IDEAS home Printed from https://ideas.repec.org/a/gam/jijerp/v19y2022i19p12181-d925375.html
   My bibliography  Save this article

Environmental Responsibility, Social Responsibility, and Governance from the Perspective of Auditors

Author

Listed:
  • Jaehong Lee

    (Major in Accounting/Taxation, Division of Business Administration, Kyonggi University, Suwon 16227, Korea)

  • Suyon Kim

    (YSB Center for Global ESG and Business Ethics, Yonsei-ro 50, Seoul 03722, Korea)

  • Eunsoo Kim

    (Department of Global Business Administration, Sangmyung University, Seoul 03016, Korea)

Abstract

This study examined the relationship between ESGs and the audit hours of 3010 Korean stock-listed firms from 2014 to 2019. The Korean Corporate Governance Service assigns ratings to each firm based on ESG performance. We discover that auditors exert more effort auditing companies that prioritize ESGs. Additionally, we evaluated whether the CEO’s competency level influences the relationship between ESGs and the total amount of time spent auditing the company. We observed that auditors spend less time auditing companies with highly competent CEOs. We disaggregated the total number of audit hours by rank and verified each audit hour completed by partners, CPAs, as well as staff. Based on our research, we conclude that a firm’s ESG increases audit complexity, and increases the amount of effort exerted in the auditing process.

Suggested Citation

  • Jaehong Lee & Suyon Kim & Eunsoo Kim, 2022. "Environmental Responsibility, Social Responsibility, and Governance from the Perspective of Auditors," IJERPH, MDPI, vol. 19(19), pages 1-14, September.
    • Handle: RePEc:gam:jijerp:v:19:y:2022:i:19:p:12181-:d:925375
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1660-4601/19/19/12181/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1660-4601/19/19/12181/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Anwer S. Ahmed & Scott Duellman, 2013. "Managerial Overconfidence and Accounting Conservatism," Journal of Accounting Research, Wiley Blackwell, vol. 51(1), pages 1-30, March.
    2. Xavier Gabaix & Augustin Landier, 2008. "Why has CEO Pay Increased So Much?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(1), pages 49-100.
    3. Bok Baik & David B. Farber & Sam (Sunghan) Lee, 2011. "CEO Ability and Management Earnings Forecasts," Contemporary Accounting Research, John Wiley & Sons, vol. 28(5), pages 1645-1668, December.
    4. Benjamin Richardson, 2009. "Keeping Ethical Investment Ethical: Regulatory Issues for Investing for Sustainability," Journal of Business Ethics, Springer, vol. 87(4), pages 555-572, July.
    5. Oliva, Fábio Lotti, 2016. "A maturity model for enterprise risk management," International Journal of Production Economics, Elsevier, vol. 173(C), pages 66-79.
    6. Okeefe, Tb & Simunic, Da & Stein, Mt, 1994. "The Production Of Audit Services - Evidence From A Major Public Accounting Firm," Journal of Accounting Research, Wiley Blackwell, vol. 32(2), pages 241-261.
    7. P. P. M. A. R. Heugens & N. A. Dentchev, 2007. "Taming Trojan Horses: Identifying And Mitigating Corporate Social Responsibility Risks," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 07/434, Ghent University, Faculty of Economics and Business Administration.
    8. Abagail McWilliams & Donald S. Siegel & Patrick M. Wright, 2006. "Corporate Social Responsibility: Strategic Implications," Journal of Management Studies, Wiley Blackwell, vol. 43(1), pages 1-18, January.
    9. Jong†Hag Choi & Jeong†Bon Kim & Xiaohong Liu & Dan A. Simunic, 2008. "Audit Pricing, Legal Liability Regimes, and Big 4 Premiums: Theory and Cross†country Evidence," Contemporary Accounting Research, John Wiley & Sons, vol. 25(1), pages 55-99, March.
    10. José-Luis Godos-Díez & Roberto Fernández-Gago & Almudena Martínez-Campillo, 2011. "How Important Are CEOs to CSR Practices? An Analysis of the Mediating Effect of the Perceived Role of Ethics and Social Responsibility," Journal of Business Ethics, Springer, vol. 98(4), pages 531-548, February.
    11. Pursey Heugens & Nikolay Dentchev, 2007. "Taming Trojan Horses: Identifying and Mitigating Corporate Social Responsibility Risks," Journal of Business Ethics, Springer, vol. 75(2), pages 151-170, October.
    12. Dellaportas, Steven, 2013. "Conversations with inmate accountants: Motivation, opportunity and the fraud triangle," Accounting forum, Elsevier, vol. 37(1), pages 29-39.
    13. Caramanis, Constantinos & Lennox, Clive, 2008. "Audit effort and earnings management," Journal of Accounting and Economics, Elsevier, vol. 45(1), pages 116-138, March.
    14. Timothy B. Bell & Wayne R. Landsman & Douglas A. Shackelford, 2001. "Auditors' Perceived Business Risk and Audit Fees: Analysis and Evidence," Journal of Accounting Research, Wiley Blackwell, vol. 39(1), pages 35-43, June.
    15. Francesco Perrini & Angeloantonio Russo & Antonio Tencati & Clodia Vurro, 2011. "Deconstructing the Relationship Between Corporate Social and Financial Performance," Journal of Business Ethics, Springer, vol. 102(1), pages 59-76, March.
    16. C. Edward Fee, 2003. "Raids, Rewards, and Reputations in the Market for Managerial Talent," The Review of Financial Studies, Society for Financial Studies, vol. 16(4), pages 1315-1357.
    17. Rahaman, Mohammad M. & Zaman, Ashraf Al, 2013. "Management quality and the cost of debt: Does management matter to lenders?," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 854-874.
    18. Hironori Fukukawa & Theodore J. Mock & Arnold Wright, 2011. "Client Risk Factors and Audit Resource Allocation Decisions," Abacus, Accounting Foundation, University of Sydney, vol. 47(1), pages 85-108, March.
    19. Chang, Yingying & Du, Xingqiang & Zeng, Quan, 2021. "Does environmental information disclosure mitigate corporate risk? Evidence from China," Journal of Contemporary Accounting and Economics, Elsevier, vol. 17(1).
    20. Vítor Silva & Vanda Lima & José Carlos Sá & Luís Fonseca & Gilberto Santos, 2022. "B Impact Assessment as a Sustainable Tool: Analysis of the Certification Model," Sustainability, MDPI, vol. 14(9), pages 1-19, May.
    21. Kothari, S.P. & Leone, Andrew J. & Wasley, Charles E., 2005. "Performance matched discretionary accrual measures," Journal of Accounting and Economics, Elsevier, vol. 39(1), pages 163-197, February.
    22. Rani Hoitash & Udi Hoitash & Karla M. Johnstone, 2012. "Internal Control Material Weaknesses and CFO Compensation," Contemporary Accounting Research, John Wiley & Sons, vol. 29(3), pages 768-803, September.
    23. David L. Owen & Tracey Swift & Karen Hunt, 2001. "Questioning the Role of Stakeholder Engagement in Social and Ethical Accounting, Auditing and Reporting," Accounting Forum, Taylor & Francis Journals, vol. 25(3), pages 264-282, September.
    24. Steven Dellaportas, 2013. "Conversations with inmate accountants: Motivation, opportunity and the fraud triangle," Accounting Forum, Taylor & Francis Journals, vol. 37(1), pages 29-39, March.
    25. Khoo, Joye & (Wai Kong) Cheung, Adrian, 2022. "Managerial ability and debt maturity," Journal of Contemporary Accounting and Economics, Elsevier, vol. 18(1).
    26. Mara Cameran & Angelo Ditillo & Angela Pettinicchio, 2018. "Audit Team Attributes Matter: How Diversity Affects Audit Quality," European Accounting Review, Taylor & Francis Journals, vol. 27(4), pages 595-621, August.
    27. Bonner, Sarah E., 1994. "A model of the effects of audit task complexity," Accounting, Organizations and Society, Elsevier, vol. 19(3), pages 213-234, April.
    28. Sanjeev Bhojraj & Partha Sengupta, 2003. "Effect of Corporate Governance on Bond Ratings and Yields: The Role of Institutional Investors and Outside Directors," The Journal of Business, University of Chicago Press, vol. 76(3), pages 455-476, July.
    29. Ioannis Ioannou & George Serafeim, 2015. "The impact of corporate social responsibility on investment recommendations: Analysts' perceptions and shifting institutional logics," Strategic Management Journal, Wiley Blackwell, vol. 36(7), pages 1053-1081, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Riquan Yao & Yingqun Fei & Zhong Wang & Xin Yao & Sasa Yang, 2023. "The Impact of China’s ETS on Corporate Green Governance Based on the Perspective of Corporate ESG Performance," IJERPH, MDPI, vol. 20(3), pages 1-16, January.
    2. Dana Simona Gherai & Diana Claudia Sabău Popa & Luminița Rus & Diana Elisabeta Matica & Codruța Mare, 2024. "The Impact of Romanian Internal Auditors in ESG Reporting and Sustainable Development Goals," Sustainability, MDPI, vol. 16(19), pages 1-20, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. DeFond, Mark & Zhang, Jieying, 2014. "A review of archival auditing research," Journal of Accounting and Economics, Elsevier, vol. 58(2), pages 275-326.
    2. Yuan Yuan & Gaoliang Tian & Louise Yi Lu & Yangxin Yu, 2019. "CEO Ability and Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 157(2), pages 391-411, June.
    3. Dafydd Mali & Hyoung‐joo Lim, 2021. "Do Relatively More Efficient Firms Demand Additional Audit Effort (Hours)?," Australian Accounting Review, CPA Australia, vol. 31(2), pages 108-127, June.
    4. Rajib Doogar & Padmakumar Sivadasan & Ira Solomon, 2010. "The Regulation of Public Company Auditing: Evidence from the Transition to AS5," Journal of Accounting Research, Wiley Blackwell, vol. 48(4), pages 795-814, September.
    5. Yang, Seunghee & Lee, Woo-Jong & Lim, Youngdeok & Yi, Cheong H., 2021. "Audit firm operating leverage and pricing strategy: Evidence from lowballing in audit industry," Journal of Contemporary Accounting and Economics, Elsevier, vol. 17(2).
    6. Jeffrey Pittman & Baolei Qi & Yi Si & Zi-Tian Wang & Chongwu Xia, 2024. "Individual Auditor Social Responsibility and Audit Quality: Evidence from China," Journal of Business Ethics, Springer, vol. 194(1), pages 119-144, September.
    7. Chang, Hsihui & Ho, L.C. Jennifer & Liu, Zenghui & Ouyang, Bo, 2021. "Income smoothing and audit fees," Advances in accounting, Elsevier, vol. 54(C).
    8. Hyoung-Joo Lim & Dafydd Mali, 2024. "An analysis of the effect of audit effort (hours) on stock price volatility: evidence of increasing demand reducing uncertainty," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 21(3), pages 359-375, September.
    9. Meyer, Margit & Waßmann, Jan, 2011. "Strategische Corporate Social Responsibility. Konzeptionelle Entwicklung und Implementierung in der Praxis am Beispiel 'dm-drogerie markt'," Research Papers on Marketing Strategy 3/2011, Julius-Maximilians-Universität Würzburg, Lehrstuhl für BWL und Marketing.
    10. Wong, Jin Boon & Zhang, Qin, 2022. "Stock market reactions to adverse ESG disclosure via media channels," The British Accounting Review, Elsevier, vol. 54(1).
    11. Cao, June & Ee, Mong Shan & Hasan, Iftekhar & Huang, He, 2024. "Asymmetric reactions of abnormal audit fees jump to credit rating changes," The British Accounting Review, Elsevier, vol. 56(2).
    12. Persakis, Anthony & Iatridis, George Emmanuel, 2016. "Audit quality, investor protection and earnings management during the financial crisis of 2008: An international perspective," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 41(C), pages 73-101.
    13. Inder K. Khurana & Hoyoun Kyung, 2021. "Internal control material weakness and CEO recruitment," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(9-10), pages 1940-1987, October.
    14. Jingyu Yang & Hai Wu & Yangxin Yu, 2021. "Distracted institutional investors and audit risk," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(3), pages 3855-3881, September.
    15. Duellman, Scott & Hurwitz, Helen & Sun, Yan, 2015. "Managerial overconfidence and audit fees," Journal of Contemporary Accounting and Economics, Elsevier, vol. 11(2), pages 148-165.
    16. Rustam, Sehrish & Rashid, Kashif & Zaman, Khalid, 2013. "The relationship between audit committees, compensation incentives and corporate audit fees in Pakistan," Economic Modelling, Elsevier, vol. 31(C), pages 697-716.
    17. Stergios Leventis & Emmanouil Dedoulis & Omneya Abdelsalam, 2018. "The Impact of Religiosity on Audit Pricing," Journal of Business Ethics, Springer, vol. 148(1), pages 53-78, March.
    18. Minjung Kang & Ho-Young Lee & Myungsoo Son & Michael Stein, 2017. "The association between human resource investment by audit firms and their audit quality," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 24(3-4), pages 249-271, October.
    19. Habib, Ahsan & Hasan, Mostafa Monzur, 2017. "Managerial ability, investment efficiency and stock price crash risk," Research in International Business and Finance, Elsevier, vol. 42(C), pages 262-274.
    20. Nguyen, Hung T. & Pham, Mia Hang & Truong, Cameron, 2023. "Leadership in a pandemic: Do more able managers keep firms out of trouble?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jijerp:v:19:y:2022:i:19:p:12181-:d:925375. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.