| This study evaluated whether Zmijewski's, Ohlson's, and Altman's bankruptcy prediction models were generalizable to periods, industries, and financial distress situations other than those used to develop the models. The results indicated that the models' accuracies using 1988-1991 firms were significantly lower than those reported by Zmijewski, Ohlson, and Altman using 1958-1976 firms. Ohlson's and Altman's models were sensitive to industries; that is, the accuracies using industrial firms were significantly higher than those using the entire 1988-1991 samples. The accuracies of Zmijewski's, Ohlson's, and Altman's models using bankruptcies were not significantly different from those using the entire 1988-1991 samples. Thus, the models were more useful for identifying financially distressed firms than for only bankruptcies. Other evidence suggests that those who employ the models using recent data should reestimate the models' coefficients.; SAS-59's impact on auditors' going concern opinion (GCO) decisions also was evaluated. The results indicated that SAS-59 generally did not affect auditors' reliance on the financial characteristics listed in SAS-59 even though the standard increased auditors' responsibilities related to GCO decisions. Only the change in debt to total assets variable was useful to auditors in GCO evaluations subsequent to SAS-59.; The proportion of post-SAS-59 bankruptcies that received GCOs was significantly higher than that of pre-SAS-59 bankruptcies that received GCOs. Thus, auditors were more likely to issue GCOs to bankrupt firms for audits performed after the issuance of SAS-59. The proportion of post-SAS-59 financially distressed firms, other than bankruptcies, with GCOs was higher than that of pre-SAS-59 financially distressed firms with GCOs; however, the proportions were not significantly different between the pre and post-SAS-59 periods. Post-SAS-59 GCO companies were not significantly different than pre-SAS-59 GCO companies in terms of financial health and size.; The consistency between the models' predictions and auditors' opinions also was evaluated. Though SAS-59 likely increased auditors' costs of issuing non-GCOs to firms that failed, the results indicated that the consistency between Zmijewski's, Ohlson's, and Altman's models' predictions and auditors' opinions generally was unchanged after SAS-59. In sum, the findings of this study suggest that SAS-59 had a modest impact on auditors' GCO decisions. |
