Identification of auditor’s report qualifications: an empirical analysis for Slovenia

Figures & data

Table 1. List of variables.

	Name of variables
Y	Dependent variable: 1 if auditor’s report is qualified, 0 otherwise
X1	Debt ratio
X2	Debt to equity ratio
X3	Long-term financing to long-term assets ratio
X4	Quick ratio
X5	Liquidity ratio
X6	Current ratio
X7	Short-term business receivables to short-term business liabilities ratio
X8	Inventory turnover ratio
X9	Trade receivables turnover ratio
X10	Cash turnover
X11	Operating efficiency ratio
X12	Total assets turnover
X13	Working capital turnover
X14	Current liabilities turnover
X15	Capital employed turnover
X16	Short-term assets rate
X17	Cash assets rate
X18	Return on assets rate
X19	Total assets
X20	Auditor’s report time lag (in days)

Source: Boynton & Johnson, 2006; Brigham & Ehrhardt, 2005; Keasey et al., 1988; Laitinen & Laitinen, 1998; Wild et al., 2003; etc.).

Table 2. Results for selected logistic regression models.

Model abbreviation^†	Number of variables	Akaike’s information criterion	Nagelkere’s determination coefficient	Overall accuracy
Intercept	–	102.1881	–	0.5000
Model_1	8	72.4242	0.4993	0.9625
Model_2	7	72.6653	0.4766	0.9590
Model_3	6	72.7746	0.4551	0.9590

Note:

^† Variables included in the model and parameter values are presented in Table 4.

Source: Own calculation.

Table 3. Quartiles of explanatory variables.^†

	Companies with unqualified auditors’ reports (281)			Companies with qualified auditors’ reports (12)			Kruskal-Wallis test
	First quartile	Median	Third quartile	First quartile	Median	Third quartile	χ ^2	Stat. sig.
X1	0.3938	0.5402	0.7199	0.6500	0.7467	0.8414	7.9712	0.0048	*
X2	0.7618	1.4579	3.0061	2.6490	4.8761	8.1834	9.5880	0.0020	*
X3	0.8439	1.0176	1.3767	0.4242	0.6679	0.8920	14.1056	0.0002	*
X4	0.0427	0.1591	0.3968	0.0218	0.0984	0.2081	2.5669	0.1091
X5	0.5433	0.8049	1.1761	0.4662	0.6378	0.7123	5.2727	0.0217	**
X6	0.8621	1.1495	1.5606	0.5883	0.7121	0.9144	12.2746	0.0005	*
X7	0.6425	1.0037	1.3643	0.7355	0.9854	1.9023	0.4009	0.5266
X8	4.6000	8.6600	21.7250	6.1400	11.2150	25.2200	0.8278	0.3629
X9	3.2701	4.7760	7.9323	2.3966	2.8132	4.7814	7.3833	0.0066	*
X10	7.3392	17.2359	53.7435	6.4848	19.6536	32.4450	0.0001	0.9917
X11	1.0022	1.0267	1.0563	0.9035	0.9861	1.0361	5.1852	0.0228	**
X12	0.6827	0.9645	1.5273	0.6392	0.8088	1.4705	0.7385	0.3901
X13	−6.3943	4.1002	14.0080	−14.1498	−4.7771	−3.1472	7.9418	0.0048	*
X14	1.8765	2.9085	4.4547	1.1915	1.6650	2.3081	9.7177	0.0018	*
X15	1.3216	2.6774	5.7394	2.2947	4.5884	6.7941	1.8129	0.1782
X16	0.2884	0.4437	0.6808	0.3189	0.4432	0.6107	0.0804	0.7768
X17	0.0171	0.0602	0.1273	0.0090	0.0551	0.1495	0.1587	0.6904
X18	−0.0085	0.0158	0.0562	−0.1185	−0.0253	0.0023	9.6961	0.0018	*
X19	31,827,066	54,227,193	122,532,674	39,293,828	43,219,975	55,733,803	0.7565	0.3844
X20	85	110	153	94	140	169	1.3109	0.2522

Notes:

^† A description of the explanatory variables is provided in Table 1.

^* Significant at 0.01.

^** Significant at 0.05.

Source: Own calculation.

Table 4. Logistic regression results.^†

	Model_1			Model_2			Model_3
	Param. est.		Odds ratio	Param. est.		Odds ratio	Param. est.		Odds ratio
X3	−2.7343	*	0.0649	−2.6895	**	0.0679	−3.5049	**	0.0301
X6	−6.0364	**	0.0024	−6.2668	**	0.0019	−3.7378	**	0.0238
X7	1.5418	**	4.6728	1.3696	**	3.9337	1.1998	***	3.3195
X9	−0.5992	**	0.5492	−0.6058	*	0.5456	−0.6374	*	0.5287
X11	−7.6464		0.0005	–	–	–	–		–
X16	4.5962	***	99.1049	4.0299		56.2538	–		–
X19	0.0000	***	1.0000	0.0000	***	1.0000	0.0000	**	1.0000
X20	−0.0144	**	0.9857	−0.0142	**	0.9859	−0.0124		0.9877
	13.6413	*	840,124.36	6.8497	*	943.5506	7.2700	*	1,436.5666

Notes:

^† Variables X₁, X₂, X₄, X₅, X₈, X₁₀, X₁₂, X₁₃, X₁₄, X₁₅, X₁₇ and X₁₈ are not shown (that is, these variables are not included in the selected models). A description of explanatory variables is provided in Table 1.

^* Significant at 0.01.

^** Significant at 0.05.

^*** Significant at 0.10.

Source: Own calculation.

Table 5. Logistic regression performance results.

	Model_1	Model_2	Model_3
Nagelkere’s det. coef. *	0.4993 (0.4253)	0.4766 (0.4044)	0.4551 (0.3846)
Overall accuracy	0.9625	0.9590	0.9590
True positive rate ^†	0.3333	0.2500	0.1667
False positive rate ^‡	0.0107	0.0107	0.0071
c-index *	0.9469 (0.9388)	0.9440 (0.9374)	0.9392 (0.9326)

Notes:

^† The true positive rate presents the correct classification of companies with qualified auditors’ reports among the companies with qualified auditors’ reports.

^‡ The false positive rate presents the incorrect classification of companies with a qualified auditor’s report among the companies with an unqualified auditor’s report.

^* The results in brackets are the results of internal validation using the bootstrap method (n=10.000).

Source: Own calculation.

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