Voluntary Assurance Research Articles

Leveraging Emerging Cybersecurity Reporting Regulations: The Effect of Industry Driven Expectations for Voluntary Assurance

SYNOPSIS As the associated costs, business impacts, and high variability of cybersecurity disclosures capture the attention of regulators, we are witnessing a rapid emergence of proposals for new reporting requirements, such as recent SEC proposed disclosure guidelines and legislation being passed in both the EU and U.S. Within the context of cyber-breach disclosure, this study investigates how voluntary assurance provided by professional accounting firms affects nonprofessional investors’ judgments and decisions after the disclosure of a cybersecurity breach—an inevitable event. The study also examines how value relevance of voluntary assurance is altered when having such assurance is expected/unexpected given the company’s industry. We find expectancy violations, based on industry norms and investors’ perceived benefits of voluntary assurance, significantly influence investors’ judgments. This study begins to address questions on whether demand exists for voluntary assurance provided by professional accounting firms, particularly given lingering concerns over the viability of new forms of assurance. Data Availability: Data are available from the authors upon request. JEL Classifications: M41; M42; O31; O33.

ESG 생태계와 지속가능성보고서 검증 표준 발전 동향에 관한 연구

The information in the Sustainability Report, covering Environment (E), Social (S), and Governance (G), serves as a crucial reference for stakeholders in the ESG ecosystem, enabling effective decision-making. Consequently, companies bear the responsibility to transparently explain their performance, plans, risks, and opportunities to the capital market. To achieve this, ESG information must adhere to standardized criteria, ensuring comparability across different companies, industries, and nations, and be verifiable by independent third parties.
 Recently, there has been an accelerated global discussion on mandating the disclosure of ESG information. Legal disclosure of ESG information must be grounded in high reliability. When ESG information disclosure activities fall within a legal framework, disclosure actors may be subject to the same level of standardization as business reports. Currently, domestic companies engaging in voluntary assurance will likely require recognized service providers in the future ESG disclosure system.
 This study aimed to derive the qualifications of assurance service providers and propose a quality management approach applicable to the ESG ecosystem. To achieve this, we examined the global ESG ecosystem structure, focusing on the roles and functions of ESG information disclosure standards setters, assurance providers, and evaluators. We also analyzed the characteristics of assurance practices. By researching the qualifications and quality management requirements of assurance providers concerning mandatory ESG information disclosure, we identified the assurance practice standards necessary for improving ESG disclosure quality.
 Assurance service providers should establish business processes in line with global assurance standards and guidance, meeting ethics and quality management standards equivalent to accounting firms. Furthermore, assurance practitioners should possess specified qualifications and practical experience, being recognized for their expertise in the ESG field. The assurance supporting the domestic ESG disclosure mandate should evolve into a public activity open to anyone with suitable qualifications, fostering development.

Managerial ability and voluntary ESG disclosure and assurance: evidence from Taiwan

PurposeThe purpose of this study is to explore the effect of managerial ability on voluntary environmental, social and governance (ESG) disclosure and assurance. By focusing on managerial ability, this study provides a more nuanced understanding of the factors influencing a firm’s ESG disclosure and assurance practices. This study contributes to a relatively unexplored area of study regarding the role of top management in promoting ESG reporting.Design/methodology/approachThis study draws on a sample of publicly listed firms from 2014 to 2019 in Taiwan and applies the data envelopment analysis method to measure managerial ability. Heckman’s (1979) two-step model is used to estimate the primary models to prevent the results from being affected by possible bias because of self-selection.FindingsThe empirical evidence suggests that managerial ability is positively related to voluntary ESG disclosure and intention to seek third-party assurance of the report. Overall, managerial ability determines whether a firm will use voluntary ESG disclosure and assurance as a corporate strategy to respond effectively to stakeholders’ needs. The findings are robust after using alternative measures of managerial ability.Practical implicationsInvestors and other stakeholders keen on seeking ESG information offered by companies could find the findings of this study valuable. By better comprehending how managerial competence impacts voluntary ESG disclosure and assurance, stakeholders may be better equipped to hold companies responsible for their ESG disclosure practices and make informed investment decisions.Social implicationsIn the ESG decision-making process, managers with better abilities have a higher tendency to use voluntary disclosure and assurance as a part of the company’s sustainable policy.Originality/valueUnlike previous studies of the determinant factors of ESG disclosure, which mainly explore factors at the national or corporate level, this study focuses on factors at the individual level (i.e. managerial ability) to fill the gap in the literature. This study also presents empirical evidence that corroborates the idea that managerial competence can influence not only ESG disclosure but also the voluntary assurance of ESG information.

Understanding biosecurity behaviors of Australian beef cattle farmers using the ten basic human values framework.

On-farm biosecurity is an essential component of successful disease management in the beef cattle industry on an individual, regional, and national level. Participation in mandatory or voluntary assurance schemes, knowledge and trusted relationships have all been demonstrated to contribute to the development of behaviors that promote biosecurity. However, compliance with rules, socio-psychological relationships and knowledge-seeking behavior are all contingent upon the motivations and beliefs of the individual. It is widely accepted that the motivations and beliefs of all cultures can be defined by ten basic values (Self-direction, Stimulation, Hedonism, Achievement, Power, Security, Conformity, Tradition, Benevolence and Universalism). In this study, we use the ten basic values to characterize the on-farm biosecurity behaviors of Australian beef farmers to facilitate the identification of interventions that are most likely to align with producer motivations and therefore, more likely to result in wider adoption of effective on-farm biosecurity. Semi-structured interviews were conducted with 11 Australian beef farmers to discuss the reasons behind decisions to alter or implement biosecurity practices in response to endemic diseases. Thematic analysis was used to identify the motivations, opportunities, and capability of biosecurity behaviors. The ten basic human values were used to characterize these behaviors and inform enablers and barriers to biosecurity adoption. Benevolence and Self-direction, relating to self-transcendence and an openness to change, were the principal values associated with good biosecurity behaviors. This suggests that farmers will be receptive to education strategies that communicate the actual risk of disease in their area, the impact of disease on animal welfare, and the ability for on-farm biosecurity to mitigate these impacts. Farmers also expressed values of Security which entrenched behaviors as common practice; however, in some cases the Security of trusted relationships was identified as a potential barrier to behavior change. Overall, values associated with biosecurity behaviors were found to align with values that are most important for social cohesion, suggesting that collaborative disease efforts between industry stakeholders and farmers are likely to succeed if designed with these values in mind.

Voluntary Assurance of Sustainability Reports: Evidence from Indonesia

Purpose : This study aims to prove the determinants of the adoption of assurance statements in companies in Indonesia. Several companies in Indonesia have included assurance reports in their sustainability reports as a voluntary disclosure. This phenomenon motivates this study, considering that sustainability report assurance is gaining interest among companies, but there is still very little literature discussing this issue, specifically in Indonesia. This research will fill the research gap on sustainability report assurance. 
 Method : Using data from companies participating in ASRRAT (Asian Sustainability Report Rating) for five years (2017 – 2021), this study assesses the influence of governance, profitability, and company age on the company’s decision to adopt assurance on sustainability reports. Total unit analysis are 140 sustainability reports from 28 companies. 
 Findings : The results show that governance, profitability, and the company age significantly influence the adoption of assurance on sustainability reports. This study provides preliminary evidence of the willingness of companies to adopt assurance of sustainability reports in Indonesia by identifying characteristics that distinguish Indonesia from other countries concerning the choice to implement an assurance for sustainability reports. 
 Novelty : This research uses governance measures based on the GRI standard of governance disclosure standards, consisting of 29 disclosure indicators. Previous studies linking governance with sustainability reports only tested specific governance mechanisms, such as the audit committee, board of directors, or diversity.
 Keywords : Assurance Statement; Corporate Governance; Sustainability Report

Determinants and Value Relevance of Voluntary Assurance of Sustainability Reports in a Mandatory Reporting Context: Evidence from Europe

This paper investigates the determinants of sustainability report (SR) assurance and whether this assurance is value relevant within the context of the European Union (EU), where, under the Non-Financial Reporting Directive (NFRD), sustainability reporting is mandatory for large public interest entities (PIE) as of fiscal year 2017. Using a sample of 1832 firm-year observations from 660 European listed companies over the period 2017–2020, the results of a logistic regression analysis indicate that firm size, environmental, social and governance (ESG) performance and industry affiliation are important drivers of the demand for SR assurance. The value relevance regressions suggest that SR assurance is positively associated with the stock market value. The study contributes to the existing knowledge on SR assurance by documenting its determinants and value relevance in a context where sustainability reporting is mandatory and that is predominantly stakeholder-oriented. The results may be of interest to companies that consider to adopt SR assurance in such a context and to the European Commission (EC), which has included a mandatory SR assurance requirement in the proposed Corporate Sustainability Reporting Directive (CSRD), the successor to the NFRD.

The Effects of CSR Report Mandatory Policy on Analyst Forecasts: Evidence from Taiwan

The Taiwanese government altered its corporate social responsibility (CSR) report management policy from voluntary disclosure and assurance of CSR reports to partial mandatory disclosure and partial mandatory assurance. This paper examines this policy’s effects on analyst forecast. The empirical results showed that the mandatory disclosure policy on CSR reports significantly increased analyst forecast accuracy and reduced analyst forecast dispersion. Furthermore, the study found that analyst forecast accuracy was further increased when CSR reports were forced to undergo accountant assurance than those without mandatory accountant assurance which means that the mandatory assurance policy on CSR reports significantly further increased analyst forecast accuracy.

The impact of voluntary assurance of CSR reports on firms' operating performance: Evidence from Taiwan

This paper investigates the impact of the voluntary assurance of corporate social responsibility (CSR) reports on firms' operating performance. Using data from listed firms in Taiwan to test three theory‐driven hypotheses, we found that the voluntary assurance of CSR reports may not lead to firms' positive performance. However, both voluntary dual‐assurance and high confidence levels of assurance for CSR reports can positively influence such performance. We offer incremental insights into expanding the CSR literature by elaborating the importance of voluntary assurance. We suggest that firms voluntarily assure their CSR reports with a higher confidence level to further improve their performance.

Helping midwives support families who require non-therapeutic infant male circumcision

In the UK, the majority of non-therapeutic infant male circumcisions for religious or cultural reasons are performed by private providers in community settings. There have been reports of unsafe practices by some unregulated private providers. The implementation of a voluntary quality assurance process in one region in northwest England has been associated with a decrease in paediatric surgical admissions of infant boys admitted following complications of circumcision in the community. Voluntary quality assurance is a feasible option to implement quality improvement for services outside clinical governance systems. The quality assurance process provides a valuable resource for midwives to signpost families to safely practising providers, potentially reducing the risk of harm to children resulting from families using unqualified providers and safeguarding infant boys from harm becuase of poor practice.

The signalling role of voluntary ESG assurance

The signalling role of voluntary ESG assurance

Attributes of corporate boards and assurance of corporate social responsibility reporting: evidence from the UK

PurposeThis study aims to investigate the relationship between the attributes of corporate boards in UK companies and their tendency to assure their corporate social responsibility (CSR) reports.Design/methodology/approachFrom the agency theory perspective, the authors examine the impact of board attributes on the assurance of CSR reports for the Financial Times Stock Exchange (FTSE) 350 during 2016–2019. The authors used annual integrated reports, companies’ websites and Thomson Reuters Eikon database for data collection and the logistic regression for data analysis.FindingsThe results confirm that some board attributes significantly influence a company’s decision to assure its CSR reports. While board size, board tenure, the presence of female board members and female executive directors and Chief Executive Officers (CEOs)’ global working experience positively contribute to CSR assurance (CSRA) decisions, the chairman’s independence negatively contributes to it. However, board independence, board meetings and board financial expertise demonstrate no effect on the CSRA decision.Research limitations/implicationsThe authors focus on some attributes of board members, but the authors did not consider board diversity in its broader meaning. Moreover, the effect of board committees and their attributes on CSRA was not addressed. The authors also did not consider the impact of scope, the quality level of assurance service and the differences between assurance providers on companies’ decisions to neither undertake CSRA nor choose between assurance providers.Practical implicationsThe study provides insights into the increasing demand on voluntary assurance to boost the credibility of CSR reports and the role of the board of directors (BOD) in taking this initiative. The findings highlight the importance of board diversity (e.g. gender) in improving transparency and sustainability reporting, which can help policymakers and regulators in shaping future governance policies. Additionally, the findings refer to a drawback in the UK Corporate Governance Code regarding the chairman’s independence, which requires corrective actions from the Financial Reporting Council. The findings raise concern over the small share of audit firms in the assurance service market, despite the growing demand for these services in the UK, which may require more attention to these services from the audit firms.Social implicationsCompanies are increasingly pressurized, especially after the COVID-19 pandemic, to discharge their accountability to stakeholders and to act in a socially responsible manner in their business activities. CSR reporting is one of the main tools that companies use to communicate their social activities. Understanding the determinants of voluntary CSRA helps to increase the credibility of CSR reports and the favorable response to social pressure.Originality/valueThe authors add empirical evidence to the limited literature on CSRA about the role of the BOD in undertaking companies’ social responsibility, improving CSR reporting and reducing information asymmetry. It also highlights the significance of maintaining a balanced BOD in terms of gender, experience and tenure, in minimizing the risk of perpetuating non-transparent integrated reporting.

Same information, different value: New evidence on the value of voluntary assurance

This paper examines whether there is a difference in the value of voluntarily assured financial statements of private firms, depending on the availability of other information for the users of the statements. By using a within-firm estimator that completely controls for firm fixed effects, we find that the loan interest rate for private firms with voluntarily assured financial statements is lower when the firms have longer relationships with their banks. This finding suggests that the value of assured financial statements differs among the same type of users (banks), and is larger for those that accumulate soft information through long-term lending relationships. We also find that this larger value is not present when the tenure of the auditor with the client is very long.

The Role of Assurance in Equity Crowdfunding

ABSTRACTThe SEC requires equity crowdfunding (ECF) companies to provide assured financial statements. Assurance can be provided with certification by management or an audit or review by an independent accountant. We utilize the ECF setting to examine whether voluntary assurance facilitates capital formation. We find that companies that provide either reviewed or audited financial statements during a capital campaign are marginally more likely to raise their target capital. They also raise more funds and attract more investors relative to companies that only provide management-certified financial statements. However, relative to reviews, audits are not associated with a greater likelihood of success in an ECF offering other than attracting more investors. Finally, we find that assurance is indirectly associated with a company's post-ECF survival and its ability to raise future capital. This suggests that assurance at the time of ECF has implications for a company's success beyond ECF.Data Availability: Data are available from the public sources cited in the text.

Do investors value the voluntary assurance of sustainability information? Evidence from the Spanish stock market

AbstractThis study examines in the Spanish setting whether, after the passing of the European Directive 2014/95/UE, investors value positively the voluntary assurance of sustainability reports corresponding to the period 2014–2017 for a sample of listed companies. It also analyzes the valuation by investors of a series of assurance characteristics such as its quality, level of application (reasonable/high vs. moderate/limited), scope (complete vs. partial), and the type of assurance provider (accounting vs. non‐accounting firms). Our results find that investors reward firms that adopt external sustainability assurance. Furthermore, we document that investors value to a greater extent those assurance statements with a broader scope, a high/reasonable level of assurance, and with a better quality. Our results are relevant for companies, investors, regulators, and practitioners, and justify the pertinence of the recent Law 11/2018 that places Spain as a European reference by requiring a mandatory assurance of sustainability information in order to increase its reliability and comparability.

An international investigation on assurance of integrated reports: Institutions, assurance quality, and assurers

The main objective of this study was to identify country-specific factors associated with the decision to adopt voluntary assurance on integrated reports, the level of assurance quality, and the choice of assurance provider. The sample for this research comprised all companies registered in the example database of the International Integrated Reporting Council (IIRC) during the period from 2011 to 2016. First, we found that the institutional environment is significantly associated with the adoption of independent assurance upon integrated reports. Second, we determined that a country’s sustainable development level has a significant positive association with assurance quality, whereas the strength of public institutions has a significant negative association. Third, the preference of an accountant as an assurance provider is likely to be directly associated with the strength of public institutions, whereas it is inversely related to a country’s sustainable development level.

Voluntary assurance of sustainability reporting: evidence from an emerging economy

PurposeThis paper aims to investigate the supply and demand side of sustainability assurance in Bangladesh.Design/methodology/approachDrawing on signalling theory, a logistic regression model is used for a sample of 100 of the largest Bangladeshi companies to study the relationships between assurance, sustainability disclosure, industry membership and reporting format.FindingsAuthors’ results show that companies which produce more sustainability information are more likely to get their sustainability assured, to be from non-carbon intensive industries, and are more likely to integrate their sustainability information with the financial annual reports. Authors’ results support the argument that organisations based in weaker legal environments are more likely to secure assurance as this adds to the credibility and reliability of sustainability reports.Research limitations/implicationsThis paper has limitations which raise some issues for future research. First, the authors have covered only large companies; therefore, future research could examine the differences between small and large companies in relation to assurance. Secondly, the authors’ data consist of company sustainability disclosure information in the fiscal year 2015. Longitudinal studies are recommended to extend this research. Finally, future research could examine the moderating effects of geographical location on the relationship between assurance (and its providers) and other variables.Practical implicationsThe findings of this paper will prove valuable to practitioners and researchers. Practitioners, including assurance providers and sustainability reporting managers will benefit from authors’ study as it covers both the demand and supply side characteristics of assurance. Researchers will benefit from the study as it investigates assurance practices in the developing country of Bangladesh.Originality/valueTo the best of the authors’ knowledge, this is the first study to examine both the supply and demand sides of sustainability assurance in Bangladesh. Authors also introduce reporting format when measuring the relationship between assurance and its determinant factors at micro level. The study also links assurance to signalling theory.

The impact of institutional ethics and accountability on voluntary assurance for integrated reporting

Purpose The purpose of this paper is to investigate whether the ethics and accountability environment influences the voluntary assurance demand for integrated reports through the lens of institutional theory. Design/methodology/approach This study used an international sample of 192 companies that have registered in the International Integrated Reporting Council’s (IIRC) early examples database and that published integrated reports during the years 2011–2016. Binary logistic regression as well as Instrumental Variables (IV) regression with Probit and GMM estimators were employed to test the proposed hypotheses. Findings The results confirm that assurance of integrated reports serves as a response to the absence or incompetence of formal and informal institutions that facilitate private contracting. Specifically, the authors found that firms tend to assure their integrated reports in business environments that are characterized by weaker ethical behaviors, less effective boards, poorer auditing and reporting standards, and insufficient protection of the rights of minority shareholders by the legal system. Research limitations/implications This study responds to the research calls upon integrated reporting assurance by investigating the underlying drivers of and motives for voluntary assurance on integrated reports. Practical implications The findings provide practical implications for firms, regulators and assurance firms. Firms can utilize the results of the study in determining their corporate policies and strategies regarding whether to undertake assurance on integrated reports. Regulators can also consider the results in shaping and improving the institutional ethical and accountability environment of their countries. Further, assurance firms can use these results to help position themselves and guide their market entry decisions. Originality/value This study adds to the understanding of institutional factors that impact the assurance of integrated reports which has been rarely examined by prior research. In particular, this is one of the few attempts to examine the link between institutional ethics and accountability environment and the voluntary assurance demand in an international context.

Is voluntary external assurance relevant for the valuation of environmental reporting by firms in environmentally sensitive industries?

PurposeThis paper aims to investigate whether providing voluntary external assurance on voluntary environmental information by firms operating in environmentally sensitive industries (ESI) is relevant in terms of market value. It also examines how various characteristics of assurance statements (i.e. level of assurance, scope of assurance and provider of assurance) affect the value-relevance of environmental disclosure by ESI firms.Design/methodology/approachTo mitigate the endogeneity problem, the authors use the two-step generalized method of moments estimation approach.FindingsFocusing on annual and social reports of French companies listed in the SBF120 index, results show that environmental disclosure by ESI firms and its assurance are destructive in terms of market value. Moreover, while providing a broader scope of assurance and having a professional accountant as the assurance provider enhance the value relevance of environmental reporting of the whole sample, this is unlikely to be the case for ESI firms. In particular, a higher level of environmental disclosure is financially rewarded by market participants for ESI firms that provide a higher level of assurance.Practical implicationsThe study provides a better understanding of the circumstances under which market participants assign value to voluntary environmental information disclosed by companies operating in ESI. It also provides insights into the value added to different characteristics inherent in the quality of assurance provided with regard to environmental disclosure.Social implicationsThe study indicates that the institutional context of the relationship between the firm and its shareholders influence the value obtained from assurance. Results provide value insights regarding cultural and legal dimensions of environmental reporting.Originality/valueThe study extends the prior literature on the capital market benefits of voluntary assurance practices by focusing on the French legal environment. France can be considered as a new institutional context that has been little addressed by the existing literature.

Causes and consequences of voluntary assurance of CSR reports

PurposeThe purpose of this paper is twofold. First, the authors investigate a firm’s decision to provide a CSR report, and if so, whether to have the report assured and to seek higher quality assurance as reflected through the choices of the scope of the assurance and type of assurer, Big 4 accounting firm vs specialist consultant. Second, the authors investigate the impact of voluntary assurance of CSR reports, assurance scope and type of assurer on the likelihood of inclusion in the DJSI and on market valuation.Design/methodology/approachThe study’s sample consists of 17,050 firm-year observations from 40 countries with CSR reports available from Corporate Register and ESG metrics available from ASSET4 over the period 2009–2015. The study first empirically examines the associations between CSR commitment and each of CSR report provision, CSR report assurance, assurance scope and type of assurer. It then examines that association between both inclusion in the DJSI and market valuation with each of CSR report assurance, assurance scope and type of assurer, using inclusion in the DJSI as an objective measure of a firm’s reputation for sustainability given its recognition as a leading indicator for corporate sustainability and market valuation as a reflection of the broader set of capital market participants.FindingsThe authors establish two key findings consistent with the predictions of signaling theory. First, we show that high CSR commitment firms are more likely to: provide standalone CSR reports; obtain assurance; obtain assurance from a Big 4 accounting firm; and, adopt higher assurance scope. Second, the authors find that both CSR report assurance and assurance scope increase the likelihood of inclusion in the DJSI, but that the type of assurance provider does not. Alternatively, the authors find that capital market participants appear to value the provision of a CSR report only when it is assured by a Big 4 accounting firm.Originality/valueThe results in the existing literature exploring the capital market benefits to CSR Assurance have been mixed. Firms that voluntarily obtain CSR Assurance incur a cost in doing so and must perceive a net benefit from obtaining such assurance. Despite the limited guidance currently provided by existing CSR standards, we establish the existence of benefits to obtaining CSR Assurance in terms of enhanced likelihood of DJSI inclusion and, more generally, enhanced market valuation. The discussions with DJSI analysts indicate that CSR assurance does enhance the perceived reliability of CSR data, thus improving user confidence.

The Role of Assurance in Equity Crowdfunding

The SEC requires equity crowdfunding (ECF) companies to provide assured financial statements. Assurance can be provided with certification by management or an audit or review by an independent accountant. We utilize the ECF setting to examine whether voluntary assurance facilitates capital formation. We find that companies that provide either reviewed or audited financial statements during a capital campaign are marginally more likely to raise their target capital. They also raise more funds and attract more investors relative to companies that only provide management-certified financial statements. However, relative to reviews, audits are not associated with a greater likelihood of success in an ECF offering other than attracting more investors. Finally, we find that assurance is indirectly associated with a company’s post-ECF survival and its ability to raise future capital. This suggests that assurance at the time of ECF has implications for a company’s success beyond ECF.