Applicative Model with regard to Testing the Risk of Affecting the Prudence Principle for Romanian Listed Companies

Author:Master Student Eusebiu BUREANĂ, Master Student Adela Ramona BORDEA

JEL:C12, C52, M40

DOI:

Keywords:prudence principle, multiple linear regression, financial indicators, listed companies

Abstract:
One of the auditor’s challenges in audit mission is to identify and evaluate the risks from the financial statement level. Both, studies and practice have shown that the accounting principle most violated in the country is prudence principle. This could be considered as a risk that should be identified. This study aims to support the external auditor in the step of gathering general information about the client by establishing a relationship between the violation of prudence principle and four financial indicators: In term indebtedness Indicator; Overall borrowing Rate; the overall solvency Ratio; Commercial productivity Rate. This analyze was realized through an econometric model (multiple linear regression function), the sample being the companies from the Bucharest Stock Exchange. The resulted model, statistical valid, demonstrates the existence of the inverse relation between Overall Indebtedness Rate, the Overall Solvency Ratio; the Commercial Productivity Rate and the principle violation and of the direct relation between In Term Indebtedness Indicator and the principle violation proving to be an reliable and efficient one.\r\n\r\n

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