How much does a loan officer’s familiarity with an auditor affect their client’s ability to receive a commercial loan? New research from Georgia Tech suggests that while knowing an auditor doesn’t guarantee a commercial loan, loan officers are more likely to deny loans to companies that have auditors with poor reputations.
Arnold Schneider, a professor in the Scheller College of Business, found that loan officers who knew the borrower’s audit firm were reassured the loan wasn’t high-risk. However, familiarity with an audit firm didn’t guarantee an approved loan. If anything, an audit firm’s negative reputation for association with a defaulting client or a client needing regulatory enforcement meant a new client is more likely to lose out on a loan.
The research was presented in “Do Familiarity With a Loan Applicant’s Auditor and the Auditor’s Associations With Past Borrowers Impact Lending Judgments?” in the 2023 issue of Advances in Accounting Behavioral Research.
Continue reading: Loan Liability: Negative Associations With an Auditor Can Affect Loan Changes.
