The Double Materiality Audit: Assurance of ESG Disclosure

30 Pages Posted: 28 Feb 2023

See all articles by Deniz Appelbaum

Deniz Appelbaum

Montclair State University

Huijue Kelly Duan

Sacred Heart University

Hanxin Hu

Rutgers Business School - Rutgers University

Ting Sun

The College of New Jersey

Date Written: February 22, 2023


Auditors must now not only evaluate the accuracy of financial numbers but could soon be required to provide assurance on the information regarding the environmental, social justice, and good governance (ESG) claims made by its clients (SEC 2021; Harrington and Garzon 2022). Double-materiality refers to assessing materiality from two aspects: (1) the extent necessary for an understanding of the company’s financial position; and (2) the environmental, social, and governance impact of the company’s activities on a broad range of stakeholders (European Commission, 2019). For an audit, the two aspects of double-materiality are interconnected, meaning that despite their inherently non-financial nature, ESG factors are closely associated with financial outcomes and potential business risk (Hales 2018). This research provides an understanding for such a “double materiality” audit by first identifying the current issues in ESG disclosures, recognizing the role of external auditors in the ESG disclosure and the interaction between a financial audit and ESG disclosure assurance, and by suggesting an audit analysis roadmap that incorporates both quantitative financial numbers and big ESG data. This paper then proposes an audit approach that incorporates a “double materiality” lens of financial and ESG data to evaluate the risk of material misstatement and the reliability of ESG disclosure. Specifically, it suggests the extended audit procedures for data collection and verification, recommends criterion for the selection of ESG indices, and highlights the ongoing challenges (e.g., audit independence) and opportunities.

Keywords: Double Materiality, ESG Assurance, ESG disclosure, Audit

JEL Classification: M42, M48

Suggested Citation

Appelbaum, Deniz and Duan, Huijue Kelly and Hu, Hanxin and Sun, Ting, The Double Materiality Audit: Assurance of ESG Disclosure (February 22, 2023). Available at SSRN: or

Deniz Appelbaum (Contact Author)

Montclair State University ( email )

Upper Montclair, NJ 07043
United States

Huijue Kelly Duan

Sacred Heart University ( email )

5151 Park Ave
Fairfield, CT 06432
United States

Hanxin Hu

Rutgers Business School - Rutgers University ( email )

Ting Sun

The College of New Jersey ( email )

P.O. Box 7718
Ewing, NJ 08628-0718
United States

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