Title
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THE INFLUENCE OF PREVIOUS AUDIT
OPINION GOING CONCERN, AUDIT QUALITY AND COMPANY’S FACTORS TO AUDIT OPINION
GOING CONCERN
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Author
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DWI CAHYONO
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Year
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2007
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Introduction
Hyperinflation
is poorly understood. As its name might imply, most people believe
hyperinflation is merely very high inflation. Inflation can and does occur in a
perfectly healthy economy. In fact, since 1913 when the Fed was founded
inflation in the USA has consistently risen at 3.5% per year on average.3 One
might assume that this means the country has experienced some great injustice,
but the truth is that the 1900's were characterized by the greatest economic
expansion and wealth creation the world has ever seen.
A
Historical Review
A
review of the modern economic cases of hyperinflation show striking
similarities. Most notably, they involved war (the losing end of a war), regime
change, rampant corruption or foreign denominated debt. All resulted in catastrophic
hyperinflations. It’s important to note the cause and effect here. These
hyperinflations were not merely monetary events. It was not just “high
inflation” or excessive government spending. It was a full blown rejection of
the sovereign currency.
The
Case of Weimar
The
Weimar Republic is the most notable hyperinflation. But it was not the only
case of hyperinflation that occurred in Europe at the time. In fact, several
European nations were ravaged by the war.
The
Case of Zimbabwe
This
is another extraordinary circumstance. To call these events “rare” and “severe”
is a vast understatement. Zimbabwe is an utter economic catastrophe. GDP has
declined 40% since 2000, unemployment has risen as high as 95% and
hyperinflation has ravaged the country. In essence, Zimbabwe has proven a
highly inefficient and corrupt nation for several decades.
The
Cause & Effect
1. A
ceding of monetary sovereignty (usually in the form of foreign denominated
debt, a currency peg, etc).
2. Extraordinarily unusual social circumstances
(war, regime change, etc.).
3. Very
low levels of faith in government during regime change (high public mistrust).
4. Ineffective
government response or rampant corruption.
5. Combustible political environment.
6. A collapse in the domestic economy.
Conclusion
Hyperinflation
is a disorderly economic progression that leads to complete psychological
rejection of the sovereign currency. While government debts and deficit
spending can exacerbate a hyperinflation they have not generally been the cause
of hyperinflation, but rather the result of severe and unusual exogenous
events. The excessive and incompetent monetary response is generally the result
of severe exogenous forces at work such as war, regime change, corruption, or a
ceding of monetary sovereignty.
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