Page 114 - Auditinf Electronic System
P. 114
Eleventh : Bankruptcy prediction models
The auditor’s assessment of the going concern issue is a complex process that
can benefit from the use of a decision aid as bankruptcy prediction models, as it may
help auditors judge companies abilities to continue as a going concerns by alerting
auditors to certain problems that may be difficult to detect using traditional auditing
procedures.
A. Altman Model(manufacturing)
B. Altman Model(service )
C. Zmjewski Model
D. Ohlson Model
First: Altman Z-model for manufacturing companies
The Altman Z-score is a statistical model is a formula for determining whether
a company, is headed for bankruptcy. Which is considered one of the main
incentives for fraudulent financial statements, hence represents firms with high
probability of financial statements manipulation and fraudulent financial statements
formula takes into account profitability, leverage, liquidity, solvency, and
activity ratios.
Altman Z-Score = 1.2 X1 + 1.4X2 + 3.3 X3 + 0.6 X4 + 1.0 X5
Where:
• X1 = working capital / total assets
• X2 = retained earnings / total assets
• X3 = earnings before interest and tax / total assets
• X4 = market value of equity / total liabilities
• X5= sales / total assets
115
114
جميع الحقوق محفوظة ـ الإعتداء على حق المؤلف بالنسخ أو الطباعة يعرض فاعله للمسائلة القانونية
