included an
explanatory paragraph after paragraph of explanatory or modification of words
in the standard audit report are:
a. Inconsistencies in the application of accounting principles are generally
acceptable.
b. Grave doubts about the viability of the entity.
c. Auditor agrees with a deviation from the accounting principles issued
by the Financial Accounting Standards Board.
d. Emphasis on one thing.
e. Audit reports involving other auditors.

3. A qualified with exception (qualified opinion)
Reasonable income with the exception is granted if the auditee financial
statements fairly present all material respects in accordance with generally
acceptable accounting principles in Indonesia, except for the impact of the
excluded. Reasonable income declared in a state with the exception of:
a. Not sufficient competent evidence or a limitation on the scope of the
audit.
b. Auditor believes that the financial statements contain departures from
generally acceptable accounting principles in Indonesia, which have a
material effect, and the auditor concludes that not expressing an opinion is
not fair.

4. adverse opinion
Improper revenue is provided by the auditor when the financial statements
do not fairly present auditee financial statements in accordance with generally
acceptable accounting principles.

5. Disclaimer opinion
Auditor does not express an opinion if the auditor does not perform
sufficient audit to allow the auditor to give an opinion on the financial
statements. This opinion is also given if the condition is not independent
auditor in the relationship with the client




2.5 Companies growth
The company's growth indicates a company's ability to maintain its
survival. The company's growth can be proxied by the ratio of sales growth. This
ratio measures how well the company maintains its economic position, both in
industry and in the overall economic activity (Weston & Copeland, 1992 in
Setyarto et al, 2006). Companies experiencing growth, indicate the operational
activities of the company to run properly so that the company can maintain its
economic position and its survival. While the ratio of companies with potentially
large negative sales growth decrease earnings so the management need to take
corrective action in order to maintain its viability.
High profits generally signify high cash flow (Weston & Bringham, 1993).
Altman (1968) and Petronela (2004) suggested that companies with negative
growth indicate a greater tendency towards bankruptcy because bankruptcy is one
of the basis for the auditor to give a going concern audit opinion.

2.6 Size of Companies
Firms with positive growth give a sign of the company's growing size and
reduce the tendency towards bankruptcy. McKeown et al. (1991), Mutchler et al.
(1997), and Carcello and Neal (2000) find evidences of a significant negative
relationship that exist between the size of the auditee company with going-
concern audit opinion.
McKeown et al. (1991) said that larger companies offer higher audit fees
than those offered by smaller companies. Mutcler (1985) states that auditors more
frequently issue going concern audit opinion on small firms, as auditor needs to
believe that a large company can resolve its financial difficulties of the small
companies. Mutchler et al. (1997) provide empirical evidences that there is a
negative relationship between firm size and going-concern audit opinion.

2.7 Debt To Equity Ratio
To measure the extent how far the company financed with debt. can be
seen through the debt to equity ratio. Debt to equity ratio reflects the proportion
between the total debt to total shareholders' equity. Total debt is total liabilities
(both short-term debt and long-term), while total shareholders' equity is total
equity (total equity shares deposited and retained earnings) that a company has.
According to Robert Ang (1997) this composition show composition from ratio
of debt to total equity. The higher the debt to equity ratio,the greater the
composition of total debt the total equity capital. Thus, it gives impact to the
greater burden of the company to outsiders (creditors).
To expand the company in the face of competition, it is necessary the
existence of a financing that could be used for meet those needs. Funding sources
can be obtained from the company within the company (internal) and outside the
company (external). In practice, the resources available to the company should be
managed well, because each of these funding sources contains accountability
obligations to the owner of the funds. The proportion between capital and equity
(internal) with loan capital (external) should be considered, so that the company
can know the burden against the owners of the capital. the financial management
of the proportion between the number of outside funds is commonly referred to as
capital structure or capital structure (capital structure).
Brigham (1983) states that in developing the capital structure targets
require analysis of many factors to take into consideration the financial condition
of the company. External sources of funds are obtained from loans or debt (both
forests short and long term), while the internal sources of funds a rderived from
capital stock (equity) and undivided profits (retained earnings).

2.8 Audit Client Tenure
Auditor tenure is a term client engagements that exists between public
accounting firms (KAP) with the same auditee. the fearness of losing a large
amount of the fee would cause the auditor occurs doubts to give going concern
audit opinion. A report issued by the Securities Practice Section of Exchange
Commission (SEC) Executive Committee (American Institute of Certified Public
Accountants (AICPA), 1992 in Sinason et al., 2001) revealed some of the
arguments that were made about audit tenure. This argument states that in the long
term, the relationship between auditor and client companies will cause the
following problems:
(1) The auditor has a closer relationship with the client's management that
causes the auditor to identify management problems and loss of
professional skepticism.
(2) The auditor may consider testing conducted as a repetition of a previous
engagement so that the auditor felt already know in advance the results of
such testing. This causes the auditor to less able to evaluate significant
changes in the client's condition.
(3) The auditor may wish to solve the problem of client companies in order to
maintain relationships with clients. Meeting the wishes of the client's
management may be a priority auditor, than to follow professional
standards.

2.9 Opini Audit Going Concern
Going concern audit opinion is opinion that published by the auditors to
determine whether the company can maintain its viability (SPAP, 2004). Gray and
Manson (in Praptitorini and Januarti, 2007), going concern is one of the most
important concepts that underlies financial reporting. Setiawan (in Praptitorini and
Januarti, 2007) states that it is an auditor's responsibility to determine the
appropriateness of the financial statements using the going concern basis, and that
the use of the going concern basis by the company is viable and adequately
disclosed in the financial statements.
Arens (in Fanny and Saputra, 2005) states that there are several factors
that give rise to uncertainty about the viability of the company:
1. Large business losses are recurring or shortage of working capital.
2. The company's inability to pay its obligations as they mature in the short term.
3. Loss of key customers, uninsured disasters, such as earthquakes or floods or
unusual labor issues.
4. Litigation, lawsuits or similar problems that have occurred and may endager
the company's ability to operate.
Going concern assumption used in financial reporting as a whole does not
prove the existence of information that suggests the opposite (Contrary
information). Significant information is deemed contrary to the assumption of the
survival of business units typically the business unit associated with the inability
to meet obligations when due,,without making major asset sales to outsiders
through regular business, restructuring of debt, operating improvements imposed
from the outside, and other similar activities (SPAP 341, 2004). SPAP (PSA 30)
provides guidance to auditors about the impact of the ability of the business unit
to continue to survive:
1. If the auditor believes that there are doubts about the ability of the unit
continue to survive within a reasonable period of time, the auditor should:
a. obtain information regarding the management plan gives impact and
reduces future conditions and events.
b. determine whether the plan can be effectively implemented
2. If management does not have a plan that reduces the impact of the conditions
and events of the ability of the business units continued survival, the auditors
consider giving a statement that did not have an opinion.
3. If management has the plan, the next step should be done by the auditor is
making conclusion that the effectiveness of the plan should include:
a. if the auditor concludes that the plan is not effective, the auditor does
not express an opinion
b. if the auditor concludes that an effective plan and clients are disclosed
in the notes of financial statements, the auditors express an unqualified
opinion
c. if the auditor concludes that the plan will be effective but the client did not
disclose in the notes to the financial statements, the auditor provides no
reasonable opinion.
4. If the auditor concludes hesitations or doubts over the company's ability to
continue its business, an unqualified opinion with an explanatory paragraph needs
to be made, regardless of the disclosures in the financial statements. PSA 30
permits, but does not suggest the statement did not give an opinion because theirs
survival.

2.10 Previous Research
Ramadhany (2004) conducted a study entitled "Analysis of the factors that
affect the going concern audit opinion on manufacturing companies experiencing
financial distress at the Jakarta Stock Exchange. The factors used are the audit
committee, debt default, financial condition, previous year's audit opinion, the
auditor firm size and scale. With logistic regression data analysis techniques it
was found that, financial condition, debt default, and previous audit opinion
significantly influence the going-concern audit opinion. While the audit
committee, company size, and scale the auditor do not significantly influence the
going-concern audit opinion.
Research conducted by Fanny and Saputra (2005) with the title of "going-
concern audit opinion studies are based on bankruptcy prediction model, the
growth of the company, and the reputation of KAP (Office of Public Akuntan)
study on the JSE listed companies. Research uses the dependent variable and the
going-concern audit opinion, independent variables bankruptcy prediction model,
the growth of the company, and the reputation of the firm (public accounting
firm). By using logistic regression analysis, it was found that, using a bankruptcy
prediction model developed by Altman affect the provision for granting a going
concern audit opinion. Results also found that the company's growth and
reputation of the firm (public accounting firm) does not affect the provision going
concern audit opinion.
In the study conducted by Santosa and Wedari (2007), it was concluded
that receipt of an audit opinion can be demonstrated through the company's
internal conditions of observation, the previous year's audit opinion, the
company's growth, and the size of the company. As a result, audit quality and firm
growth does not affect the going concern opinion. However, the auditor's opinion
on the previous year has a positive influence on the going concern opinion.
Research conducted Praptitorini and Januarti (2007) use a slightly
different variable. The study shows that the quality of the audit did not
significantly influence the acceptance of a going concern opinion. Meanwhile,
debt default significant positive effect on the going-concern audit opinion.
Companies in Indonesia are likely to receive non going-concern opinion when the
auditor does not make the turn. It indicates a lack of auditor independence level in
Indonesia.
In the next study, Setyarno and Januarti (2006) showed that the company's
financial condition gives a negative effect on the possibility of receiving a going
concern opinion, and the previous year's audit opinion gives positive effect on the
probability of going concern audit opinion. In comparison, audit quality and firm
growth does not affect the possibility of receiving a going concern opinion.
In a study conducted by Rudyawan and Badera (2009) regarding the going
concern opinion by using variable model of bankruptcy prediction, corporate
growth, leverage, and the auditor's reputation, it is suggested that bankruptcy
prediction variable model influemce the going-concern audit opinion. In contrast,
growth, leverage, and the auditor's reputation have no impact on the going-
concern audit opinion.
Junaidi and Hartonos research (2010) entitled "non-financial factors on
the going concern opinion" lead to the conclusion that the hypothesis testing
results showed three non-financial variables tested that were significant (tenure,
reputation, disclosure) and a non-financial variable that was not significant (size )

2.11 Research method development
Research method












H7-





AUDIT QUALITY
FINANCIAL CONDITION
OF THE COMPANY
COMPANIES GROWTH
AUDIT OPINION
PREVIOUS YEAR
SIZE OF THE
COMPANY
DEBT TO EQUITY
RATIO
H1+
H2-
H3+
H4+
H5-
H6+
ACCEPTANCE OF
AUDIT OPINION
GOI NG CONCERN
AUDIT CLIENT TANURE

2.11.1 Audit Quality
Junaidi and Hartono (2010) state that the auditor is responsible for
providing high quality information useful for decision making. Reputable auditors
tend to issue going concern audit opinion if the client has problem related with
going concern of the companies. Craswell, et al. (in Fanny and Saputra, 2005)
states that the client usually has perception of auditor from a large public
accounting firm that is affiliated with the international public accounting firm. It
has higher quality because the auditor has characteristics that can be associated
with quality, such as training, international recognition, as well as a peer review.
Sharma and Sidhu (in Fanny and Saputra, 2005) classify public accounting
firm's reputation into six big scale firms and non-big six firms to look at the
degree of independence, as well as the tendency of a public accounting firm to
audit the costs it receives. Mutchler (in Fanny and Saputra, 2005) uses scale proxy
variables of public accounting firm for the public accounting firm's reputation in
order to see the trend of the audit opinion given to the troubled company.
Based on previous research, proxies are often used to assess the reputation
of the auditor in using scale public accounting firm. McKinley et al. (In Fanny and
Saputra, 2005) state that when a public accounting firm claims to be a major
accounting firm as is done by the big four firms, then they will try hard to keep
the big names. They avoid actions that could disrupt the reputation of their name
that is often used as a proxy for auditors and audit quality. However, a lot of
research competence and independence are still rarely used to see how big the
actual audit quality is (Barbadillo Ruiz et al. 2004). Auditor reputation is based on
trust service user auditor and that auditor has the power monitoring in general can
not be observed. DeAngelo (1918) stated that large-scale auditors have incentives
to avoid criticism and this is more reputational damage than the small-scale
auditor. That argument means that the big auditor has more incentives to detect
clients report going concern problem.
Mutchler et al. (1997) found evidences that univariate big 6 auditors are
more likely to publish going concern audit opinion on the company experiencing
financial distress than non-Big 6 auditors. Auditors can provide a large-scale audit
of a better quality than the small scale auditor, including in exposing the going
concern issue. The larger the scale of the auditor, the more likely the auditor will
issue a going concern audit opinion.
In the study, Craswell et al. (1995) in Setyarno (2006), auditor quality is
measured using specializion auditor. Craswell suggests that specialized auditors in
certain areas are another dimension of audit quality. Research results show that
the specialist audit fee is higher than non-specialist auditors. Mayangsari (2003)
conducted a study presenting the influence of auditor industry specialization as
another proxy of audit quality on the integrity of financial statements. Research
results indicate that auditor specialization has positive effect on the integrity of the
financial statements.
In previous studies, testing on the relationship between the behavior of the
auditor's going concern opinion with the administration was carried out. Altman
(1982), Chen and Church (1992) compared the type of audit opinion issued by
auditors in corporate bankruptcy using bankruptcy prediction models. In general,
these studies found that the majority of the bankrupcys of the studied companies
were the companies that received a going concern opinion. The other results
stated that the bankruptcy prediction model which was used is more accurate than
the given auditor's opinion. The results of these studies indicate that the audit
profession has failed to undertake the professional responsibilities.
H1: Audit quality negatively influences the possibility of going concern audit
opinion acceptance

2.11.2 Financial condition of the company
Some previous studies concluded that bankruptcy prediction models used
traditional financial ratios which were more accurate than the auditor's opinion in
classifying bankrupt and not bankrupt companies (Altman & McGough, 1974,
koh & Killough, and Koh 1991).
Altman (1993) revised the model which was developed previously and
underwent revision whose goal is to make the model predictions are applicable
not only in manufacturing companies but also in the company besides
manufacturing. Altman revised the model as follows:
Z= 0,717Z+ 0,874Z2 + 3,107Z3 + 0,420Z4 + 0,998Z5
Z1= working capital/ total asset
Z2= retained earnings/total asset
Z3=earnings before interest and taxes /total asset
Z4= book value of equity /book value of debt
Z5= sales/total asset
Z value is obtained by calculating the ratio of five based on data on the
balance sheet and profit / loss, multiplied by the coefficient of each ratio, then the
results are summed. This calculation results Z score is a ratio scale.
H2: financial condition of the company negatively influence the possibility of
going concern audit opinion acceptance

2.11.3 Companies Growth
In this study, the company's growth is proxied by the ratio of sales growth.
This ratio measures how well the companies maintain its economic position, both
in industry and in the overall economic activity (Weston and Copeland, 1992).
Sales are the main operating activities of the auditee. Auditees that have positive
sales growth ratio indicate that the auditee can maintain its economic position and
better able to survive (going concern). Sales that continue to increase from year to
year will be the opportunities of the auditee, and the auditor will be less likely to
issue a going concern audit opinion.
Sale growth is used to measure the effectiveness of the company to
maintain its economic position, both in the industry and overall economic activity
(Weston & Copeland, 1992) in Setyarno et al. 2006). Companies experiencing
growth indicate that the operational activities of the company run properly so that
the company can maintain its viability and economic position, while firms with
negative growth indicates a greater tendency towards bankruptcy (Altman, 1968).
H3: Growth of companies has a negative effect on the possibility of going concern
audit opinion acceptance .

2.11.4 Prior Year Audit Opinion
Auditee that receives a going concern audit opinion in the previous year
shall be deemed to have continuity problems, so it is more likely for the auditor to
issue a going concern audit opinion on the current year. Companies that have
problems will experience problems such as loss of public confidence so that
management will increasingly find it difficult to overcome the existing difficulties
(Ramadhany, 2004).
Ramadhany (2004) Setyarno et al. (2007), January and Fitrianasari (2008),
Fanny and Saputra (2000), and January (2007) found evidences that the previous
year's audit opinion significantly affect the going concern audit opinion. This
suggests that the auditee receiving a going concern audit opinion in the previous
year will have the possibility to accept similar audit opinion in the current year.
The hypothesis is presented as follows:
H4: Audit opinion given in the previous year has positive effect on the possibility
of going concern audit opinion Acceptance

2.11.5 Company Size
The size of the company is a large-scale in which small firms can be
clarified by way of total assets, log size, the value of the stock market, and so on.
Bigger companies offer higher audit fees than smaller companies. In the hook of
the significant loss of the audit fee, auditors may question spending on going
concern audit opinion on the big companies.
Januarti and Fitrianasari (2008), Junaidi and Hartono (2010) found that
firm size does not affect the going concern audit revenues, while Santosa and
Wedari (2007) find evidence that firm size affects the going concern opinion. This
shows that the larger the company, the less likely it receives going-concern audit
opinion. The hypothesis is presented as follows:
H5: Company size has negative effect on the possibility of going concern audit
opinion acceptance .

2.11.6 Debt to Equity Ratio
Debt to equity ratio shows the proportion of the use of debt to finance
investment (Sartono, 2001:120). Debt to equity ratio is measured by comparing
the total liabilities and equity toatal. This ratio measures the percentage level of
corporate debt to total assets owned or how big the percentage of total assets is
financed with debt. The higher level of debt compared to equity ratio causes
doubts about the ability of the company to maintain the continuity of their
business in the future. This is due to the fact that most of the funds raised by the
company will be used to refinance debt and fund to operate will decrease.
Creditors generally prefer low numbers of debt ratio , because the greater
the likelihood of losses suffered by creditors in the event of liquidation. The
greater debt ratio would be more likely to give the auditor going concern audit
opinion. The results Praptitorini and Januarti (2007), Januarti and Fitriasari
(2008), as well as Januarti (2009) found that the ratio of debt default significant
positive effect on the going-concern audit opinion. Based on the description, the
sixth hypothesis in this study is as follows:
H6: Debt to equity ratio possitively influence the possibility of going-concern
audit opinion acceptance

2.11. 7 Audit Client Tenure
Client auditor tenure is the number of years in which the firm does the
audit engagement with the same auditee. Long time of audit engagement the
auditor will make affect losing its independence, so it is likely to provide a going
concern opinion will be hard, or it will make the firm better understand the
financial condition and will be easier to detect problems going concern To
maintain its independence some countries establish regulations regarding KAP
rotation. In Indonesia, regulations require a change of 5 years public accounting
firm and auditor who audited the company in 3 year in a row (Bapepam, 2002).
Based on the description, the seventh hypothesis in this study is as follows:
H7: Client Audit Tenure negatively influence the possibility of going concern
audit opinion acceptance















CHAPTER III
RESEARCH METHOD

3.1 Sample
The sample used in this study are all listed manufacturing companies in
Indonesia Stock Exchange (IDX) in 2006 to 2010. The manufacturing company
sector was chosen because to avoid the industrial effect, industry risk is different
between an industrial sector with each other. Year 2006 to 2010 was selected due
to the economic situation in Indonesia which is relatively stable, so as to reflect
the movement of shares on the IDX (Indonesia Stock Exchange), which is
actually after the economic crisis in previous years.
This study uses purposive sampling method that is sampling technique with
specific considerations or criteria (Sugiyono, 2007:78). The criteria considered in
this study sample are as follows:
1. Auditee is listed on the Indonesia Stock Exchange (IDX) .
2. Published financial statements that were audited by independent
auditors during the year 2006- 2010
3. Has undergone a net profit after tax of at least two negative period
financial statements in two consecutive years. Because auditor almost
never issued a going concern opinion on the companies that have a
positive net profit after tax (McKeown et al.1991).





3.2 Types and Sources of Data used in this study are as follows:
1. The quantitative data, the data in the form of numbers or qualitative data
in the form of numbers (Sugiyono, 2007:13). Quantitative data in this study is the
annual financial statements companies listed in Indonesia Stock Exchange 2006-
2010.
2. The qualitative data, the data in the form of words, sentences,
schematic, and images (Sugiyono, 2007:13). The qualitative data in this study is
the auditor's independent report.
Sources of data in this study were secondary data in which researchers
obtained data indirectly through intermediaries, such as other people or
documents (Sugiyono, 2007:129) The secondary data in this study is data of
independent auditors' report and annual financial statements of companies listed
Indonesia Stock Exchange in the period of 2006-2010. The data used in this study
were obtained from the website of the Indonesia Stock Exchange (IDX)
www.idx.co.id and ICMD (Indonesian Capital Market Directory)

3.3 Research variables, Operational Definitions and measurement
1. Independent variable
Independent variable is the variable that affects or cause of the
amendment or the emergence of an independent variable or bound (Sugiyono,
2007:33). Independent variables in this study are the quality of the audit, the
financial condition of the company, the previous year's audit opinion, the growth
of the company, company size, debt to equity ratio, and the audit client tenure
and the operational definition of a variable measurements are as follows

a. Audit Quality
Audit quality is measured based on the auditor's reputation. Auditor
reputation in this research is the firm auditing the financial statements which are
derived from the big four or not. GAP is the purpose with the big four, namely,
(1)affiliated with KPMG Siddharta & Widjaja, (2) Ernst and Young is affiliated
with Purwanto, Sarwoko & Sandjaja, (3) Satria bing Osman and associates
affiliated with Deolitte Touche Tohmatsu, and (4) Haryantono Sahari and
colleagues affiliated with audit Price water houseCoopers. Audit quality is
measured using a dummy variable, which is coded 1 if the firm is affiliated with
the big four accounting firm,given code 0 if the firm is not affiliated with the big
four accounting firm (Setyarno et al, 2006).

b. Financial condition of the companies
In this study the company's financial condition is peroxide by using
bankruptcy prediction models Zscore Altman. The formula used is :
Z = 0,717Z1 + 0,874Z2 +3,107Z3+0,420Z4+0,998Z5
Z1 = working capital / total asset
Z2 = retained eaarnings / total asset
Z3 = earnings before interest and taxes / total asset
Z4 = market capitalization / book value of debt
Z5 = sales/total asset
Z value is obtained by calculating the ratio of five based on data on the
balance sheet and profit / loss, multiplied by the coefficient of each ratio which
then summed the results. This calculation results in the form of ratio scale Zscore.

c. Companies Growth
The company's growth in this study is proxied by the ratio of sales
growth (Setyarno et al, 2006). Sales growth ratio is used to measure the ability of
firms in the current growth rate of sales compared to that in the previous year.
This data was obtained by calculating the ratio of sales growth based on profit /
loss of each auditee. The calculation results are presented with the sales growth
ratio scale.





d. Pevious audit opinion
Defined as audit opinion received by the auditee in the previous year,
measured by using the dummy variable, coded 1 if auditee received a going
concern audit opinion, whereas if auditee received non going-concern audit
opinion given code 0 (Ramadhany, 2004). This data was obtained from the
independent auditor's report on the year before the year of observation that is
2005-2009.


Sales Growth = Net Sales - Net sales 1-t
Net sales -t

e. Size of the Companies
Company size is a scale that can classify companies into big, medium, or
small companies. Company size in this study was measured by the logarithm of
total assets. The total assets chosen as a proxy for the size of the company, with
consideration , that the asset value is relatively more stable than the capitalized market
value and sales (Wuryatiningsih, 2002 in Sudarmaji and Sularto, 2007)
Size= Logaritma (Total aset)

f. Debt to equity Ratio
Debt to equity ratio shows the proportion of the use of debt to finance
corporate investment. Debt to equity ratio in this study was measured by
comparing total liabilities to total equity (Sartono, 2001: 121). This ratio measures
the extent to which the company's assets are spent with the obligations derived from
creditors and equity capital from shareholders




G. Auditor Client Tenure
Client Auditor Tenure is measured by counting the same year in which
the firm has conducted the engagement to the auditee.(Januarti ,2009).



Debt to equity ratio = Total laibilities
Total Equity


2. Independent Variable
Independent variable is the variable that is affected or which become
due because of the independent variable (Sugiyono, 2007: 33). The dependent
variable in this study is a going concern audit opinion. Going concern audit
opinion is modified audit opinion in which the auditor judges that there is an
inability or significant uncertainty over the viability of the company in running its
operations in the foreseeable future. Included in this is a going concern opinion,
qualified opinion, adverse opinion, and no opinion (Mutchler, 1986, Ramadhany,
2004: Rahayu, 2006).
Going concern audit opinion is measured using a dummy variable where 1
category for the auditee received a going concern audit opinion and 0 for auditee
category that receives non going-concern audit opinion. These data were obtained
by analyzing the independent auditors' report on the observation of the years 2006
to 2010.

3.4 Hypothesis Testing
Hypothesis testing is done by multivariant analysis using logistic
regression Logistic regression is a specialized form of regression analysis with the
dependent variable is the independent variable and the category is a combination of
metric and non-metric Ohlson (1980) used logistic regression to predict financially
distressed companies. Analysis of logistics is one of the best alternative
techniques to overcome the limitations of MDA. The analysis must be done
separately between each variable. Logistic regression was predicted by the
independent variable. This analysis technique does not require the normality test
and test again the classical assumptions on the independent variable (Ghozali,
2005). Gujarati (2003) states that ignore heteroscedasity logistic regression, the
dependent variable means that not require homoscedacity for each independent
variable. Logistic regression models were used to test the following hypothesis :


GCO = opini going concern (variable dummy, 1 for auditee with audit going
concern opinion (GCAO) and 0 for auditee with audit non going concern opinion
(NGCAO).
= konstanta
1 = regression coefficient
ADQ = auditor quality proxy dummy variable (1 for auditors who are members
of a large scale (big 4) and 0 for non-(non big 4)
Zsc = financial condition are proxied by using five Zscore Altman's
bankruptcy prediction model for manufacturing companies.

PRO = audit opinion received in the previous year (category 2 if the going
concern audit opinion (GCAO), 0 if not (NGCAO).

SLR = Ratio of sales growth auditee

Siz = Size of Company

DER = Debt to equity ratio
= Residual Erorr


GCO= +1 ADQ+ 2 ZSC+ 3 PRO+ 4 SLR + 5 SIZ+ 6 DER + 7 ACT

1. Assess the feasibility of Regression Model
Feasibility regression model was assessed using Hosmer and Lemeshow's
Goodness of fit Test. If the statistical value of Hosmer and Lemeshow Goodness
of fit is greater than 0.05 then the null hypothesis can not be rejected, and it means
that the model is able to predict the value of observations or the model can be said
to be acceptable because it fits with the observation data (Ghozali, 2005)
2. Assessing Model Fit
A reduction in the value of the - 2LL initial (initial-2LL function) with
the-2LL values in the next step shows that the hypothesized model fit to the data
(Ghozali, 2005). Log likelihood in logistic regression similar to definition "Sum
of Square Error" in the regression model, so the decrease in log likelihood
regression model showed the better.
3. Parameter estimation and interpretation
Parameter estimation is seen through the regression coefficients.
Regression coefficients of each of the tested variables indicates the relationship
between the variables. Hypothesis testing is done by comparing the probability
value (sig) with a significance level ().




Tabel 3.1
Hypothesis
Hipotesis Statements Expectation
H1 Audit quality negatively influences the possibility of
going concern audit opinion acceptance

1 Positive
H2 financial condition of the company negatively
influence the possibility of going concern audit
opinion acceptance

2 Negative
H3 Growth of companies has a negative effect on the
possibility of going concern audit opinion acceptance

3 Negative
H4 Audit opinion given in the previous year has positive
effect on the possibility of going concern audit
opinion acceptance
4 Positive
H5 Size of the company has negative effect on the
possibility of going concern audit opinion acceptance
5 Negative
H6 Debt to equity ratio possitively influence the
possibility of going-concern audit opinion acceptance

6 Positive
H7 Client Audit Tenure negatively influence the
possibility of going concern audit opinion acceptance

7 Negative


Chapter IV
Data analysis and discussion

A financial statement basically shows that the company will continue its
efforts in the future. Consideration of an entity's business continuity needs to be
done as a way to identify the condition of the company, identifying the condition
of the company seen from the performance appraisal firm, which is important to
be done by the parties concerned in the company's accounting information. In
determining the decision to invest in a company, it is important for investors to
know the financial condition of the company, especially regarding survival. Audit
opinion containing survival information (going concern) the company will be very
useful to investors, when an investor will invest in a company.
Related with the company's continuance and by using financial statements
that have been issued by companies especially manufacturing companies that have
been listed on the Indonesia Stock Exchange (BEI), so in this study will be
described on the effect of variables that include : audit quality , financial condition
of the company, companies growth , audit opinion previous year , company size ,
debt to equity ratio and audit client tenure into audit opinion on going concern
manufacturing companies in Indonesia Stock Exchange.
Based on sampling techniques that have been mentioned in the previous
section, using purposive sampling can be seen from all the manufacturing
company from 2006 to 2010 who had criteria. The details of the number of firms
sample used in this study are as follows:




Tabel 4.1
Rincian Hasil Seleksi Sampel Perusahaan


Kriteria Sampel Jumlah
1. Auditee listed on the Indonesia stock exchange

2. Companies that do not publish annual financial
statements and audited by an independent
auditor for the period 2006 2010

3. Companies that have negative profits for two
consecutive years
150

(15)

(112)
Total company has criteria 25



4.1 Measurement research variable

4.1.1 audit quality

Audit quality is the level of achievement and reputation of an auditor in
the presence of users. To determine where the auditor is included into the
prestigious group, used considering the auditor's market share in Indonesia, which
is dominated by the big 4 accounting firm (the big four) are: Haryanto Sahari and
Partners, Purwantono, Sarwoko and Sanjaya, Osman Bing Satrio and Partners and
Siddharta & Widjaja. For example Abadi Tbk PT Davomas 2006 audited by
Kanaka Puradireja, Robert Yogi, Suhartono, including the auditor's non-Big Four
and scored 0. Further calculations auditor reputation on the entire sample of firms
in this study can be found in appendix.

4.1.2 financial condition of the company
The financial condition of the company is measured by Altman
model are as follows:
Z = 0.717Z1 + 0.874Z2 + 3.107Z3 + 0.420Z4 + 0.998Z5
Z1 = working capital/total asset
Z2 = retained earnings/total asset
Z3 = earnings before interest and taxes/total asset
Z4 = market capitalization/book value of debt
Z5 = sales/total asset
For example PT Davomas Abadi Tbk in the year 2006 have value of
working capital/total asset in the amount of 0,3175, retained earnings/total asset
sebesar 0,1307, earnings before interest and taxes/total asset amounted 0,1033,
market capitalization/book value of debt sebesar 0,5635, and sales/total asset
amounted 0,6118 so it can be calculated the magnitude of Z-Score
Z = 0.717 x 0,3175 + 0.874 x 0,1307 + 3.107 x 0,1033 + 0.420 x
0,5635 + 0.998 x 0,6118
Z = 1,5102
The amount of Z-Score of 1.5102 means that the company's financial
condition Abadi Tbk PT Davomas 2006 in good condition because it has a Z
Score <1.81 which is in the category of potential bankruptcy. Further calculation
of the company's financial condition on the entire sample of firms in this study
can be found in appendix.
4.1.3 The company growth
Company growth can be calculated using sales growth, with the following
formula :
Net sales
t
Net sales
t-1
Net sales = X 100%
Net sales
t-1

For example Davomas Abadi Tbk PT, in 2007 had net sales of Rp.
2,800,084 million and the previous year's net sales amounted to Rp 1,656,584
million, so the magnitude of the company's growth can be calculated as follows:

2.800.084

- 1.656.584

Net sales = X 100%
1.656.584

= 69,03%
Value of the company's growth by 69.03% indicates that sales on
Davomas Abadi Tbk PT, in 2007 an increase of 69.3% from the previous year's
sales, resulting in sales growth with an increasing trend. Further calculations on
the company's growth throughout the sample firms in this study can be found in
appendix
4.1.4. Audit opinion previous year
auditor's opinion measured using dummy with a category , company that
gets going concern audit opinion in the previous years given dummy rated 1 and
the company is not get a going-concern audit opinion was given dummy 0. For
example Davomas Abadi Tbk PT in 2007, in 2006 this company does not get a
going-concern audit opinion that given a dummy value 0. Further calculations
going concern audit opinion on the entire sample of firms in this study can be
found in appendix.
Calculations for variables going concern audit opinion can be done the
same way, and the results of calculations going concern audit opinion can be
found in appendix.
4.1.5 Company Sizes
Firm size is measured by the logarithm of total assets. This is done to
simplify the measurement scale total assets whose value is very large compared to
other variables. For example, the PT Davomas Abadi Tbk, in 2006 had total assets
of Rp. 2,707,801 million, the size of the company can be calculated:

Size = log (2,707,801) = 6.43
So also for the calculation of the size of the other companies that can be
done in the same way and can be seen in the attachment.
4.1.6 Debt to equity ratio
DER is the ratio of debt to equity. For example Davomas Abadi Tbk PT in
2006 had a total debt of Rp. 1,731,849 million and equity of Rp. 975 951 million,
then the amount of DER is as follows:
1.731.849

DER =
975.951

= 1,77
DER of 1.77 indicates that the amount of debt the company is still much
higher than the capital itself, reaching 1.77 times. For the DER calculation periods
and other companies can be found in appendix.
4.1.7 Audit client tenure
Audit client tenure is measured by counting the same year in which the
firm has conducted the engagement to the auditee. For example Davomas Abadi
Tbk PT in 2006 and 2007 audited by Kanaka Puradireja, Robert Yogi, Suhartono,
so for two years, from 2006 obtained a score of 1, and in 2007 obtained a score of
1 to its total score is 2.
4.2 Descriptive Analysis
Descriptive analysis between companies that receive going-concern audit
opinion and a company that gets non going-concern audit opinion can be given in
the following table :
Tabel 4.2
Hasil Analisis Deskiptif
Opini Audit Going
Concern N Mean
Std.
Deviation
Financial condition Opini Audit Non Going
Concern
69 1.81574 3.463637
Opini Audit Going
Concern
56 2.07321 9.447440
Company Opini Audit Non Going
Concern
69 .14622 1.126731
Growth Opini Audit Going
Concern
56 .15439 .909371
Size Opini Audit Non Going
Concern
69 12.66326 1.512145
Opini Audit Going
Concern
56 13.49907 1.605742
DER Opini Audit Non Going
Concern
69 2.60510 6.100780
Opini Audit Going
Concern
56 1.62631 7.085402
Auditor Client Tenure Opini Audit Non Going
Concern
69 2.41 .551
Opini Audit Going
Concern
56 2.34 .514
Sumber : Hasil olah data, 2013.


Descriptive results in Table 4.2 shows that the company that getting going
concern audit opinion has better financial conditions (2.07321). Poor financial
condition of the company said if the value of the proxy Z - Score low (Z <1.81),
and vice versa when the value of the Z-Score of the company's financial condition
is healthy. So, if the average comparing among companies that received a going
concern audit opinion and that does not receive audit going concern has Z -
Score> 1.81, so that both companies have been going concern audit opinion and
audit firms that do not receive going concern are both healthy companies.

The results in Table 4.2 shows that the company received a going concern
audit and non-going concern, the majority experienced positive sales growth in
the amount of 14.622% for companies that receive non going concern and
15.439% for companies that receive audit.

The results on the size of the company towards that companies that
received a going concern audit opinion has a higher size (12.66) compared to
companies that do not get a going-concern audit opinion. The results on the Debt
Ratio shows that companies that do not get a going-concern opinion has a larger
debt ratio (2.605) from those of companies that received a going concern audit
opinion (1,626). And companies that do not get a going-concern opinion has a
longer tenure client auditors (2.41) from those of companies that received a going
concern audit opinion (1,34)






Tabel 4.3
Audit quality frequently
Opini Audit * Audit Crosstabulation
Kualitas Audit
Total
KAP Non
4 Four
KAP 4
Four
Opini
Audit
Going
Concern
Opini Audit
Non Going
Concern
Count 53 16 69
% of Total 42.4% 12.8% 55.2%
Opini Audit
Going Concern
Count 28 28 56
% of Total 22.4% 22.4% 44.8%
Total Count 81 44 125
% of Total 64.8% 35.2% 100.0%

Based on the results of the descriptive analysis shows that companies that
received a going concern audit and did not receive a going-concern audit the same
majority that is equal to 22.4% is a company which is not audited by the Auditor-
quality (non-Big Four) and a quality auditor (Big Four). Then the company
received a going concern audit is not audited by the majority of non big four
accounting firm that is equal to 42.4% and the company is audited by a qualified
auditor (Big Four) was by 12.8% .. This indicates that the firm has not been
affected in the delivery of going concern audit opinion.



Tabel 4.4
Opini Audit previous year frequent
Opini Audit * previous opini audit Crosstabulation
Opini Audit Going Concern * opini audit previous year Crosstabulation
Audit opinion previous year
Total
Opini Audit
Non Going
Concern
Opini Audit
Going
Concern
Opini Audit
Going
Concern
Opini Audit
Non Going
Concern
Count 54 15 69
% of Total 43.2% 12.0% 55.2%
Opini Audit
Going
Concern
Count 0 56 56
% of Total .0% 44.8% 44.8%
Total Count 54 71 125
% of Total 43.2% 56.8% 100.0%

Descriptive results of the previous year's audit opinion variable indicates
that companies that received non-concern opinion by 43.2% tendency that the
company previously received non-going concern opinion then in later years the
company will get the same opinion is non going concern. Other wise , the
company received a going concern opinion in the previous year will be tendencies
will get the same opinion in the year after the going concern. Based on Table 4.4
shows that the company received a going concern audit opinion on the previous
year, the current year is likely to receive the same opinion that in the previous
year, the current year is likely to receive the same opinion that the going concern
with a percentage of 44.8%.
4.3 Logistic Regression Analysis
To avoid significant errors in the use of linear regression using the Least
Square formula as a result of which the dependent variable is the nominal scale /
ordinal, then in this study used logistic regression the expected results obtained
regression equation is good or according to research data
4.3.1 Test of appropriate regression model
In logistic regression this value will be Hosmer Lemeshow's Goodness of
Fit Test. Value will be known on the suitability of the model was evaluated
between the models predicted the observed data, testing these models by using the
criteria of Goodness of Fit, the Chi-Square and probability. Models are
categorized as good or better must have a small chi-square value and
recommended acceptance level of significance was p 0.05 if that means the
actual input matrix with the predicted input matrices were not statistically
different. If the significance of the results obtained is equal to or less than 0.05,
then it means that there is a significant difference between the models with
observations values, then testing being done with simultaneous multivariate, and
multivariate testing separately by issuing one or more independent variables that
ultimately testing only conducted on the independent variables that have the
smallest significance level. Results Hosmer and Lemeshow Goodness-Off-Fit
Test with SPSS program can be shown in Table 4.5 below
Tabel 4.5
Nilai Hosmer Dan Lemeshow Goodness-Off-Fit Test

Hosmer and Lemeshow Test
Step Chi-square df Sig.
1 4.436 8 .816
source : result of data, 2013.

Based on Table 4.5 above shows that the significant value of Hosmer and
Lemeshow Goodness-Off-Fit Test was 0.816, which means that the obtained
results of significance greater than 0.05, then this means that the regression model
feasible for use in subsequent analyzes, because it is not there is a marked
difference between the predicted classification with the classification of the
observed.




4.3.2 Assessment Model Fit
This step is a test of the overall model (overall model fit). Testing is done
by comparing the values between -2 Log Likelihood (-2LL) at the start (Block
Number = 0) with a value of -2 Log Likelihood (-2LL) at the end (Block Number
= 1). A reduction in the value of the - 2LL early (initial - 2LL function) by value -
2LL in the next step (-2LL end) shows that the hypothesized model fit the data.
4.3.3 Coefficient of Determination
The test is performed to determine the contribution the effect of
independent variables on the dependent can be indicated by the value of R2 Kerke
Nagel. Results of testing this model are as follows:
Tabel 4.7
Nilai Nagel KerkeR
2
Model Summary
Step
-2 Log
likelihood
Cox & Snell
R Square
Nagelkerke R
Square
1 59.863
a
.592 .792
a. Estimation terminated at iteration number 20
because maximum iterations has been reached.
Final solution cannot be found.
Source : Result of data, 2013.



Based on Table 4.7 R2 values obtained by Nagel Kerke 0.792: this means
that the influence of seven variables consisting of audit quality, the company's
financial condition, the growth of the company, the previous year's audit opinion,
company size, debt to equity ratio and audit client tenure into acceptance of going
concern audit opinion on companies listed in Indonesia Stock Exchange amounted
to 79.2%. The remaining 20.8 percent is explained by other variables outside the
research model.

4.3.4 Parameter Estimation Results and Interpretation
The logistic regression analysis aimed to determine the effect of financial
ratios as independent variables namely: quality audit, financial condition, the
growth of the company, previous year's audit opinion, firm size, debt-to-equity
ratio and the audit client tenure into the dependent variable that is a going
concern audit opinion on companies listed in Indonesia Stock Exchange. Of
calculations performed using SPSS for windows, logistic regression coefficients
obtained results as follows:







Tabel 4.8
Hasil Regresi Logistik

Variabel B SE Wald Sig. Keterangan
Audit quality 1.711 .840 4.150 .042 Signifikan
Financial condition of the
company
.009 .057 .027 .869 Not Signifikan
Company growth -.009 .414 .000 .983 Not Signifikan
Audit opinion previous
year
22.798 5040.802 .000 .996 Not Signifikan
Company size .557 .283 3.865 .049 Signifikan
Debt to equity ratio -.005 .050 .012 .912 Not Signifikan
Audit client tenure -1.594 .661 5.818 .016 Signifikan
Constant -25.504 5040.803 .000 .996
Chi Square : 112,069
p-value : 0,000
Cox & Snell R Square : 0,592
Nagelkerke R Square : 0,792
source : result of data, 2013.
4.4 Test of hypothesis
Test this hypothesis aims to determine whether there is influence of
variable quality audit, the financial condition of the company, the company's
growth, the previous year's audit opinion, company size, debt to equity ratio and
audit client tenure into going concern audit opinion on companies listed on the
Stock Exchange Indonesia (BEI). Based on the results of the calculation are
shown in Table 4.8 above can be interpreted as follows:
For variable audit quality get regression coefficient of 1.711 and a
probability of 0.042 <0.05, its mean audit quality significantly affect the going
concern audit opinion. The results support the first hypothesis which states that
audit quality has positive influence on the possibility of going concern audit
opinion.
For the financial condition variable regression get coefficient of 0.009 and
a probability of 0.869> 0.05, meaning financial condition does not significantly
affect the going concern audit opinion. Results of this study do not support the
second hypothesis which states that the negative effect on the financial condition
of the possibility of going concern audit opinion.
For the company's growth variable regression get coefficient of -0.009 and
a probability of 0.983> 0.05, mean growth companies do not significantly affect
the going concern audit opinion. Results of this study do not support the third
hypothesis which states that the growth of the company negatively affect the
possibility of going concern audit opinion.
For the previous year's audit opinion variable regression get coefficient
obtained by 22.798 and probability of 0.996> 0.05, meaning the previous year's
audit opinion does not significantly affect the going concern audit opinion.
Results of this study do not support the fourth hypothesis which states that the
previous year's audit opinion on the possibility of receiving a positive influence
going concern audit opinion.
For firm size variable regression get coefficient of 0.557 and a probability
of 0.049 <0.05, mean firm size significantly affect the going concern audit
opinion. The results support the hypothesis that states that the five firm size
negatively affects the possibility of going concern audit opinion.

Debt to equity ratio variable regression get coefficient of -0.005 and a
probability of 0.912> 0.05, meaning the debt equity ratio does not significantly
affect the going concern audit opinion. Results of this study do not support the
sixth hypothesis which states that the debt equity ratio has a positive effect on the
possibility of going concern audit opinion.
For the client auditor tenure variable regression get coefficient of -1.594
and a probability of 0.016 <0.05, means the client auditor tenure significantly
affect the going concern audit opinion. The results support the hypothesis that the
seven states that auditor tenure client negatively affect the possibility of going
concern audit opinion.
4.5 Discussion
Based on the results of hypothesis testing with logistic regression models
showed that audit quality variables simultaneously, the financial condition of the
company, the company's growth, the previous year's audit opinion, company size,
debt to equity ratio, and the audit client tenure significantly influence the going-
concern audit opinion. However, if viewed only partial test audit quality variables,
company size, and audit client tenure that proved significant effect on the going
concern audit opinion, while the company's financial condition, the growth of the
company, the previous year's audit opinion, and debt to equity ratio is not
significant effect on the going-concern audit opinion.
4.5.1. The influence of the audit quality on acceptance of going concern audit
opinion
The study found that audit quality significantly influence the acceptance of
a going concern opinion, which is shown with sig (p-value) of 0.042 <0.05. These
results are well received the first research hypothesis. This result is consistent
with the opinion Junaidi and Hartono (2010) which states that the auditor is
responsible for providing high quality information useful for decision making.
These results imply that the use of the auditor has the different responsibility to
going concern audit opinion, so when the company has not and does not explain
the going concern in their audit opinion indicates that the auditor has less quality.
This impacts both the auditor and the image of the high investor confidence in the
company's audit. Thus the image of both GAP will be applied to both the qualified
and non-qualified. Public accounting firm, whether large or small, will always be
objective in giving opinions. If a company having doubts in the viability of their
business will then be given audit opinion going.
4.5.2 the influence of the audit quality on acceptance of going concern audit
opinion
The results found that the financial condition of the company as measured
by the bankruptcy prediction models Altman Z-Score does not significantly
influence the going-concern audit opinion. This is evidenced by the p-value of
0.869> 0.05. The results while rejecting the second hypothesis which says "the
financial condition of the company negatively affect the possibility of going
concern audit opinion". The results are not in accordance with the results of
Altman & McGouch, 1974) which states that a bankruptcy prediction model using
financial ratios are more accurate than the auditor's opinion in classifying the
company bankrupt and not bankrupt.
This is because for the auditor to provide an auditor's going concern
opinion, if a company said to be bankrupt or difficult to continue its survival. This
is in accordance with the opinion of Mc Keown et al (1991) which says that the
auditor is almost never give an audit opinion on the company's going concern is
not having financial difficulties. In measuring doubts about the viability of the
company, in terms of losses suffered by the company continuously. While the
Altman Z-Score measures are not only refer to the conditions of new income, but
also pay attention to five aspects of the working model, retained earnings,
earnings before taxes, equity and the book value of the company's sales. This is of
course only a few parameters are related directly to the doubts about the survival
of the company.
Used in the study is the Revised Model Altman (1993) called the Z93.
This model is a revision of a previous Altman capital that can be applied to
measure the company's financial condition is not only manufacturing, but also in
the non-manufacturing companies. The results Santoso and Wedari (2007) found
that the financial condition as measured by the Z93 does not significantly
influence the going-concern audit opinion.
4.5.3 influence of the companys growth on acceptance going-concern audit
opinion
Research results found that the company growth as measured by the ratio
of sales growth does not significantly influence the going-concern audit opinion.
This is proven by the p-value of 0.983> 0.05. The results while rejecting the third
hypothesis which said "the company growth has a positive effect to the probability
of audit opinion going concern acceptance ". The results are not in accordance
with the opinion of Altman (1986) which states that companies experiencing
growth, operational activities of the company shows running properly so that the
company can maintain its viability and economic position, while companies with
negative growth indicates a greater tendency towards bankruptcy. This condition
explains that the company's growth can not be used as the primary benchmark that
the company will get a good assessment audit opinion.
4.5.4 influence of the size of the company on going concern audit opinion
The results found that size of the company significantly influence the
acceptance of a going concern opinion, which is shown with sig (p-value) of
0.049 <0.05. These results are well received fifth research hypothesis. This result
is consistent with the opinion and Wedari Santoso (2007) who found evidence that
firm size significantly influence the acceptance of a going concern opinion. This
shows the huge size of the company will be less likely to receive going-concern
audit opinion. Thus the larger companies in the audit, the audit quality given KAP
also getting bigger. KAP means in carrying out auditing affect the size of the
company that may provide fee greater than the size of a smaller company.
4.5.5 The influence of the previous year's audit on acceptance going concern
audit opinion
The results found that the previous year's audit opinion does not
significantly influence the going-concern audit opinion. This is evidenced by the
p-value of 0.996> 0.05. The results at the same time reject the fourth hypothesis
which says "the previous year's audit opinion positive effect on the probability of
going concern audit opinion". The results are inconsistent with Ramadhany study
(2004) which states that the previous year's audit opinion significantly affect the
going concern audit opinion. Thus the previous year's audit opinion was not used
as a major factor of consideration in issuing an audit opinion on returning next
year.
4.5.6 The influence of the debt to equity ratio of the going concern audit opinion
The results found that the debt equity ratio as measured by the ratio of
liabilities and equity does not significantly influence the going-concern audit
opinion. This is evidenced by the p-value of 0.912> 0.05. The results at the same
time reject the hypothesis that a sixth said "debt equity ratio has a positive effect
on the possibility of going concern audit opinion". The results are inconsistent
with research Praptitorini and Januarti (2007) which states that the debt equity
ratio has a positive effect significantly affects the going concern audit opinion. It
is clear that the magnitude of the use of debt by the company do not affect the
auditor's assessment, the use of debt by the company is an important asset in the
company's activities, with a note that the company has the ability in the payment
of debt.
4.5.7 The influence of the audit client tenure of the going concern audit opinion.
The results found that the audit client tenure significantly influence the
acceptance of a going concern opinion, which is shown with sig (p-value) of
0.016 <0.05. These results are well received seven research hypotheses. This
study describes the results of that audit engagement with the same auditee and
significant negative effect on revenues going concern opinion. Long audit
engagement the auditor will make a loss of independence, so the chances for
survival would be difficult to give an opinion, or it will make the company better
understand the financial condition and would be easier to detect any problems
going concern.

Chapter V
Conclusion and Recommendation

5.1 Conclusion
Based analysis the influence of the variables on financial statements
include: audit quality , financial conditions, growth of the company, the previous
year's audit opinion, company size, debt to equity ratio and audit client tenure to
the acceptance of going concern audit opinion on manufacturing companies in
Indonesia Stock exchange can be concluded as follows:
1. Audit quality is positively and significantly influence to the going concern
audit opinion.
2. Financial condition of the company does not influence to the going concern
audit opinion.
3. The company's growth does not influence to the going concern audit opinion.
4. The previous year's audit opinion does not influence to the going concern audit
opinion.
5. Company size is positively and significantly influence to the going-concern
audit opinion.
6. Debt to equity ratio does not influence to the going concern audit opinion.
7. Audit client tenure is negatively and significantly influence to the going
concern audit opinion.

5.2 Research limitation
There are several limitations to this research , including:
1. At least that is only a sample of 25 companies, these conditions can affect
the results of the study, so that the results of this study can not be generalized to
the entire company in Indonesia Stock Exchange.

2. Measurement of a company's financial condition is merely the Altman
model calculations, where there are some other models that are used to measure
a company's financial condition. Eg The Zmijewski and The Springate Model.

5.3 Recommendation
The suggestions are proposed by the authors of the research that has been
done:
3. In determining investment, investors should consider audit quality,
company size, audit client tenure , as proven in this study those three variables
significantly influence to the going concern audit opinion on manufacturing
companies in Indonesia Stock Exchange.

4. The next study should be able to expand research on the same sample,
where the sample is limited to the company's manufacturing only. Further
research can be done by adding besides manufacturing company.