Purpose This paper aims to investigate the relationship between the quality of internal corporate governance mechanisms and the audit issues disclosed by external auditors in their report, assuming the beneficial effect related to the adoption of a sustainable corporate governance system. Design/methodology/approach This paper investigates the impact of the International Auditing and Assurance Standards Board’s ISA 701 in the European context as a new auditing principle supporting the key audit matters (KAMs) in reporting and disclosing auditing activities. The analysis is carried out through a quantitative methodology using a sample composed of non-financial companies listed on the Italian Stock Exchange. Findings Empirical findings highlight that firms having a high quality and sustainable corporate governance system tend to have fewer KAMs arising from the audit process and then disclosed in the audit report. To ensure the reliability of the empirical analysis, the authors controlled for a set of variables that could affect the audit function and for the mediating role of the overall business complexity (as proxied by the firm size). Originality/value This study is of interest to academics, practitioners and regulators, as it highlights the role of a higher quality internal corporate governance on the perceived corporate riskiness and complexity. It contributes to the recent debate on sustainable corporate governance, corporate sustainability and auditing streams.

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Self-dealing refers to all kinds of transactions and operations whose aim is to divert value from a company to corporate controllers. In order to tackle self-dealing, scholars and regulators have emphasised the importance of legal tools. However, although the pro-regulatory approach prevails on a wide scale in the academic arena, there still exists a marked divergence between theoretical positions supporting the existence of a benchmark model towards which to converge (convergence hypothesis) and those that underscore the importance of socio-economic factors on the efficacy of governance rules (path dependency view). The aim of this paper is to join in the convergence vs. path dependency debate by adding some considerations on the efficiency of mandatory rules to the well-known investigations on the effectiveness of legal frameworks. Specifically, considering the current market integration and associated opportunities and threats, the traditional cost-benefit analysis has been extended in order to embrace direct and indirect costs specifically associated to the issue of domestic rules in a global scenario. Such an economic analysis on self-dealing introduces new variables that may support the convergence view and encourage at least a partial and gradual adjustment of national legislations towards the Anglo-Saxon model. To test our hypothesis, an examination of the self-dealing rules adopted in Germany, Italy and UK has been conducted. In particular, spatial and temporal comparisons of conflict of interests and self-dealing legislations have been carried out in order to appreciate trends, differences and similarities of some of the most important European legal frameworks.

As a performance indicator, net debt conveys information to assess firms' gearing level and the ability to service the outstanding borrowings. Moreover, net debt is frequently used in debt covenants in order to reduce information asymmetry between borrowers and lenders and to enhance the efficiency of the debt contracting process.Notwithstanding the decision usefulness and the contracting relevance associated to net debt disclosure, contrasting positions have been suggested concerning the notion of-and the information about the net financial position. In particular, a regulated/narrow approach contrasts an unregulated/principle-based one, and both the academic literature and accounting profession are far from being unanimous on this issue.By examining financial statements of 60 Italian listed companies, we compare the content of the net debt disclosure produced in a non-regulated environment with that delivered within a mandatory disclosure regime. Our analysis shows that the adoption of a mandatory disclosure regime has only slightly enhanced the comparability of net debt disclosure and highlights the opportunistic nature of the disclosure about the net financial position. At the same time, the multivariate analysis shows the role that regulation could play as a low-cost commitment device.

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