Does Corporate Social Responsibility Reporting Impact Auditor Conservatism

• In Event: Audit I

Abstract

In this paper, we examine whether and how corporate social responsibility (hereafter, CSR) reporting activities and credibility-enhancing CSR assurance are associated with auditor conservatism. Following prior research, we employ going-concern modified opinion and discretionary accruals as two proxies of auditor conservatism. The results show that the propensity for auditors to issue going-concern opinion to non-reporting clients is significantly more than reporting clients. The results imply that CSR reports are associated with lower business and litigation risk and decrease auditors’ estimation risk. In addition, CSR reporting companies are associated with greater abnormal accruals after controlling other factors affecting abnormal accruals. The results indicate that auditors are more conservative to non-reporting companies by requiring more conservative accounting choice. This paper contributes to the literature by providing additional evidence that CSR reports and CSR assurance have impacts on auditors’ evaluation and judgment.

Authors

• Shipeng Shawn Han, University of Massachusetts-Dartmouth

• Ling Tuo, Lawrence Tech University

• Zabihollah Rezaee, University of Memphis