Why Going Concern Opinions Matter
A going concern audit opinion is one of the most important signals auditors can provide. It indicates that substantial uncertainty exists about a company's ability to continue operating in the foreseeable future. Such opinions influence investor confidence, lending decisions, corporate governance, and market transparency.
The issue has become increasingly significant in Indonesia following the delisting of several companies from the Indonesia Stock Exchange due to financial and operational difficulties. These events highlight the importance of early identification of business sustainability risks before companies reach insolvency or bankruptcy.
According to the researchers, going concern opinions reduce information asymmetry between company management and stakeholders by providing an independent assessment of business continuity. This makes audit reports valuable not only for shareholders but also for creditors, regulators, and policymakers responsible for maintaining healthy capital markets.
How the Research Was Conducted
The researchers analyzed publicly available financial statements and independent auditor reports from companies listed on the Indonesia Stock Exchange during the 2021–2024 observation period.
Instead of focusing on a single industry, the study examined companies from multiple business sectors to obtain a broader picture of the determinants of going concern opinions across Indonesia's capital market.
The research employed:
- A quantitative research design.
- Secondary data from audited annual financial reports.
- Purposive sampling of companies meeting the study criteria.
- Logistic regression analysis to evaluate the relationship between four explanatory variables and the issuance of going concern opinions.
The four variables examined were:
- Audit quality
- Debt ratio
- Company size
- Financial distress
This approach allowed the researchers to estimate which corporate characteristics most strongly influence auditors' professional judgments regarding business continuity.
Key Findings
The analysis produced several important conclusions.
Audit quality significantly increases the likelihood of a going concern opinion.
Companies audited by highly reputable auditors were more likely to receive a going concern opinion when material business continuity risks existed. The authors suggest that experienced auditors are more independent and more willing to communicate financial uncertainty to investors.
High debt ratios substantially increase audit concern.
Companies relying heavily on debt financing were considerably more likely to receive a going concern opinion. High leverage signals greater financial pressure and raises concerns about a firm's ability to meet future obligations.
Financial distress is a strong predictor of business continuity risk.
Companies experiencing financial distress were significantly more likely to receive going concern opinions. Indicators of financial weakness provide auditors with evidence that future operations may be at risk.
Company size alone does not determine audit outcomes.
Although larger companies generally possess greater resources, the study found that company size did not significantly influence auditors' decisions once financial conditions were considered.
The researchers also found that all four variables collectively explain approximately 52.2 percent of the variation in going concern opinions, indicating that financial condition and audit characteristics account for a substantial portion of auditors' judgments.
Implications for Investors and Businesses
The findings have practical implications across multiple sectors.
For investors, the study reinforces the importance of carefully reading audit opinions rather than focusing solely on profitability or company size. A going concern opinion may provide an early indication of future financial difficulties.
For corporate management, maintaining healthy financial ratios and reducing financial distress can lower the likelihood of receiving a going concern opinion. Improving financial performance and strengthening corporate governance remain essential strategies for maintaining investor confidence.
For auditors, the research supports maintaining professional skepticism and high audit quality when evaluating business continuity. Independent assessments remain critical for protecting financial statement users from unexpected corporate failures.
For regulators and policymakers, the findings demonstrate the value of transparent auditing standards in strengthening confidence in Indonesia's capital market and improving corporate accountability.
Academic Perspective
Nyimas Alya Tiara Putri and Khairudin of Bandar Lampung University conclude that the study supports signaling theory, demonstrating that audit opinions function as credible signals that help reduce information asymmetry between companies and external stakeholders. Their findings indicate that audit quality, debt levels, and financial distress provide meaningful information for assessing a company's ability to sustain its operations, while company size alone is not a decisive indicator of business continuity.
Why This Research Matters
Business failures rarely occur without warning. Financial indicators, audit assessments, and independent oversight often provide early signals before companies experience severe operational problems.
This study contributes updated evidence from Indonesian listed companies and confirms that auditors primarily evaluate financial risk rather than organizational scale when determining whether a company faces significant uncertainty about its future operations.
As Indonesia's capital market continues to grow and attract domestic and international investors, reliable audit opinions remain an essential mechanism for promoting transparency, reducing investment risk, and supporting informed economic decision-making.
The research also strengthens understanding of how signaling theory operates in real financial markets, demonstrating that credible audit reports continue to play a central role in protecting stakeholders and improving corporate governance.
Author Profile
Nyimas Alya Tiara Putri, S.Ak. (Candidate) is a researcher from the Faculty of Economics and Business, Bandar Lampung University, specializing in auditing, financial accounting, and corporate governance.
Khairudin, a lecturer and researcher at Bandar Lampung University, specializes in auditing, financial reporting, accounting quality, corporate governance, and financial statement analysis.
Source
Article Title: Going Concern Opinion: A Signaling Theory Perspective
Journal: International Journal of Economics, Business Management and Accounting (IJEBMA)
Volume: 8, Issue 2
Year: 2026
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