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1 – 10 of over 9000Though assurance services framework has been defined in the Auditing Standards, the understandability of the concept of reasonable assurance are varied by different auditors. The…
Abstract
Purpose
Though assurance services framework has been defined in the Auditing Standards, the understandability of the concept of reasonable assurance are varied by different auditors. The audit risk model (ARM) that is being used on a worldwide basis to underpin the audit risk of companies, is often being criticized. The purpose of this paper is to assess auditors' perceptions of reasonable assurance in audit work and the effectiveness of the ARM.
Design/methodology/approach
Three independent variables are examined: CPA certification, ranks of auditors and gender for their influence on two dependent variables: the perceptions of reasonable assurance in audit work and the effectiveness of the ARM. MANOVA analysis and follow up Discriminant Analysis are employed.
Findings
Results reveal that there are significant differences between the perceptions held by auditors of different ranks regarding reasonable assurance in audit work. Partners entertain higher perceptions of reasonable assurance than staff auditors. The “gender” variable does not have an influence on the two dependent variables. Auditors with CPA certifications have higher perceptions of reasonable assurance. There are no differences in the perceptions ratings by different rank of auditors, gender and CPA certifications on the effectiveness of the ARM. The three independent variables have average high‐mean ratings on the effectiveness of the ARM, confirming that the current ARM still can provide an effective assurance.
Originality/value
This empirical study revokes the UK study and The Netherlands study. Immediate attention need not be focused on restructuring the ARM. Future contemplation of other important issue such as auditor independence may be considered.
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William Dilla, Diane Janvrin, Jon Perkins and Robyn Raschke
This paper aims to examine the influence of sustainability assurance report format (separate versus combined with financial information assurance) and level (limited versus…
Abstract
Purpose
This paper aims to examine the influence of sustainability assurance report format (separate versus combined with financial information assurance) and level (limited versus reasonable) on nonprofessional investors’ judgments.
Design/methodology/approach
This study uses a 2 × 2 between-participants experiment with 436 US nonprofessional investors. The authors manipulate sustainability assurance report format and level to identify differences in judgments of information credibility, investment desirability and investment amount.
Findings
This study finds that sustainability assurance level influences participants’ judgments only when the financial and sustainability assurance reports are presented separately. Specifically, participants assess sustainability performance information as more credible and make higher investment judgments when presented with a separate limited, as opposed to reasonable, assurance sustainability report.
Practical implications
The International Auditing and Assurance Standards Board expressed concerns regarding whether assurance reports accompanying emerging forms of extended external reporting (EER) effectively communicate the level of assurance provided by the independent practitioner. The result that assurance level does not influence investor judgments in the combined reporting format appears contrary to the idea that integrated reporting should provide connectivity between financial and sustainability information. The finding that investors make higher investment and credibility judgments with limited assurance is inconsistent with the intent of sustainability assurance professional guidance and recent research results. Together, the findings suggest that investors may not be able to distinguish between differing levels of sustainability assurance when this information is presented in a combined report format.
Social implications
Standard setters should consider how sustainability assurance report format and assurance level impact nonprofessional investor judgments.
Originality/value
Research on the effects of EER assurance report format is sparse. The results indicate that even slight changes in assurance report wording may cause investors to perceive that a limited assurance report conveys a higher assurance level than a reasonable assurance report.
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Mark D. Sheldon and J. Gregory Jenkins
This study empirically examines perceptions of environmental report believability based on a firm's relative performance and level of assurance obtained on environmental…
Abstract
Purpose
This study empirically examines perceptions of environmental report believability based on a firm's relative performance and level of assurance obtained on environmental activities under the recently clarified and recodified attestation standards in the United States.
Design/methodology/approach
The paper uses a 2 × 3 between-subjects experiment to identify differences in 153 non-expert environmental report users' perceptions of report believability based on positive or negative firm performance and (level of) assurance provided by an accounting firm.
Findings
Results show a main effect in that negative performance reports are perceived to be more believable than positive performance reports, as driven by negative performance reports being significantly more believable when no assurance is present. The firm performance effect is eliminated once limited or reasonable assurance is provided. Further, positive performance reports with limited, but not reasonable, assurance are perceived to be more believable than reports without assurance. No differences are identified within the negative performance condition.
Practical implications
Limited assurance might be used as an impression management tool to enhance the believability of positive performance environmental reports. Users, practitioners, and standard-setters should also be aware that users might believe environmental reports are assured, even when no such assurance has been provided.
Originality/value
This paper examines the impact of assured environmental reporting on users that review firms' environmental reports outside of a shareholder/investor role. The study also demonstrates conditions in which firm performance and assurance impact perceptions of report believability.
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Hawariah Dal Nial, Zarina Zakaria and Anna Che Azmi
The study aims to evaluate how different types of assurors and investors’ Big Five personality traits affect the relationship between levels of assurance for Greenhouse Gas (GHG…
Abstract
Purpose
The study aims to evaluate how different types of assurors and investors’ Big Five personality traits affect the relationship between levels of assurance for Greenhouse Gas (GHG) reporting and individual investors' decision-making in social responsible investment (SRI).
Design/methodology/approach
This study adopted an experimental approach with 315 individual investors as participants.
Findings
The results show that there are some differences in the individual investors’ decision-making. Accountants are the preferred assuror. Type of assuror and level of assurance for GHG reporting affect investors’ decision-making, in the presence of different levels of investors’ personality traits, extraversion, openness, conscientiousness and neuroticism. However, individual investors with different levels of agreeableness do not have similar influence.
Originality/value
This study extends the literature on individual investors’ decision-making in socially responsible investment by examining the combination of the type of assuror, level of assurance and investors’ personality traits. This study also observes three different assurors, accountants, engineers and specialists and four different assurance levels – reasonable, hybrid, limited and not specified.
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Alireza Rohani, Mirna Jabbour and Sulaiman Aliyu
With the growing attention around carbon emissions disclosure, the demand for external carbon assurance on emissions reports has been increasing by stakeholders as it provides…
Abstract
Purpose
With the growing attention around carbon emissions disclosure, the demand for external carbon assurance on emissions reports has been increasing by stakeholders as it provides additional credibility and confidence. This study investigates the association between the higher level of external carbon assurance and improvement in a firm's carbon emissions. It provides an understanding of corporate incentives for obtaining a higher level of carbon assurance, particularly in relation to carbon performance enhancements.
Design/methodology/approach
Data are collected from 170 US companies for the period 2012–2017 and are analysed using a change analysis. Generalised method of moment (GMM) is used to address endogeneity.
Findings
Following the rationales taken by legitimacy and “outside-in” management views, the findings reveal that a higher level of carbon assurance (i.e. reasonable assurance) marginally improves firms' carbon performance (i.e. reported carbon emissions). This is consistent with “outside-in” management view suggesting that a higher level of assurance could be utilised as a tool for accessing more information about stakeholders' needs and concerns, which can be useful in enhancing carbon performance.
Research limitations/implications
The findings are generalisable to US firms and may not extend to other contexts.
Practical implications
The implication of this study for companies is that a high level of sustainability assurance is a useful tool to access detailed information about stakeholder concerns, of which internalisation can help to marginally improve carbon performance. For policymakers, the insights into and enhanced understanding of the incentives for obtaining carbon assurance can help policymakers to develop effective policies and initiatives for carbon assurance. Considering the possible improvements in carbon performance when obtaining a high level of sustainability verification, governments need to consider mandating carbon assurance.
Originality/value
This study extends the existing studies of assurance in sustainability context as well as in carbon context by explaining why companies voluntarily get expensive external verification (i.e. higher level of assurance) of their carbon emissions disclosure. This study responds to calls in the literature for empirical research investigating the association between environmental performance and external assurance with a focus on level of assurance.
Highlights
A higher level of carbon assurance Marginally improves firms' carbon performance.
Corporate incentives to obtain higher level of carbon assurance is beyond seeking legitimacy.
Higher level of assurance is a useful tool for accessing more information about stakeholders' concerns.
Consistent with “ouside-in”management view, companies internalise stakeholders' concerns to marginally improve performance.
A higher level of carbon assurance Marginally improves firms' carbon performance.
Corporate incentives to obtain higher level of carbon assurance is beyond seeking legitimacy.
Higher level of assurance is a useful tool for accessing more information about stakeholders' concerns.
Consistent with “ouside-in”management view, companies internalise stakeholders' concerns to marginally improve performance.
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Reiner Quick and Petra Inwinkl
This paper aims to clarify whether assurance on non-financial corporate social responsibility (CSR) reports impacts the perceptions and decisions of banks as capital providers…
Abstract
Purpose
This paper aims to clarify whether assurance on non-financial corporate social responsibility (CSR) reports impacts the perceptions and decisions of banks as capital providers. The authors investigate the effects of the type of assurance provider and the level of assurance provided on decisions by banks to grant credit, make their own personal investments or recommend share purchases to their customers. The study aims to expand the domain of assurance on CSR reports (CSRR) by taking up a call by Cohen and Simnett (2015), who ask for behavioral research on how non-financial report’s intended users interpret and react to assurance.
Design/methodology/approach
The paper is based on an experiment case on a fictitious company with a 2 × 2 + 1 between-subjects design. To overcome concerns regarding external validity and to prove results in a real-world setting, the authors selected German bank directors as subjects due to the extremely high relevance of banks to the German economy. The authors investigated the perceptions of 69 bank directors and analyzed the influence of CSR assurance on their decisions.
Findings
The findings suggest that assurance positively influences confidence in CSRR and that, consequently, bankers are more likely to make favorable decisions toward the reporting companies, such as approving applications for credit, investing themselves in the company or recommending the purchase of shares to their clients. These effects are stronger when an accounting firm provides the assurance and when the assurance level is reasonable rather than limited.
Research limitations/implications
The arguments presented are, strictly speaking, limited to the case in the experiment and the views held by the bank directors at the time the authors sent out the questionnaires. Moreover, the cell sizes are quite small. Nevertheless, the authors were able to find highly significant results.
Practical implications
The main implication of the paper is that the purchase of CSRR assurance services has a positive effect on bank directors’ perceptions and decisions. They favor the provision of such services by accounting firms and they prefer a reasonable assurance level. Thus, it can be concluded that bank directors perceive quality differences between assurance providers, are able to recognize the difference between reasonable and limited assurance and that the related information is relevant for their decisions.
Originality/value
This paper fulfils an identified need to study the influence of CSRR assurance on decisions by bank directors. The observation of a high decisions-usefulness of CSRR assurance suggests that regulators should consider mandating some form of assurance on non-financial reports throughout the EU member states.
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The International Auditing and Assurance Standards Board (IAASB) is currently in the process of revising International Standard on Assurance Engagements (ISAE) 3000. The purpose…
Abstract
Purpose
The International Auditing and Assurance Standards Board (IAASB) is currently in the process of revising International Standard on Assurance Engagements (ISAE) 3000. The purpose of this paper is to review the implications of this revision process for providing assurance on sustainability reports, and identify policy‐related research opportunities associated with this review.
Design/methodology/approach
The paper takes the form of a conceptual and critical review of standards development, and archival analysis of ISAE 3000 exposure draft responses.
Findings
In the revision of ISAE 3000, concerns have been expressed by a number of parties around the distinction between reasonable and limited assurance, the procedures necessary in properly undertaking a limited assurance engagement and the structure and content of a limited assurance report. These concerns can be addressed by appropriate research initiatives which can inform these policy issues.
Research limitations/implications
Research opportunities are identified, in particular the use of experimental design to examine implications of changing the requirements of the procedures for limited assurance on assurance practitioners and of changing aspects of the assurance report on the level of assurance conveyed by limited assurance reports.
Practical implications
The paper contains a review of the standard‐setting process and has implications for assurance providers of sustainability reports, standard setters and regulators.
Originality/value
The paper provides an update of relevant standards for assurers of sustainability reports and review and appraisal of issues raised in the recent revision process of ISAE 3000.
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The Foreign Corrupt Practices Act (FCPA) of 1977 and its amendment – the Trade and Competitive Act of 1988 – are unique not only in the history of the accounting and auditing…
Abstract
The Foreign Corrupt Practices Act (FCPA) of 1977 and its amendment – the Trade and Competitive Act of 1988 – are unique not only in the history of the accounting and auditing profession, but also in international law. The Acts raised awareness of the need for efficient and adequate internal control systems to prevent illegal acts such as the bribery of foreign officials, political parties and governments to secure or maintain contracts overseas. Its uniqueness is also due to the fact that the USA is the first country to pioneer such a legislation that impacted foreign trade, international law and codes of ethics. The research traces the history of the FCPA before and after its enactment, the role played by the various branches of the United States Government – Congress, Department of Justice, Securities Exchange commission (SEC), Central Intelligence Agency (CIA) and the Internal Revenue Service (IRS); the contributions made by professional associations such as the American Institute of Certified Public Accountants (AICFA), the Institute of Internal Auditors (IIA), the American Bar Association (ABA); and, finally, the role played by various international organizations such as the United Nations (UN), the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO) and the International Federation of Accountants (IFAC). A cultural, ethical and legalistic background will give a better understanding of the FCPA as wll as the rationale for its controversy.
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Barry Ackers and Neil Stuart Eccles
Despite its voluntary nature, the Johannesburg stock exchange (JSE) requires all listed companies to apply the King III principles, including providing independent CSR assurance…
Abstract
Purpose
Despite its voluntary nature, the Johannesburg stock exchange (JSE) requires all listed companies to apply the King III principles, including providing independent CSR assurance. King III has accordingly made independent CSR assurance a de facto mandatory requirement, albeit on an “apply or explain” basis. The purpose of this paper is to examine the impact mandatory corporate social responsibility (CSR) assurance practices in South Africa, within a King III context.
Design/methodology/approach
To understand the impact of King III on South African CSR assurance practices, a longitudinal study covering reporting periods both before and after King III implementation. The first stage reviewed the annual reports of the 200 largest JSE-listed companies to establish the frequency of CSR assurance provision. The second stage involved performing a content analysis on the CSR assurance reports.
Findings
King III is driving the institutionalisation of CSR assurance practices in South Africa, as evidenced by the growth in CSR assurance since the implementation of King III. The study also found that the audit profession’s dominance was being eroded by specialist CSR assurors providing higher levels of assurance, despite concerns about the rigour of their assurance methodologies. Voluntary CSR assurance practices have resulted in the inconsistent application of CSR assurance practices, impairing the ability of stakeholders to understand the nature and scope of CSR assurance engagements. It is argued that this deficiency may be overcome through the imposition of a mandatory CSR assurance regime.
Originality/value
The pervasive impact of the King Code of Governance on South African organisations makes it appropriate to examine its impact on South African CSR assurance practices. As such, this paper represents one of the first studies to specifically consider the impact of a mandatory regulatory requirement for independent CSR assurance and suggests a future direction for global CSR assurance practices.
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As companies begin accounting for the triple bottom line, external corporate social responsibility (CSR) assurance provides stakeholders with assurance that CSR disclosures may be…
Abstract
As companies begin accounting for the triple bottom line, external corporate social responsibility (CSR) assurance provides stakeholders with assurance that CSR disclosures may be relied upon. In this way, companies may go some way towards avoiding their CSR efforts simply being perceived as greenwash or a public relations exercise. Several organisations currently provide this assurance, using different methodologies and standards. Using a content analysis, the annual and/or CSR reports of the top 100 South African publicly listed companies were investigated in respect of CSR assurance, and compared with international trends. Despite a slow response, the evidence suggests that CSR assurance prevalence is growing. It was found that despite its developing country status, the prevalence of CSR assurance by South African companies compared favourably with that of their counterparts in developed countries. In South Africa and the UK, the audit profession, led by the “Big 4” firms, is the dominant provider of CSR assurance. As the demand increases, the auditor’s role as a CSR assurance provider is expected to become increasingly more important, especially in South Africa, where the audit profession is highly regarded. This increased demand for assurance services will require the global audit profession’s paradigm to be re‐examined to include competence in contextual accounting and auditing.
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