What question did this study set out to answer?

The research aims to determine how well financial and market variables can predict the issuance of qualified audit reports by auditors.

Predicting Audit Qualifications with Financial and Market Variables.

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Probit model predicts audit qualifications in firms, suggesting financial variables influence auditor decisions.

The research aims to determine how well financial and market variables can predict the issuance of qualified audit reports by auditors.
Developed a probit model to analyze audit qualifications.
Dependent variable indicates whether a firm received a qualified opinion.
Included publicly available financial and market variables as independent variables.
Differentiated between clean opinions and various types of qualifications.
Evaluated predictive accuracy based on misclassification costs.
The model accurately distinguishes between unqualified and qualified audit opinions.
Predictive accuracy assessed through misclassification costs of type I and type II errors.
Specific prior probabilities of opinions were factored into the evaluation.

Dopuch et al. (1987) studied this question.

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