HCBE Faculty Articles
Environmental Responsibility, External Assurance, and Firm Valuation
Document Type
Article
Publication Title
AUDITING: A Journal of Practice & Theory
ISSN
0278-0380
Publication Date
11-2018
Abstract/Excerpt
We provide new evidence in examining whether external auditors price environmental responsibility initiatives when performing the audit of financial statements. We also examine how investors value the firm when environmental initiatives occur in conjunction with higher audit fees. Results show environmental initiatives are positively associated with audit fees, but the extent of this association varies across the five different types of environmental initiatives we consider. We further find that auditors appear to price environmental initiatives due to their risk rather than additional audit effort. While environmental initiatives may be costly from an audit standpoint, investors value (Tobin's Q) firms more highly when environmental initiatives occur in conjunction with higher audit fees. Collectively, our findings imply that auditors price environmental initiatives into the audit and investors value firms more highly when auditors consider this social responsibility.
DOI
10.2308/ajpt-51940
Volume
37
Issue
4
First Page
207
Last Page
233
NSUWorks Citation
Sharma, Divesh S.; Sharma, Vineeta D.; and Litt, Barri A., "Environmental Responsibility, External Assurance, and Firm Valuation" (2018). HCBE Faculty Articles. 1095.
https://nsuworks.nova.edu/hcbe_facarticles/1095
