Advertisement

Journal of Business Ethics

, Volume 154, Issue 3, pp 733–757 | Cite as

The Role of Sustainability Performance and Accounting Assurors in Sustainability Assurance Engagements

  • Katrin Hummel
  • Christian Schlick
  • Matthias FifkaEmail author
Original Paper

Abstract

Research on sustainability assurance is still in its beginnings. One of the key questions in this field that also is of the highest practical relevance is concerned with the quality of the assurance process. However, a common understanding of assurance quality and how it should be measured is still missing. We try to close this gap by building on the financial audit literature. We introduce a definition of assurance quality that comprises two key aspects: the depth of the assurance process and the breadth of the assurance statement. Based on prior research, we hypothesize that a firm’s sustainability performance is related to the depth of the assurance process, while the type of the assurance provider, more precisely the affiliation to the accounting profession, is related to the breadth of the assurance statement. Results for a sample of 122 European firms reveal a negative relationship between sustainability performance and assurance process depth as well as between the affiliation to the accounting profession and assurance statement breadth. Thus, we find evidence that poor sustainability performers ask for in-depth assurance services, most likely as a means to enhance their internal sustainability-related processes and systems. Assurance providers that do not belong to the accounting profession in turn are associated with broader assurance statements.

Keywords

Sustainability assurance Sustainability reporting Assurance quality Content analysis Sustainability performance Accounting assuror 

Notes

Compliance with ethical standards

Conflict of interest

The authors declare that they have no conflict of interests.

References

  1. AccountAbility. (2008). AA1000 Assurance Standard 2008. London: AccountAbility.Google Scholar
  2. Ball, A., Owen, D. L., & Gray, R. (2000). External transparency or internal capture? The role of third-party statements in adding value to corporate environmental reports. Business Strategy and the Environment, 9(1), 1–23.Google Scholar
  3. Bentler, P. M., & Chou, C. P. (1987). Practical issues in structural modelling. Sociological Methods and Research, 16(1), 78–117.Google Scholar
  4. Blay, A. D., & Geiger, M. A. (2013). Auditor fees and auditor independence: Evidence from going concern reporting decisions. Contemporary Accounting Research, 30(2), 579–606.Google Scholar
  5. Campbell, M. J., & Swinscow, T. D. V. (2009). Statistics at square one (11th ed.). Chicester: Wiley-Blackwell Publishing.Google Scholar
  6. Casey, R. J., & Grenier, J. H. (2015). Understanding and contributing to the enigma of corporate social responsibility (CSR) assurance in the United States. Auditing: A Journal of Practice & Theory, 34(1), 97–130.Google Scholar
  7. Cho, C. H., Michelon, G., Patten, D. M., & Roberts, R. W. (2014). CSR report assurance in the USA. An empirical investigation of determinants and effects. Sustainability Accounting, Management and Policy Journal, 5(2), 130–148.Google Scholar
  8. Cho, C. H., & Patten, D. M. (2007). The role of environmental disclosures as tools of legitimacy: A research note. Accounting, Organizations and Society, 32(7), 639–647.Google Scholar
  9. Clarkson, P. M., Overell, M. B., & Chapple, L. (2008). Revisiting the relation between environmental performance and environmental disclosure: An empirical analysis. Accounting, Organizations and Society, 33(4), 303–327.Google Scholar
  10. Cohen, J. R., & Simnett, R. (2015). CSR and assurance services: A research agenda. Auditing: A Journal of Practice & Theory, 34(1), 59–74.Google Scholar
  11. Cooper, S. M., & Owen, D. L. (2007). Corporate social reporting and stakeholder accountability: The missing link. Accounting, Organizations and Society, 32(7–8), 649–667.Google Scholar
  12. Daniels, B. W., & Booker, Q. (2011). The effects of audit firm rotation on perceived auditor independence and audit quality. Research in Accounting Regulation, 23(1), 78–82.Google Scholar
  13. Darnall, N., Seol, I., & Sarkis, J. (2009). Perceived stakeholder influences and organizations’ use of environmental audits. Accounting, Organizations and Society, 34(2), 170–187.Google Scholar
  14. DeAngelo, L. E. (1981). Auditor independence, ‘low balling’, and disclosure regulation. Journal of Accounting and Economics, 3(2), 113–127.Google Scholar
  15. Deegan, C., Cooper, B. J., & Shelly, M. (2006). An investigation of TBL report assurance statements. UK and European evidence. Managerial Auditing Journal, 21(4), 329–371.Google Scholar
  16. Edgley, C. R., Jones, M. J., & Solomon, J. F. (2010). Stakeholder inclusivity in social and environmental report assurance. Accounting, Auditing & Accountability Journal, 23(4), 532–557.Google Scholar
  17. Elitzur, R., & Gavious, A. (2003). Contracting, signaling, and moral hazard: A model of entrepreneurs, “angels”, and venture capitalists. Journal of Business Venturing, 18, 709–725.Google Scholar
  18. Fifka, M., & Drabble, M. (2012). Focus and standardization of sustainability reporting. A comparative study of the United Kingdom and Finland. Business Strategy and the Environment, 21(7), 455–474.Google Scholar
  19. Fifka, M., & Pobizhan, M. (2014). An institutional approach to corporate social responsibility in Russia. Journal of Cleaner Production, 82, 192–201.Google Scholar
  20. Global Reporting Initiative (GRI). (2013). Reporting principles and standard disclosures. Amsterdam: Global Reporting Initiative.Google Scholar
  21. Hodge, K., Subramaniam, N., & Stewart, J. (2009). Assurance of sustainability reports. Impact on report users’ confidence and perceptions of information credibility. Australian Accounting Review, 19(3), 178–194.Google Scholar
  22. Hsieh, H. F., & Shannon, S. E. (2005). Three approaches to qualitative content analysis. Qualitative Health Research, 15(9), 1277–1288.Google Scholar
  23. Huggins, A., Green, W. J., & Simnett, R. (2011). The competitive market for assurance engagements on greenhouse gas statements: Is there a role for assurers from the accounting profession? Current Issues in Auditing, 5(2), A1–A12.Google Scholar
  24. Hummel, K., & Festl-Pell, D. (2015). Much Ado About Nothing? Sustainability disclosure in the banking industry. Zeitschrift für Wirtschafts- und Unternehmensethik (Journal for Business, Economics & Ethics), 16(3), 369–393.Google Scholar
  25. Hummel, K., & Schlick, C. (2016). The relationship between sustainability performance and sustainability disclosure quality. Reconciling voluntary disclosure theory and legitimacy theory. Journal of Accounting and Public Policy, 35(5), 455–476.Google Scholar
  26. IFAC. (2013). Handbook of the code of ethics for professional accountants (2013th ed.). New York: IFAC.Google Scholar
  27. International Auditing and Assurance Standard Board (IAASB). (2004). International standard on assurance engagement 3000. Assurance engagement other than audits or reviews of historical information. http://www.ifac.org/system/files/downloads/b012-2010-iaasb-handbook-isae-3000.pdf.
  28. International Auditing and Assurance Standard Board (IAASB). (2013). ISAE 3000 (revised), assurance engagements other than audits or reviews of historical financial information. International framework for assurance engagements and related conforming amendments. http://www.ifac.org/sites/default/files/publications/files/ISAE%203000%20Revised%20-%20for%20IAASB.pdf.
  29. Jain, T. (2016). Decoupling corporate social orientations: A cross-national analysis. Business & Society. doi: 10.1177/0007650315610609.
  30. Jamal, K., & Sunder, S. (2011). Is mandated independence necessary for audit quality? Accounting, Organizations and Society, 36(4–5), 284–292.Google Scholar
  31. Kolk, A. (2010). Trajectories of sustainability reporting by MNCs. Journal of World Business, 45(4), 367–374.Google Scholar
  32. Kolk, A., & Perego, P. (2010). Determinants of the adoption of sustainability assurance statements. An international investigation. Business Strategy and the Environment, 19(3), 182–198.Google Scholar
  33. KPMG. (2015). The KPMG survey of corporate responsibility reporting 2015. Switzerland: KPMG International.Google Scholar
  34. Manetti, G., & Becatti, L. (2009). Assurance services for sustainability reports. Standards and empirical evidence. Journal of Business Ethics, 87, 289–298.Google Scholar
  35. Manetti, G., & Toccafondi, S. (2012). The role of stakeholders in sustainability reporting assurance. Journal of Business Ethics, 107(3), 363–377.Google Scholar
  36. Markelevich, A., & Rosner, R. L. (2013). Auditor fees and fraud firms. Contemporary Accounting Research, 30(4), 1590–1625.Google Scholar
  37. Matisoff, D. C., Noonan, D. S., & O’Brien, J. J. (2013). Convergence in environmental reporting. Assessing the carbon disclosure project. Business Strategy and the Environment, 22(5), 285–305.Google Scholar
  38. Mock, T. J., Rao, S. S., & Srivastava, R. P. (2013). The development of worldwide sustainability reporting assurance. Australian Accounting Review, 23(4), 280–294.Google Scholar
  39. Mock, T. J., Strohm, C., & Swartz, K. M. (2007). An examination of worldwide assured sustainability reporting. Australian Accounting Review, 17(1), 67–77.Google Scholar
  40. O’Dwyer, B. (2011). The case of sustainability assurance. Constructing a new assurance service. Contemporary Accounting Research, 28(4), 1230–1266.Google Scholar
  41. O’Dwyer, B., & Owen, D. L. (2005). Assurance statement practice in environmental, social and sustainability reporting. A critical evaluation. The British Accounting Review, 37(2), 205–229.Google Scholar
  42. O’Dwyer, B., Owen, D. L., & Unerman, J. (2011). Seeking legitimacy for new assurance forms. The case of assurance on sustainability reporting. Accounting, Organizations and Society, 36(1), 31–52.Google Scholar
  43. Owen, D. L., Swift, T. A., Humphrey, C., & Bowerman, M. (2000). The new social audits. Accountability, managerial capture or the agenda of social champions? The European Accounting Review, 9(1), 81–98.Google Scholar
  44. Oz, E. (2001). Organizational commitment and ethical behavior: An empirical study of information system professionals. Journal of Business Ethics, 34, 137–142.Google Scholar
  45. Park, J., & Brorson, T. (2005). Experiences of and views on third-party assurance of corporate environmental and sustainability reports. Journal of Cleaner Production, 13(10–11), 1095–1106.Google Scholar
  46. Patten, D. M. (1991). Exposure, legitimacy, and social disclosure. Journal of Accounting and Public Policy, 10(4), 297–308.Google Scholar
  47. Perego, P., & Kolk, A. (2012). Multinationals’ accountability on sustainability. The evolution of third-party assurance of sustainability reports. Journal of Business Ethics, 110(2), 173–190.Google Scholar
  48. Pflugrath, G., Roebuck, P., & Simnett, R. (2011). Impact of assurance and assurer’s professional affiliation on financial analysts’ assessment of credibility of corporate social responsibility information. Auditing: A Journal of Practice & Theory, 30(3), 239–254.Google Scholar
  49. Reverte, C. (2009). Determinants of corporate social responsibility disclosure ratings by Spanish listed firms. Journal of Business Ethics, 88(2), 351–366.Google Scholar
  50. Ruhnke, K., & Gabriel, A. (2013). Determinants of voluntary assurance on sustainability reports. An empirical analysis. Journal of Business Economics, 83(9), 1063–1091.Google Scholar
  51. Simnett, R., Vanstraelen, A., & Chua, W. F. (2009). Assurance on sustainability reports. An international comparison. The Accounting Review, 84(3), 937–967.Google Scholar
  52. Spence, M. (1973). Job market signaling. Quarterly Journal of Economics, 87(3), 355–374.Google Scholar
  53. Spence, M. (2002). Signaling in retrospect and the information structure of markets. American Economic Review, 92, 434–459.Google Scholar
  54. Stemler, S. (2001). An overview of content analysis. Practical Assessment, Research & Evaluation, 7(17), 137–146.Google Scholar
  55. Weaver, G. R., Treviño, L. K., & Cochran, P. L. (1999). Integrated and decoupled corporate social performance: Management commitments, external pressures, and corporate ethics practices. The Academy of Management Journal, 42(5), 539–552.Google Scholar
  56. Weber, R. P. (1990). Basic content analysis. Newbury Park, CA: Sage Publications.Google Scholar
  57. White, H. (1980). A heteroskedastic-consistent covariance matrix estimator and a direct test of heteroskedasticity. Econometrica, 48(4), 817–838.Google Scholar
  58. Zorio, A., García-Benau, M. A., & Sierra, L. (2013). Sustainability development and the quality of assurance reports Empirical evidence. Business Strategy and the Environment, 22, 484–500.Google Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2017

Authors and Affiliations

  • Katrin Hummel
    • 1
  • Christian Schlick
    • 2
  • Matthias Fifka
    • 3
    Email author
  1. 1.Department of Business AdministrationUniversity of ZurichZurichSwitzerland
  2. 2.Glemco GmbHFreisingGermany
  3. 3.Institute of EconomicsFriedrich-Alexander University Erlangen-NuernbergErlangenGermany

Personalised recommendations