Is the External Audit Report Useful for Bankruptcy Prediction? Evidence Using Artificial Intelligence

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dc.contributor.authorMuñoz Izquierdo, Nora
dc.contributor.authorCamacho Miñano, María del Mar
dc.contributor.authorSegovia Vargas, María Jesús
dc.contributor.authorPascual Ezama, David
dc.date.accessioned2023-06-17T12:30:05Z
dc.date.available2023-06-17T12:30:05Z
dc.date.issued2019
dc.description.abstractDespite 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.
dc.description.departmentDepto. de Economía Financiera y Actuarial y Estadística
dc.description.facultyFac. de Ciencias Económicas y Empresariales
dc.description.refereedTRUE
dc.description.sponsorshipUniversidad Complutense de Madrid
dc.description.statuspub
dc.eprint.idhttps://eprints.ucm.es/id/eprint/60274
dc.identifier.doi10.3390/ijfs7020020
dc.identifier.issn2227-7072
dc.identifier.officialurlhttps://doi.org/10.3390/ijfs7020020
dc.identifier.urihttps://hdl.handle.net/20.500.14352/12306
dc.issue.number2 (20)
dc.journal.titleInternational Journal of Financial Studies
dc.language.isoeng
dc.page.final23
dc.page.initial1
dc.publisherMultidisciplinary Digital Publishing Institute (MDPI)
dc.relation.projectIDUCM (950025)
dc.rights.accessRightsopen access
dc.subject.jelG33
dc.subject.jelM40
dc.subject.jelM41
dc.subject.jelM42
dc.subject.jelC14
dc.subject.keywordBankruptcy prediction
dc.subject.keywordAudit report
dc.subject.keywordArtificial intelligence
dc.subject.keywordPART algorithm
dc.subject.ucmContabilidad (Economía)
dc.subject.ucmEconometría (Economía)
dc.subject.ucmFinanzas
dc.subject.unesco5303 Contabilidad Económica
dc.subject.unesco5302 Econometría
dc.titleIs the External Audit Report Useful for Bankruptcy Prediction? Evidence Using Artificial Intelligence
dc.typejournal article
dc.volume.number7
dspace.entity.typePublication
relation.isAuthorOfPublication44aad0f9-4f64-46ee-a6b7-e9a317fa42fd
relation.isAuthorOfPublicationeb3f8682-46ad-4402-9b16-7aa47542424c
relation.isAuthorOfPublication.latestForDiscovery44aad0f9-4f64-46ee-a6b7-e9a317fa42fd
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