ANALYSIS OF COMPANY PERFORMANCE AND OPINIONS IN INDONESIAN FOOD AND BEVERAGES COMPANIES

Febby Namira Yosman Bustaman PT. Bahana Sekuritas Swiss German University, Tangerang, Indonesia

This paper analyzes relationship between company performance and audit opinion. We use some financial ratios as measurement of firm’s performance such as liquidity, efficiency, profitability, Abstract market measurement and flows. This study uses food and beverages companies listed in Bursa Efek Indonesia (BEI) for five consecutive years from 2009 until 2013 as our sample data. Panel data analyses are used to regress our empirical model. After controlling with size of company and macroeconomics variables namely inflation rate and movement of Indonesian currency exchange rate against US dollar, we find that firm’s liquidity, profitability, market ratios and company cash flow significantly affect the audit opinion. Large firm size does not influence the audit opinion significantly, meanwhile both macro economic variables inflation rate and exchange rate link negatively with audit opinion however do not significantly affect the opinion. Thin volume of transactions in foreign currency among these companies might lead to non-significant effect between audit opinion and exchange rate.

Company performance; liquidity; profitability; market measurement; cash flows performance; audit opinion.

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I. INTRODUCTION the client’s business. Kreutzfield and Wallace in Riyadi’s (2011) prove that 40% of misstatements were detected he competition among com- from analytical procedure. There are five panies these days is getting types of analytical procedures, which tougher. Various ways are used compare client’s financial ratio with the in order to increase company’s industry data, compare client data with Trevenue and survive in this tough com- similar prior period data, compare client petition. One of the ways that is usually data with client-determined expected taken by the company is checking their result, compare client data with auditor , which is performed determined expected result and compare by a third party or auditor. The current client data with expected result using and potential investors and creditors who nonfinancial data (Arens, Elder, & do not deal directly with the auditor need Beasley, 2012). an independent audited financial state- ment (Simunic & Wu, 2009). The purpose of an audit report is often to communicate the information about Financial statements contain the audited financial statements between information about the company’s auditor and financial users. In the audit performance (Yap, Yong, & Poon, 2010). report, an auditor could express their Using financial ratio cash flows ratio could opinion and describe the nature of the assess firm’s performance. Financial ratios audit. Based on the standard of PCAOB, if are ways of linking and investigating the the financial statement is not fairly stated, correlation between different parts of auditor may issue qualified opinion, financial information (Arens, Elder, & adverse opinion, or disclaimer opinion Beasley, 2012). Cash flows ratios are used ( Oversight to provide some important information Board). Financial statements users do not about company’s operation (Nahandi, read the whole audit’s report. Moreover, Sarokolaei, & Ghasemi, 2013). non-professional investors do not even The purpose of financial statements is to read the audit reports. External parties present a true and fair view of an entity’s such as investors and bankers only focus financial performance, financial position, on the result of audit opinion where there and cash flows that is useful to a is an unqualified opinion (Mock, Turner, wide range of users in making economic Gray, & Coram, 2009). decisions (Deloitte, 2009). Moreover, a The scandal of a big American company financial statement is also might used as like Enron might be one of the largest one of the management’s responsibility to corporate scandals in history. Enron might the owner. External parties also may need have manipulated their financial statement the company’s information for decision in order to attract the investors which making related to investment or merger. involved Arthur Andersen as their auditor. Before the auditors come up with their This scandal had possibly give an affect opinion, they should perform necessary to the big audit company. The auditors analytical procedure to get the opinion can carry out their responsibility against (Matarneh, 2011). Auditors perform the employer and the society by audit analytical procedures to assess the quality control which is considered as the client business risk and to understand priority in the audit institution (Rudkhani

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& Jabbari, 2013). Indonesia (Gapmmi) said that most of the investment made indicates that domestic Al Matarneh (2011) found that auditors demand is increasing and they also keep consider the activity ratio, profitability looking at opportunities to export its ratio, and long term paying ability ratio products. High investment growth will which could give effect to auditor’s come from domestic investment and opinion. Whereas short term paying is believed to increase by 30% in 2014 ability ratio and market (investment) ratio (Suara Pembaruan, 2013). Because of is not be considered by Jordanian auditor that, this industry was chosen as data to as ratios affect the auditor’s opinion. be analysed in this research. Nahandi, Sarokolaei, and Ghasemi (2013), indicates that all cash flow ratios This research will use 5 classifications which are cash flows to , cash of financial ratio and 2 cash flows flows to sale, cash flows to stockholders’ ratios in order to assess the company’s equity, operational earning to cash flows, performance, which are liquidity ratio, net to cash flows are considered in management ratio, debt management predicting auditor’s opinion except ratio ratio, profitability ratio, market ratio, ratio of cash flows to stockholders equity. These of cash flow to total assets, and ratio of authors view that cash flows can reduce the cash flow to sale by using a different study stakeholder’s decision-making problem population. So, the author propose topic and provide the important information about “Analysis of the Financial Ratio in about financial operation. Rudkhani and Relation to Audit Opinion in Food and Jabbari (2013) show that net earnings to Beverages Industry Listed in Bursa Efek gross earning ratio, return on asset, return Indonesia (BEI) for the Year 2009 to on equity, net earnings to sale ratio, gross 2013.” earnings to sale and investment return had significant impact to the audit opinion. II. LITERATURE REVIEW Current ratio, invoice turnover ratio and II.I. Auditing quick ratio did not give an impact to the audit opinion. Auditing is process of seeking the facts on There are still some speculations about the each generated report especially a financial effect of financial ratio on audit opinion report by gathering the sufficient evidence found in previous studies. Therefore, the (Loughran, CPA, 2010). Nowadays, primary purpose of this study is to analyze demand for auditing is increasing which whether there is a relationship between aims to allocate economic resources so financial ratio and audit opinion by using that the quality of audit and reliability in food and beverages company’s financial a financial statement is more important statement listed in Bursa Efek Indonesia. (Saif, Sarikhani, & Ebrahimi, 2012). For financial users such as investors, creditors, Currently, there are 16 food and beverages and owners, auditing could increase their companies listed in Bursa Efek Indonesia. reliability (Salehi, 2010). Investment in the food and beverage industry in 2014 is estimated at Rp.80 An audit of a financial statement is a billion until 84 billion, growing by 10- reasonable assurance engagement where 15% compared to this year’s target of Rp the auditor gives an opinion about 73 trillion. Sekretaris Jenderal Gabungan whether there is material misstatement Pengusaha Makanan dan Minuman and financial statement that has followed

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the accounting standards (CPA Australia, that experience, education, skills, and 2013). Certain companies needs an employee competence are the factors that independent auditor to perform the audit could influence on the quality of auditors of their financial statement because it and their opinion. becomes a foundation of trust in the world’s financial system (Pricewaterhouse II.II. Company’s Performance Coopers, 2013). Based on audited And Predicted Audit Opinion financial statements, financial user can make a financial decision (Kabajeh, Al It is generally known that financial Shanti, Dahmash, & Hardan, 2012). When statement could provide the information financial users wants to assess a company about firm’s performance, stability, and by using unaudited financial statement, future financial prospects (Yap, Yong, & they will asked for an auditor’s report. Poon, 2010). Financial ratio is a tool to Lack of an auditor’s report could decrease assess the company’s performance and the reliability of financial information position of an enterprise by understanding (Mock, Turner, Gray, & Coram, 2009). and interpreting the correlation between Therefore, an audited financial statement each element in the financial statements should be trustable, credible, and reliable. (Babalola & Abiola, 2013). Florenz C. Tugas (2012) also mentions that financial II.I.I Audit opinion ratio analysis is one of the tools of financial An audit report is the main product of an statement analysis. Cash flow ratio also audit by independent certified , might be used to for evaluating company’s which is a tool to communicate between performance. Nahandi, Sarokolaei, and auditor and financial user (Salehi, 2010). Ghasemi (2013) stated that cash flow The audit report that is issued by the ratio provides the important information auditor is important for many parties about financial operation and non-profit to make financial decision (Kabajeh, unit status whose analysis could increase Al Shanti, Dahmash, & Hardan, 2012). stakeholder’s decision-making problems. In an audit report, the audit opinion The auditor could perform audit test and will be stated in different paragraph further analysis by using (PriceWaterhouseCoopers, 2013). Audit that might be used to predict the possible opinion is the auditor’s responsibility to problems areas in the future. Unusual assess whether the financial statement change could be disclosed by comparing is fairly stated in accordance with ratios and prior research or industry data accounting standards and free from that can help an auditor to identify the material misstatement, whether due to possible misstatement that needs more fraud and error. attention during the audit (Arens, Elder, An audit opinion could be influenced & Beasley, 2012). by some factors. Some researchers There are 5 classifications of financial mentioned different factors that can affect ratio generally uses in the literature, they audit opinion. Haron et al (2009) said are liquidity ratio, asset management that there are 3 factors that could affect ratio, debt management ratio, profitability the auditor judgments, which are financial ratio, and market ratio. Liquidity ratio indicators, disclosure, and evidence. measures the ability of company to meet Based on Naslmosavi, Sofian, and the unexpected need for cash to pay debt Maisarah’s survey (2013) it was found

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(Weygandt, Kimmel, & Kieso, 2012). Allen (2011) stated that ratio Liquidity ratio could assess the health is to assess how the company use debt of company as well. When the financial to generated income. Financial leverage health of company is decreased, the usually uses debt ratio by measuring long- likelihood of qualified audit report will term debt to total long-term capital. If a be given by auditor is increased (Kirkos, company has very low debt ratio, it means Spathis, Nanopoulos, & Manolopoulos, that a company does not use leverage for 2009). In the other words, the company owner’s benefit, whereas if the debt ratio that has low liquidity ratio may have a is too high, it means that company uses greater possibility to receive a qualified available leverage at maximum level audit report. There are 3 important ratios so a company could not have additional in liquidity ratio, which are current ratio, debt (Arens, Elder, & Beasley, 2012). quick ratio, and cash ratio. Matarneh’s (2011), Rudkhani and Jabbari, (2013) find that debt management ratio Asset management ratio or efficiency ratio has the maximum effect to predict audit is used to measure how efficiently the opinion. company uses their existing asset to run the business (Brealey, Myers, & Allen, 2011). The next measurement is profitability ratio This ratio may used to define the strengths reflects. Ross, Jordan, and Westerfield of a company compared with their rivals. (2008), mentioned that profitability ratio There are two important efficiency ratios, is used to measure whether the company which are invoice turnover ratio and total uses their asset efficiently and how assets turnover. Invoice turnover ratio is manage its operation to generate their also called accounts receivables turnover. income and profit. This study uses return This ratio is useful for the auditor to on equity (ROE) and earning before tax evaluate the reasonableness of that and interest to total or operating have not been paid (Arens, Elder, & profit margin. Profitability ratio is one Beasley, 2012). If customers pay the bills of the ratios that has significant effect to quickly and on time, the company may predict auditor opinion (Al Matarneh, have only a less unpaid number of bills and 2011). Rudkhani and Jabbari (2012) also the receivable turnover will be high. High stated that profitability ratio significantly receivables turnover also indicates that affect auditor opinion. the company has good credit policy which Market ratios such as price to earnings means that company choose a trustworthy ratio, dividend to ratio, customer who are willing to pay the bills stock payment earnings ratio, and earnings on time (Brealey, Myers, & Allen, 2011). ratio commonly uses to measure current Another efficiency ratio is asset turn price of stock in the market towards the over ratio, which indicates how efficient ability of company to generate the income the company uses the available assets in or assets. Rudkhani and Jabbari’s (2012) generating sales revenue (Brealey, Myers, shows that market ratio have significant & Allen, 2011). However, Rudkhani & effect in predicting the type of audit Jabbari (2013) did not find significant opinion. However, Matarneh (2011) find relationship between this ratio andthe Jordanian auditors in predicting audit type of audit opinion. opinion do not consider that market ratio. Debt management ratio is also known Many analysts believe that payout ratio as leverage ratio. Brealey, Myers, and could assess the shareholders equity of the

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company. Parsian and Koloukhi (2014) have higher risk of misstatement which is mentioned that when dividend payout could influence to the audit opinion. ratio of a firm is decreasing, a firm would get accumulated profit and also have II.4. Macroeconomics investment opportunities to develop their business in the future. They also said that Macroeconomics explains about the has an important behaviour of large economic agents, role in the determining value of company’s which is focus on the behaviour of equity. Dividend to earnings per share consumers, firms, and government. It also ratio has significant effect in predicting explains the whole of economy activity in type of audit opinion (Rudkhani & a country and effect of monetary and fiscal Jabbari, 2013). These authors also prove policy (Williamson, 2014). According that earnings per share ratio significantly to statement of auditing standard no. effect audit opinion. 55, when the auditor performs the audit, they have to understand the entity and Operating cash flows also important its environment by looking at industry in assessing Company’s performance factors, regulatory factors, and external (Jooste, 2006). Cash flow ratio may factors in order to identify and assess useful in evaluating performance, which risk of material misstatement. The can be discussed in terms of sufficiency external factors that might be considered and efficiency. Efficiency indicates the by auditors are inflation and currency fitness of obtained cash flows compared revaluation. with another business units or previous years, whereas sufficiency indicates the Currency exchange rate is the price of ability of company in order to fulfil the nation’s currency valued with another operational needs (Nahandi, Sarokolaei, country’s currency. The fluctuated & Ghasemi, 2013). There are 2 cash flow exchange rate might have an affect ratio used in this study, which are ratio of on how economic transaction that use cash flows to total assets and ratio of cash foreign currency poured into the financial flow to sale. Sarokolaei, and Ghasemi statements. It is very important to avoid (2013) stated that cash flow to sale ratio financial statement are not materially one of ratio that can be used in predicting misstated or in other words, the financial auditor opinion. statements still describe the actual economic reality (Sinaga, 2010). II.III. Company Size And Audit Opinion Badan Pusat Statistik defines inflation as an indicator to see the economic Companies with positive growth might stability of a region or area that shows give a sign that the size of the company is the development of prices of goods and growing and reduce the tendency towards services in general are calculated from the bankruptcy. But, the size and complexity consumer price index. Thus the inflation of company, might influence in achieving rate greatly affects the purchasing power its control objectives. The company’s size of fixed-income communities, and on the and its complexity also could affect the other hand also influences the production risk of the misstatement (Public Company of goods. Shortly, inflation could be Accounting Oversight Board, 2007). In defines as decline the purchasing power the other words, the size of company might of in general as a result of the

6 ANALYSIS OF COMPANY PERFORMANCE AND AUDIT...... Namira, And Bustaman increase in the level of prices of goods and LR = Liquidity ratios, consists of current services. ratio measure by current asset over current liability, quick ratio is measured by liquid asset over current liability, and cash III. METHODOLOHY ratio is the ratio of cash plus marketable securities over current liability III.I. Data AM = Asset management ratio, consists The data uses in this research are financial of invoice turnover (net sales/ account report of food and beverages industry receivable) and asset turnover (net sales listed in Bursa Efek Indonesia (BEI) 2009 over total assets) to 2013. There are 16 food and beverages DM = Debt management ratio only consist companies that meet our criteria. The of debt ratio (total debt over total equity) financial statement is gathered from the Indonesia Stock Exchange’s website PR = Profitability ratio are measured by (www.idx.co.id) and Bloomberg which (ROE = over is used to measure the company’s total equity) and operating profit margin performance and company size. For (OPM = operating income over total macroeconomics variable, data are taken revenue) from Central Bank’s website and BPS- MR = Market ratio consists of price to Indonesia statistics’ website. earnings ratio (PER = Market Value 3.2 Empirical Model per Share / Annual Earning per Share), dividend to earning per share ratio (PAYT The following regression model of panel = Dividend / Earnings per share), and data is used to measure the effect of earning per share ratio (EPS = Net Income company’s performance towards audit – Preferred Dividends / Weighted-average opinion: common stock outstanding) CF = Cash flows are represented by operational cash flow over sales (CFTS) and operational cash flows over total asset (CFTA) CS = Company’s size is represented by total firm asset CER = Current exchange rate

The equation above identifies explanatory IR = Inflation rate variables that used in this study to estimate ERR = Error those variables towards audit opinion that in the regression audit opinion as Dependent variable of this study is type dependent variable, financial ratio as of audit opinion, which is divided into independent variable, company’s size 2 variables (unqualified opinion and and macroeconomics variables as control qualified opinion). The first variable is variables. unqualified opinion and second aspect is qualified opinion, including the other Y = Audit opinion opinions (adverse opinion and disclaimer

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opinion). value of debt ratio is 1.06 which indicates that the companies’ funds its operation There are 2 control variables in this with an even mix of debt and equity. study, which are company size and macroeconomics. Macroeconomics The mean of return on equity is 24.77% consists of current exchange rate and that is considered as strong. The average inflation. As already mentioned that operating profit margin is 13.16% company’s size is classified into 3 groups; which is considered as vulnerable. It is big, medium, and small company that is indicates that this industry might have a measured based on the company’s asset. lower price production or high or inefficient in the production. Price IV. RESULTS AND DIS- earnings ratio (PER) has an average CUSSION of 19.91 within the range of -166.67 IV.1. Descriptive Statistic until 501.462. It can be said that Price Earnings Ratio in food and beverage industry is high. The high of price to Table 1 shows the descriptive statistics of earning indicates that the market price all variables in equation. The table consist in this industry is expensive because of Mean, Median, Maximum, Minimum, company sell for 20 times of earnings. Standard Deviation of variables.

Table 1 Descriptive Statistics of 10 Food and Beverages Earning per Share (EPS) is a comparison Companies of net profit after tax in the financial year and the number of shares issued. The mean for the variable of Earing per Share Ratio is Rp.1050.71 with the highest value is Rp.14.485 and the lowest value is Rp.-12.00. It can be said that earning per share in food and beverage industry is high, which means that most of companies in this industry successful in increasing the prosperity of shareholder and makes them happy because the greater profits is provided Source : Eviews to shareholders. As seen in the table, turnover of account The average of payout ratio is 0.90 receivable in food and beverages industry within the range value from 0.00 to have an average of 9.41 with the highest 9.05, means that most of companies in value of 39.77 and the lowest value of this industry not pay dividends, and the -0.79. AR Turnover could indicate that company that pay dividend are paid 90% the company have a strict credit policy from their profit. The cash flow to sales (Gorczynska, 2011). Assets turnover ratio ratio is range from -1.35 to 1.80 and the shows the total assets turnover measured average value is 0.10. It indicates that by the volume of sales. The range value of companies in this industry have good assets turnover is from 2.63 to -0.04 and cash flow to sale ratio. Meanwhile mean the mean is 1.23, Debt to of the cash flow to total asset variable describe extent to which the owner’s is 0.03. capital to cover the debts. The average

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IV.II. Analysis rate is low, it generates benefits for company. Consequently, It reduces the This study uses panel data regression likelihood of bankruptcy and increase the which have 3 methods in panel data; possibility to get good audit opinion. This Pooled Least Square, Fixed Effect Model, result is consistent with finding obtained and Random Effect Model. Table 5 by Riyadi (2012) that debt to total equity shows the result of regression panel data has positive and no significant effect using 3 methods. Using the chow test with audit opinion, but in opposite with and Hausmann test, model that is more Rudkhani and Jabbari, (2013) who find appropriate for our data is Random effect. debt to equity has negatively significant effect with audit opinion. Table 2 Regression Panel Data Estimation Results ROE influences audit opinion positively. This ratio is useful to know how much the shareholders return from the money they invested (Kabajeh, AL Nu’aimat, & Dahmash, 2012). Higher profit expects to reduce bankruptcy and increase the likelihood to receive good opinion. This result is consistent with previous study, where return on equity has positively significant effect with audit opinion, which means the higher return on equity of a company, the better opinion they will obtain (Maraputra, 2012).

Account receivable turnover ratio has Operating Profit Margin has positively positively and significant affect with audit significant effect with audit opinion. It opinion. This ratio is useful to assess means that the higher operating profit the effectiveness in extending credit margin, the more possibility results in and collect it back in a timely manner. better audit opinion. This ratio usually This result indicates that if company has uses to see how efficient the company is, higher receivable turnover, it will reduce because this ratio could show the level of the likelihood of bankruptcy and increase expense of a company (Kantrovich, 2011). the possibility to get good audit opinion. When a company has good operating profit The findings are different with previous margin ratio, it means the company’s has research that stated that has negative low expense and high operating income. effect and no significant effect with audit Thus, it would reduce the possibility of opinion (Rudkhani & Jabbari, 2013). bankruptcy and increase the likelihood to get good audit opinion. Debt to Total Equity has positive and no significant effect with audit opinion. Price to earnings ratio has negative and Debt to Equity ratio is useful to show no significant effect with audit opinion. what proportion of stockholder’s equity This result can be interpreted that high and debt used in order to financing the or low price to earnings ratio does not company’s assets. High debt to equity have significant effect with audit opinion. means that most of company’s capital Earnings per share ratio have negative comes from debt. As long as the interest and significant effect with audit opinion.

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EPS is useful to measure how much the and does not have significant effect with shareholders will get from each share audit opinion. Thin transactions in foreign (Weygandt, Kimmel, & Kieso, 2012). currency among these companies might The result of this study is consistent with lead to non significant effect between finding obtained by Rudkhani and Jabbari, audit opinion and exchange rate. (2013). Payout Ratio has negative and has significant affect with audit opinion. V. CONCLUSIONS Our finding this study is consistent with the previous one, which mentioned that This study analyse financial ratio in payout ratio has negatively significant relation to audit opinion in food and effect with audit opinion (Rudkhani & beverages industry listed in Bursa Efek Jabbari, 2013). Indonesia (BEI) for the year 2009 to 2013. Cash flow to sale (CFTS) ratio has The sample of this study is 10 companies negatively significant effect with audit listed in Bursa Efek Indonesia and uses opinion. The more cash generated from panel data analysis. the sales indicates the improvement of the Asset management ratio is consists of management decisions regarding variable account receivable turnover and assets cost that relates to the operational of the turnover. Account receivable turnover company (Amuzu, 2010). In the other has positively significant effect with audit words, this ratio describe how well the opinion. The result of this study is different management performance in order to with previous research that stated that this generate cash from net operations. This ratio has negative effect and no significant result is different with Nahandi et al effect with audit opinion. Whereas the (2013) who report that cash flow to sales result of assets turnover is negative and has positively significant effect with audit no significant effect with audit opinion, opinion so it’s the consistent with Rudkhani and Total asset is a control variable in this Jabbari (2013) but different from Riyadi study, this variable associate negatively (2012), where assets turnover has positive with audit opinion however is not significantly affect audit opinion. significant. Inflation has negative and Debt management ratio is represented by no significant effect with audit opinion. debt ratio, has positive and no significant High inflation might encourage people effect with audit opinion. This result is to manipulate their financial statement or consistent with Riyadi (2012), but different window dressing to attract the investors. with previous research that is debt to total Therefore, it would increase the likelihood equity has negatively significant effect to get bad opinion from auditor. with audit opinion (Rudkhani & Jabbari, The fluctuations of exchange rate might 2013). influence the economic transaction, Profitability ratio consists of return on especially for company that used foreign equity and operating profit margin. Return currency that is poured into financial on equity has positive and significant statement. For this kind of company, they effect with audit opinion. This result should ensure that their financial statement is different with Rudkhani and Jabbari describes the actual economic condition (2013) who note negative and significant and free from the material misstatement effect with audit opinion. Operating profit (Sinaga, 2010). Exchange rate has negative margin has positive and significant affect

10 ANALYSIS OF COMPANY PERFORMANCE AND AUDIT...... Namira, And Bustaman to audit opinion, which different with the Babalola, Y., & Abiola, F. (2013). previous finding obtained by Rudkhani Financial Ratio Analysis of Firms : A tool and Jabbari, (2013). for Decision Making , 1. Market ratio is represented by price to Brealey, R. A., Myers, S. C., & Allen, F. earnings ratio, earnings per share, and (2011). Principles of Corporate Finance payout ratio. Price to earnings ratio (Tenth Edition ed.). Mc-Graw Hill. (PER) has negative and not significantly CPA Australia. (2013, February). A Guide affect audit opinion. It is contrast with the to Understanding Auditing and Assurance. previous study that mentioned the Price to Earnings has significant effect with audit Deloitte. (2009). IAS 1 - Presentation of opinion. Earning per share has negative Financial Statement. and significant effect with audit opinion. The result of this study consistent with Gorczynska, M. (2011, September). finding of Rudkhani and Jabbari, (2013). Account Receivable Turnover Ratio. The For payout ratio, the result is negatively Purpose of Analysis in Terms of Credit significant affect audit opinion, which is Policy Management. consistent with previous research. Haron, H., Hartadi, B., Ansari, M., & Cash flows ratio has significant effect Ismail, I. (2009). Factors Influencing with audit opinion. Cash flow ratio is Aduitor Going Concern Opinion. vol. 14. consist of cash flows to assets and cash Jooste, L. (2006). Cash flow ratios flows to sale. Cash flow to sale ratio has as yardstick for evaluating financial negative significantly affect audit opinion. performance in African business. The result of this study different with previous research (Nahandi et al 2013), Kabajeh, D. M., AL Nu’aimat, D. A., & which mentioned that cash flow to sale Dahmash, D. N. (2012). The Relationship have significant effect with audit opinion. between the ROA, ROE and ROI Whereas cash flow to total asset has Ratios woth Jordanian Insurance Pblic positively and does not significant affect Companies Market Share Prices. 2, 115- audit opinion. 120. Kabajeh, D. M., Al Shanti, D. M., Dahmash, D. N., & Hardan, D. S. (2012). REFERENCES Informational Content of Auditor’s Report and its Impact on Making Decision From Lenders and Management’s View in the Al Matarneh, G. F. (2011). Effect of Jordanian Industrial Public Firms. 2. using Financial Ratios on the Auditor’s Opinion : Evidence from Jordan. Kantrovich, A. (2011). Financial Ratios: Operating Profit Margin. Amuzu, M. S. (2010, March). Cash Flow Kirkos, E., Spathis, C., Nanopoulos, A., Ratio as Measure of Performance of Listed & Manolopoulos, Y. (n.d.). Predicting Companies in Emerging Economies: The Qualiffied Auditor’s Opinion : A Data Ghana Example. Mining Approach. Arens, A. A., Elder, R. J., & Beasley, M. S. Loughran, CPA, M. (2010). Auditing for (2012). Auditing and Assurance Services Dummies. WIley Publishing, Inc. (Fourteenth Edition ed.). Pearson.

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