The Effects of Using Bank Auditors on Audit Quality and the Agency Cost of Bank Loans

SYNOPSIS In this study, we examine the effect of a borrower having the same auditor as its main creditor bank on audit quality and the cost of the firm's bank loans. Japan is chosen as the context for this study because of its long-established bank-based system and the heavy reliance of Japanese companies on bank loans as a source of financing. The recent accounting scandals at Olympus Corporation and Toshiba Corporation highlight concerns about...