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Sustainability reporting quality and post‐audit financial reporting quality: Empirical evidence from the UK

Lookup NU author(s): Dr Habiba Al-Shaer



This work is licensed under a Creative Commons Attribution 4.0 International License (CC BY 4.0).


This study examines whether firms that appear to exhibit high sustainability reporting quality are less likely to engage in earnings management activities, thereby delivering financial information that is more transparent and reliable than that delivered by firms that do not produce high-quality sustainability reports. I also investigate whether the association between sustainability reporting quality and post-audit financial reporting quality is conditional on audit effort. Analysis of data drawn from FTSE 350 companies covering 2007 to 2018 indicates that firms that produce high-quality sustainability reports are significantly and negatively associated with earnings management metrics. More importantly, this association is moderated by audit effort, measured by audit fees, suggesting that sustainability reporting quality reflects factors considered by auditors in their audit risk assessment practices. These results remain robust after several sensitivity analyses. I conclude that firms that devote more resources to producing high-quality sustainability reports are likely to demonstrate an overall commitment to quality that alleviates auditors’ concerns about the opportunistic use of sustainability reporting and reduce business risk, thereby reducing the effort auditors expend to verify financial reports.

Publication metadata

Author(s): Al-Shaer H

Publication type: Article

Publication status: Published

Journal: Business Strategy and the Environment

Year: 2020

Volume: 29

Issue: 6

Pages: 2355-2373

Print publication date: 01/09/2020

Online publication date: 22/04/2020

Acceptance date: 06/04/2020

Date deposited: 10/04/2020

ISSN (print): 0964-4733

ISSN (electronic): 1099-0836

Publisher: John Wiley & Sons Ltd


DOI: 10.1002/bse.2507


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