the Influence of Sustainability Assurance Report Level and Format on Nonprofessional Investors’ Judgments

• In Event: Auditing Standards and Rules

Abstract

The International Auditing and Assurance Standards Board (IAASB) recently identified effective communication in the assurance reports that accompany emerging forms of external reporting (EER) as an important challenge. Our study addresses this challenge in the context of assurance on integrated financial and sustainability reports. It examines the influence of sustainability assurance report level (limited versus reasonable) and format (presented separately or combined with financial information assurance) on investor judgments. Nonprofessional investors viewed integrated financial and sustainability performance information accompanied by assurance reports and made investment judgments based on this information. Participants assessed sustainability performance information to be more credible and made higher investment judgments when the sustainability assurance report was presented separately from financial statement assurance. They assessed sustainability performance information to be more credible and made higher investment judgments with a separate limited assurance sustainability report as opposed to a separate reasonable assurance report. Sustainability assurance level did not influence participants’ judgments when the financial and sustainability assurance reports were combined. A supplemental analysis indicates that this may have occurred due to participants’ having difficulty understanding the combined assurance report. Results indicate that standard setters’ concerns regarding whether assurance reports that accompany EER effectively communicate the level of assurance provided are warranted.

Authors

• William N Dilla, Iowa State University

• Diane J Janvrin, Iowa State University

• Jon D Perkins, Iowa State University

• Robyn L Raschke, University of Nevada-Las Vegas