Accountability, completeness, credibility and the audit expectations gap

This article deals with two concerns in achieving greater accountability in social reports: the lack of completeness of reporting, and the lack of credibility of reports. The article focuses, in particular, on the role of social audits in improving the completeness and credibility of reporting, thereby reducing the audit expectations gap. We suggest that this gap arises due to an over-emphasis on the validity of performance data at the expense of addressing completeness and credibility, both of which, we argue, require stakeholder involvement. The article reviews recent guidelines aimed at ensuring that companies produce reports that are complete in all material respects including those produced by the Global Reporting Initiative and the Federation des Experts Comptables Europeens, focusing particularly on AccountAbility's AA1000 Standard and AA1000S Assurance Standard. Finally, the article considers the development of a practical approach to social audit following principles increasingly being incorporated into developing assurance guidelines aimed at reducing the audit expectations gap.

Assessment practices in Scottish social work education: a practice audit of Scottish universities providing qualifying social work courses

Student assessment is a critical component of social work education. In the last ten years, the nature of assessment in social work education has changed considerably. Alongside innovations to more traditional forms of assessment such as essays and examinations, there has been increased emphasis on student participation in assessment in various forms of self- and peer-assessment. However, there is a dearth of published information on assessment strategies and methods employed in mainstream social work education programmes. The inception of the new qualifying courses across the UK has catalysed interest in the development of innovative assessment strategies and tools. In Scotland, the Scottish Institute for Excellence in Social Work Education (SIESWE) has commissioned research into innovative assessment strategies. This paper reports on the findings of a practice audit of current assessment practices in social work education in Scotland.

The ethical, social and environmental reporting-performance portrayal gap

The purpose of this article is twofold. First, it assesses in detail the extent to which corporate reporting on ethical, social and environmental issues reflects corporate performance in case study company Alpha. This “reporting-performance” portrayal gap is a key measure of the extent to which an organisation is accountable to its stakeholders. Alpha's disclosures concerning its ethical, social and environmental performance for the years 1993 and 1999 were compared with information obtained on Alpha's performance from other sources. Two different pictures of performance emerged leading to the conclusion that, in the case of Alpha, reports do not demonstrate a high level of accountability to key stakeholder groups on ethical, social and environmental issues. Of particular concern is the lack of “completeness” of reporting. Second, the article assesses the potential of recent standards or guidelines developed by the Global Reporting Initiative (GRI) and the Institute of Social and Ethical AccountAbility (AccountAbility) as well as the industry's own “responsible care” initiative to reduce this “reporting-performance” portrayal gap and improve corporate accountability. The conclusions point to the need for other measures to improve accountability including mandatory reporting guidelines, better developed audit guidelines, a mandatory audit requirement for MNCs and a radical overhaul of corporate governance systems.

Corporate governance and corporate social responsibility disclosures : evidence from an emerging economy

We examine the relationship between corporate governance and the extent of corporate social responsibility (CSR) disclosures in the annual reports of Bangladeshi companies. A legitimacy theory framework is adopted to understand the extent to which corporate governance characteristics, such as managerial ownership, public ownership, foreign ownership, board independence, CEO duality and presence of audit committee influence organisational response to various stakeholder groups. Our results suggest that although CSR disclosures generally have a negative association with managerial ownership, such relationship becomes significant and positive for export-oriented industries. We also find public ownership, foreign ownership, board independence and presence of audit committee to have positive significant impacts on CSR disclosures. However, we fail to find any significant impact of CEO duality. Thus, our results suggest that pressures exerted by external stakeholder groups and corporate governance mechanisms involving independent outsiders may allay some concerns relating to family influence on CSR disclosure practices. Overall, our study implies that corporate governance attributes play a vital role in ensuring organisational legitimacy through CSR disclosures. The findings of our study should be of interest to regulators and policy makers in countries which share similar corporate ownership and regulatory structures.

Firm compliance with social insurance obligations where there is a weak surveillance and enforcement mechanism: empirical evidence from Shanghai

This article examines why firms in Shanghai comply or over-comply with social insurance obligations in a regulatory environment where the expected punishment for non-compliance is low. Our first finding is that firms found to be in non-compliance in the first audit in 2001 were moved into a separate violation category and the probability of being reaudited in 2002 was significantly higher if the firm was in that category. Our second main result is that, across the board, firms which were reaudited continued to underpay in 2002 but the extent of underpayment was significantly reduced. © 2007 The Authors. Journal compilation © 2007 Blackwell Publishing Ltd.

City-level auditor industry specialization, economies of scale, and audit pricing

We examine the effects of city-level auditor industry specialization and scale economies on audit pricing in the United States. Using a sample of Big N clients for the 2000-2007 period, and a scale measure based on percentile rankings of the number of audit clients at the city-industry level, we document significant specialization premiums and scale discounts in both the pre- and post-Sarbanes-Oxley Act (SOX) periods. However, the effects of industry specialization and scale economies on audit pricing are highly interactive. The negative effect of city-industry scale on audit fees obtains only for clients of specialist auditors. By contrast, clients of non-specialist auditors obtain scale discounts only when they enjoy strong bargaining power, suggesting that auditors are "forced" to pass on scale economies to clients with greater bargaining power.

Executive equity risk-taking incentives and audit pricing

Using a large sample of U.S. firms spanning the period 2000-2010, we document a strong positive association between the sensitivity of CEO compensation portfolio to stock return volatility (vega) and audit fees. We also show that the positive association between vega and audit fees is weaker in the post-Sarbanes-Oxley Act (SOX) period. In supplementary tests, we show that the relation between vega and audit fees is stronger for firms with older CEOs and in firms where the CEO is also chairman of the board. Collectively, our results suggest that audit firms incorporate executive risktaking incentives in the fees they charge for their services.

Auditee religiosity, external monitoring, and the pricing of audit services

Based on prior studies which show that firms headquartered in high religiosity counties exhibit high level of business ethics, this study examines whether these firms are associated with low audit risk, and therefore low audit fees. In investigating this relationship, we draw a distinction between intrinsic and extrinsic religiosity of auditees. Using a sample of 25,872 U.S. observations from 2003 to 2012, we find that intrinsic religiosity of the auditees is associated with low audit fees after controlling for auditee extrinsic religiosity, social capital, firm-specific characteristics, and county-specific characteristics. Furthermore, we find that external monitoring (institutional ownership and leverage) weakens the negative relationship between auditee intrinsic religiosity and audit fees. Finally, we conclude that the effect of auditor religiosity on audit fees is a regional effect that may affect the relationship between audit fees and auditee intrinsic religiosity.