Corporate governance and the use of external assurance for integrated reports

Research Question/Issue

This paper investigates the relationship between the use of external assurance for testing integrated reports (ESG assurance) and firm-level governance features: the board of directors, the audit and/or risk committee, and the internal audit department. Data are collected from South Africa where integrated reporting and corporate governance practices are mature and listed companies have had more time to implement ESG assurance than in other countries.

Research Findings/Insights

Monitoring attributes of boards of directors promotes the use of ESG assurance which provide both limited (moderate) and reasonable (high) assurance. The monitoring attributes of the audit and risk committees limit the use of limited assurance but are associated with the greater use of reasonable assurance. In contrast, internal audit functions are not affecting the use of ESG assurance.

Theoretical/Academic Implications

The study provides one of the first accounts of how firm-level governance promotes or reduces the use of external assurance in an integrated reporting context. The research also frames ESG assurance as part of the broader corporate governance machinery rather than seeing assurance and governance as separate issues.

Practitioner/Policy Implications

Overall, the findings suggest that ESG assurance is an important part of a combined assurance model. As those charged with governance become more proactive in ensuring the credibility of their organizations' corporate reports, they not only choose to appoint an external assuror but also rely on more extensive testing designed to provide higher levels of assurance.