Is a Client’s Corporate Social Responsibility Performance a Source of Audit Complexity?

International Journal of Auditing, Forthcoming

The University of Auckland Business School Research Paper

63 Pages Posted: 17 Dec 2020

See all articles by Joy Garcia

Joy Garcia

University of Auckland

Charl de Villiers

The University of Auckland

Lina Li

University of Auckland - University of Auckland, Business School

Date Written: 2020

Abstract

This study examines whether corporate social responsibility (CSR) performance impacts financial audit fees of US listed firms from2000 to 2016. We use the CSR performance ratings from the KLD database to measure firms’ CSR performance. Using the sum of a firm’s CSR strengths and concerns as a measure of a firm’s overall involvement in CSR related matters, we find that a greater score is associated with higher audit fees. Further, we disaggregate this measure into CSR concerns and CSR strengths and find that both measures are positively related to audit fees. In additional analyses, we find that firms involved in certain CSR initiatives (strengths) as well as controversies (concerns) pay higher audit fees due to increased audit complexity. Our findings suggest that firms’ CSR performance is a source of audit complexity, in addition to other sources that have been documented in prior literature.

Suggested Citation

Garcia, Joy and de Villiers, Charl and Li, Lina, Is a Client’s Corporate Social Responsibility Performance a Source of Audit Complexity? (2020). International Journal of Auditing, Forthcoming, The University of Auckland Business School Research Paper, Available at SSRN: https://ssrn.com/abstract=3750411

Joy Garcia (Contact Author)

University of Auckland ( email )

Private Bag 92019
Auckland Mail Centre
Auckland, 1142
New Zealand

Charl De Villiers

The University of Auckland ( email )

Private Bag 92019
Auckland Mail Centre
Auckland, 1142
New Zealand

Lina Li

University of Auckland - University of Auckland, Business School ( email )

Auckland, 1010
New Zealand

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