Abstract
This study examines whether loan officers’ perception of auditor economic independence affects audit report information content. We conducted an experiment where 80 experienced loan officers from one of the largest European commercial banks were provided with a request for financing from a hypothetical client. Type of audit report and economic independence in terms of non-audit services were manipulated in a 2 (unqualified but modified vs. a going concern audit report) × 2 (low economic dependence vs. high economic dependence) between-subjects design. According to recent research on audit report information content, our findings support that loan officers view a qualified audit report as a first-order mechanism/filter that acts as an early warning system. In addition, our results also suggest that auditor economic dependence is viewed as a second-order mechanism that only activates loan officers’ professional skepticism when the first-order mechanism has not released a warning signal.
Published Version
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