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CORPORATE GOVERNANCE AND AUDIT DECISION MAKING
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Yulius Kurnia Susanto 
, Arya Pradipta
Abstract
The purpose of this study is to investigate the factors that affect qualified opinion. This study use earnings management, audit quality, audit tenure, firm size, leverage, liquidity, inventories, and losses to predict qualified opinion. The qualified opinion was measured using dummy variables, value 0 for unqualified opinion, 1 other unqualified opinion (Blandón & Bosch, 2013). If the auditor provides an unqualified opinion then the audit opinion is clear. Conversely, if the auditor provides qualified opinion such as going concern, litigation, asset realizing then the audit opinion is unclear (Dopuch et al., 1987). The study uses purposive sampling from financial statement of manufacturing company in Indonesia Stock Exchange for period 2011-2015. This study uses binary logistic regression to test the hypothesis. The result of the research showed that earnings management, audit quality, and tenure can increase the probability of the unqualified opinion. Firm size and losses can increase the probability of the qualified opinion. Meanwhile, leverage, liquidity, and inventories didn’t have statistically significant to predict qualified opinion. Companies that make earnings management, auditors rarely provide a qualified opinion. This is due to the behavior of auditors who are less independent in auditing the financial statements. It is proven that the auditor is likely to give an unqualified opinion to a company that has long been a client. British Telcom conducts Accounting Fraud by making an unfair increase in corporate earnings. For 33 years British Telcom obtained an unqualified opinion from the Public Accounting Firm Price Waterhouse Coopers (PWC). This suggests that the higher the earnings management, audit quality and tenure the higher the likelihood of obtaining an unqualified opinion.
Keywords: Qualified Opinion, Earnings Management, Audit Quality, Audit Tenure, Firm Size, Leverage, Liquidity, Inventories, Losses
Received: 30.07.2017
Accepted: 27.10.2017
How to cite this paper: Susanto, Y. K., & Pradipta, A. (2017). Corporate governance and audit decision making. Corporate Ownership & Control, 15(1-2), 381-386. https://doi.org/10.22495/cocv15i1c2p7
