ANALYSIS THE INFLUENCE OF INSTITUTIONAL

OWNERSHIP, MANAGERIAL OWNERSHIP,

INDEPENDENT COMMISSIONERS, AND AUDIT

COMMITTEE IN RECEIVING GOING CONCERN

AUDIT OPINION

(A CASE STUDY: MANUFACTURE – BASIC INDUSTRY

LISTED IN IDX PERIOD 2010-2014)

SKRIPSI

By

Shierly

008201200009

A skripsi presented to the Faculty of Business President University in partial

fulfillment of the requirements for Bachelor Degree in Economics, Major in

Accounting

President University

Cikarang Baru – Bekasi

Indonesia

2016

i

PANEL OF EXAMINERS APPROVAL SHEET

Herewith the Panel of Examiners declare that the skripsi entitles “Analysis the

Influence of Institutional Ownership, Managerial Ownership, Independent

Commissioners, and Audit Committee in Receiving Going Concern Audit

Opinion (A Case Study: Manufacture – Basic Industry Listed in IDX Period

2010-2014)” submitted by Shierly, Accounting Study Program, and Faculty of

Business, has been assessed and proved to pass the Oral Examination

ii

RECOMMENDATION LETTER OF SKRIPSI

ADVISOR

The skripsi prepared and submitted by

Name : Shierly

Student ID : 008201200009

Faculty : Business

Study Program : Accounting

Field of Study : Quantitative

Skripsi Title : Analysis the Influence of Institutional Ownership,

Managerial Ownership, Independent Commissioners, and

Audit Committee in Receiving Going Concern Audit

Opinion (A Case Study: Manufacture – Basic Industry

Listed in IDX Period 2010-2014).

Has been reviewed and found to have satisfied the necessities for Oral Defense as

partial fulfillment of the requirements for Bachelor Degree in Economics–

Faculty of Business.

Cikarang, Indonesia, January 24, 2016

iii

DECLARATION OF ORIGINALITY

This skripsi entitled “Analysis the Influence of Institutional Ownership,

Managerial Ownership, Independent Commissioners, and Audit Committee in

Receiving Going Concern Audit Opinion (A Case Study: Manufacture – Basic

Industry Listed in IDX Period 2010-2014)” is originally written by me on my own

research and has never been used for any other purpose before. I therefore request

the skripsi for Oral Defense.

Cikarang, Indonesia January 24, 2016

iv

ANALYSIS THE INFLUENCE OF INSTITUTIONAL

OWNERSHIP, MANAGERIAL OWNERSHIP,

INDEPENDENT COMMISSIONERS, AND AUDIT

COMMITTEE IN RECEIVING GOING CONCERN

AUDIT OPINION

(A CASE STUDY: MANUFACTURE – BASIC INDUSTRY

LISTED IN IDX PERIOD 2010-2014)

ABSTRACT

The purpose of this research is to examine effect of corporate

governance role to the possibility of company in receiving going concern

audit opinion by auditor. The independent variables used in this study are

Proportion of Institutional ownership, Managerial Ownership,

Independent Commissioners, and Audit Committee.

This research used 68 manufacturing companies in basic industry,

which listed on Stock Exchange in the period 2010-1014 as sample. The

samples were selected using purposive sampling method and obtained 39

companies with 5 periods to run for analysis. With total of 195, the data

were analyzed using logistic regression analysis model.

The result shows that proportion of institutional ownership

influence possibility of company receives going concern audit opinion. On

other hand, proportion of managerial ownership, independent

commissioner, and audit committee has no effect on issuance of going

concern audit opinion. This study only use Corporate Governance to

analyze the probability of going concern audit opinion, so for further

research is expected to add another corporate governance variables,

financial variables, and obtain the complete data from IDX central office

in Jakarta.

Keywords: Corporate Governance, Institutional Ownership, Managerial

Ownership, Independent Commissioner, Audit Committee, Going Concern

Audit Opinion.

v

ACKNOWLEDGEMENT

Thanks to God Almighty for His blessing to keep the author stay healthy

physically and mentally. His blessing made the author to finish this skripsi entitled

“Analysis the Influence of Institutional Ownership, Managerial Ownership,

Independent Commissioners, and Audit Committee in Receiving Going Concern

Audit Opinion (A Case Study: Manufacture – Basic Industry Listed in IDX Period

2010-2014)” on time. Furthermore, it would not have been possible to write this

thesis without help and support of the kind people around the Author. Therefore,

the author would like to express her respect and gratitude. it is possible to give

particular mention here:

1. Mr. Dr. Djadja Sukirman, Ak., MBA., CA., CFrA, as the supervisor who

always gave his time to provide guidance, advice, and ideas for

preparation of this skripsi. Thank you for all of your effort, guidance, and

patience.

2. Misbahul Munir, MBA., Ak., CPMA., CA, as the Head of Accounting

Study Program.

3. Mr. Drs. Gatot Imam Nugroho, Ak., MBA and Mr. Dr. Sumarno Zain,

S.E., Ak., MBA to taught the author in understanding audit and skripsi.

4. Beloved brother, Harry Anderson who had encouraged, heard my concern,

and helped me all the time in his busy time. Thank you for your life

support.

5. Support from father and mother in finishing this project

6. My bestfriend Indah Permata Sari. Thank you for your patience in hearing

my story and always encourage me mentally.

7. Babas & Ojis Group that always encourage each other to finish the skripsi.

8. Rica Mandasari Sembiring who always accompany me as an accounting

skripsi fellow that through same hardship with the author. Thank you for

your randomness in encouraging each other.

9. Colleagues in PwC Indonesia, Teresa Devi loviana, Yorji Immanuel,

Alyssa, Stevanie, Firman Dermawan, and Amanda Sarasvatty whose

vi

always asking when I will join PwC again. This question has become my

strength to finish my skripsi.

10. Sarbaenah (a.k.a Ardena), my new friend in BaoHan FC who always chat

me in every random occasion.

11. Manga artist who always issue many illustration through book and

website. Their artworks are inspiring for my illustration and mood

boosterfor my power during the skripsi process.

12. Friends of Accounting batch 2012 which cannot be mentioned one by one.

13. Employees in Accounting Department who always assist the student in

terms of administration.

May God Almighty repay kindness for those who helped, and always gives His

blessing to all of us, and hopefully this skripsi can be useful for future

development.

Cikarang, 22 January 2016

Shierly

Researcher

vii

TABLE OF CONTENT

PANEL OF EXAMINERS APPROVAL SHEET ............................................... i

RECOMMENDATION LETTER OF SKRIPSI ADVISOR ............................ ii

DECLARATION OF ORIGINALITY .............................................................. iii

ABSTRACT .......................................................................................................... iv

ACKNOWLEDGEMENT .................................................................................... v

TABLE OF CONTENT ...................................................................................... vii

LIST OF TABLES ............................................................................................... ix

LIST OF FIGURES .............................................................................................. x

CHAPTER I INTRODUCTION .......................................................................... 1

I.1. Research Background ................................................................................... 1

I.2. Problem Identification and Statement........................................................... 5

I.3. Research Scope and Limitation .................................................................... 5

I.3.1. Research Scope ...................................................................................... 5

I.3.2. Research Limitation ............................................................................... 6

I.4. Research Objectives ...................................................................................... 6

I.5. Research Benefit ........................................................................................... 7

I.5.1. Practical Benefits ................................................................................... 7

I.5.2. Theoretical and Academic Benefit ........................................................ 7

CHAPTER II LITERATURE REVIEW ............................................................ 8

II.1. Theoretical Review ...................................................................................... 8

II.1.1. Agency Problem ................................................................................... 8

II.1.2. Audit Opinion ....................................................................................... 9

II.1.3. Going Concern Audit Opinion ........................................................... 11

II.1.4. Corporate Governance ........................................................................ 14

II.2. Previous Research ..................................................................................... 19

II.3. Theoretical Framework ............................................................................. 24

II.4. Hypotheses ................................................................................................ 24

II.4.1. Proportion of Institutional Ownership ................................................ 24

II.4.2. Proportion of Managerial Ownership ................................................. 25

II.4.3. Proportion of Independent Commissioners ........................................ 26

II.4.4. Audit Committee ................................................................................ 26

CHAPTER III RESEARCH METHODOLOGY ............................................ 27

viii

III.1. Research Method ...................................................................................... 27

III.2. Operational Definition ............................................................................. 27

III.2.1. Dependent Variable ........................................................................... 27

III.2.2. Independent Variable ........................................................................ 28

III.3. Research Instrument ................................................................................. 29

III.4. Sampling Design ...................................................................................... 29

III.5. Data Analysis ........................................................................................... 31

III.5.1. Descriptive Statistics ......................................................................... 31

III.5.2. Logistic Regression ........................................................................... 31

III.5.3. Hypotheses Testing ........................................................................... 34

CHAPTER IV ANALYSIS OF DATA AND INTREPRETATION OF RESULTS 36

IV.1. Research Sample Data ............................................................................. 36

IV.2. Data Analysis ........................................................................................... 36

IV.2.1. Descriptive Analysis ......................................................................... 36

IV.2.2. Logistic Regression ........................................................................... 37

IV.3. Hypotheses Test ....................................................................................... 41

IV.3.1. F-Statistical Test ............................................................................... 41

IV.3.2. Coefficient of Determination (Nagelkerke R2) ................................. 42

IV.4. Interpretation of Results ........................................................................... 44

IV.4.1. Hypotheses Test 1 ............................................................................. 44

IV.4.2. Hypotheses Test 2 ............................................................................. 45

IV.4.3. Hypotheses Test 3 ............................................................................. 46

IV.4.4. Hypotheses Test 4 ............................................................................. 47

CHAPTER V CONCLUSION AND RECOMMENDATION ........................ 49

V.1 Conclusion .................................................................................................. 49

V.2 Recommendation ........................................................................................ 50

REFERENCES

APPENDICES

ix

LIST OF TABLES

Table 2. 1 Previous Research ................................................................................ 19

Table 3. 1 Research Variables and Measurement ................................................. 28

Table 3. 2 Sampling Process ................................................................................. 30

Table 4. 1 Descriptive Statistics ............................................................................ 36

Table 4. 2 Hosmer and Lemeshow Test ................................................................ 37

Table 4. 3 Overall Model Fit ................................................................................. 38

Table 4. 4 -2 Log Likelihood 1 .............................................................................. 38

Table 4. 5 -2 Log Likelihood 2 .............................................................................. 39

Table 4. 6 Omnibus Test ....................................................................................... 40

Table 4. 7 Classification Table ............................................................................. 41

Table 4. 8 Simultaneous Test Results ................................................................... 42

Table 4. 9 Cox and Snell R2 and Nagelkerke’s R

2 ................................................ 42

Table 4. 10 Hypotheses Testing ............................................................................ 43

x

LIST OF FIGURES

Figure 2. 1 Going Concern Evaluation Flowcharts ............................................... 13

Figure 2. 2 The Three Main Areas of Focus or the Audit Committeee ............... 18

Figure 2. 3 Research Model .................................................................................. 24

1

CHAPTER I

INTRODUCTION

I.1. Research Background

The competition in global business that becomes fiercer every period

makes company not only optimally generate profit, but in search of its viability in

market or in other words, going concern. The bankruptcy due to accounting

manipulation by Enron, Worldcom, and Xerox had effected the global economic

into a crisis. Indonesia got the effect because of this crisis such as the decreasing

of Indonesia currency and stock price index. During crisis, many companies

cannot maintain its capability as a going concern. Now, the companies try to

optimize its performance to avoid financial difficulty to maintain its business and

get non-going concern audit opinion from auditor.

The researcher wants to know groundwork for going concern opinion was being

researched in this paper. Given from author’s internship experience, account

receivable was define as a base for auditor in determine auditor judgement in

giving going concern audit opinion. Further findings revealed corporate

governance, market trend, and debt settlement are factors along with account

receivable, in conclude audit opinion.

The definition of Going Concern. Comply with SAK (Standar Akuntasi

Keuangan, 2009) in Hartas et. al. (2012) Going Concern is a sustainability of the

business entity. An Entity assume not in purpose or willing to liquidate, or

decreasing the business material scale. Therefore, every entity is not only focus in

generate the profit but also to keep their ability as a going concern.

Based on American Institute of Certified Public Accountant (AICPA, 2012) AU-

C Section 570, the auditor’s responsibility is to evaluate whether there is

substantial doubt about the entity’s entity ability to continue as a going concern

for a reasonable period of time.

2

Going concern problems can be overcome by the presence of Corporate

Governance mechanism, which has the function to ensure the company

management, is in accordance with the policy. Corporate governance will work as

a control mechanism in managing the business to develop the survival of the

company as a player in the competitive market.

Organization of Economic Cooperation and Development (OECD, 2004) defined

corporate governance as a procedures and processes according to which an

organization is directed and controlled. The corporate governance structure

specifies the distribution of rights and responsibilities among the different

participants in the organization – such as the board, managers, shareholders and

other stakeholders – and lays down the rules and procedures for decision-making.

Corporate Governance involves a set of relationships between a company’s

management, its board, its shareholders and the other stakeholders. Corporate

governance also provide the structure through which the objectives of the

company are set, and the means of attaining those objectives and monitoring

performance are determined (OECD Principles of Corporate Governance, 2015)

Regarding Richard Anderson & Associates (2009), recall the purposes of

Corporate Governance. The financial Reporting council (FRC) Combined Code

sets out the purpose of Corporate Governance as follow:

“Good corporate governance should contribute to better company performance by

helping a board discharge its duties in the best interests of shareholders; if it is

ignored, the consequence may well be vulnerability or poor performance. Good

governance should facilitate efficient, effective and entrepreneurial management

that can deliver shareholder value over the long term.” (Source: FRC, Combined

Code, June 2008)

Hartas et. al. (2012) define one of the function of Good Corporate Governance.

Corporate Governance mechanism will ensure if the company’s management

always in line with regulation. The elements that will measure the corporate

3

governance mechanism is managerial ownership, institutional ownership,

independent commissioners, and audit committee.

Beside the going concern problem, Corporate Governance mechanism will

anticipate the agency problem, which is will arise an asymmetry information and

conflict between manager and shareholders. Fama (1983) and hart (1995) in

Zureigat et. al. (2014) explain the separation between managers and shareholders

of firms leads to conflict of interest. Agency theory cannot completely resolved by

contracts because its costly and difficult to write and impose the complete

contracts. Because of the imperfect contract, the role of corporate governance

have arisen to limit such a conflicts and assist the firm to protect their investment

to ensure continuity.

Hartas et. al. (2012) took an explanation from Jensen and Meckling (1976).

Jensen and Meckling (1976) define agency theory as a misalignment between the

interest of the agent (shareholders) and the principal (CEO). The agent have

authority to monitor the company’s operational so, the agent will have more

information that the principal (asymmetry information).

As stated earlier, agency theory which is can lead into going concern problem, can

be reduced by the existence of corporate governance. In this research, the

corporate governance proxies are Institutional Ownership, Managerial Ownership,

Independent Commissioner, and audit Committee.

Tarjo (2008) in Nasution (2012) explained the institutional ownership have a role

in minimize the agency theory conflict. The presence of institutional investor

considered has an effective monitoring role in management decision. Institutional

ownership will do the monitoring, which is will ensure their prosperity of share.

The influence of institutional ownership is being pushed by their massive

investment in market share. The higher of ownership, the higher its monitoring by

institutional investor which is will prevent the opportunistic act.

4

Bangun et.al. (2012) described the managerial ownership and institutional

ownership are comprise in corporate governance mechanism to resolve the agency

theory. The more share percentage owned by management, they will be motivated

to work harder and focusing in increasing the company’s value. At this point, the

conflict of interest will be decreasing because management will synchronize each

of the company interest.

Arifin et. al. (2013) state the Independent Commissioner has the best portion in

carrying out the monitoring function so that good corporate governance of the

company is created. Based on Decision of Board of Directors of the Jakarta Stock

Exchange Inc. Number: Kep-305/BEJ/07-2004, company should has Independent

Commissioner at least 30% (thirty percent) of overall Board of Commissioners

member.

Kumala (2015) state the committee audit as one of the corporate governance. In

Komite Nasional Kebijakan Governance (KNKG 2006), audit committee has a

purpose to assist board of commissioner in assessed the effectiveness of its

responsibility and authority. Based on “Surat Edaran BAPEPAM No. SE-

03/TM/2000” explained the member of audit committee in Indonesia public

company at least three member acknowledge by independent commissioner with

two people from external that must be independent (Setiawan, 2011).

This research aims to examine the effect of corporate governance on company’s

going concern audit opinion. This study is an extended version from the study that

has been done by Adjani and Rahardja. (2013) that examines the role of corporate

governance in Indonesia. They use variables of corporate governance such as

managerial ownership, institutional ownership, and independent commissioners.

In this study audit committee is added as a part of corporate governance and

extended length of the period which is from 2010-2014.

5

I.2. Problem Identification and Statement

A stated earlier in the background, the researcher want to the “source” behind

the going concern audit opinion beside account receivables. So as the conclusion

the researcher aimed is to analyze the influence of corporate governance and

entity characteristics in the companies that were listed in Indonesia Stock

Exchange (IDX) for the basic industry for the period 2010-2014. The researches

need to find out whether the Institutional Ownership, Managerial Ownership,

Independent Commissioners, and Audit committee influence the company in

getting going concern audit opinion. Thus, the statement is “What is the influence

of the Institutional Ownership, Managerial Ownership, Independent

Commissioners, and Audit committee for the entities ‘going concern audit

opinion?”

1. How does the size of the proportion of institutional ownership in an entity

influence the company going concern opinion?

2. How does the size of the proportion of managerial ownership in an entity

influence the company going concern audit opinion?

3. How does the size of the proportion of independent commissioners in an

entity influence the company going concern audit opinion?

4. How does the audit committee influence the company going concern audit

opinion?

5. How does the size of the proportion of institutional ownership, managerial

ownership, independent commissioners, and audit committee

simultaneously influence the company going concern audit opinion?

I.3. Research Scope and Limitation

I.3.1. Research Scope

This research is entitled “Analysis the Influence of Institutional

Ownership, Managerial Ownership, Independent Commissioners, and Audit

Committee in Receiving Going Concern Audit Opinion (A Case Study:

Manufacture – Basic Industry Listed in IDX Period 2010-2014)”. The research

6

will analyze the influence of corporate governance and entity characteristics on the

acceptance of going concern audit opinion.

I.3.2. Research Limitation

This study has limitations that can be considered for further researched:

1. The researched companies are limited only in the companies that run the

business on manufacturing sector, classify in basic industry.

2. Many companies did not provide the necessity information regarding the

variables that being researched and as the result, many companies cannot

be included in the research. The period of this study is only five years that

is unable to analyze the trend of the company’s going concern audit

opinion for a long-term period.

I.4. Research Objectives

The objectives of this study are:

1. To identify the influence of institutional ownership proportion toward

company going concern audit opinion.

2. To identify the influence of managerial ownership proportion toward

company going concern audit opinion.

3. To identify the influence of independent commissioner proportion in the

board toward company going concern audit opinion.

4. To identify the influence of audit committee toward company going

concern audit opinion.

5. Have an empirical test on the influence of the proportion of institutional

ownership, managerial ownership, independent commissioner, and audit

committee simultaneously toward company going concern audit opinion.

7

I.5. Research Benefit

I.5.1. Practical Benefits

There are several practical benefits of this study

1. For Company’s Management

This study can be used as an assessment of company’s performances and

have management a consideration in making decision that can be used to

maintain its going concern for the future.

2. For investor

The disclosure of going concern can influence the interest of investor to

make a decision to invest in certain company.

3. For Accountant

This study can be used as a material for discussion and reference by the

auditor to do an audit process, especially in giving the audit opinion.

I.5.2. Theoretical and Academic Benefit

1. Increase accreditation of President University’s Accounting study program

2. Develop and enhance the knowledge of corporate governance that related

to the going concern opinion stated by auditor.

8

CHAPTER II

LITERATURE REVIEW

II.1. Theoretical Review

II.1.1. Agency Problem

Han (2012) define agency problem as a contractual relationship between

principals and agents. Under the contracts, agents are obligated to run company by

its shareholder’s will. However, both parties are self-utility maximizers and

monitor is not strong enough, agents may not behave in the best interests of

principals sometimes. Thus comes the classical topic upon corporate governance –

agency problem.

Han (2012) with definition by Berle & Means (1932) define agency problem in

that was firmly discussed in their published article which illustrating corporate

architectures. They state that, as the providers of cash flow in a company are

different from the decision makers which led to an agency problem between the

firm’s owners and controllers. For the owners, it is important for them to well

motivate the managers to behave in the interest of shareholders instead of wasting

corporation’ resources to satisfy their own interests.

Further study in Adjani and Rahardja. (2013) define an agency relationship by

Jensen & Meckling (1976) as a contract under the owner (principals) engage the

management (agent) to perform some service in the company on their behalf,

which involves delegating some authority to the agent. At this point, the agent has

more information regarding the company than the principal itself – information

asymmetries.

The existence of information asymmetries cause some problem proceed from the

principal difficulties in monitoring and controlling the agent. The problems are:

1 Moral Hazard

It happens because of the conflict of interest between agent and

principal that lead into agent fraudulent action to the principal.

9

2 Adverse Selection

This condition happens because the agent knows more information

regarding the real condition and its prospect rather than the

principal. The effect is in investing decision making that will

disadvantageous the principal.

The agent presence as a party that know more about the company information

rather than principal itself, there will be a fraudulent action by manipulate the data

regarding the company’s condition (which is a form of moral hazard by manager).

The purpose is to issue financial report free from material error and not being

given an audit opinion going concern by the auditor and at the end it can optimize

the agent’s interest.

Information Asymmetries between agent and principal will cause adverse

selection. The principal have less information regarding company than agent

which is will affect investment decision making because the principal maybe will

cancel its investment. The negative effect of going concern will occur, so auditor

will consider giving the going concern audit opinion will higher.

Many thought regarding corporate governance come in contact with agency

theory. Many publicly traded companies have a large controlling shareholder.

While the presence of a controlling shareholder can reduce the agency problem by

closer monitoring of management, weaknesses in the legal and regulatory

framework may lead to the abuse of other shareholders in the company. Abusive

self-dealing occurs when persons having close relationships to the company,

including controlling shareholders, exploit those relationships to the detriment of

the company and investors (OECD – Principles of Corporate Governance 2015).

II.1.2. Audit Opinion

Hartas (2012) define audit opinion according by SPAP (2004) as a part of

audit report over an entity’s financial report and main information of audit report.

Auditor must independent when he/she give an assessment and opinion over the

10

financial report. The opinion given by auditor is stated free from material error

over the statement of financial position, income statement, retained earning, and

cash flow which are agree with a legal accounting principles.

Based on Auditing book – A Risk Based Approach to Conducting a Quality Audit

by Johnstone, Gramling, and Rittenberg (2014 p. 689-703) state 5 type of audit

opinion with its condition:

1. Unqualified Opinion

Standard unqualified audit reports on financial statements following the

PCAOB’s reporting standard can be issued only if:

There are no material violations of GAAP.

Disclosures are adequate.

The auditor was able to perform all of the necessary procedures.

There was no change in accounting principles that had a material

effect on the financial statements.

The auditor does not have significant doubt about the client

remaining a going concern.

The auditor is independent

2. Unqualified Opinion with Explanatory Language

There are five situations in which an auditor may choose to issue an

unqualified audit report with explanatory language. Explanatory language

would be used to explain the following:

A justified departure from GAAP

Inconsistent application of GAAP

Substantial doubt about the client being a going concern

The emphasis of some matter, such as unusually important

subsequent events, risks, or uncertainties associated with

contingencies or significant estimates

Reference to other auditors

3. Qualified Opinion

11

There are three situations in which an auditor will issue a qualified report.

These situations occur when there is:

A material unjustified departure from GAAP that is not pervasive

Inadequate disclosure that is not pervasive

A scope limitation such that the possible effects on the financial

statements of undetected misstatements, if any, could be material

but not pervasive.

4. Adverse Opinion

An auditor issue an adverse report when the financial statements contain a

pervasive and material unjustified departure from GAAP, including a lack

of important disclosures that is pervasive. An adverse opinion should be

expressed when the auditor believes that the financial statements taken as

a whole are not presented fairly in conformity with GAAP. This can

happen when a significant number of items in the financial statements

violate GAAP. For example, if the auditor believes that the client is no

longer a going concern, GAAP may require the financial statements to

reflect liquidation values. If the items ae presented in accordance with

normal going-concern accounting, the statements are not fairly presented.

Such opinion are very rare. When issuing an adverse opinion, the opinion

paragraph should refer to a separate paragraph that provides the basis for

the adverse opinion.

5. Disclaimer Opinion

An auditor issues a disclaimer of opinion report in the following

situations:

A scope limitation exists

Substantial doubt exists about the client being a going concern

The auditor lacks independence

II.1.3. Going Concern Audit Opinion

Zureigat et. al. (2014) define Going concern that based on Malaysian

International Accounting (2008) as “an entity the is ordinarily viewed as

continuing business for the foreseeable future with neither the intention not the

12

necessity of liquidation ceasing trading or seeking protection from creditors

pursuant to laws or regulation. When company faces financial difficulties such as

inability to fulfill its commitments and suffer losses, the external auditors’ role

becomes high importance in evaluating the ability of the company to continue.

This will protect the interest of the financial statement users and help them to

make their investments decisions. Ultimately, this could also protect the social

and economic stability in Jordan. Furthermore, if the accountant does not provide

the needed information, to the external auditor, definitely he will be unable to

evaluate the companies’ going concern and may not give the right decision to the

investors.

Adjani and Rahardja (2013) define the Audit Opinion Going Concern based on

SPAP 2004 (Standar Profesional Akuntan Publik) as an opinion gave by auditor to

make sure if the entity have ability to maintain its sustainability. Assessment and

opinion regarding the entity sustainability by auditor are important for investor to

make an investment decision.

The entity’s going concern is related with the management ability to carry out and

maintaining the business to survive in the market as long as possible. Going

concern opinion will the first assumption to describe the condition of company.

Indicators of potential Going-concern problems: (SPAP SA section 341)

Negative trends; negative cash flow from operating activities, recurring

loss

Internal matters; loss of key personnel, employees strikes

External matters; new legislation, pending litigation, loss of franchise

Other miscellaneous matters; inability to pay dividend, violation of law

Significant changes in the competitive market

If auditor have consideration on the condition and found any findings regarding

entity’s ability to maintain its sustainability, auditor will give unqualified opinion

13

with explanatory language, qualified opinion, adverse opinion, or disclaimer

opinion.

Yes

Disclaimer

Unqualified opinion with

explanatory paragraph

about the going concern

of the entity on the

Emphasis of Matter

Qualified or

Adverse

Opinion

Does the

management’s plan

can be effectively

done?

Yes

Does the

management’s plan

can be effectively

done?

Unqualified

Opinion

No Disclaimer

Is there any

plant from

management

to mitigate

it?

The auditor is

doubt about the

going concern of

the company

Are there any

condition and/or

even which affect

the entity’s going

concerns?

SA Section

508

(PSA

No.29)

No

Ye

s

No

Yes

No

No Yes

Figure 2. 1

Going Concern Evaluation Flowcharts

Source of Figure: Triputra (2013)

14

II.1.4. Corporate Governance

Spinos (2013), in state the basic purpose of corporate governance

mechanisms is to limit the potential agency costs that happen within the company

(Shleifer and Vishny (1997)). Agency costs could happen from insignificant level

of goal incongruence and misunderstanding between management and

shareholders. Thus, the basic assumption is that every party acts for his own

benefit and interest.

From Indonesia corporate governance manual first edition (2014 p.30-31) - There

is no single definition of corporate governance that can be applied to all situations

and jurisdictions. The various definitions that exist today largely depend on the

institution or author, country and legal tradition.

International Finance Corporation (IFC) defines corporate governance as “the

structures and processes for the direction and control of companies.” The

Organization for Economic Cooperation and Development (OECD), which 1999

published its Principles of Corporate Governance, offers a more detailed

definition of corporate governance as:

“The internal means by which corporations are operated and controlled

[...], which involve a set of relationship between a company’s management, its

board, its shareholders, and other stakeholders. Corporate governance also

provide the structure through which the objectives of the company are set, and the

means of attaining those objectives and monitoring performance are determined.

Good corporate governance should provide proper incentives for the board and

management to pursue objectives that are in the interest of the company and

stakeholders, and should facilitate effective monitoring, thereby encouraging

firms to use resource more efficiently”.

Most definitions that center on the company itself (an internal perspective) do,

however have certain elements in common, which can be summarized as follows:

Corporate governance is a system of relationships, defined by structures

and processes.

15

These relationships may involve parties with different and sometimes

contrasting interests.

All parties are involved in the direction and control of the company

All this is done to properly distribute rights and responsibilities – and thus

increase long –term shareholder value

II.1.4.1. Institutional Ownership

Adjani and Rahardja (2013) stating in according of Permatasari (2011), the

proportion of shares that owned by institution such as bank, insurance company,

and investment company. Jensen & Meckling state that institutional ownership

has an important role in minimize the agency problem that occur between

management and shareholder. Institutional ownership will increase and optimize

monitoring action.

In Bangun (2011), Machmud & Djakman (2008) explain the higher of

institutional ownership will also, increasing act of monitoring from institutional

investor so, opportunistic action by manager will be prevented.

Hartas (2012) define institutional ownership based on Beiner et.al (2008) as the

right of votes owned by the institution. Institutional ownership has a certain better

monitoring function rather that individual ownership so, institutional ownership

affecting management’s performance.

According to Chung & Zhang (Journal of Financial and Quantitative Analysis

Vol.46, 2011), despite of free-rider problem, institutional investors have much

stronger incentive to monitor companies that they own than individual investors

because of their larger stakes in those companies, especially if exit cost is costly

(i.e., large trading costs). Bushee and Noe (2000) in Chung & Zhang (2011)

suggest that institutional investors prefer firm with better disclosure ranking to

reduce monitoring costs.

16

II.1.4.2. Managerial Ownership

Adjani and Rahardja (2013) define managerial ownership based on Gideon

(2005) as shares owned by management from overall company shares managed by

company. The bigger proportion of managerial ownership will reduce agency

problem in company. Therefore, the interest between manager and shareholder

will be same because manager will increase company’s value and keep its

viability.

Bangun (2011) define managerial ownership based on Downes & Goodman

(1999) as shareholder or owner in company that is influence in decision-making.

The conflict of interest between manager and shareholder will be higher when

managerial ownership of company is insignificant (Jensen & Meckling 1976). On

contrary, bigger managerial ownership will make manager more productive in

maximizing company’s value (Anggraeni 2006:8). The company’s manager will

disclose its social responsibility in order to raise company’s image though

manager will sacrifice many resources for the social responsibility (Gray et. al.,

1988).

II.1.4.3. Independent Commissioners

As from definition of agency theory state that there is different interest

between agent and principal therefore, from independent party must tak

monitoring role. Independent Commissioner is such an example to make the agent

work as an order from the principal and not cause any fraudulent action that lead

into amount of loss affecting to majority and minority shareholder.

The presence of independent commissioner have been arranged by Bursa Efek

Jakarta in Kep-361/BEJ/06-2000 on July 1, 2000 which is stated about the

proportion of Independent Commissioner must at least 30% of overall

commissioner board. Independent Commissioner is a part of board of

commissioner that has not affiliation with management, other commissioner

member, and shareholder. In addition, independent commissioner are free from

business relationship (or any kind of relationship) that can affect its independency

(Komite Nasional Kebijakan Governance, 2006)

17

Jakarta Stock exchange though its regulation on July 1st, 2010 has determined the

existence of independent commissioners which is explained as companies that

listed in stock exchange should have independent commissioners. Minimum

requirements for independent commissioners is 30% of all members of board

commissioners. Criteria for independent commissioners are as follows (FCGI,

2006):

1. Independent commissioners are from outside of the company.

2. Independent commissioners are not having affiliation with the main board

of company, commissioner, management, or shareholder in that company

itself.

3. Independent commissioners are not having direct or non-direct business

association.

4. Independent commissioners are not have double position as another

company director that has affiliation with related company

5. Independent commissioners should understand the capital market’s laws

and regulations.

II.1.4.4. Audit Committee

Based on Indonesia Corporate Governance Manual (2014), the board of

Commissioners is encouraged to establish an Audit Committee, as it is

increasingly seen as essential element of the corporate governance structure in

many countries. Indonesia CG Code Part IV 3.7 stipulated that in carrying out its

duty, the Board of Commissioners may forms committees. Any proposal from the

committees shall be submitted to Board of Commissioners for approval.

According to Regulation Number IX.I.5, for publicly listed companies, state-

owned enterprises, province and region-owned companies, companies that raise

and manage public funds, companies of which products or services are widely

used by public, and companies with extensive influence on environment, an Audit

Committee shall be established, whereas other committees are formed as required.

The purpose of Audit Committee is to assist supervisory function of the Board of

Commissioners to oversee the integrity of company’s financial statements,

External Auditor’s qualifications and independence, and performance of internal

18

audit function and External Auditor at other hand prepare report that OJK rules

require to be included in company’s annual proxy statement.

Board of Commissioners’ Audit Committee safeguards company by questioning

executive bodies regarding the way in which financial reporting responsibilities

are handled, as well as by ensuring that correction action are ensure to be taken.

The audit committee oversees the company’s relations with External Auditor.

(Indonesia Corporate Governance Manual, 2014).

Members of the Audit Committee must be financial literate. An experienced

individual who is a financial expert should chair the audit committee. The

independence, aptitude and leadership skills of leader are crucial for committee’s

success. According to Regulation Number IX.I.5, for public listed company, the

head of the Audit Committee shall be independent commissioner. (496-498).

The Audit Committee typically focuses on financial reporting, risk management,

internal and external auditing.

Source of Figure: The Indonesia Corporate Governance Manual – First

Edition (2014)

Based on the regulation of Bapepam-LK no. IX.1.5 regarding “Pembentukan dan

Pedoman Pelaksanaan Kerja Komite Audit.” From the regulation, audit committee

in company must at least three members and one of the members is Independent

Commissioner which is also act as the Audit Committee leader and other

Audit Committee

Risk Management Financial Reporting Internal & External Audit

Figure 2. 2

The Three Main Areas of Focus for the Audit Committee

19

members are from outside company. There are also state about trequirement of

Audit committee:

a. Audit Committee must have high integrity, skill, knowledge, and

sufficient experience, which are in line with his/her study

background. In addition, has a good communication skill.

b. Have a background study of accounting or finance.

c. Have sufficient knowledge and understand the financial report.

d. Have sufficient knowledge about capital market.

e. Not the member of Public Accounting Firm, Law Consultant, or

other consultation services in the time of six months before

selected by Commissioner.

f. Not have authority and responsibility to planning, leading, or

controlling the company’s activity in the time of 6 months before

selected by commissioner, except by Independent Commissioner.

g. Audit committee not have any share in the company.

h. Not have family relationship.

i. Not have business relationship related the company business.

II.2. Previous Research

Previous researches that have been done regarding corporate governance

to acceptance of going concern audit opinion in Table 2.1 as follows:

Table 2. 1

Previous Research

Title Author Variable Result

Analisis Pengaruh

Corporate

Governance terhadap

Kemungkinan

Pemberian Opini

Audit Going

Concern oleh

Auditor Independent

Adjani, E. D.

Rahardja, S.

(2013)

Independent

Commissioners

Managerial

Ownership

Institutional

Ownership

Independent

Commissioners

and Institutional

Ownership not

significantly

influence for

auditor in

giving going

concern audit

opinion.

20

Managerial

Ownership

significantly

influence for

auditor in

giving going

concern audit

opinion.

The Influence of

Corporate

Governance,

Intellectual Capital

of Financial

Performance and

Firm Value of Bank

Sub-Sector

Companies Listed at

Indonesia Stock

Exchange in Period

2008-2012

Arifin, J.,

Suhadak.,

Endang S. A.,

Zainul A.,

Corporate

Governance

Intellectual

Capital

Firm Value

Corporate

governance

have an effect

not significant

on intellectual

capital in the

sub-sector

banks

companies

Disclosure of

Intellectual

capital have an

effect not

significant on

corporate

governance of

banking sub-

sector

companies

Corporate

Governance

have a

significant

effect in

negative

direction on

financial

performance in

banking sub-

sector

companies

Corporate

governance

have a

21

significant

effect in

negative

direction on

firm value in

banking sub-

sector

companies

Disclosure of

Intellectual

Capital

significantly

influences the

financial

performance.

Capital in

banking sub-

sector

companies

Disclosure of

intellectual

capital

significant

effect on firm

value banking

sub-sector

companies

Financial

Performance

have an

significant

effect on firm

value in sub-

sector banking

companies

Pengaruh Prior

Opinion,

Pertumbuhan dan

Mekanisme

Corporate

Governance pada

Pemberian Opini

Audit Going

Sulistya, A.F.

Sukartha, D. T.

(2013)

Prior Opinion

Company

Growth

Independent

Commissioners

Prior Opinion

has positive

influences for

auditor in

giving going

concern audit

opinion.

22

Concern. Audit Committee Company

Growth has

negative

influences for

auditor in

giving going

concern audit

opinion

Independent

Commissioners

is not

significantly

influence for

auditor in

giving going

concern audit

opinion.

Audit

Committee is

not significantly

influence for

auditor in

giving going

concern audit

opinion.

Pengaruh Komisaris

Independent, Komite

Audit, dan

Kepemilikan

Institutional

terhadapa OPini

Audit asumsi Going

Concern.

Ravyanda, M., G.

Dwi, E., D.

Zubaidah, S.

Independent

Commissaries

Audit

Committee

Institutional

Ownership

Logistic

Regression

show there is no

significance

influence

through going

concern audit

opinion.

The Role of Foreign,

Family Ownership

and Audit

Committee in

Evaluating the

Company as a Going

Concern: Evidence

from Jordan

Zureigat, B., N.

Fadzil, F., H.

Ismail, S., S., S.

(2014)

Foreign

Ownership

Family

Ownership

Audit

Committee

The relationship

between foreign

ownership and

going concern

evaluation is

negative but

not significant.

There is

significant

23

relationship

between family

ownership and

going concern.

There is a

positive and

significant

direction of the

relationship

between audit

committee and

going concern.

The Effect of

Corporate

Governance on the

Company’s going

Concern Audit

Opinion

Triputra, B. Institutional

Ownership

Managerial

Ownership

Independent

Commissioners

The Corporate

Governance

Committee

Institutional

Ownership has

a negative and

significant

effect on the

company’s

going concern

audit opinion.

Independent

commissioners,

has positive and

non-

significance

effect on the

company’s

going concern

audit opinion.

Managerial

ownership and

Corporate

Governance

Committee has

negative and

non-significant

effect on the

company’s

going concern

audit opinion.

24

II.3. Theoretical Framework

The research is done to investigate the influence of corporate governance

using the proxies Institutional Ownership, Managerial Ownership, Independent

commissioners, and audit committee, for the companies which is listed in IDX in

getting the going concern audit opinion. The theoretical framework of the research

is shown below.

II.4. Hypotheses

II.4.1. Proportion of Institutional Ownership

Agency theory explained there is authority delegation from principal to

agent in order to run the company. In Addition, there is principal interest to gain

more return from its investation. Because of that, the principal need to monitor the

activities and the process of management to take a decision and have in line with

each of the interest.

As for institutional ownership, earlier findings were consistent with Bushee et.al

(2014) in Journal of Management Accounting Research Vol.26, No.2 (2014)

(pp.123-149), investigate the association between total institutional ownership and

firms’ corporate governance mechanisms. Despite a number of potential

Audit Opinion

Going Concern

H2

H1

H3

Independent Variable Dependent Variable

Institutional Ownership

Managerial Ownership

Independent Commissioners

Audit Committee H4

Figure 2. 3

Research Model

25

incentives that institutional investors have to tilt their portfolios toward firms with

“better” governance mechanism, Bushee et. al (2014) find little evidence of an

association between total institutional ownership and corporate governance. There

is weak evidence that firms “better” board characteristics have higher levels of

total institutional ownership, but they find no association between shareholder

rights and total institutional ownership. Given the lack of an overall relation, they

identify institutions that exhibit strong revealed preferences for governance

mechanism to provide stylized facts on the proportion, influence, and

characteristics of institutional investors that are sensitive to governance in their

investment decisions and monitoring activities

Therefore, the resulted hypothesis:

H1: The proportion of institutional ownership negatively influences the

company’s going concern audit opinion.

II.4.2. Proportion of Managerial Ownership

According to Agency Theory, there are conflict of interest between the

principal and the agent. In order to overcome agency problem, there is a need of

incentive mechanism to motivate the management to act according to principal’s

interest, means managerial ownership. Managerial ownership is a total of share

own by management from overall shares managed by company. If there is a

bigger proportion of managerial ownership, the agency problem can be decreased

so, the auditor highly chance to give audit opinion going concern become smaller.

Iskandar et. al (2011) in Adjani and Rahardja (2013) found that the management

equity ownership has a negative significant relationship with going concern.

There is capsize relationship between managerial ownership with going concern

problems that can be represent going concern opinion. This research is in line with

Linoputri (2010) in Adjani and Rahardja (2013) which is explain the increasing of

managerial ownership will make auditor give audit opinion non going concern.

Thus, the second hypothesis is:

H2: The proportion of managerial ownership negatively influences the

company’s going concern audit opinion.

26

II.4.3. Proportion of Independent Commissioners

Based on Agency theory, there are conflict of interest between the

principal and the agent, so it need supervisor to monitor it from the Independent

party or Independence commissioners. Independence commissioners will monitor

the management to make sure the management act according the principal interest.

According to empirical study by Setiawan (2011) in Adjani and Rahardja (2013),

there is negative influence from independence commissioners to company’s audit

opinion going concern. Followed by Iskandar et al., (2011) in Adjani and

Rahardja (2013) stated that the commissioners proportion has negative influence

to company’s audit opinion going concern. The bigger proportion of

independence commissioners will give better monitoring action so, the auditor

highly chance to give audit opinion going concern become smaller. Therefore,

based on the explanation, the conclusion for the third hypotheses is:

H3: The proportion of independent commissioners negatively influences

the company’s going concern audit opinion.

II.4.4. Audit Committee

Ramadhany (2004) in Sulistya and Sukahrta (2013) state the independent

Audit Committee will minimize the management pressure to get unqualified

opinion when the auditor feels right to give going concern audit opinion. So, the

bigger proportion of audit committee, the smaller probability for company to get

going concern audit opinion. The research done by Carcello and Neal (2000) in

Sulistya and Sukartha (2013) state about the presence of inside and grey director

(commissioner/ director from management) will minimize the probability from

auditor to give going concern audit opinion especially for the company that has a

financial problem even the company has audit committee.

Al-Khabash (2008) in Zureigat et. al. (2014) revealed that the level of corporate

governance is low particularly with the lack of an audit committee. In Ravyanda

(2015), the audit committee has negative influence for auditor to asses, give, and

evaluate the company in getting going concern audit opinion.

H4: The Audit Committee negative influences the company going

concern audit opinion.

27

CHAPTER III

RESEARCH METHODOLOGY

III.1. Research Method

The researcher use quantitative method with the hypotheses that aim to

test the influence of corporate governance with Institutional Ownership,

Managerial Ownership, Independent commissioners, and Audit Committee as the

proxy against the granting of the audit opinion of going concern. The purpose of

quantitative research is to develop the theories and hypotheses by using

mathematical method. There are measurement process which is will provide the

fundamental relationship between empirical observation and mathematical

expression of quantitative relationships.

III.2. Operational Definition

III.2.1. Dependent Variable

The dependent variable for this study is Going Concern Opinion (GCO).

The dependent variable is measured by using dummy variable. Code 1 for audit

opinion going concern, while code 0 is for audit opinion non-going concern. The

purpose why the researcher use dummy variables is to quantified the qualitative

variables which is in this research is the going concern audit opinion. Variable

dummy only has two values, 1 and 0.

The going concern opinion is restricted on unqualified opinion with explanatory

paragraph. The explanatory paragraphs in going concern opinion emphasizes the

auditor’s judgement regarding the significant uncertainty in company’s ability to

run its operations for the future. In other side, the non-going concern audit opinion

is limited only in unqualified opinion without explanatory paragraph (clean

opinion). Researcher give limitation on the variables to get more proportional

sample to be analyzed.

28

III.2.2. Independent Variable

This study has four independent variables that are tested on the acceptance

of going concern audit opinion by the company. The four independent variables

are:

a. Institutional Ownership (Ins_Own)

In this study, institutional ownership is represented by the largest

percentage of shares owned by an institution. Institutional ownership can

be calculated by using the total percentage of the share that owned by

shareholders institution from overall share that being issued. The

institution can be government, domestic institution, or any outside country

institution.

b. Managerial Ownership (Man_Own)

The managerial ownership is resulted from the sum of percentage of share

owned by the members of the board of directors and commissioners.

c. Proportion of Independent Commissioner (Ind_Com)

Independence Commissioner proportion can be calculate by using the

percentage of the number of independent commissioner from the total size

of the board members in the company. According to KEP-362/BEJ/06-

2000 on July 1 2000 stated that the requirement total minimum of

Independence Commissioners is 30% of the total of Board of

Commissioners.

d. Audit Committee

The presence of Audit committee can be calculated by the total of audit

committee in board of committee divided by the total of board of

committee in the company.

Table 3. 1

Research Variable and Measurement

Variable Measure Scale

Dependent

GCO

Opinion issued by Public

Accountant

Nominal Scale:

Going Concern Opinion =1

Non Going concern Opinion =

0

29

Independent

INS_OWN

Proportion ownership by

institutional shareholder Ratio

MAN_OWN Proportion of ownership

by managerial shareholder Ratio

IND_COM Proportion of Independent

Commissioner in Board of

Commissioner

Ratio

AU_COM Proportion of Audit

Committee in Board of

Commissioner

Ratio

The statistical analysis of this research in order to test the hypothesis is

using logistic regression. Performed by SPPS for Windows version 22.0.

III.3. Research Instrument

Documentation method is used as a data collection method. The data

collection, which is a secondary data, is performed directly by quoting or

recording data from annual reports, financial statements, and websites of

researched company. The data are financial and non-financial information which

are presented in company’s annual report and audited financial statements. The

data is obtained from:

1. Financial statements and annual reports of listed manufacturing in basic

industry (real sector) companies for years 2010-2014.

2. Access of IDX website (www.idx.co.id) and www.sahamok.com.

3. Website of the firms.

III.4. Sampling Design

This study use purposive sampling. The sample of research is listed

manufacture companies specialized at basic industry at Indonesia Stock

Exchange. The researcher use basic industry as the sample because of the data

completion and information consistency. In manufacture especially basic industry,

it has met the certain requirement of the SPSS which is minimum of 25 samples.

30

At this point, the researcher also found several samples with additional paragraph

regarding going concern.

Purposive sampling, also known as judgmental, selective or subjective

sampling, is a type of non-probability sampling technique.

The condition that necessary to make a company as the sample are:

1. The company is listed at Indonesia Stock Exchange and run the business in

the real sectors for the years 2010-2014.

2. The company issues financial statements and annual reports that have been

audited includes auditor’s opinion especially for going concern audit

opinion for the year 2010-2014 respectively.

3. The annual report that disclose company’s Corporate Governance

information. This information are the composition of shareholder, the

board of commissioners, independent commissioners, and audit committee

within the company. The sampling process can be seen in Table 3.1 below:

Table 3. 2

Sampling Process

Description Number of

Companies

Companies which run business in manufacturing sector

specialize in basic industry (Real sector) and listed as of 31

December 2014

68

Data is incomplete (28)

Number of Samples 39

The number of samples for 5 years research (2010-2014) 195

Manufacturing companies focused in basic industry which are listed in the

Indonesia Stock Exchange since 2010-2014 are 68 companies. Several companies

are exclude from the list of the sample because do not meet the criteria of

sampling. From the table, 28 companies do not have complete data. Number of

sample 5 years is 195.

31

III.5. Data Analysis

III.5.1. Descriptive Statistics

In research, descriptive is important to give a simple explanation of our

research. As an addition, with descriptive statistics will easier the reader to read

the summary of the research. The function of descriptive statistic to give a

description of the data that is shown by mean, standard deviation, variant,

maximum, minimum, sum, range, qurtois, and skewness.

Descriptive statistics is used to describe the research’s variables. This research use

descriptive statistics which is consist of Maximum value, Minimum value, mean,

and standard deviation of each variable that will be used (Ghozali, 2005).

Descriptive statistic is the method related with gathering and presentation of the

data with quantitative value use variable, statistics, distribution, and graphic,

without probability formula (Walpole, 1993; Correa-Prisant, 2000; Dodge, 2006).

III.5.2. Logistic Regression

In this research, the test and hypotheses are using logistic regression to test

if the probability happen in dependent variable can be predicted by the

independent variable (Ghozali, 2005). The researcher uses logistic regression

because the independent variable is the combination of metric and non metric

(nominal).

Logistic Regression did not use normality test and classic assumption test

(Ghozali, 2007:225). Also, Logistic Regression not use heteroscedasity which is

the dependent variable not use heteroscedasity for each independent variable

(Gujarati, 2003, in Sutedja et al., 2010).

This study use Logistic Regression model with the analysis equation as below:

𝐿𝑛 𝐺𝐶

𝐺𝐶 − 1=∝ + 𝛽1IN_COMM + 𝛽2MAN_OWN + 𝛽3𝐼NST_OWN

+ 𝛽4AU_COM + 𝑒

Where:

32

𝐿𝑛 𝐺𝐶

𝐺𝐶 − 1

Audit Opinion, are audit opinion going concern (the value of

1) and audit opinion non-going concern (the value of 0).

∝ Constanta

IND_COMM The percentage of Independent Commissioners from the

total of Board of Commissioners.

MAN_OWN Proportion of share that own by Board of Management.

INST_OWN Share percentage that is owned by the institution from

overall modal share that being issued.

AU_COM The percentage of Audit Committee from the total of Board

of Commissioner.

𝑒 Error

Hypotheses testing use logistic regression analysis because in the research the

dependent variable is measures by dummy variable so, the researcher choose

logistic regression to test the influence of the 4 independent variables which are:

Independent Commissioner, Managerial Ownership, Institutional Ownership, and

Audit Committee through going concern opinion.

III.5.2.1. Hosmer and Lemeshow’s Goodness of fit test

The feasibility of regression model evaluated by Hosmer and Lemeshow’s

which is show the capability of the model to explain the data.

The hypotheses to assess the feasibility of the model is:

H0 : There is no disparity between the model with the data

Ha : There is disparity between the model with the data

If the Hosmer and Lemeshow statistic same with or less than 0.05, H0 rejected.

Then, if the value is more than 0.05 H0 is cannot be rejected and the model can

predict the observation value or the model is accepted because it is corresponds

with the observation data. (Ghozali, 2005).

III.5.2.2.Assessing the Overall model (Overall Model Fit)

The first analysis is asses the overall model toward the data. The

hypotheses to assess the model fit are:

H0: The hypotheses Model is fit with the data

33

Ha: The hypotheses Model is not fit with the data

From the hypotheses if the model fit the data, H0 must be accepted or Ha must

rejected. Statistic used that based on Likelihood (L) of the model is the probability

of the model represent the inputted data. To test the null hypotheses and

alternative hypotheses, L is transformed to -2LogL. With alpha 5%, to assess the

model fit is:

If -2LogL < 0,05, H0 rejected and Ha accepted, it means the model is fit

with the data.

If -2LogL > 0,05, H0 accepted and Ha rejected, it means the model is not

fit with data.

The reduction value of -2 Log Likelihood (-2LL) between Block No. 0 with Block

No. 1 show the hypotheses’ model is fit with the data (Ghozali, 2005). If there is a

decreasing of Log Likelihood, it means a good regression model.

III.5.2.3.Coefficient Determination (R2)

Cox and Snell's R2 is a measures that imitates the coefficient of

determination (R2) in multiple regression that use likelihood estimation technique

with maximum value less than 1. Nagelkerke's R2 is coefficient Cox and Snell's

R2 modification to ensure the value is between 0 and 1. To ensure the value, it can

divided the Cox and Snell's R2 value with the maximum value. The researcher did

this test to find out how capable the independent variable’s variability to clarify

the dependent variable’s variability (Ghozali 2007:233).

III.5.2.4. Classification Table

Classification table show the prediction power of the regression model to

predict the probability of the auditor to give going concern audit opinion. Form

the column, there are two value prediction of variable dependent which are going

concern audit opinion (1) and non-going concern audit opinion (0). From the row

section show the real observation of dependent variable which are going concern

audit opinion (1) and non-going concern audit opinion (0).

34

III.5.2.5. Hypotheses Test

The hypothesis testing is done with logistic regression. Assessing the

hypotheses in this research are:

H0: Variable Independent has no significant influence in giving going

concern audit opinion.

Ha: Variable Independent has significant influence in giving going concern

audit opinion.

The criteria to take the conclusion are:

If the t significant value < 0, 05, H0 rejected, Ha accepted.

If the t significant value > 0, 05, H0 accepted, Ha rejected.

The hypotheses testing is done by compare the probability value (sig). if the

significant value less than 0,05, the regression coefficient is significant at the level

of 5% which is mean reject H0 and accept Ha. It means the independent variable

has significant influence to dependent variable.

III.5.3. Hypotheses Testing

The data that has been obtained from the annual financial reports of the

company is being processed and calculated on Microsoft Excel before it is

analyzed by statistics software IBM Statistical Package for Social Science (SPSS)

version 22. SPSS is a software package used for statistical analysis that is use by

researches to manage and calculate a wide variety of statistics. In this research,

SPSS is to used to analyze descriptive statistics, binary logistics, and, hypotheses

testing.

III.5.3.1. F-Statistical Testing

In Ayudia (2014) F Statistic Test show whether the independent variables

includes in the model have a simultaneous influence on dependent variable

(Ghozali, 2006). The testing steps are as follows:

1. Formulate hypothesis

H0: b1 = b2 = b3 = 0 means there is no effect of the independent variables

(X1, X2, X3, X4) to the dependent variable (Y).

2. Basis for decision making

35

If the probability > 0.05, then H0 is accepted means no effect

If the probability < 0.05, then H0 is rejected means influential

If the F-count ≥ F-table, then H0 is rejected means influential

If the F-count ≤ F-table, then H0 is accepted, it means no effect

III.5.3.2. Coefficient of Determination Test

R squared (R2) is a statistic that will give information regarding the

goodness of fit of a model. In regression, the R2 coefficient of determination is a

statistical measure of how well the regression line approximates the real data

points. Value of 1 in R2 indicates that the regression line perfectly fits the data.

36

CHAPTER IV

ANALYSIS OF DATA AND INTREPRETATION OF

RESULTS

IV.1. Research Sample Data

This chapter show the statistical analysis perform by SPSS to know the

effect of institutional ownership, managerial ownership, independent

commissioners, and audit committee on company’s going concern audit opinion

in the real sector of manufacturers (basic industry) that listed at Indonesia Stock

Exchange from 2010 to 2014. The study conducted on 195 audited financial

statements and annual reports. Sampling method used is purposive sampling.

IV.2. Data Analysis

IV.2.1. Descriptive Analysis

Before the samples are being analyzed, the object of descriptive research

will appear in the table 4.1 below:

Table 4. 1

Descriptive Statistics

Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

GCO 195 0 1 .05 .221

INS_OWN 195 .22 .96 .6716 .14887

MAN_OWN 195 .00 .26 .0142 .05005

IND_COM 195 .25 .67 .3849 .08426

AU_COM 195 .33 1.50 .8024 .28374

Valid N (listwise) 195

Source: Constructed on SPSS 22 (2016).

Companies that received going concern audit opinion were 10 companies

in the past 5 years, or an average number of 5% each year. The result of the

analysis by descriptive statistics show the average proportion of shares held by

Institutional Ownership by 67%. This results demonstrate the high level of

concentration of institutional ownership in Indonesia. The average percentage of

37

Managerial Ownership is 1.4%, which is show the low percentage of share owned

by the management.

Then, descriptive statistics shows the average percentage of Independent

Commissioners in the company by 38.5%, which is shows the number of

independent commissioners in companies already comply with Securities and

Exchange Commission (BAPEPAM). As the theory told before, the minimum

percentage requirement of independent commissioners is by 30%. The number of

companies which has Audit Committee is 80% from the sample population. It

indicates the high presence of Audit committee in the companies.

IV.2.2. Logistic Regression

IV.2.2.1. Hosmer and Lemeshow Goodness of Fit Test

Testing the logistic regression model feasibility can be done by Hosmer

and Lemeshow Goodness of Fit Test which is measure by Chi-Square.

Significance probabilities that are obtain can be compared with the level of

significance ɑ 0.05%. Hypotheses to assess the feasibility of the regression model

are:

H0: Model can explain the data.

Ha: Model cannot explain the data.

Reject H0 if significant value < 0.05

Table 4. 2

Hosmer and Lemeshow Test

Hosmer and Lemeshow Test

Step Chi-square df Sig.

1 5.753 8 .675

Source: Constructed on SPSS 22 (2016).

If the value of significant is greater than 0.05, the model can be accepted because

it is appropriate for the result. From the table 4.2, the significant value is 0.675

which is greater than 0.05. Thus, the model can be approved. With assurance of

67.5%, the logistic regression model can explain the data.

38

IV.2.2.2. Overall Model Fit Test

Overall Model Fit is to assess if the model used in this research in

accordance with the observed data. In the overall model fit, there are some

measures used. The measurers and its result is below.

Table 4. 3

Overall Model Fit

Measurement Result

-2 Log Likelihood 1 78.886

-2 Log Likelihood 2 42.282

Cox and Snell’s R2 0.171

Nagelkerke’s R 0.514

Classification Table 96.9%

Hosmer and Lemeshow’s Goodness of Fit 67.5%

The result of SPSS provides two values -2 Log Likelihood. The first model is only

includes the Constant which is 96.069 (table 4.4). The second model with -2 log

likelihood value for the model with constant and independent variables 42.600

(table 4.5).

Table 4. 4

-2 Log Likelihood 1

Iteration Historya,b,c

Iteration -2 Log likelihood

Coefficients

Constant

Step 0 1 95.843 -1.795

2 80.394 -2.541

3 78.916 -2.862

4 78.886 -2.916

5 78.886 -2.918

6 78.886 -2.918

a. Constant is included in the model.

b. Initial -2 Log Likelihood: 78.886

c. Estimation terminated at iteration number 6 because

parameter estimates changed by less than .001.

Source: Constructed on SPSS 22 (2016).

39

Table 4. 5

-2 Log Likelihood 2

Iteration Historya,b,c,d

Iteration

-2 Log

likelihood

Coefficients

Constant INS_OWN MAN_OWN IND_COM AU_COM

Step 1 1 87.857 -1.201 -1.105 -.083 2.023 -.784

2 61.482 -1.112 -2.702 -.531 4.969 -2.075

3 50.367 -.470 -4.503 -3.187 8.263 -4.020

4 44.964 .851 -6.359 -12.349 10.324 -6.278

5 42.858 2.860 -8.361 -26.843 10.440 -8.261

6 42.414 4.270 -9.561 -40.009 9.782 -9.337

7 42.346 4.602 -9.846 -50.959 9.582 -9.563

8 42.321 4.602 -9.841 -62.266 9.579 -9.565

9 42.308 4.584 -9.820 -76.803 9.585 -9.555

10 42.297 4.562 -9.794 -100.982 9.592 -9.543

11 42.289 4.538 -9.766 -145.499 9.600 -9.530

12 42.284 4.534 -9.761 -197.310 9.601 -9.527

13 42.283 4.533 -9.761 -250.359 9.601 -9.527

14 42.282 4.533 -9.761 -305.315 9.601 -9.527

15 42.282 4.533 -9.761 -363.314 9.601 -9.526

16 42.282 4.533 -9.761 -426.003 9.601 -9.526

17 42.282 4.533 -9.761 -495.450 9.601 -9.526

18 42.282 4.533 -9.761 -573.468 9.601 -9.526

19 42.282 4.533 -9.761 -660.245 9.601 -9.526

20 42.282 4.533 -9.761 -753.686 9.601 -9.526

a. Method: Enter

b. Constant is included in the model.

c. Initial -2 Log Likelihood: 78.886

d. Estimation terminated at iteration number 20 because maximum iterations has been reached. Final solution

cannot be found.

Source: Constructed on SPSS 22 (2016).

40

The decreasing of -2 Log Likelihood 1 and -2 Log Likelihood 2 with the result of

36.605, also can be seen in Omnibus Test of Model Coefficient in table 4.5 below.

Table 4. 6

Omnibus Test

Omnibus Tests of Model Coefficients

Chi-square df Sig.

Step 1 Step 36.605 4 .000

Block 36.605 4 .000

Model 36.605 4 .000

Source: Constructed on SPSS 22 (2016).

The decrease in this -2LL values show a good regression model or in other words,

the hypothesized model fits the data. On the table above, researcher obtained

significant value of 0.000, which is smaller than alpha 0.05. it means, the

independent variable (Institutional Ownership, Managerial Ownership,

Independent Commissioner, and Audit Committee) influence the dependent

variable (Going Concern audit opinion).

IV.2.2.3. Classification Table

Classification table is use to determine the predictive power of the regression

model to predict the probability of going concern audit opinion which is show by

percentage. The classification table shows the probability that the company which

received going concern audit opinion is amounted to 50%. So, by using regression

model there are 5 companies are expected to receive going concern audit opinion

from the total of 10 companies that received going concern audit inion. The result

form SPSS from table 4.7 show the classification’s correctness by 96.9% based on

the model.

41

Table 4. 7

Classification Table

Classification Tablea

Observed

Predicted

GCO Percentage

Correct

0 1

Step 1 GCO 0 184 1 99.5

1 5 5 50.0

Overall Percentage 96.9

a. The cut value is .500

Source: Constructed on SPSS 22 (2016).

IV.3. Hypotheses Test

IV.3.1. F-Statistical Test

The F Statistic Test is used to test whether all independent variables are

significantly influencing the dependent variable simultaneously.

H0: b1 = b2 = b3 = b4 = 0

Company’s corporate governance, institutional ownership,

managerial ownership, independent commissioner, and audit

committee simultaneously do not influence the probability of going

concern audit opinion acceptance.

Ha: b1 ≠ b2 ≠ b3 ≠ b4 ≠ 0

Company’s corporate governance, institutional ownership,

managerial ownership, independent commissioner, and audit

committee simultaneously influence the probability of going

concern audit opinion acceptance.

42

Table 4. 8

Simultaneous Test Results

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1 Regression 1.328 4 .332 7.730 .000b

Residual 8.159 190 .043

Total 9.487 194

a. Dependent Variable: GCO

b. Predictors: (Constant), AU_COM, MAN_OWN, IND_COM, INS_OWN

From the regression test result in table 4.9 above, the value of F-count is

amounted 7.730 > F-table of 2.42 with the p-value of 0.000 which is smaller than

0.05, then H0 is rejected. It means that when the company’s corporate governance

with institutional ownership, managerial ownership, independent commissioner,

and audit committee as the proxy are being tested simultaneously will

significantly influence the probability on acceptance of the going concern audit

opinion.

IV.3.2. Coefficient of Determination (Nagelkerke R2)

Table 4. 9

Cox and Snell R2 and Nagelkerke’s R

2

Model Summary

Step -2 Log likelihood

Cox & Snell R

Square

Nagelkerke R

Square

1 42.282a .171 .514

a. Estimation terminated at iteration number 20 because maximum

iterations has been reached. Final solution cannot be found.

From SPSS output value (table 4.6) of Cox and Snell R2 with 0.171 and

Nagelkerke’s R2

with the value of 0.51. It means, the variability of dependent

variable can be explained by the independent variable is equal to 51.4%, while the

remaining 48.6% is explained by other variables such as the change of auditors,

financial condition, and others.

43

IV.3.3. Variables in the Equation

Table 4. 10

Hypotheses Testing

Variables in the Equation

B S.E. Wald df Sig. Exp(B)

Step 1a INS_OWN -9.761 4.685 4.341 1 .037 .000

MAN_OWN -753.686 95707.385 .000 1 .994 .000

IND_COM 9.601 7.279 1.740 1 .187 14778.538

AU_COM -9.526 3.439 7.673 1 .006 .000

Constant 4.533 4.336 1.093 1 .296 93.065

a. Variable(s) entered on step 1: INS_OWN, MAN_OWN, IND_COM, AU_COM.

Hypotheses Testing

𝐿𝑛 𝐺𝐶

𝐺𝐶 − 1= 4.533 − 9.761 𝐼𝑁𝑆 𝑂𝑊𝑁 − 753.686 𝑀𝐴𝑁 𝑂𝑊𝑁

+ 9.601 𝐼𝑁𝐷 𝐶𝑂𝑀 − 9.526 𝐴𝑈 𝐶𝑂𝑀 + 𝑒

The variables of Institutional Ownership shows the regression coefficient

amounted to -9.761 with the probability of 0.037 < 0.05 which means that the

Institutional Ownership affects significantly to the provision of going concern

audit opinion. For Managerial Ownership result, it show the regression coefficient

amounted to -753.686 with the probability of 0.994 > 0.05 which means that the

Managerial Ownership does not has a significance effect on the provision going

concern audit opinion. Another proxy of corporate governance, Independent

Commissioner has significance of 9.061 with the probability of 0.187 > 0.05

which means that the Independent Commissioner does not has a significant effect

on the provision going concern audit opinion. The variable of Audit Committee

shows the regression coefficient of -9.526 and probability of 0.006 > 0.005 which

means that for Audit Committee does not significantly affect the provision of

going concern audit opinion.

44

IV.4. Interpretation of Results

IV.4.1. Hypotheses Test 1

H1: The proportion of institutional ownership negatively influences the

company’s going concern audit opinion.

The first hypotheses aim to test whether the institutional ownership

negatively influences on the company’s going concern audit opinion. The result

on Table 4.8 shows for the hypotheses 1 for the variables institutional

ownership (INS_OWN) produces p-value with significant number 0.037 with the

variable coefficient is -9.761. Thus, it can be concluded that institutional

ownership has value less than ɑ = 0.05 and the hypotheses is accepted. The result

shows Institutional Ownership significantly has negative influence the company’s

going concern audit opinion.

The result is in line with Hartas (2012) which is has negative beta with coefficient

less than ɑ = 0.05. With a bigger proportion of company’ institutional ownership

can give pressure for management to maintain the financial condition. At this

point, institutional ownership is expected to monitor the decision taken my

management to prevent the bankruptcy. The company with bigger institutional

ownership will minimize the probability in getting going concern audit opinion.

This result also in line with Triputra (2013) where the significance is 0.02 which

is less than ɑ = 0.05. it describes that institutional ownership in the company is

one of the factor that influence company to avoid the risk of not being able to

stay in business. In Triputra (2013) predicts the share ownership structure’s effect

to capital structure. The more concentrated share ownership, companies tend to

reduce the debt when need the working capital. Working capital requirements is

derived from institutional owners with equity instead of debt or any loan. The

management will be more cautious in borrowing, because if the amount of debt is

too high, it will lead to the risk which is financial distress that can affect the going

concern of the company. The increase of capital by institutional owners will also

45

affect to the effectiveness control of management in using the capital from

institutional owners.

IV.4.2. Hypotheses Test 2

H2: The proportion of managerial ownership negatively influences the

company’s going concern audit opinion.

The second hypotheses aim to test whether the managerial ownership

negatively influences on the company’s going concern audit opinion. The result

on Table 4.8 shows for the hypotheses 2 for the variables managerial ownership

(MAN_OWN) produces p-value with significant number 0.994 and variable

coefficient is -753.686. Thus, it can be concluded that institutional ownership has

value greater than ɑ = 0.05 and the hypotheses is rejected. The result shows

Managerial Ownership does not significantly influences the company’s going

concern audit opinion.

The result shown by Hartas (2011) also indicate that the managerial ownership

has negative effects on the company’s going concern audit opinion. In line with

agency theory, human only priority their self-interest and ignore other people

interest so, the manager as a human will act opportunistically to priority its

interest and ignore other interest. Management which has bigger share in the

company has tendency to expropriation (seizure of private party for the state’s

purposes, with little or no compensation to the property’s owner) the company

asset for self interest (Febrianto, 2011).

The result is in line with Januarti (2008) in Triputra (2013). Managerial ownership

does not effect on the acceptance of going concern audit opinion. Although

managerial ownership apparently has a control function through the mechanism of

managerial ownership, it does not give guarantee for not accepting going concern

audit opinion. In addition, due to the low percentage of the average managerial

ownership which is equal to 1.4% is unable to motivate the manager to improve

the performance of the company.

46

IV.4.3. Hypotheses Test 3

H3: The proportion of independent commissioners negatively influences

the company’s going concern audit opinion.

The third hypotheses aim to test whether the independent commissioner

negatively influences on the company’s going concern audit opinion. The result

on Table 4.8 shows for the hypotheses 3 for the variables independent

commissioner (IND_COM) produces p-value with significant number 0.187 and

positive variable coefficient is 9.601. Thus, it can be concluded that Independent

Commissioner has value greater than ɑ = 0.05 and the hypotheses is rejected. The

result shows Independent Commissioner does not significantly influences the

company’s going concern audit opinion.

The proportion of Independent commissioner in the company is not significantly

dominant. As the result, independent commissioner role in taking decision is not

had an effect. In addition, the presence of independent commissioner is just to

fulfill the requirement in the regulation and ending with not fulfill its purpose.

Arief Effendy (2008) state there is constraint in independent commissioner which

are weak competency and integrity. Also, maybe its presence only for the reward

because of family or acquaintance relationship (in Hartas 2011).

There is no significantly influences between Independet Commissioner with going

concern opinion. The research that has been done by Sulistya and Sukharta (2013)

also prove it. Based on Peraturan Bapepam LK no. IX.1.5 state that company has

at least one Independent Commissioner. As the result from observation, the

proportion of independent commissioner has no influence in amelioration of

company financial condition.

In Ravyanda (2015) state that the institutional party only controlling and

managing the management action and not the independent auditor in giving going

concern audit opinion. From Triputra (2013) state about the regulation requires

minimum number of Independent Commissioner is 30% of the number of the

Board of Commissioners. This regulation enables the different practice in

47

fieldwork. The company can have only one independent and two non-independent

boards of commissioner that make the independent commissioner cannot perform

its function properly because he/she works alone.

Sylvia and Sidharta (2005) in Triputra (2013) state that the appointment of an

independence board of commissioner can only done by the company to meet with

the required regulations but it is not intended to enforce Good Corporate

Governance (GCG) in the company. This condition is also confirmed by the

survey result from Boediono Gideon (2005) that stated the strong control of the

company’s founder and majority shareholders makes the commissioner is not

being independent. The control function which is the responsibility of the board of

commissioner becomes ineffective. the existence of independent commissioner is

unable to increase the effectiveness of the monitoring action which is carried out

by the commissioner.

IV.4.4. Hypotheses Test 4

H4: The Audit Committee negative influences the company going

concern audit opinion.

The fourth hypotheses aim to test whether the audit committee negatively

influences on the company’s going concern audit opinion. The result on Table 4.8

shows for the hypotheses 4 for the variables audit committee (AU_COM)

produces p-value with significant number 0.06 and negative variable coefficient is

-9.526. Thus, it can be concluded that Audit Committee has value greater than ɑ =

0.05 and the hypotheses is rejected. The result shows Audit Committee is not

significantly influences the company’s going concern audit opinion.

The result from calculation is in line with Ravyanda (2015) which is state that

audit committee in the company did not influence independent auditor in evaluate

and giving going concern audit opinion.

The research that has been done by Sulistya and Sukartha (2013) also in line with

Ravyanda (2015). It can be happen because the audit committee responsibility is

48

directly for board of commissioner not for company management. As the result,

audit committee cannot directly involve in solving the company financial or

operational problem and cannot directly do the corrective action if there are any

deviations in the company.

49

CHAPTER V

CONCLUSION AND RECOMMENDATION

V.1 Conclusion

In this final chapter of the research, the researches draw the conclusion and

recommendation. The study is conducted empirically to examines the influences

of corporate governance on the company’s going concern audit opinion by the

auditor specifically for manufacture (basic industry) that are listed in IDX for

2010-2014 period. There are four independent variables in this study to test the

company’s going concern audit opinion. The four independent variables are

institutional ownership, managerial ownership, proportion of independent

commissioners, and audit committee.

The results shows in this research are:

1 The proportion of institutional ownership is proven negatively

influences on the company’s going concern audit opinion. The

result likely due to the big proportion of institutional ownership in

the company which is will minimize the probability in getting

going concern audit opinion.

2 The proportion of managerial ownership is not significantly

influences the company’s going concern audit opinion. The result

likely because of self-interest nature and expropriation of the

management.

3 The proportion of independent commissioner is not significantly

influences the company’s going concern opinion. It can be from

the independent commissioner that is not dominant in the company

which is led to weak of competency

4 The presence of audit committee in the company is not

significantly influences the company’s going concern audit

opinion. The result may come because of audit committee

responsibility is directly for board of commissioner not the

management.

50

V.2 Recommendation

Based on conclusions and limitations, the researchers can give the

recommendation as follows:

1. For company’s management

The managerial ownership may want to evaluate its integrity. Because of

different interest, business activity and management can be interrupted.

The addition of the independent commissioner should not be a mere of

formality. Independent commissioner should be encouraged to participate

in taking decision. Audit committee is also a part of company so, it may

involve in solving the company financial or operational problem.

2. For investor

The investor may need to take a good look at auditor report especially if

there is an additional paragraph for going concern audit opinion. The

disclosure of going concern can influence the interest of investor to make

a decision to invest in certain company

3. For accountant

Accountant may discuss for the study regarding the audit opinion

especially in going concern audit opinion. Reference may be added from

auditor because there is no exact reason for company to get going

concern audit opinion.

4. For Theoretical and Academic purposes

The researches who are going to research in relation of audit opinion

topic of going concern opinion with corporate governance as the proxy

should add another variable such as family ownership or financial

variable to see from profitability point of view. In addition, the

researcher may asses the implementation effectiveness of corporate

governance. Furthermore, the data regarding the sample (especially

annual report) is not complete. The research may obtain the data at IDX

central office in Jakarta or visit the company. The data used in this

research is only limited to the information from company’ annual

financial report, the future researches are suggested to gather information

from more various sources outside companies’ annual financial reports

51

for more coverage on other aspects of companies’ ability in going

concern.

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APPENDICES

GET

FILE='C:\Users\shierly\Desktop\PRESIDENT\Semester 10\SPSS\EDIT\Sample.sav'.

DATASET NAME DataSet1 WINDOW=FRONT.

DESCRIPTIVES VARIABLES=GCO INS_OWN MAN_OWN IND_COM AU_COM

/STATISTICS=MEAN STDDEV MIN MAX.

Descriptives

[DataSet1] C:\Users\shierly\Desktop\PRESIDENT\Semester 10\SPSS\EDIT\Sample.sav

Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

GCO 195 0 1 .05 .221

INS_OWN 195 .22 .96 .6716 .14887

MAN_OWN 195 .00 .26 .0142 .05005

IND_COM 195 .25 .67 .3849 .08426

AU_COM 195 .33 1.50 .8024 .28374

Valid N (listwise) 195

LOGISTIC REGRESSION VARIABLES GCO

/METHOD=ENTER INS_OWN MAN_OWN IND_COM AU_COM

/CLASSPLOT

/PRINT=GOODFIT CORR ITER(1)

/CRITERIA=PIN(0.05) POUT(0.10) ITERATE(20) CUT(0.5).

Logistic Regression

Notes

Output Created 22-JAN-2016 03:05:21

Comments

Input Data C:\Users\shierly\Desktop\PRESIDENT\Semest

er 10\SPSS\EDIT\Sample.sav

Active Dataset DataSet1

Filter <none>

Weight <none>

Split File <none>

N of Rows in Working Data File 195

Missing Value Handling Definition of Missing User-defined missing values are treated as

missing

Syntax LOGISTIC REGRESSION VARIABLES

GCO

/METHOD=ENTER INS_OWN

MAN_OWN IND_COM AU_COM

/CLASSPLOT

/PRINT=GOODFIT CORR ITER(1)

/CRITERIA=PIN(0.05) POUT(0.10)

ITERATE(20) CUT(0.5).

Resources Processor Time 00:00:00.03

Elapsed Time 00:00:00.05

Case Processing Summary

Unweighted Casesa N Percent

Selected Cases Included in Analysis 195 100.0

Missing Cases 0 .0

Total 195 100.0

Unselected Cases 0 .0

Total 195 100.0

a. If weight is in effect, see classification table for the total number of cases.

Dependent Variable Encoding

Original Value Internal Value

0 0

1 1

Block 0: Beginning Block

Iteration Historya,b,c

Iteration -2 Log likelihood

Coefficients

Constant

Step 0 1 95.843 -1.795

2 80.394 -2.541

3 78.916 -2.862

4 78.886 -2.916

5 78.886 -2.918

6 78.886 -2.918

a. Constant is included in the model.

b. Initial -2 Log Likelihood: 78.886

c. Estimation terminated at iteration number 6 because

parameter estimates changed by less than .001.

Classification Tablea,b

Observed

Predicted

GCO

Percentage Correct

0 1

Step 0 GCO 0 185 0 100.0

1 10 0 .0

Overall Percentage 94.9

a. Constant is included in the model.

b. The cut value is .500

Variables in the Equation

B S.E. Wald df Sig. Exp(B)

Step 0 Constant -2.918 .325 80.768 1 .000 .054

Variables not in the Equation

Score df Sig.

Step 0 Variables INS_OWN 11.278 1 .001

MAN_OWN .847 1 .357

IND_COM 2.776 1 .096

AU_COM 15.975 1 .000

Overall Statistics 27.291 4 .000

Block 1: Method = Enter

Iteration Historya,b,c,d

Iteration

-2 Log

likelihood

Coefficients

Constant INS_OWN MAN_OWN IND_COM AU_COM

Step 1 1 87.857 -1.201 -1.105 -.083 2.023 -.784

2 61.482 -1.112 -2.702 -.531 4.969 -2.075

3 50.367 -.470 -4.503 -3.187 8.263 -4.020

4 44.964 .851 -6.359 -12.349 10.324 -6.278

5 42.858 2.860 -8.361 -26.843 10.440 -8.261

6 42.414 4.270 -9.561 -40.009 9.782 -9.337

7 42.346 4.602 -9.846 -50.959 9.582 -9.563

8 42.321 4.602 -9.841 -62.266 9.579 -9.565

9 42.308 4.584 -9.820 -76.803 9.585 -9.555

10 42.297 4.562 -9.794 -100.982 9.592 -9.543

11 42.289 4.538 -9.766 -145.499 9.600 -9.530

12 42.284 4.534 -9.761 -197.310 9.601 -9.527

13 42.283 4.533 -9.761 -250.359 9.601 -9.527

14 42.282 4.533 -9.761 -305.315 9.601 -9.527

15 42.282 4.533 -9.761 -363.314 9.601 -9.526

16 42.282 4.533 -9.761 -426.003 9.601 -9.526

17 42.282 4.533 -9.761 -495.450 9.601 -9.526

18 42.282 4.533 -9.761 -573.468 9.601 -9.526

19 42.282 4.533 -9.761 -660.245 9.601 -9.526

20 42.282 4.533 -9.761 -753.686 9.601 -9.526

a. Method: Enter

b. Constant is included in the model.

c. Initial -2 Log Likelihood: 78.886

d. Estimation terminated at iteration number 20 because maximum iterations has been reached. Final solution

cannot be found.

Omnibus Tests of Model Coefficients

Chi-square df Sig.

Step 1 Step 36.605 4 .000

Block 36.605 4 .000

Model 36.605 4 .000

Model Summary

Step -2 Log likelihood

Cox & Snell R

Square

Nagelkerke R

Square

1 42.282a .171 .514

a. Estimation terminated at iteration number 20 because maximum

iterations has been reached. Final solution cannot be found.

Hosmer and Lemeshow Test

Step Chi-square df Sig.

1 5.753 8 .675

Contingency Table for Hosmer and Lemeshow Test

GCO = 0 GCO = 1

Total Observed Expected Observed Expected

Step 1 1 20 20.000 0 .000 20

2 20 20.000 0 .000 20

3 20 19.998 0 .002 20

4 20 19.995 0 .005 20

5 20 19.980 0 .020 20

6 20 19.942 0 .058 20

7 21 21.646 1 .354 22

8 19 19.163 1 .837 20

9 21 18.287 0 2.713 21

10 4 5.989 8 6.011 12

Classification Tablea

Observed

Predicted

GCO

Percentage Correct

0 1

Step 1 GCO 0 184 1 99.5

1 5 5 50.0

Overall Percentage 96.9

a. The cut value is .500

Variables in the Equation

B S.E. Wald df Sig. Exp(B)

Step 1a INS_OWN -9.761 4.685 4.341 1 .037 .000

MAN_OWN -753.686 95707.385 .000 1 .994 .000

IND_COM 9.601 7.279 1.740 1 .187 14778.538

AU_COM -9.526 3.439 7.673 1 .006 .000

Constant 4.533 4.336 1.093 1 .296 93.065

a. Variable(s) entered on step 1: INS_OWN, MAN_OWN, IND_COM, AU_COM.

Correlation Matrix

Constant INS_OWN MAN_OWN IND_COM AU_COM

Step 1 Constant 1.000 -.505 .001 -.689 -.582

INS_OWN -.505 1.000 .000 -.144 .072

MAN_OWN .001 .000 1.000 .000 -.002

IND_COM -.689 -.144 .000 1.000 .218

AU_COM -.582 .072 -.002 .218 1.000

Step number: 1

Observed Groups and Predicted Probabilities

160 + + I I

I I

F I0 I R 120 +0 +

E I0 I

Q I0 I U I0 I

E 80 +0 + N I0 I

C I0 I

Y I0 I 40 +0 +

I0 I

I0 I I00000 I

Predicted ---------+---------+---------+---------+---------+---------+---------+---------+---------+----------

Prob: 0 .1 .2 .3 .4 .5 .6 .7 .8 .9 1 Group:

000000000000000000000000000000000000000000000000001111111111111111111111111111111111111111111111111

1

Predicted Probability is of Membership for 1

The Cut Value is .50 Symbols: 0 - 0

1 - 1

Each Symbol Represents 10 Cases.

Coefficientsa

Model

Unstandardized Coefficients

Standardized

Coefficients

t Sig. B Std. Error Beta

1 (Constant) .200 .090 2.206 .029

INS_OWN -.276 .108 -.186 -2.552 .011

MAN_OWN -.021 .302 -.005 -.069 .945

IND_COM .506 .181 .193 2.800 .006

AU_COM -.196 .057 -.251 -3.462 .001

a. Dependent Variable: GCO

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1 Regression 1.328 4 .332 7.730 .000b

Residual 8.159 190 .043

Total 9.487 194

a. Dependent Variable: GCO

b. Predictors: (Constant), AU_COM, MAN_OWN, IND_COM, INS_OWN

Manufacture – Basic Industry 2010

GCO INS_OWN MAN_OWN IND_COM AU_COMM

AKKU 0 0.65 0.01 0.50 1.50

ALKA 0 0.79 0.00 0.50 0.75

ALMI 0 0.72 0.02 0.40 0.60

AMFG 0 0.51 0.00 0.33 0.67

ASII 0 0.75 0.00 0.45 0.76

BRNA 0 0.22 0.11 0.29 0.56

BUDI 0 0.72 0.00 0.33 1.00

CPIN 0 0.74 0.00 0.40 1.00

CTBN 0 0.61 0.00 0.40 0.60

ETWA 0 0.66 0.00 0.33 1.00

FASW 0 0.52 0.00 0.33 1.00

FPNI 0 0.95 0.00 0.50 1.50

IGAR 0 0.79 0.00 0.33 1.00

INAI 0 0.63 0.00 0.40 0.60

INKP 1 0.48 0.00 0.44 0.33

INRU 0 0.91 0.00 0.50 0.75

INTP 0 0.51 0.00 0.43 0.43

IPOL 0 0.72 0.00 0.33 1.00

JPRS 0 0.89 0.16 0.50 1.50

KDSI 1 0.49 0.00 0.50 0.75

KIAS 0 0.69 0.00 0.33 0.50

KRAS 0 0.80 0.00 0.50 0.60

LION 0 0.69 0.00 0.33 1.00

LMSH 0 0.78 0.26 0.33 1.00

NIKL 0 0.50 0.00 0.33 0.67

SIAP 0 0.53 0.00 0.33 1.00

SIPD 0 0.69 0.00 0.67 1.33

SMCB 0 0.41 0.00 0.57 0.43

SMGR 0 0.51 0.00 0.40 0.60

SPMA 0 0.59 0.00 0.40 0.60

SRSN 0 0.68 0.00 0.33 0.56

SULI 0 0.66 0.00 0.40 0.60

TIRT 0 0.64 0.00 0.50 1.50

TKIM 0 0.60 0.00 0.43 0.43

TOTO 0 0.52 0.00 0.33 1.00

TPIA 0 0.78 0.00 0.33 0.50

TRST 0 0.65 0.00 0.33 1.00

UNIC 0 0.47 0.00 0.43 0.67

YPAS 0 0.89 0.00 0.33 1.00

Manufacture – Basic Industry 2011

GCO INS_OWN MAN_OWN IND_COM AU_COMM

AKKU 0 0.85 0.00 0.33 1.00

ALKA 0 0.79 0.00 0.50 0.75

ALMI 0 0.72 0.02 0.40 0.60

AMFG 0 0.51 0.00 0.33 0.67

ASII 0 0.75 0.00 0.45 0.36

BRNA 0 0.22 0.11 0.33 0.50

BUDI 0 0.71 0.00 0.33 1.00

CPIN 0 0.74 0.00 0.40 1.00

CTBN 0 0.73 0.00 0.40 0.60

ETWA 0 0.66 0.00 0.25 0.75

FASW 0 0.52 0.00 0.33 1.00

FPNI 0 0.95 0.00 0.50 1.00

IGAR 0 0.79 0.00 0.33 1.00

INAI 0 0.63 0.00 0.40 0.60

INKP 1 0.53 0.00 0.44 0.33

INRU 0 0.91 0.00 0.50 1.00

INTP 1 0.49 0.00 0.43 0.43

IPOL 0 0.72 0.00 0.33 1.00

JPRS 0 0.89 0.16 0.50 1.00

KDSI 0 0.49 0.00 0.50 1.50

KIAS 0 0.94 0.00 0.33 0.50

KRAS 0 0.80 0.00 0.40 0.60

LION 0 0.69 0.00 0.33 1.00

LMSH 0 0.78 0.26 0.33 1.00

NIKL 0 0.35 0.00 0.33 0.67

SIAP 0 0.53 0.00 0.33 1.00

SIPD 0 0.69 0.00 0.67 1.33

SMCB 1 0.41 0.00 0.43 0.57

SMGR 0 0.51 0.00 0.33 0.50

SPMA 0 0.59 0.00 0.40 0.60

SRSN 0 0.68 0.00 0.33 0.56

SULI 0 0.66 0.00 0.40 0.60

TIRT 0 0.64 0.00 0.50 1.50

TKIM 1 0.60 0.00 0.43 0.43

TOTO 0 0.52 0.00 0.33 0.75

TPIA 0 0.59 0.00 0.33 0.50

TRST 0 0.65 0.00 0.33 1.00

UNIC 0 0.47 0.00 0.33 0.50

YPAS 0 0.89 0.00 0.33 1.00

Manufacture – Basic Industry 2012

GCO INS_OWN MAN_OWN IND_COM AU_COMM

AKKU 0 0.85 0.00 0.33 1.50

ALKA 0 0.79 0.00 0.50 0.75

ALMI 0 0.72 0.02 0.40 0.60

AMFG 0 0.51 0.00 0.33 0.67

ASII 0 0.75 0.00 0.42 0.75

BRNA 0 0.51 0.10 0.29 0.56

BUDI 0 0.81 0.00 0.33 1.00

CPIN 0 0.74 0.00 0.40 1.00

CTBN 0 0.60 0.00 0.40 0.60

ETWA 0 0.66 0.00 0.25 0.75

FASW 0 0.52 0.00 0.33 1.00

FPNI 0 0.95 0.00 0.50 1.00

IGAR 0 0.79 0.00 0.33 1.00

INAI 0 0.63 0.00 0.40 0.60

INKP 1 0.53 0.00 0.44 0.33

INRU 0 0.91 0.00 0.50 0.75

INTP 0 0.51 0.00 0.43 0.53

IPOL 0 0.72 0.00 0.33 1.00

JPRS 0 0.89 0.16 0.50 1.00

KDSI 0 0.76 0.00 0.50 1.50

KIAS 0 0.96 0.00 0.33 0.50

KRAS 0 0.80 0.00 0.40 0.60

LION 0 0.69 0.00 0.33 1.00

LMSH 0 0.78 0.26 0.33 1.00

NIKL 0 0.35 0.00 0.33 0.67

SIAP 0 0.53 0.00 0.33 1.00

SIPD 0 0.69 0.00 0.67 1.33

SMCB 0 0.81 0.00 0.50 1.00

SMGR 0 0.51 0.00 0.50 0.67

SPMA 0 0.59 0.00 0.40 0.60

SRSN 0 0.68 0.00 0.33 0.75

SULI 0 0.66 0.00 0.40 0.60

TIRT 0 0.64 0.00 0.50 1.50

TKIM 0 0.60 0.00 0.43 0.56

TOTO 0 0.52 0.00 0.25 0.75

TPIA 1 0.59 0.00 0.29 0.71

TRST 0 0.65 0.00 0.33 1.00

UNIC 0 0.47 0.00 0.33 0.50

YPAS 0 0.89 0.00 0.33 1.00

Manufacture – Basic Industry 2013

GCO INS_OWN MAN_OWN IND_COM AU_COMM

AKKU 0 0.85 0.00 0.33 0.67

ALKA 0 0.80 0.00 0.25 0.75

ALMI 0 0.72 0.02 0.50 0.75

AMFG 0 0.51 0.00 0.33 0.67

ASII 0 0.75 0.00 0.30 0.75

BRNA 0 0.51 0.00 0.38 0.56

BUDI 0 0.81 0.00 0.33 1.00

CPIN 0 0.74 0.00 0.33 1.00

CTBN 0 0.60 0.00 0.33 0.50

ETWA 0 0.66 0.00 0.25 0.75

FASW 0 0.52 0.00 0.33 1.00

FPNI 0 0.95 0.00 0.33 1.00

IGAR 0 0.79 0.00 0.33 1.00

INAI 0 0.63 0.00 0.25 0.75

INKP 1 0.53 0.00 0.44 0.33

INRU 0 0.90 0.00 0.50 0.75

INTP 0 0.51 0.00 0.43 0.53

IPOL 0 0.72 0.00 0.33 1.00

JPRS 0 0.89 0.16 0.50 1.00

KDSI 0 0.76 0.00 0.50 1.50

KIAS 0 0.96 0.00 0.33 0.50

KRAS 0 0.80 0.00 0.40 0.67

LION 0 0.69 0.00 0.33 1.00

LMSH 0 0.78 0.26 0.33 1.00

NIKL 0 0.35 0.00 0.33 0.67

SIAP 0 0.53 0.00 0.33 1.00

SIPD 0 0.69 0.00 0.33 1.33

SMCB 0 0.81 0.00 0.50 0.50

SMGR 0 0.51 0.00 0.43 0.57

SPMA 0 0.59 0.00 0.40 0.60

SRSN 0 0.68 0.09 0.38 0.75

SULI 0 0.52 0.01 0.33 1.00

TIRT 0 0.64 0.00 0.33 1.00

TKIM 0 0.60 0.00 0.43 0.56

TOTO 0 0.52 0.00 0.25 0.75

TPIA 0 0.55 0.00 0.29 0.71

TRST 0 0.65 0.00 0.33 1.00

UNIC 0 0.47 0.00 0.33 0.50

YPAS 0 0.89 0.00 0.33 1.00

Manufacture – Basic Industry 2014

GCO INS_OWN MAN_OWN IND_COM AU_COMM

AKKU 0 0.77 0.00 0.33 1.00

ALKA 0 0.80 0.00 0.50 0.75

ALMI 0 0.72 0.02 0.50 0.75

AMFG 0 0.51 0.00 0.33 0.67

ASII 0 0.75 0.00 0.36 0.67

BRNA 0 0.51 0.00 0.29 0.43

BUDI 0 0.81 0.00 0.33 1.00

CPIN 0 0.74 0.00 0.33 0.83

CTBN 0 0.60 0.00 0.33 0.50

ETWA 0 0.66 0.00 0.25 0.75

FASW 0 0.51 0.00 0.40 0.60

FPNI 0 0.95 0.00 0.50 1.50

IGAR 0 0.79 0.00 0.33 1.00

INAI 0 0.65 0.00 0.50 0.75

INKP 1 0.53 0.00 0.44 0.33

INRU 0 0.90 0.00 0.50 0.75

INTP 0 0.51 0.00 0.43 0.43

IPOL 0 0.72 0.00 0.33 1.00

JPRS 0 0.89 0.16 0.50 1.00

KDSI 0 0.76 0.00 0.33 1.50

KIAS 0 0.96 0.00 0.33 0.50

KRAS 0 0.80 0.00 0.33 0.67

LION 0 0.69 0.00 0.33 1.00

LMSH 0 0.78 0.26 0.33 1.00

NIKL 0 0.55 0.00 0.33 0.67

SIAP 0 0.82 0.00 0.25 0.75

SIPD 0 0.69 0.00 0.67 1.00

SMCB 0 0.81 0.00 0.50 0.50

SMGR 0 0.56 0.00 0.29 0.57

SPMA 0 0.59 0.00 0.40 0.60

SRSN 0 0.68 0.12 0.38 0.63

SULI 0 0.53 0.01 0.33 1.00

TIRT 0 0.63 0.00 0.33 1.00

TKIM 0 0.60 0.00 0.43 0.57

TOTO 0 0.60 0.00 0.40 0.60

TPIA 0 0.55 0.00 0.29 0.71

TRST 0 0.65 0.00 0.50 0.50

UNIC 0 0.63 0.00 0.33 0.33

YPAS 0 0.89 0.00 0.33 0.67