Corporate Social Responsibility and Auditing Opinions

cited authors

  • Simerly, Melloney C; Green, Karen Y

description

  • ABSTRACT: In this study, we examine the ethical link between audit opinions and corporate social responsibility (CSR). Specifically, we investigate whether socially responsible firms are more likely to receive clean audit opinions. In the context of this study, we define modified audit opinions as an unqualified opinion with additional language and a clean audit opinion as an unqualified opinion without clarifying language added by the auditor. We examine the relationship between CSR and clean versus modified audit opinions using a continuous score for CSR ratings. Then, we classify firms as CSR or non-CSR companies to investigate whether an organization’s CSR agenda is associated with the type of audit opinion. Finally, to support our theoretical argument that CSR and auditing are linked by virtue of managerial ethics, we analyze how CSR strengths and concerns are associated with audit opinions. We find that CSR score and CSR company are positively (negatively) associated with the receipt of a clean (modified) audit opinion. Moreover, our results suggest that CSR strengths are significantly related to clean opinions and CSR concerns are significantly related to modified audit opinions. Limitations of this study include the inability to address the specific circumstance for the receipt of the modified opinion and endogeneity concerns associated with the determinants for both CSR and auditing. Despite the limitations, our empirical results demonstrate that CSR and auditing are related. This study also highlights the importance of managerial ethics while providing support that CSR performance may be extended to financial reporting behavior and is related to the external independent auditing function.

authors

publication date

  • 2017

published in