Integrated reporting, audit quality: presence of environmental auditing in an international context

Abstract

Purpose This paper aims to investigate the effect of audit quality and environmental auditing on integrated reporting and the effect of environmental auditing on audit quality. Design/methodology/approach Data was collected from a sample of 300 international companies during the period 2010–2019. The author collected the data from the Thomson Reuters Eikon database, sustainability reports and annual reports. A multiple regression analysis was performed to test the hypotheses. Findings The finding of this study confirms a positive and significant relationship between audit quality and integrated reporting. It is also found that environmental auditing has a positive and significant effect on integrated reporting. Thus, this study found a positive and significant relationship between environmental auditing and audit quality. Practical implications The findings in this paper identify strategies for improving integrated reporting as a crucial element in the processing of financial and nonfinancial information, to help managers and investors and shareholders take a long-term perspective. Therefore, the results encourage companies to invest in economic, environmental and social aspects. This enables accounting professionals, stock exchange authorities and users of environmental and social information to be aware of the factors associated with environmental reporting, to improve the efficiency of those producing the audit service. Originality/value The originality of this study lies in its consideration of a particular aspect of auditing, namely, environmental auditing. However, despite the large body of research on auditing and integrated reporting, to the best of the author’s knowledge, this is the first study to examine the relationship between environmental auditing and integrated reporting. Furthermore, in this research, the author has emphasized the importance of the role played by environmental auditing on audit quality. This design has been neglected in previous studies. Finally, the choice of the field of investigation for the reliability of the data used and the generalization of the results obtained, enables us to make important contributions to the user of the information.

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“…There are also few service articles that measure the environmental impacts of services, although the quantification of environmental impacts arises in the non-service domain. For example, the literature in accounting discusses the measurement of firms’ environmental impact (Vitolla et al , 2019; Hichri, 2023; Niemenmaa, 2022). Environmental auditing and management services are explored in non-business journals, such as Ecosystem Services (e.g.…”

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

“…Using the U.S. data, Sun et al found that firms with higher CSR performance are more likely to engage industry specialist auditors [56]. Using international evidence, Hichri found a positive association between audit quality and integrated reporting [57]. Using U.S. data, Du et al found that companies with higher CSR performance are likely to engage big (high-quality) auditors [52].…”

“…According to the ethical perspective, firms committed to ESG practices are likely to be honest and trustworthy by having a strict code of ethics [57] that, in turn, would restrict reporting irregularities [60], and instead support transparency of financial reports and information quality [51,61]. Supporting this view, some studies revealed that firms' ESG practices are related to lower misstatement and client business risk [60,62].…”

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“…The regulatory environment and oversight mechanisms significantly impact audit quality, as stringent regulations and effective oversight contribute to a more robust auditing process [ 8 ]. Technological advancements and the adoption of innovative audit tools have emerged as crucial factors shaping audit quality in the contemporary business landscape [ 9 ]. Understanding the intricate interplay of these factors is essential for advancing research and enhancing the overall quality and effectiveness of auditing practices.…”