Private lenders' demand for audit

• 成果类型: Article
• 署名作者: Baylis, Richard M.; Burnap, Peter; Clatworthy, Mark A.; Gad, Mahmoud A.; Pong, Christopher K. M.
• 署名单位: Cardiff University; Cardiff University; University of Bristol; Tilburg University; Heriot Watt University
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2017.06.001
• 发表日期: 2017
• 关键词: syndicated loan market; DEBT CONTRACTS; Accounting information; corporate governance; FINANCIAL CONTRACTS; Ownership structure; positive research; covenants; conservatism; QUALITY

摘要

We study clauses in private lending agreements requiring auditors to assure lenders of borrowers' compliance with financial covenants. Auditors are required under general purpose financial reporting to review covenant compliance. However, by informing lenders directly that they have no knowledge of default, auditors may increase their litigation risk. We find that auditor covenant compliance assurance clauses are significantly associated with more complex contractual adjustments to .net income, the extent of reliance on accounting information in the contract, intangibility of borrowers' assets, the number of lenders and loan maturity. We provide novel evidence of the audit market enhancing efficient contracting. (C) 2017 Elsevier B.V. All rights reserved.