Creating Legitimacy for Sustainability Assurance Practices: Evidence from Sustainability Restatements
Michelon, G; Patten, D; Romi, A
Date: 10 May 2018
Journal
European Accounting Review
Publisher
Taylor & Francis (Routledge) for European Accounting Association
Publisher DOI
Abstract
This study examines sustainability reporting assurance (SRA) provider use of sustainability
restatements as a means to create legitimacy in the developing SRA market. In comparison to
financial data, mistakes in sustainability reporting are more likely to be made and less likely
to be discovered prior to reporting. A lack of clear ...
This study examines sustainability reporting assurance (SRA) provider use of sustainability
restatements as a means to create legitimacy in the developing SRA market. In comparison to
financial data, mistakes in sustainability reporting are more likely to be made and less likely
to be discovered prior to reporting. A lack of clear reporting standards and ambiguous SRA
guidelines create a setting where providers can use restatements in an attempt to demonstrate
both a problem in sustainability reporting and assurance as the solution to that issue. Based
on a sample of U.S. firms from 2010–14, we find that SRA is associated with an increased
likelihood of sustainability restatements, that the association is stronger for error restatements
than for restatements due to methodological updates, and that SRA is significantly associated
with the disclosure of quantitatively non-material restatements. We also document
differences in these relations across provider-type, with only consultant assurance
significantly associated with methodological restatements and restatements of a non-material
amount. Our findings support differences between sustainability report restatements and
financial restatements, and provide evidence in support of our argument that assurance
providers may be using restatements in an attempt to expand market share in a new
professional space.
Finance and Accounting
Faculty of Environment, Science and Economy
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