Corporate Social Responsibility Reporting, Sustainability Assurance and Auditor Conservatism

• In Event: Continental Breakfast & Research and Education Forum
  In Paper Session: Table 7: Corporate Social Responsibility Reporting

Abstract

In this paper, we examine whether CSR reports and sustainability assurance have influence on auditor conservatism. Following prior research we use 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 the CSR reports non-disclosing clients is significantly higher than disclosing clients. The results imply that CSR reporting signals lower business and litigation risk to auditors. In addition, CSR reports disclosing clients have higher discretionary accruals than non-disclosing clients, indicating that auditors are more conservative to non-disclosing companies by requiring more conservative accounting choice. This paper contributes to the literature by providing additional evidence that CSR reporting is an important factor for auditors to evaluate their clients’ litigation and business risk.

Authors

• Shipeng S Han, UMass Dartmouth

• Zabihollah Rezaee, University of Memphis

• Liang Song, Michigan Tech University

• Joseph H. Zhang, University of Memphis