{"674983":{"#nid":"674983","#data":{"type":"news","title":" Loan Liability: Negative Associations With an Auditor Can Affect Loan Chances","body":[{"value":"\u003Cp\u003EHow much does a loan officer\u2019s familiarity with an auditor affect their client\u2019s ability to receive a commercial loan? New research from Georgia Tech suggests that while knowing an auditor doesn\u2019t guarantee a commercial loan, loan officers are more likely to deny loans to companies that have auditors with poor reputations.\u0026nbsp;\u003C\/p\u003E\u003Cp\u003E\u003Ca href=\u0022https:\/\/www.scheller.gatech.edu\/directory\/faculty\/schneider\/index.html\u0022\u003EArnold Schneider\u003C\/a\u003E, a professor in\u0026nbsp;the \u003Ca href=\u0022https:\/\/www.scheller.gatech.edu\/index.html\u0022\u003EScheller College of Business\u003C\/a\u003E, found that\u0026nbsp;loan officers who knew the borrower\u2019s audit firm were reassured the loan wasn\u2019t high-risk. However, familiarity with an audit firm didn\u2019t guarantee an approved loan. If anything, an audit firm\u2019s 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.\u003C\/p\u003E\u003Cp\u003EThe research was presented in\u0026nbsp;\u003Cstrong\u003E\u201c\u003C\/strong\u003E\u003Ca href=\u0022https:\/\/www.emerald.com\/insight\/content\/doi\/10.1108\/S1475-148820230000026009\/full\/html\u0022\u003EDo Familiarity With a Loan Applicant\u2019s Auditor and the Auditor\u2019s Associations With Past Borrowers Impact Lending Judgments?\u201d\u003C\/a\u003E\u003Cstrong\u003E\u0026nbsp;\u003C\/strong\u003Ein the 2023 issue of \u003Cem\u003EAdvances in Accounting Behavioral Research\u003C\/em\u003E.\u003C\/p\u003E\u003Cp\u003EIn his study, Schneider conducted an experiment with 64 loan officers from 49 banks across the eastern U.S. He examined two main variables: whether the loan officer was familiar or unfamiliar with an auditor and whether an auditor had a history with regulatory enforcement of a client or a defaulting client.\u003C\/p\u003E\u003Cp\u003EEach questionnaire used the same case scenario: a client applying for a $4 million commercial loan at a hypothetical loan company, along with their financial statements. Participants were asked to assess risk on a 10-point scale and provide the probability that they would extend the credit at a reasonable rate of interest. Then they rated the importance of the factors that helped them make their decisions.\u0026nbsp;\u003C\/p\u003E\u003Cp\u003E\u201cI found that the lenders did assess the risk higher in the case where the auditors were not familiar to them,\u201d Schneider said. \u201cBut to my surprise, that did not translate into a lower probability of granting credit to these borrowers.\u201d\u003C\/p\u003E\u003Cp\u003ERather, if the loan officer only knew of an auditor because of their poor history with defaulting clients or clients having regulatory enforcement, this negative association would inhibit a loan.\u003C\/p\u003E\u003Cp\u003EUnderstanding the role of auditors in loan decisions is crucial for borrowers. While familiarity with a loan provider can reduce perceived risk, loan approval remains a complex process.\u0026nbsp;\u003C\/p\u003E","summary":"","format":"limited_html"}],"field_subtitle":"","field_summary":[{"value":"\u003Cp\u003EHow much does a loan officer\u2019s familiarity with an auditor affect their client\u2019s ability to receive a commercial loan? New research from Georgia Tech suggests that while knowing an auditor doesn\u2019t guarantee a commercial loan, loan officers are more likely to deny loans to companies that have auditors with poor reputations.\u0026nbsp;\u003C\/p\u003E","format":"limited_html"}],"field_summary_sentence":[{"value":"New research from Georgia Tech suggests that while knowing an auditor doesn\u2019t guarantee a commercial loan, loan officers are more likely to deny loans to companies that have auditors with poor reputations. "}],"uid":"34541","created_gmt":"2024-06-03 20:21:54","changed_gmt":"2024-06-04 15:36:52","author":"Tess Malone","boilerplate_text":"","field_publication":"","field_article_url":"","dateline":{"date":"2024-06-03T00:00:00-04:00","iso_date":"2024-06-03T00:00:00-04:00","tz":"America\/New_York"},"extras":[],"hg_media":{"674127":{"id":"674127","type":"image","title":"Arnold Schneider ","body":null,"created":"1717446546","gmt_created":"2024-06-03 20:29:06","changed":"1717447055","gmt_changed":"2024-06-03 20:37:35","alt":"Arnold Schneider","file":{"fid":"257602","name":"Arnold Schneider headshot.jpg","image_path":"\/sites\/default\/files\/2024\/06\/03\/Arnold%20Schneider%20headshot.jpg","image_full_path":"http:\/\/hg.gatech.edu\/\/sites\/default\/files\/2024\/06\/03\/Arnold%20Schneider%20headshot.jpg","mime":"image\/jpeg","size":108620,"path_740":"http:\/\/hg.gatech.edu\/sites\/default\/files\/styles\/740xx_scale\/public\/2024\/06\/03\/Arnold%20Schneider%20headshot.jpg?itok=pO2MD-IJ"}}},"media_ids":["674127"],"groups":[{"id":"1214","name":"News Room"},{"id":"1188","name":"Research Horizons"},{"id":"1274","name":"Scheller College of Business"}],"categories":[],"keywords":[{"id":"187915","name":"go-researchnews"}],"core_research_areas":[],"news_room_topics":[],"event_categories":[],"invited_audience":[],"affiliations":[],"classification":[],"areas_of_expertise":[],"news_and_recent_appearances":[],"phone":[],"contact":[{"value":"\u003Cp\u003ETess Malone, Senior Research Writer\/Editor\u003C\/p\u003E\u003Cp\u003Etess.malone@gatech.edu\u003C\/p\u003E","format":"limited_html"}],"email":[],"slides":[],"orientation":[],"userdata":""}}}