Financial factors affecting audit opinion: BIST SME Index example

The audit is when an independent auditor examines whether a company's financial statements accurately and honestly reflect its financial position by generally accepted accounting principles and provides an opinion based on the evidence obtained. This opinion given by independent auditors is important for the company and external users. This study aims to determine whether the financial ratios of companies listed in the Borsa Istanbul (BIST) SME Index affect the audit opinion. Accordingly, the sample consists of 37 companies whose financial statements were accessible out of 46 companies listed in the BIST SME Index between 2018 and 2022. From the financial statements of the companies in the sample, the independent variables include total asset growth, net sales growth, asset turnover ratio, debt-to-total assets ratio, return on assets, return on equity, net profit margin, acid-test ratio, and current ratio. At the same time, the audit opinion is the dependent variable. The effect of the selected independent variables on the audit opinion was analyzed using the logit regression. The analysis results revealed a significant relationship between net sales growth, asset turnover ratio, return on assets, return on equity, net profit margin, acid-test ratio, and current ratio with the audit opinion. However, no significant relationship was found between total asset size and the total assets ratio with the audit opinion. The study indicates that financial ratios are important determinants to be considered during the audit process. SMEs can increase their likelihood of receiving a favorable audit opinion by improving their financial structure.