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Implications of the Joint Provision of CSR Assurance and Financial Audit for Auditors’ Assessment of Going Concern Risk

Author

Listed:
  • Lorenzo Dal Maso
  • Gerald J. Lobo

    (C. T. Bauer College of Business - University of Houston)

  • Francesco Mazzi
  • Luc Paugam

    (ESSEC Business School)

Abstract

We examine whether the joint provision of corporate social responsibility (CSR) assurance services and financial audit by the same audit firm influences auditors' assessment of going concern risk. We predict that the provision of CSR assurance and financial audit by the same audit firm creates CSR-related knowledge spillovers from the CSR assurance team to the financial audit engagement team, which help in the auditor's assessment of going concern risk. Using more than 28,000 firm-year observations from 55 countries, we document that, relative to audit firms that provide only the financial audit, audit firms that provide both CSR assurance and financial audit for the same client (1) issue more frequent going concern opinions and have lower Type-II going concern errors, (2) have clients that book larger environmental and litigation provisions, (3) report earnings that are more persistent and value relevant and are less likely to book income-decreasing earnings restatements, and (4) do not charge higher audit fees or total fees. Our results are important especially because of firms' increasing exposure to CSR risks and the growing number of countries that require assurance of CSR reports.

Suggested Citation

  • Lorenzo Dal Maso & Gerald J. Lobo & Francesco Mazzi & Luc Paugam, 2020. "Implications of the Joint Provision of CSR Assurance and Financial Audit for Auditors’ Assessment of Going Concern Risk," Working Papers hal-02896476, HAL.
    • Handle: RePEc:hal:wpaper:hal-02896476
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    Citations

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    Cited by:

    1. Hans B. Christensen & Luzi Hail & Christian Leuz, 2021. "Mandatory CSR and sustainability reporting: economic analysis and literature review," Review of Accounting Studies, Springer, vol. 26(3), pages 1176-1248, September.
    2. Tsang, Albert & Frost, Tracie & Cao, Huijuan, 2023. "Environmental, Social, and Governance (ESG) disclosure: A literature review," The British Accounting Review, Elsevier, vol. 55(1).
    3. Habiba Al‐Shaer, 2020. "Sustainability reporting quality and post‐audit financial reporting quality: Empirical evidence from the UK," Business Strategy and the Environment, Wiley Blackwell, vol. 29(6), pages 2355-2373, September.
    4. Ojala, Hannu & Malo, Pekka & Penttinen, Esko, 2023. "Private firms’ tax aggressiveness and lightweight pre-tax-audit interventions by the tax administration," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 51(C).
    5. Dimos Andronoudis & Diogenis Baboukardos & Fanis Tsoligkas, 2024. "How the information content of integrated reporting flows into the stock market," Post-Print hal-04389552, HAL.
    6. Dimos Andronoudis & Diogenis Baboukardos & Fanis Tsoligkas, 2024. "How the information content of integrated reporting flows into the stock market," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 1057-1078, January.
    7. Bradbury, Michael & Jia, Jing & Li, Zhongtian, 2022. "Corporate social responsibility committees and the use of corporate social responsibility assurance services," Journal of Contemporary Accounting and Economics, Elsevier, vol. 18(2).
    8. Andrew R. Finley & Curtis M. Hall & Amanda R. Marino, 2022. "Negotiation and executive gender pay gaps in nonprofit organizations," Review of Accounting Studies, Springer, vol. 27(4), pages 1357-1388, December.

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