The Effects of Outsourcing and Offshoring of Independent Audit Procedures on Bank Loan Officers’ Perceptions of Financial Statement Reliability and Loan Decisions

Abstract

This paper examines whether outsourcing and offshoring of independent audit procedures affect bank loan officers’ perceptions of financial statement reliability and loan decisions. A 2 x 2 between-subjects experimental design is utilized to investigate the main and interactive effects of outsourcing and offshoring of audit procedures. The results provide empirical evidence that sourcing (insourced or outsourced) or location (onshore or offshore) of independent audit procedures does not impact bank loan officers' perceptions and decisions. These implications are significant for accounting researchers, practitioners and policy setters.