Predicting business bankruptcy in the financial audit of SMEs: A descriptive study

Abstract

Financial auditing is a tool focused on the reliability of resource management, which is used by large companies because they are obliged to do so. However, more than a tool for fraud detection, financial auditing favors the efficiency of business management, so it should also be used by SMEs as a strategy to support their permanence and competitiveness in a global market. In this research, therefore, an attempt was made to analyze how business bankruptcy prediction models in SMEs in the Laja-Bajío region generate benefits in terms of efficient control of resources and permanence in the market. For this purpose, a quantitative method was used, with an interpretative and cross-sectional approach, applied between 2019 and 2020. Based on the survey technique applied to 305 companies, and eight interviews with companies in the Laja-Bajío region of Mexico, it was detected that they fear the application of auditing, and that they are more familiar with fiscal auditing, which they confuse with financial auditing. Likewise, a direct correlation was observed between the age of the company and the willingness to undergo a financial audit. Likewise, with regard to the size of the company, an inverse correlation was observed, since the smaller the company, the more interested it is in the tool shown. It is worth mentioning that by knowing the benefits of the financial audit and differentiating it from the tax audit, the companies valued the application of the tool, which they considered would guarantee the permanence and competitiveness of the organizations. In addition, it was detected that 84 % of the companies consulted did not have financial statements, and when applying the models, 62.5 % were solvent. Therefore, the need to promote a financial culture and to study the models for predicting business bankruptcy in SMEs is highlighted.