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The effect of key audit matters reviewing on loan approval decisions?

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  • Yao, Jie
  • Su, Shengqi
  • Liu, Shanmin

Abstract

The existing literature does not provide a definitive statement on whether the inclusion of Key Audit Matters (KAM) in accounting research increases the likelihood of loan approval by bank approvers. This study investigates the combined effects of approvers' trait skepticism, their professional background in accounting and auditing, as well as the familiarity and readability of KAM content, on loan approval probability. The findings indicate that an increased duration spent reading 'How' paragraph enhances the probability of loan approval by approvers. Moreover, this positive correlation is more pronounced for familiar and easily legible content, highly skeptical individuals, and those with expertise in accounting and auditing. These results offer novel insights and research perspectives for KAM while expanding upon the literature concerning factors influencing approvers' loan approvals.

Suggested Citation

  • Yao, Jie & Su, Shengqi & Liu, Shanmin, 2023. "The effect of key audit matters reviewing on loan approval decisions?," Finance Research Letters, Elsevier, vol. 58(PB).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pb:s1544612323008395
    DOI: 10.1016/j.frl.2023.104467
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    References listed on IDEAS

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    1. Pan, Yue & Shroff, Nemit & Zhang, Pengdong, 2023. "The dark side of audit market competition," Journal of Accounting and Economics, Elsevier, vol. 75(1).
    2. Weerapong Kitiwong & Naruanard Sarapaivanich, 2020. "Consequences of the implementation of expanded audit reports with key audit matters (KAMs) on audit quality," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 35(8), pages 1095-1119, July.
    3. repec:eme:maj000:maj-09-2019-2410 is not listed on IDEAS
    4. Ran An & Wentao Li & Di Wang & Yanyan Wang & Lisheng Yu, 2023. "Do Key Audit Matters Affect Operating Activities? Evidence from Inventory Management," Abacus, Accounting Foundation, University of Sydney, vol. 59(1), pages 300-339, March.
    5. Antti Rautiainen & Jani Saastamoinen & Kati Pajunen, 2021. "Do key audit matters (KAMs) matter? Auditors’ perceptions of KAMs and audit quality in Finland," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 36(3), pages 386-404, May.
    Full references (including those not matched with items on IDEAS)

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