Bank loan officers' reactions to audit reports issued to entities with litigation and going concern uncertainties

Document Type

Article

Publication Date

12-1-1997

Abstract

This study examines whether bank loan officers differ in their reactions to financial statements when they are accompanied with a disclaimer of opinion rather than an unqualified report with an explanatory paragraph. Using between-subjects experiments, the study investigates loan officers' reactions to entities involved with either litigation or going concern uncertainties. Results for litigation uncertainties show that a disclaimer (1) reduces the loan officers' willingness to grant a line of credit, (2) decreases loan officers' assessment of the entity's ability to service their debt, (3) reduces the assessed likelihood that the entity can improve its profitability, and (4) increases the point spread that would be charged if the entity was granted a loan. The results for going concern uncertainties show significant differences for only the first two of the above types of loan officer reactions. © 1997 American Accounting Association.

Identifier

0012236049 (Scopus)

Publication Title

Accounting Horizons

e-ISSN

15587975

ISSN

08887993

First Page

33

Last Page

40

Issue

2

Volume

11

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