The Effect of External Auditor's Report on the Credit Decision for Yemeni Banks

Abstract

The purpose of this study was to examine the effect of external auditor’s report on credit decision in Yemen banks to identify if the type of audit report affects credit decision. To empirically study our problem, we collected forty (40) cases actual investment credit from eight banks Yemenis (28 cases and 12 cases of agreement of rejection). The results of the study showed that auditor's report is considered as one of the important sources for credit officers in making their credit decision. The study also showed that qualified auditor's report, compared to clean reports, influences the credit officer's decision. Finally the study concludes that there are significant statistical differences between the various types of qualified auditor's reports in affecting the credit decision. Based on the conclusions of the study, the researchers recommend that the banks should increase their reliance on the various types of audit reports in making credit decisions, and pay more attention to disclosure and accounting policies qualifications. The researchers also recommend that the Yemen Association of the Certified Public Accountants should encourage the auditors to be very careful when expressing their opinions about the financial statements in order to avoid misleading decision makers.