Implications of the Joint Provision of CSR Assurance and Financial Audit for Auditors’ Assessment of Going Concern Risk

Posted: 20 Aug 2019 Last revised: 23 Sep 2019

See all articles by Lorenzo Dal Maso

Lorenzo Dal Maso

affiliation not provided to SSRN

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business

Francesco Mazzi

University of Florence - Department of Business Economics

Luc Paugam

HEC Paris, Accounting and Management Control Department

Multiple version iconThere are 2 versions of this paper

Date Written: August 16, 2019

Abstract

We examine whether the joint provision of corporate social responsibility (CSR) assurance services and financial audit by the same audit firm influences auditors’ assessment of going concern risk. We predict that the provision of CSR assurance and financial audit by the same audit firm creates CSR-related knowledge spillovers from the CSR assurance team to the financial audit engagement team, which help in the auditor’s assessment of going concern risk. Using more than 28,000 firm-year observations from 55 countries, we document that, relative to audit firms that provide only the financial audit, audit firms that provide both CSR assurance and financial audit for the same client (1) issue more frequent going concern opinions and have lower Type-II going concern errors, (2) have clients that book larger environmental and litigation provisions, (3) report earnings that are more persistent and value relevant and are less likely to book income-decreasing earnings restatements, and (4) do not charge higher audit fees or total fees. Our results are important especially because of firms’ increasing exposure to CSR risks and the growing number of countries that require assurance of CSR reports.

Keywords: CSR Assurance, CSR Risks, Going Concern Opinion, Knowledge Spillover, Non-Audit Services

Suggested Citation

Dal Maso, Lorenzo and Lobo, Gerald J. and Mazzi, Francesco and Paugam, Luc, Implications of the Joint Provision of CSR Assurance and Financial Audit for Auditors’ Assessment of Going Concern Risk (August 16, 2019). Contemporary Accounting Research, Forthcoming, HEC Paris Research Paper No. ACC-2019-1347, Available at SSRN: https://ssrn.com/abstract=3438435

Lorenzo Dal Maso

affiliation not provided to SSRN

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business ( email )

Houston, TX 77204-6021
United States
713-743-4838 (Phone)
713-743-4828 (Fax)

HOME PAGE: http://www.bauer.uh.edu/acct/acctprofile.asp?search=Gerald%20Lobo

Francesco Mazzi

University of Florence - Department of Business Economics ( email )

Via delle Pandette 9
Florence, Florence 50132
Italy
0039 055 4374684 (Phone)
0039 055 4374910 (Fax)

Luc Paugam (Contact Author)

HEC Paris, Accounting and Management Control Department ( email )

1 avenue de la libération
Jouy-en-Josas, 78350
France

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