The Association Between Audit Opinion and Financial Performance: Evidence from Turkish Listed Companies
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This study examines whether audit opinion is associated with financial performance among Turkish listed companies. Using annual firm-year observations from 2008 to 2022, the analysis classifies audit opinions as unqualified or modified and compares profitability and financial health measures across groups. The final descriptive sample contains 4,360 firm-year observations from 468 companies after restricting the dataset to annual reports, excluding observations after 2022, retaining records with available audit opinions, and collapsing duplicate firm-year rows. Financial performance is measured using return on assets, return on equity, net profit margin, and Altman Z-Score. The models also control for firm size, liquidity, leverage, asset turnover, and year effects. Descriptive evidence shows that firms receiving modified audit opinions report weaker average profitability and financial health than firms receiving unqualified opinions. Modified-opinion firms have lower mean return on assets, return on equity, net profit margin, and Altman Z-Score, suggesting that audit qualifications are related to unfavorable financial conditions. Regression results using firm-clustered standard errors indicate that modified opinions are significantly associated with lower return on assets in both same-year and lagged specifications. The lagged model further suggests that prior-year modified opinions are followed by weaker subsequent asset profitability. However, the findings reflect association rather than definitive causality, as poor financial performance may increase the likelihood of receiving a modified audit opinion. Overall, the study supports the view that audit opinion is a useful signal of financial reporting risk and financial performance among listed firms in Turkey.
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