The Moderating Role of an Auditor Independence Clarification on the Relationship Between an Internal Control Opinion and Loan Officers’ Risk Assessments and Decisions

Abstract

This study examines whether an auditor independence clarification affects loan officers’ lending risk assessments and lending decisions when it is integrated into an auditor’s report as PCAOB has required since 2017. An experiment study is conducted with 98 nationwide commercial bank loan officers. The results indicate that an auditor independence clarification moderates the relationship between an internal control opinion and loan officers’ lending risk assessments and decisions. The findings provide empirical evidence to confirm the informative value of an auditor independence clarification and support PCAOB’s expectation to enhance public users’ understanding of the auditor's independence obligations.