IDENTIFICATION OF KEY PERFORMANCE INDICATORS OF AUDITOR’S REPORTS: EVIDENCE FROM BORSA ISTANBUL (BIST)

Year 2017, , 256 - 261, 30.09.2017

Burcu Adiloglu , Bengu Vuran

https://doi.org/10.17261/Pressacademia.2017.693

Abstract

Purpose-  This paper investigates the key performance indicator
variables that predict auditors' decisions to issue unqualified or modified (a qualified opinion,  adverse opinion, and a disclaimer of opinion) audit reports for nonfinancial companies listed
in Borsa Istanbul for the year 2016.

Methodology-
Logistic Regression Model is developed to determine
the key performance indicators of the qualification of the auditors’ reports and
the predictive accuracy of the estimated model is
evaluated.

Findings- Results of
the analysis show that the qualification of an audit report is mainly associated with return on
asset, return on equity, times interest earned ratio and whether the audit firm
is classified as BIG 4 or not. The estimated model distinguishes between unqualified and other opinions
for nonfinancial companies with a 92.4 % classification accuracy.

Conclusion- Although the overall accuracy of the
logistic regression model is very high, regarding the population characteristics there is an increased risk
that the study results might be biased. The fact that the study is done for a
single period and the number of companies (240 out of 263) which have
unqualified audit opinions is very high might lead the results to be biased. This result also leads to a conclusion that other
issues rather than the deterioration in financial ratios might induce the
companies to have an audit report other than unqualified.

Keywords

Audit report, key performance indicators, Borsa Istanbul (BIST), Turkey, logistic regression

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