Abstract
Independent assurance improves the credibility of corporate social responsibility (CSR) disclosures by providing stakeholders with confidence about the veracity of CSR disclosures and attempts to ameliorate the risk of unscrupulous companies falsely reporting their CSR performance. This article establishes the prevalence of CSR assurance by the 200 largest JSE-listed companies for the period ended 2011/2 (the year after King III became effective), in terms of the assurance provider, the assurance standards, the assurance report components and assurance opinions. Within this context, this article specifically focuses on the role of the audit profession. The article concludes that the rate of growth in CSR assurance by auditors is surpassed by that of non-auditor assurance providers. Whereas reporting companies may use auditors for CSR assurance due to the perceived credibility and strong brands of the auditing profession, enhanced by rigorous assurance methodologies, they may use non-auditor assurance providers due to the higher assurance levels provided and reduced costs.
Highlights
In 1970 Friedman argued that the social responsibility of business was to use its resources in activities that would increase profits, while operating within the predefined rules and norms established by society. Freeman (1994:413), posits that business theories are inconsistent with shareholder primacy, with stakeholder theory providing a better normative fit
Since it may be argued that positively framed reasonable assurance opinions provide corporate social responsibility (CSR) report users with greater confidence about the veracity of the underlying CSR disclosures than negatively framed limited assurance opinions, this study clearly reveals that auditor conservatism produces lower assurance levels than non-auditors
This should assist in bridging the credibility gap between company CSR disclosures and the legitimate expectations of stakeholders, while at the same time ameliorating the risk of green-wash
Summary
In 1970 Friedman argued that the social responsibility of business was to use its resources in activities that would increase profits, while operating within the predefined rules and norms established by society. Freeman (1994:413), posits that business theories are inconsistent with shareholder primacy, with stakeholder theory providing a better normative fit. In 1970 Friedman argued that the social responsibility of business was to use its resources in activities that would increase profits, while operating within the predefined rules and norms established by society. Despite providing shareholders with a return on investment, it can be argued that companies contribute to the social agenda, albeit indirectly, by creating employment opportunities, stimulating the economy and uplifting dependent neighbouring communities (Freeman, 1994:411). As stakeholders begin to hold companies accountable for the non-financial impacts of their operations (albeit unintended), it is increasingly being recognised that corporate accountability extends beyond shareholders, and includes other stakeholders as well. Companies are responding to stakeholder demands to reduce the adverse impact of human activity on society and the environment by disclosing the consequences of their actions, or inactions, on society and the environment (CorporateRegister, 2008:5)
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