A Simulated Lending Decision with External Management Audit Reports

An external management audit is an independent examination of an organization resulting in a statement to external users on the performance of the management function. A simulated corporate overdraft decision was posted to 354 bankers with three groups of 118 bankers receiving the same package of information but with different audit reports namely a financial audit report only, a favourable management audit report and an adverse management audit report. The response rate was 58 per cent (205 respondents). Conclusion overall that the bankers′overdraft decisions were statistically significantly related to the addition of an adverse management audit report. The reasons given by the bankers for their corporate overdraft decisions also suggest that bankers would be interested in and would use external management audit reports.