Work

Reporting Connectivity, Audit Quality, and Audit Fees

Year: 2025

Type: article

Abstract: Regulatory and standard-setting bodies are engaging in stakeholder consultation on connectivity, a practice to connect sustainability-related disclosures with financial statements. We provide empirical evidence on the impact of reporting connectivity on auditors, which is important as several revised PCAOB Auditing Standard (ASs) and International Standards on Auditing (ISAs) highlight the importance of understanding sustainability-related financial disclosures for auditors. We find a positive association between the level of connectivity and audit quality, as well as audit fees. This suggests that sustainability-related financial disclosures are useful to auditors but increase the complexity of their work. Additional analyses reveal that the observed effects are contingent on the financial materiality of sustainability-related issues to the business.

Source: Abacus

DOI: 10.1111/abac.70008

Authors: Meiting Lu, Ruizhe Wang, Yi Wu, Shan Zhou

Institutions: Macquarie University, Zhejiang University, The University of Sydney

Language: English

Topic: Auditing, Earnings Management, Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: bronze

Funder: National Natural Science Foundation of China

Award: G7916166271