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

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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Journal of Economics Finance and Accounting-Cover

Yayın Aralığı: Yılda 4 Sayı
Başlangıç: 2014
Yayıncı: PressAcademia

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