The Quality of Mandatory Non-Financial (Risk) Disclosures: The Moderating Role of Audit Firm and Partner Characteristics

Forthcoming, The International Journal of Accounting

58 Pages Posted: 19 Mar 2019 Last revised: 2 Oct 2019

See all articles by Saverio Bozzolan

Saverio Bozzolan

Luiss Guido Carli University - Department of Business and Management

Antti Miihkinen

Aalto University - School of Business

Date Written: October 1, 2019

Abstract

Risk disclosures are among the most important types of non-financial information valued by investors. Risk disclosures are mostly narrative, proprietary in nature and, consequently, the importance of their accuracy and assurance is high to prevent them becoming boiler-plate and lose their relevance. By exploiting the unique features of a setting in which risk disclosure is mandatory and under a positive assurance requirement, we investigate whether the quality of audited risk disclosures is associated with the type of audit firm (Big-4 vs. non-Big-4), the characteristics of the audit firm and the attributes of the audit partner. Our results show an association between risk disclosure quality and auditors, but not in the ways that one would have expected. After the enforcement of a regulation that requires a detailed description of risks in the Operating and Financial Review (OFR) and a positive assurance of external audit over these disclosures, we do not document any significant Big-4 effect. The quality of risk disclosures is associated with the attributes of the audit partner, namely familiarity with different client risk disclosures, expertise and gender, independently from her belonging to a Big-4 audit firm. Along this way, we extend the recent evidence on the audit partner effects in the assurance of non-financial narrative information.

Keywords: Non-Financial Information, Risk Disclosure, Positive Assurance, Audit Partner Characteristics

Suggested Citation

Bozzolan, Saverio and Miihkinen, Antti, The Quality of Mandatory Non-Financial (Risk) Disclosures: The Moderating Role of Audit Firm and Partner Characteristics (October 1, 2019). Forthcoming, The International Journal of Accounting. Available at SSRN: https://ssrn.com/abstract=3342703 or http://dx.doi.org/10.2139/ssrn.3342703

Saverio Bozzolan (Contact Author)

Luiss Guido Carli University - Department of Business and Management ( email )

Via Salvini, 3
Rome, 00198
Italy

Antti Miihkinen

Aalto University - School of Business ( email )

P.O. Box 21220
FI-00076 Aalto, Helsinki
Finland

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