Auditor selection and corporate social responsibility

Wen Chi Sun, Hua Wei Huang, Mai Dao, Chaur Shiuh Young

Research output: Contribution to journalArticlepeer-review

14 Citations (Scopus)

Abstract

This study examines the association between the selection of an industry-specialist auditor and corporate social responsibility (CSR). We find that firms with higher CSR ratings are more likely to hire industry-specialist auditors (national-level industry leaders, city-level industry leaders or joint city-national industry leaders). Moreover, firms with better CSR performance related to product quality and the environment in controversial industries are found to select non-specialized auditors. The results suggest that such firms may overinvest in CSR activities associated with the environment and product issues to disguise the sin nature of their manufactured goods, and simultaneously engage low quality auditors perhaps to avoid full disclosure of potential environmental and legal liabilities. Overall, we conclude that CSR is associated with the non-controversial firms ensuring high quality financial reporting in response to societal expectations, and thus CSR firms in such industries have strong incentives to engage industry-specialist auditors.

Original languageEnglish
Pages (from-to)1241-1275
Number of pages35
JournalJournal of Business Finance and Accounting
Volume44
Issue number9-10
DOIs
Publication statusPublished - 2017 Oct 1

All Science Journal Classification (ASJC) codes

  • Accounting
  • Business, Management and Accounting (miscellaneous)
  • Finance

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