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ESG Performance, Auditor Choice, and Audit Opinion: Evidence from an Emerging Market

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  • Ahmed Diab

    (Accounting Department, Prince Sultan University, Riyadh 11586, Saudi Arabia
    Faculty of Commerce, Beni-Suef University, Beni-Suef 62521, Egypt)

  • Aref M. Eissa

    (Faculty of Commerce, Cairo University, Cairo 12613, Egypt
    Accounting Department, Majmaah University, Al-Majmaah 11952, Saudi Arabia)

Abstract

This study examines the effect of environmental, social, and governance (ESG) performance on auditor choice and audit opinion for Egyptian-listed firms. We use univariate and multivariate analyses of 612 firm-year observations for a sample of 68 firms listed on EGX100 over 2014–2022 using binary logistic regression models. Consistent with the ethical perspective of corporate social responsibility, we found that firms listed in the ESG index are more likely to assign one of the Big4 auditors, and less likely to receive a qualified opinion. Through an additional analysis, we found that COVID-19 moderates the relationship between ESG performance, auditor choice, and audit opinion. Our results confirm the value of ESG performance for audit practices in emerging economies. This research indicates that ESG performance can enhance financial reporting quality. Further, it ensures that binding guidelines and regulations are crucial to oversee corporate ESG performance, especially during crisis times, and enhance investors’ protection and firms’ sustainability.

Suggested Citation

  • Ahmed Diab & Aref M. Eissa, 2023. "ESG Performance, Auditor Choice, and Audit Opinion: Evidence from an Emerging Market," Sustainability, MDPI, vol. 16(1), pages 1-18, December.
    • Handle: RePEc:gam:jsusta:v:16:y:2023:i:1:p:124-:d:1305389
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    References listed on IDEAS

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