To what extent does financial performance influence audit opinion modification in the Republic of Serbia?
DOI:
https://doi.org/10.71159/bizinfo250028DKeywords:
profitability, liquidity, leverage, audit opinionAbstract
The aim of this research is to examine the impact of companies’ financial performance on the modification of audit opinion. The sample consists of manufacturing companies listed on the Belgrade Stock Exchange. Based on a sample of 71 companies (representing 84.52% of the entire population) over the period 2021–2023, we investigated whether profitability, liquidity, and leverage influence whether auditors issue an unqualified/ unmodified or a modified opinion. Our analysis is grounded in the financial and audit reports of these companies over a three-year period, encompassing a total of 213 observations. The data were analyzed using multiple logistic regression. The results indicate that companies with higher liquidity levels are more likely to receive an unmodified opinion. Conversely, companies with higher levels of leverage are more likely to receive a modified opinion. Profitability, as a financial performance indicator, did not exhibit a statistically significant effect on audit opinion in this model, suggesting it does not influence the auditor’s opinion.
Downloads
References
Abadi, K., Fauzia, Q., & Purba, D. M. (2019). The impact of liquidity ratio, leverage ratio, company size, and audit quality on going concern audit opinion. Jurnal Akuntansi Trisakti, 6(1), 69–82.
Baah, G. K., & Fogarty, T. J. (2018). What auditors think about audit quality: A new perspective on an old issue. Journal of Managerial Issues, 30(4), 483–504. https://doi.org/10.2139/ssrn.2822565
Diab, A. A., Abdelazim, S. I., Eissa, A. M., Abozaid, E. M., & Elshaabany, M. M. (2021). The impact of client size and financial performance on audit opinion: Evidence from a developing market. Academic Journal of Interdisciplinary Studies, 10(1), 228–240. https://doi.org/10.36941/ajis-2021-0020
Djordjevic, M., Novićević Čečević, B., & Mirčevski, M. (2024). Factors affecting financial reporting quality in agricultural companies in the Republic of Serbia. Economics of Agriculture, 71(3), 1033–1050. https://doi.org/10.59267/ekoPolj24031033D
Đorđević, M., & Spasić, D. (2022). Modified audit opinion and earnings management in state-owned companies: Evidence from Serbia. Facta Universitatis, Series: Economics and Organization, 19(4), 285–296. https://doi.org/10.22190/FUEO221019020D
Himam, M. F., & Masitoh, E. (2020). The effect of audit quality, liquidity, solvability, and profitability on audit going concern opinion. Jurnal Akuntansi, Audit dan Sistem Informasi Akuntansi, 4(1), 104–115.
International Auditing and Assurance Standards Board. (2009). ISA 315: Identifying and assessing the risks of material misstatement through understanding the entity and its environment. International Federation of Accountants. https://www.ifac.org
International Auditing and Assurance Standards Board. (2009). ISA 520: Analytical procedures. International Federation of Accountants. https://www.ifac.org
International Auditing and Assurance Standards Board. (2009). ISA 705: Modifications to the opinion in the independent auditor’s report. International Federation of Accountants. https://www.ifac.org
International Auditing and Assurance Standards Board. (2020). Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements (Vols. I–II). International Federation of Accountants.
Jovković, B. (2018). The analysis of auditor’s reports of insurance companies in the Republic of Serbia. Teme, 42(4), 1277–1294. https://doi.org/10.22190/TEME1804277J
Knechel, W. R., Krishnan, G., Pevzner, M., Shefchik, L. B., & Velury, U. (2013). Audit quality: Insights from the academic literature. Auditing: A Journal of Practice & Theory, 32(Supplement 1), 385–421. https://doi.org/10.2308/ajpt-50350
Mareque, M., Rivo-López, E., Villanueva-Villar, M., & Lago-Peñas, S. (2019). Audit opinions: Are they really different for family businesses? SAGE Open, 9(2), 1–12. https://doi.org/10.1177/2158244019856725
Mitrović, A., Knežević, S., Milašinović, M., & Miletović, N. (2024). Availability of financial statements of companies listed on the Belgrade Stock Exchange. BizInfo Blace, 15(1), 65–71. https://doi.org/10.5937/bizinfo2401065M
Moalla, H. (2017). Audit report qualification and audit report modification: Impact of profitability, loss, leverage, and liquidity in Tunisia. Journal of Accounting in Emerging Economies, 7(4), 468–485. https://doi.org/10.1108/JAEE-10-2016-0092
Moradi Ghale Rudkhani, T., & Jabbari, H. (2013). The effect of financial ratios on auditor opinion in the companies listed on TSE. European Online Journal of Natural and Social Sciences: Proceedings, 2(3s), 1363–1373.
Novićević Čečević, B., Antić, L., & Đorđević, M. (2024). Measuring companies’ business performance in the Republic of Serbia using composite indices. Facta Universitatis, Series: Economics and Organization, 21(3), 203–219. https://doi.org/10.22190/FUEO240606014N
Özcan, A. (2016). Determining factors affecting audit opinion: Evidence from Turkey. International Journal of Accounting and Financial Reporting, 6(2), 45–62. https://doi.org/10.5296/ijafr.v6i2.9775
Saleh, I., Afifa, M. A., & Hanian, F. (2020). Financial factors affecting earnings management and earnings quality: New evidence from an emerging market. ACRN Journal of Finance and Risk Perspectives, 9, 198–216. https://doi.org/10.35944/jofrp.2020.9.1.014
Stanišić, N., Petrović, Z., Vićentijević, K., & Mizdraković, V. (2014). Audit switching and qualified audit opinion: Evidence from Serbia. In Sinteza 2014 – International Scientific Conference on ICT and E-Business Related Research (pp. 552–558). https://doi.org/10.15308/sinteza-2014-552-558
Stevčevska Srbinoska, D. (2023). Audit modifications in emerging markets: The Macedonian Stock Exchange. https://www.researchgate.net/publication/368207771
Syahzuni, B. A., & Saputra. (2022). The role of profitability in moderating the influence of liquidity and leverage on audit opinion. International Journal of Current Science Research and Review, 5(4), 1255–1266. https://doi.org/10.47191/ijcsrr/V5-i4-48
Tsipouridou, M., & Spathis, C. (2014). Audit opinion and earnings management: Evidence from Greece. Accounting Forum, 38(1), 38–54. https://doi.org/10.1016/j.accfor.2013.09.002
Vučković Milutinović, S. (2019). Analysis of modifications to auditor’s opinion on financial statements of listed companies in Serbia. Economics of Enterprise, 67(3–4), 212–223. https://doi.org/10.5937/EKOPRE1904212V
Yaşar, A., Yakut, E., & Gutnu, M. M. (2015). Predicting qualified audit opinions using financial ratios: Evidence from the Istanbul Stock Exchange. International Journal of Business and Social Science, 6(8(1)), 57–63. https://ijbssnet.com/journals/Vol_6_No_8_1_August_2015/6.pdf
Yendrawati, R., & Mahendra, V. W. (2018). The influence of profitability, solvability, liquidity, company size, and size of public accountant firm on audit report lag. The International Journal of Social Sciences and Humanities Invention, 5(12), 5170–5178. https://doi.org/10.18535/ijsshi/v5i12.13
Zarei, H., Yazdifar, H., Dahmarde Ghaleno, M., & Azhmaneh, R. (2020). Predicting auditors’ opinions using financial ratios and non-financial metrics: Evidence from Iran. Journal of Accounting in Emerging Economies, 10(3), 425–446. https://doi.org/10.1108/JAEE-03-2018-0027
Zdolšek, D., Jagrič, T., & Odar, M. (2015). Identification of auditor’s report qualifications: An empirical analysis for Slovenia. Economic Research–Ekonomska Istraživanja, 28(1), 994–1005. https://doi.org/10.1080/1331677X.2015.1101960
Downloads
Published
Issue
Section
License
Copyright (c) 2025 BizInfo Blace
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
