PROCEEDING The 13 th Malaysia Indonesia Conference on Economics, Management and Accounting (MIICEMA) 2012 148 The Effect of Financial Ratios, Prior Audit Opinion, and Growth on the Auditors' Going Concern Opinion Erly Sherlita Elok Tika Puspita Widyatama University Abstract In this study, we examine the effect of financial ratios, prior audit opinion and growth on the auditor's going-concern opinion. The study conducted on 52 from 146 issuers listed maanufacturing companies in Indonesia Stock Exchange, selected through purposive sampling technique that is consistent with the criteria listed there since 2007 until 2010, and also has a comprehensive financial reporting data. The statistical methods used to test the hypothesis carried out by multivariate analysis using logistic regression models. The result showed that only the prior year’s audit opinion that have statistically significant effect on the going concern opinion. Keywords: going concern opinion, financial ratios, prior audit opinion, growth 1. INTRODUCTION Stakeholders of financial statements information have different interests and needs. For a go public company, financial statements serve as a tool to attract investors and potential investors to invest. However, a report that describe a good financial condition does not always indicate the truth. This condition is related to the difference in needs between management (agent) and the owner (principal) that makes the information submitted by the managers sometimes are not in accordance with such real conditions. This situation is known as asymmetric information. Management undisclose the actual information that is not expected by the owner encourage managers to manipulate financial statements. One of financial statements manipulation case for example, is a manipulation by Enron’s management which resulted adverse selection. Whereas before Enron went bankrupt, investors gained confidence to invest based on financial statements that get unqualified opinion and did not receive a going concern qualification. However, it turns out Enron couldn’t maintain the continuity of their business to avoid bancruption. This phenomenon then make people came up with the question why the company which has obtained an unqualified opinion (unqualified opinion) can’t maintain its survival. As expressed by Mutchler (1985) based on the results of research conducted by Altman and McGough (1974), who observed cases where companyies that had not previously received GCAO went bancrupt, and on the other hand companies that previously received GCAO could survive and continue to maintain their business continuity. This situation has an impact on audit proffesion which is now required to