Voluntary Audits of Nonfinancial Disclosure and Earnings Quality

Sunita S. Rao (), Carlos Ernesto Zambrana Roman and Norma Juma
Additional contact information
Sunita S. Rao: School of Business, Washburn University, Topeka, KS 66621, USA
Carlos Ernesto Zambrana Roman: Department of Economics, University of Kansas, Lawrence, KS 66045, USA
Norma Juma: School of Business, Washburn University, Topeka, KS 66621, USA

JRFM, 2025, vol. 18, issue 5, 1-19

Abstract: We investigate the association between voluntary assurance of a firm’s corporate social responsibility (CSR) report and earnings management. A concern with CSR reports is they are used to promote a socially responsible image without a meaningful commitment to CSR activities, referred to as “greenwashing”. To credibly signal the CSR report is reliable, a firm can incur the additional costs to voluntarily obtain assurance. Our results show that strong corporate governance plays a crucial role in limiting earnings management. The most consistent improvements in earnings quality occur when firms combine strong governance with CSR assurance from a non-accounting provider (NonACCT). The combination of strong governance and NonACCT assurance appears to be mutually reinforcing, suggesting a symbolic legitimacy strategy that is also substantively effective.

Keywords: sustainability assurance; Big4 auditors; earnings quality (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/1911-8074/18/5/256/pdf (application/pdf)
https://www.mdpi.com/1911-8074/18/5/256/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:18:y:2025:i:5:p:256-:d:1651300

Access Statistics for this article

JRFM is currently edited by Ms. Chelthy Cheng

More articles in JRFM from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().