Proceedings of the 1st Sampoerna University-AFBE International Conference, SU-AFBE 2018, 6-7 December 2018, Jakarta Indonesia

Research Article

The Effect of Modified Audit Opinion on Debt Contracts

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  • @INPROCEEDINGS{10.4108/eai.6-12-2018.2286276,
        author={Naufal  Zaky and Sylvia Veronica Siregar},
        title={The Effect of Modified Audit Opinion on Debt Contracts},
        proceedings={Proceedings of the 1st Sampoerna University-AFBE International Conference, SU-AFBE 2018, 6-7 December 2018, Jakarta Indonesia},
        publisher={EAI},
        proceedings_a={SU-AFBE},
        year={2019},
        month={8},
        keywords={covenant debt contract interest spread loan maturity modified audit opinion},
        doi={10.4108/eai.6-12-2018.2286276}
    }
    
  • Naufal Zaky
    Sylvia Veronica Siregar
    Year: 2019
    The Effect of Modified Audit Opinion on Debt Contracts
    SU-AFBE
    EAI
    DOI: 10.4108/eai.6-12-2018.2286276
Naufal Zaky1,*, Sylvia Veronica Siregar1
  • 1: Accounting Department, Faculty of Economy and Business University Indonesia, Indonesia
*Contact email: naufalzakyz@gmail.com

Abstract

The purpose of this study is to examine the effect of a modified audit opinion on the debt contract (interest spread, loan size, covenant, collateral, and loan maturity). Samples of this study are credit facilities obtained by listed firms in 2013-2016 with total observations of 660. Results of this study show that in general there is limited effect of modified audit opinion on debt contract. We do not find type of modified audit opinion causes higher interest rates. Modified audit opinion has significant effect on reducing the number of financial covenants. We only find evidence that material uncertainties type of modified audit opinion causes higher general covenant. We also only find evidence of the effect of modified audit opinion on loan maturity for going concern opinion type. Modified audit opinion does not affect loan size and the possibility of the need collateral in the debt contract. The insignificant results of modified audit opinion on debt contracts maybe due to lenders in Indonesia still use soft information (relationship lending) rather than hard information.