The Effect of Financial Ratios on the Receipt of a Going Concern Audit Opinion in Telecommunications Companies Listed on the Indonesia Stock Exchange

Oct 13, 2025 by wbrum.org 90 views

The Effect of Financial Ratios on the Receipt of a Going Concern Audit Opinion in Telecommunications Companies Listed on the Indonesia Stock Exchange

Introduction

The Indonesia Stock Exchange (IDX) is one of the largest stock exchanges in Southeast Asia, with a wide range of companies listed, including telecommunications companies. These companies play a crucial role in the country's economy, providing essential services such as mobile phone networks, internet, and television broadcasting. However, the telecommunications industry is highly competitive, and companies must constantly adapt to changing market conditions to remain profitable. One of the key challenges faced by telecommunications companies is the receipt of a Going Concern audit opinion, which can have significant implications for their financial stability and business continuity.

Background

A Going Concern audit opinion is an opinion expressed by an auditor that a company is likely to continue its operations for the foreseeable future. This opinion is based on the auditor's assessment of the company's financial position, liquidity, and ability to generate sustainable profits. The receipt of a Going Concern audit opinion is a critical factor in determining a company's creditworthiness and ability to access capital markets. In the context of telecommunications companies listed on the IDX, the receipt of a Going Concern audit opinion can have a significant impact on their ability to raise funds, attract investors, and maintain their market value.

Research Objectives

This study aims to reveal the effect of financial ratios on the acceptance of the Going Concern audit opinion in telecommunications companies listed on the IDX. Specifically, the study seeks to:

Examine the relationship between financial ratios and the receipt of a Going Concern audit opinion in telecommunications companies.
Identify the key financial ratios that influence the acceptance of a Going Concern audit opinion.
Provide insights into the implications of the study's findings for telecommunications companies, auditors, and investors.

Methodology

This study employed a quantitative approach, using a sample of six telecommunications companies listed on the IDX. The companies were selected through a purposive sampling method, based on their market capitalization, revenue, and profitability. The study used a range of financial ratios, including Return on Assets (ROA), Current Ratio (Cr), and Debt to Equity Ratio (DER), to examine their relationship with the receipt of a Going Concern audit opinion.

Results

The results of the study showed that the financial ratio proxied by ROA had a significant negative influence on the acceptance of the Going Concern audit opinion. This means that companies with lower profitability tend to have a higher risk of not continuing their business. However, the study found that other financial ratios, such as Cr and DER, had no significant influence on the acceptance of the Going Concern audit opinion.

Discussion

The study's findings suggest that profitability is a critical factor in determining the acceptance of a Going Concern audit opinion. Companies with high profitability tend to have a lower risk of not continuing their business, while those with low profitability tend to have a higher risk. This is consistent with the auditor's focus on a company's ability to generate sustainable profits.

The Role of Profitability

The study's findings highlight the importance of profitability in determining the acceptance of a Going Concern audit opinion. Companies with high profitability tend to have a lower risk of not continuing their business, while those with low profitability tend to have a higher risk. This is consistent with the auditor's focus on a company's ability to generate sustainable profits.

Other Factors

It is essential to note that this study only focuses on some financial ratios. Other factors, such as macroeconomic conditions, industrial regulations, and company internal management, can also affect the acceptance of a Going Concern audit opinion. Therefore, the study's findings should be considered in conjunction with other factors that may influence a company's financial stability and business continuity.

Implications for the Company

The study's findings provide an important picture for telecommunications companies listed on the IDX. They need to focus on increasing profitability and showing their ability to generate sustainable profits. This can be achieved through a range of strategies, including cost reduction, revenue growth, and investment in new technologies.

Conclusion

This study provides a deeper understanding of the relationship between financial ratios and the receipt of a Going Concern audit opinion in telecommunications companies listed on the IDX. The study's findings can be used by auditors, investors, and telecommunications companies themselves to make better decisions related to financial risks and business continuity. The study's implications highlight the importance of profitability in determining the acceptance of a Going Concern audit opinion and provide insights into the strategies that companies can use to improve their financial stability and business continuity.

Recommendations

Based on the study's findings, the following recommendations are made:

Telecommunications companies listed on the IDX should focus on increasing profitability and showing their ability to generate sustainable profits.
Auditors should consider the company's profitability when assessing its ability to continue its operations for the foreseeable future.
Investors should consider the company's profitability when making investment decisions.
The IDX should consider the study's findings when developing policies and regulations related to the listing of telecommunications companies.

Limitations

This study has several limitations that should be considered when interpreting the results. Firstly, the study only focuses on six telecommunications companies listed on the IDX, which may not be representative of the entire industry. Secondly, the study only examines a range of financial ratios, which may not capture the full range of factors that influence the acceptance of a Going Concern audit opinion. Finally, the study's findings may not be generalizable to other industries or countries.

Future Research

This study provides a foundation for future research on the relationship between financial ratios and the receipt of a Going Concern audit opinion in telecommunications companies listed on the IDX. Future studies could examine the impact of other factors, such as macroeconomic conditions, industrial regulations, and company internal management, on the acceptance of a Going Concern audit opinion. Additionally, future studies could investigate the relationship between financial ratios and the receipt of a Going Concern audit opinion in other industries or countries.
Frequently Asked Questions (FAQs) about the Effect of Financial Ratios on the Receipt of a Going Concern Audit Opinion in Telecommunications Companies Listed on the Indonesia Stock Exchange

Q: What is a Going Concern audit opinion?

A: A Going Concern audit opinion is an opinion expressed by an auditor that a company is likely to continue its operations for the foreseeable future. This opinion is based on the auditor's assessment of the company's financial position, liquidity, and ability to generate sustainable profits.

Q: Why is the receipt of a Going Concern audit opinion important for telecommunications companies listed on the IDX?

A: The receipt of a Going Concern audit opinion is a critical factor in determining a company's creditworthiness and ability to access capital markets. It can have a significant impact on a company's ability to raise funds, attract investors, and maintain its market value.

Q: What financial ratios were examined in this study?

A: The study examined three financial ratios: Return on Assets (ROA), Current Ratio (Cr), and Debt to Equity Ratio (DER).

Q: What was the finding of the study regarding the relationship between ROA and the receipt of a Going Concern audit opinion?

A: The study found that ROA had a significant negative influence on the acceptance of the Going Concern audit opinion. This means that companies with lower profitability tend to have a higher risk of not continuing their business.

Q: What was the finding of the study regarding the relationship between Cr and DER and the receipt of a Going Concern audit opinion?

A: The study found that Cr and DER had no significant influence on the acceptance of the Going Concern audit opinion.

Q: What are the implications of the study's findings for telecommunications companies listed on the IDX?

A: The study's findings suggest that telecommunications companies listed on the IDX should focus on increasing profitability and showing their ability to generate sustainable profits. This can be achieved through a range of strategies, including cost reduction, revenue growth, and investment in new technologies.

Q: What are the implications of the study's findings for auditors?

A: The study's findings suggest that auditors should consider a company's profitability when assessing its ability to continue its operations for the foreseeable future.

Q: What are the implications of the study's findings for investors?

A: The study's findings suggest that investors should consider a company's profitability when making investment decisions.

Q: What are the limitations of this study?

A: This study has several limitations that should be considered when interpreting the results. Firstly, the study only focuses on six telecommunications companies listed on the IDX, which may not be representative of the entire industry. Secondly, the study only examines a range of financial ratios, which may not capture the full range of factors that influence the acceptance of a Going Concern audit opinion. Finally, the study's findings may not be generalizable to other industries or countries.

Q: What are the future research directions based on this study?

A: Future studies could examine the impact of other factors, such as macroeconomic conditions, industrial regulations, and company internal management, on the acceptance of a Going Concern audit opinion. Additionally, future studies could investigate the relationship between financial ratios and the receipt of a Going Concern audit opinion in other industries or countries.

Q: What are the practical implications of this study for telecommunications companies listed on the IDX?

A: The study's findings provide a practical guide for telecommunications companies listed on the IDX to improve their financial stability and business continuity. By focusing on increasing profitability and showing their ability to generate sustainable profits, companies can reduce their risk of not continuing their business and improve their creditworthiness and ability to access capital markets.

Q: What are the policy implications of this study for the IDX?

A: The study's findings suggest that the IDX should consider the importance of profitability when developing policies and regulations related to the listing of telecommunications companies. By prioritizing profitability, the IDX can promote the financial stability and business continuity of telecommunications companies listed on the exchange.