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Corporate environmental responsibility and audit risk

Corporate environmental responsibility and audit risk Purpose – The purpose of this paper is to examine the relationship between and corporate environmental responsibility (CER) and audit risk. Design/methodology/approach – A survey participation request was mailed to 5,008 US auditors at random. The request provided a link to an electronic survey. The final sample consists of anonymous responses from 163 auditors. Findings – The authors find that auditors, on average, do not perceive a significant relationship between corporate environmental strengths and audit risk; however, they do perceive an increase in audit risk among firms with corporate environmental concerns. Use of CER in the risk assessment process also varies across types of CER: 15 per cent of auditors use corporate environmental strengths to assess audit risk, while 43 per cent of auditors use corporate environmental concerns to assess audit risk. Perception of the CER/audit risk relationship is a significant determinant of CER use. Finally, both types of CER are found to have average usefulness in the risk assessment process. Research limitations/implications – The findings are limited to US auditors; results may not be transferable to other countries. Originality/value – Studies involving the impact of CER on earnings generally involve archival data. By examining the impact of CER on audit risk, using a unique dataset, the authors present a different and timely setting to study the CER/earnings relationship. To the best of the authors' knowledge, this is the first paper to document the relationship between CER and audit risk. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Auditing Journal Emerald Publishing

Corporate environmental responsibility and audit risk

Mary Mindak; Wendy Heltzer
Managerial Auditing Journal , Volume 26 (8): 37 – Sep 6, 2011
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References (34)

Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
0268-6902
DOI
10.1108/02686901111161340
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to examine the relationship between and corporate environmental responsibility (CER) and audit risk. Design/methodology/approach – A survey participation request was mailed to 5,008 US auditors at random. The request provided a link to an electronic survey. The final sample consists of anonymous responses from 163 auditors. Findings – The authors find that auditors, on average, do not perceive a significant relationship between corporate environmental strengths and audit risk; however, they do perceive an increase in audit risk among firms with corporate environmental concerns. Use of CER in the risk assessment process also varies across types of CER: 15 per cent of auditors use corporate environmental strengths to assess audit risk, while 43 per cent of auditors use corporate environmental concerns to assess audit risk. Perception of the CER/audit risk relationship is a significant determinant of CER use. Finally, both types of CER are found to have average usefulness in the risk assessment process. Research limitations/implications – The findings are limited to US auditors; results may not be transferable to other countries. Originality/value – Studies involving the impact of CER on earnings generally involve archival data. By examining the impact of CER on audit risk, using a unique dataset, the authors present a different and timely setting to study the CER/earnings relationship. To the best of the authors' knowledge, this is the first paper to document the relationship between CER and audit risk.

Journal

Managerial Auditing Journal – Emerald Publishing

Published: Sep 6, 2011

Keywords: United States of America; Auditors; Corporate environmental responsibility; Audit risk; Earnings quality

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