Artikel
Is the external audit report useful for bankruptcy prediction?
Despite the number of studies on bankruptcy prediction using financial ratios, very little is known about how external audit information can contribute to anticipating financial distress. A handful of papers have shown that a combination of ratios and audit data is significant for predictive purposes, but only one recent paper provided a predictive accuracy of 80% solely by using the disclosures contained in audit reports. This study was complemented by simplifying the analysis of audit reports for prediction purposes and the same predictive accuracy was achieved. By applying three artificial intelligence techniques (PART algorithm, random forest, and support vector machine), the predictive ability of more easily extracted information from the report was examined and a practical implication suggested for each user. Simply by (1) finding the audit opinion, (2) identifying if a matter section exists, and (3) the number of comments disclosed, any user may predict a bankruptcy situation with the same accuracy as if they had scrutinized the whole report. In addition, an extended literature review is included, on previous studies on the interaction between bankruptcy prediction and the external audit information.
- Language
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Englisch
- Bibliographic citation
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Journal: International Journal of Financial Studies ; ISSN: 2227-7072 ; Volume: 7 ; Year: 2019 ; Issue: 2 ; Pages: 1-23 ; Basel: MDPI
- Classification
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Wirtschaft
Bankruptcy; Liquidation
Accounting and Auditing: General
Accounting
Auditing
Semiparametric and Nonparametric Methods: General
- Subject
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bankruptcy prediction
audit report
artificial intelligence
PART algorithm
- Event
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Geistige Schöpfung
- (who)
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Muñoz-Izquierdo, Nora
Camacho-Miñano, María-del-Mar
Segovia-Vargas, María-Jesús
Pascual-Ezama, David
- Event
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Veröffentlichung
- (who)
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MDPI
- (where)
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Basel
- (when)
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2019
- DOI
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doi:10.3390/ijfs7020020
- Handle
- Last update
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10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Artikel
Associated
- Muñoz-Izquierdo, Nora
- Camacho-Miñano, María-del-Mar
- Segovia-Vargas, María-Jesús
- Pascual-Ezama, David
- MDPI
Time of origin
- 2019
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Personal bankruptcy prediction using decision tree model
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Financial performance evaluation and bankruptcy prediction (failure)
Corporate bankruptcy prediction: International trends and local experience
Early Warning System for Bankruptcy: Bankruptcy Prediction
Learning Machines Supporting Bankruptcy Prediction
A Model of Bankruptcy Prediction
Learning machines supporting bankruptcy prediction
Bankruptcy prediction with support vector machines
Bankruptcy prediction using machine learning techniques
On unbalanced sampling in bankruptcy prediction
Personal bankruptcy prediction using decision tree model
Bankruptcy prediction models based on value measures
Dynamic bankruptcy prediction models for european enterprises
Financial performance evaluation and bankruptcy prediction (failure)