Audit Expectation Gap and Decision Performance of Iranian Loan Officers
External users of financial statements such as bank loan officers may have a greater reliance on audited financial statements in their decision-making due to their higher expectation of auditors' role and responsibility as compared to what is prescribed in statutes and thus, giving rise to a...
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| Main Author: | |
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| Format: | Thesis |
| Language: | English English |
| Published: |
2007
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| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/6915/1/GSM_2007_14.pdf |
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| Summary: | External users of financial statements such as bank loan officers may have a
greater reliance on audited financial statements in their decision-making due
to their higher expectation of auditors' role and responsibility as compared to
what is prescribed in statutes and thus, giving rise to an audit expectation
gap. The existence of an audit expectation gap may cause loan officers to
make poorer assessment of the credit worthiness of loan applicants that may
result in their banks experiencing higher non-performing loans. This study
proposes to examine the effects of individual factors on the extent of audit
expectation gap and whether audit expectation gap would adversely affect
loan officer decision performance. This study hypothesises that three
individual factors, level of accounting qualification, accounting experience
and occupation experience, to affect loan officer's perception of the role of audit and the reliability of the audited financial statements. A questionnaire
was designed based on measures used in previous studies to evaluate the
extent of the audit expectation gap with respect to perceived auditors'
responsibility, reliability and decision-usefulness of audit financial
statements. Based on the feedback of senior bank mangers of Iranian
banks, this study used four indicators to measure the decision performance
of loan officers, and the indicators were a) the percentage of non-performing
loans, including bad and doubtful loans, b) the percentage of loans that
failed to repay in the first 3 installments, c) the percentage of loans that failed
to repay in more than 3 installments and, d) the percentage of loans rejected
by loan officer's supervisor.
Out of the1 13 questionnaires that were distributed to loan officers at the
main branches of the five biggest commercial banks in Iran (Melli, Mellat,
Saderat, Tejarat and Sepah), 11 1 questionnaires were completed and
returned. Linear and multiple regression analyses indicate that accounting
qualification and accounting experience have a significant and negative
relationship with audit expectation gap. However, there is no significant
relationship between occupational experience and audit expectation gap, but
the direction of the relationship is as expected. Except for the rejected loans
indicator, the results for all the other three performance indicators indicate
significant and negative relationships between the loan officers' decision
performance and the extent of the audit expectation gap. |
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