The Determinants of Auditor’s Going Concern Opinion and The Effect of Monitoring Mechanisms

  • Zam Zuriyati Mohamad Universit Tunku Abdul Rahman
  • Loh Chun T’ing, Ms Universiti Tunku Abdul Rahman
  • Rizalniyani Abdul Razak, Ms Universiti Tunku Abdul Rahman


This research examined whether Malaysian auditors tend to under report going concern risk (GCR). The research framework in this study has been developed using Agency Theory and Theory of Inspired Confidence.18 financially distress companies listed in Bursa Malaysia Practice Note 17 (PN17) were selected and analysed from 2007 to 2018, giving 202 samples. By comparing the companies’ GCR levels determined by Altman’s Z -score with the type of auditors’ going concern opinion (GCO) issued, it was found that 81% of the GCR were under reported in Malaysia. Coupled with that, this study proposed an index in measuring going concern opinion predictive value (GCOPV). Using Paired t-tests to assess the before-and-after effect, it was found that the GCOPV of the financially distressed PN17 companies are significantly improved after the issuance of the new and revised International Standards on Auditing (ISA)s on auditor’s report and going concern effective from 15 December 2016. Lastly, multiple linear regression analysis was performed and found that Z-score, audit firm size and audit partner tenure had significant positive relationships with auditor’s GCO, independence of AC had significant negative relationships and financial experts on AC had no significant relationship. This research evaluates the effectiveness of the new and revised ISAs and thus contribute to future standard settings. Furthermore, it can give insights to the monitoring mechanisms in Malaysia like MIA By-Laws on auditors’ independence and MCCG on corporate governance. Theoretically, the application of Agency Theory and Theory of Inspired Confidence provide a new path for future researchers in examining the auditors’ GCO.


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How to Cite
MOHAMAD, Zam Zuriyati; T’ING, Loh Chun; ABDUL RAZAK, Rizalniyani. The Determinants of Auditor’s Going Concern Opinion and The Effect of Monitoring Mechanisms. Asian Journal of Accounting and Finance, [S.l.], v. 3, n. 3, p. 10-30, sep. 2021. ISSN 2710-5857. Available at: <>. Date accessed: 25 oct. 2021.