Predicting Audit Opinions Evidence From The Athens Stock Exchange

Abstract

The purpose of this study is to provide evidence drawn from publicly traded companies in Greece as far as the predictability of going-concern opinions, and other business situations (problem companies, tax contingent liabilities) based on a transition from a tax-driven accounting system which is characterized by a stakeholder (debtholder) orientation to shareholder oriented and independent of tax reporting considerations after the adoption of IFRS. This study examines companies listed in the Athens Stock Exchange to determine whether the findings with regard to the prediction of troubled companies, going-concern audit opinions and tax contingent liabilities are robust in a different accounting system than that in prior studies. We employ discriminant analysis and a logit specification to test our models. Results indicate that more noticeably going-concern audit opinions can be predicted with rates ranging from 96.7% to 98.7%.

Research findings are subject to limitations since they are drawn from publicly traded companies only. The selection of models that better fits to the Greek data provides additional evidence to the existing literature not only in so far as the statistical techniques but also in respect to the business environment (after the adoption of IFRS). These models can act as early warning systems in an effort to avoid further bankruptcies or liquidations or even to prevent window dressing phenomena.