Auditing Models for the Detection of Qualified Audit Opinions in the Uk Public Services Sector
International Journal of Accounting, Auditing and Performance Evaluation, Vol. 3, No. 4, pp. 471-493, 2006
Posted: 27 Jul 2006
Abstract
The present paper employs discriminant and logit analysis to develop classification models that could assist auditors during the examination of firms belonging in the public services sector. The sample consists of 228 firms from the Health & Social work and the Education UK sectors, half of which received a qualified audit opinion. To develop the auditing models and examine their classification ability, a 10-fold cross validation is employed. Both sector-specific and general models are developed. The results show that the developed models can discriminate between financial statements that should receive qualified opinions from those that should receive unqualified ones with a satisfactory accuracy. The variables that were found to be the most important ones in all models are the logarithm of total assets, the return on capital employed and whether the auditor was one of the big four or not.
Keywords: Auditing, Public services, Discriminant analysis, Logit Analysis
JEL Classification: M49, M47
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