Date of Award

1985

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Accounting

Abstract

The primary objective of this study was to test whether the type of accounting service, and consequently the type of report, affect a line credit decision made by commercial bank lending officers. To achieve this research objective three independent variables and two dependent variables were used. The independent variables were the level of accounting service, the size of the accounting firm, and the capital structure of the company applying for the line of credit. The two dependent variables were the bank loan officers' recommendations on the maximum line of credit to be granted and the minimum interest rate to be charged. The findings showed that the level of accounting service, the size of accounting firm, and the capital structure of the company all affected the line of credit decision. Specifically, the audit report resulted in a statistically significant higher loan size than a compilation. A statistically significant difference was not found between an audit and a review nor between a review and a compilation. The size of the CPA firm also had a significant effect on the loan size. An accounting service performed by a large international CPA firm resulted in a larger loan than when the service was performed by a local CPA firm. Neither the type of accounting report nor the size of the CPA firm affected the interest rate. The capital structure of the company significantly affected both the loan size and the interest rate. The capital structure had a statistically significant impact on both the loan size and the interest rate. This study also investigated the effect of the type of accounting service and the size of the CPA firm on certain perceptions of the bank lending officers. The findings showed that both the size of the CPA firm and the accounting service affected the bankers' perceptions as to the amount of testing (i.e., inquiries, analytical review, and substantive) performed by the CPA. The results of the study also indicate that bank loan officers are not correctly receiving the messages of the review report as intended by the ARSC.

Pages

201

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