What is it about?
Firms are producing reports which discuss the impact of their social responsibility actions on their financial success. There is a view that better internal controls will result in a greater level of trust in these reports. this study confirms that investors do place greater credence on reports from better controlled companies.
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Why is it important?
Society wants companies to be more socially responsibility. There are two questions. First do stakeholders trust companies' disclosure of this information? And second, what other information about the company could increase the trust in this social responsible information. This study shows that a company that is well controlled increases shareholders trust in these social responsible disclosures.
Perspectives
There is a need to look at the cost of providing information to interested parties. Right now companies must compensate audit firms for offering an opinion on their financial information. As part of this information the Sarbanes-Oxley legislation requires management to establish certain controls. Auditors must offer an opinion on these controls as part of the examination of financial statements. This study offers some evidence that there is a halo effect as this review of controls can provide assurance on other actions of the firm - their socially responsible actions.
Dr GRAHAM Gal
University of Massachusetts Amherst
Read the Original
This page is a summary of: Integrated reports, external assurance and financial performance, Sustainability Accounting Management and Policy Journal, October 2019, Emerald,
DOI: 10.1108/sampj-02-2019-0072.
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