3。4。5Default

In this present study, a company is classified a default company if the company is either in payment default or technical default or has breached loan covenants。 Therefore, we employ dichotomous variable as suggested by Chen and Church (1992)。 Going concern is associated with default status。 This due to the fact that default status would send strong bad signal which potential and successful negotiation with banks or other creditors would be unlikely。 In the absence of such supports, companies under financial distress would hardly stay as going-concern company in the future accounting period。 Thus, there is a positive association between default status and of going-concern opinion。

3。4。6Client Size

Total assets is used in the present study due to the amount of assets, that more consistent before and after the 1997 crisis compared to revenues。 However, Md。 Yusof et al。 (2002) found no evidence that size of clients measured by total assets has association with the type of going concern audit report。 Other measurements of client size include market capitalization and a mixture of sales and assets。 This variable is transformed to logarithmic data to control for non-normality。 Consistent with the previous research, a negative relationship between this independent variable and going concern opinion is expected。 (Geiger & Raghunandan, 2002)

4。Results and discussions

4。1Descriptive results

From 187 non-finance companies, Arthur Andersen (AA) and Ernst Young (EY) audited 42。17% of distressed companies。 Since the merger between those firms in July 2002, almost half of these troubled companies lie with this new EY。 All Big Five accounts 70。28% of the Bursa Malaysia troubled firms。 This figure is comparable with their total shares of the Bursa Malaysia companies (Md。 Yusof & Che Ahmad, 2000)。 77。5% or 145 of these companies received going concern audit opinion。 Thus many problems and critics would lie in the case of non-receiving going concern opinion。

Variance Inflation Factor (VIF) figures are closed to unitary and thus conclude that multicollinearity poses minimal threat to further regression analysis。 (Note 3) In addition, further inspection using the condition index proves prior VIF test。 Besides,

Going concern opinion has strong and significantly correlation with audit tenure (r = 0。229), default status (r = 0。647), outside audit committee (r = 0。154) and probability of bankruptcy (r = 0。171)。 In contrast, correlation analysis does not show any significant relationship between Big Five variable and going concern opinion variable。 As mentioned above, univariate results should be read with caution and act as a complement to multivariate analysis of logistic regression。

4。2Multivariate regression

The result does not support the frequent arguments of negative audit tenure effects made by public and business community。 However, our finding reveals that if a client never changes its auditor since listed in stock exchange, then the possibility of receiving clean opinion is higher。 These results support Chi and Huang (2004) who suggested that familiarity effect produce higher earnings quality, but excessive familiarity results in lower earnings quality (even the situation are difference between this study and Chi & Huang, 2004, similar proxy of audit firm tenure was used by both studies to examine the role of audit firm whether in going concern opinion or earning aspect)。

Moreover, there is evidence that audit firm size as surrogated by Big Five and non-Big Five dichotomous classifications have significant influence over auditor reporting decision。 This is consistent with Behn, Kaplan and Krumwiede (2001)。 Thus, argument of perceived high quality by DeAngelo (1981) is apparent as generally supported in the case of audit fees research。

However, audit committee independence variable is not significantly auditor going concern opinion。 This may suggest that non-executive director variable should be replaced with independent director variable as a proxy of outside audit