Academic journal article Global Business and Management Research: An International Journal

Corporate Governance and Sustainability Reporting Practices: The Moderating Role of Internal Audit Function

Academic journal article Global Business and Management Research: An International Journal

Corporate Governance and Sustainability Reporting Practices: The Moderating Role of Internal Audit Function

Article excerpt

Introduction

Sustainability reporting nowadays has become a main stream global business practice (KPMG, 2013). It states that even though the fundamental of profit-based companies exist is to serve customer's need, however, they are still expected to fulfil a wide range of stakeholder's need and problems (Ihlen et al. 2011). They are responsible for their stakeholders such as suppliers, customers, shareholders, employees, government, non-government organization, green organizations, unions as well as the society at large (Ihlen et al., 2011). Sustainability disclosure is a promising growing trend in developing countries such as Malaysia (Amran et al. 2013). More Malaysian companies are focusing and practicing sustainability today. This is in line with global trending. Further, this is partly due to the Malaysian government recognition of the importance of sustainability, and hence the government had played a facilitating role in ensuring that the country remains competitive for both local as well as foreign investors. According to Grahovar (2010), companies use sustainability reporting to account for their responsibility, to establish a good reputation and to build a relationship with their stakeholders based on trust.

Despite many decades ofresearch on sustainability reporting and corporate governance (Hahn & Kuhnen, 2013), yet only limited studies have investigated the relationship between the influence of internal audit function on the relationship between corporate governance characteristic and sustainability reporting practices (*). The research paper aims to look into the influence of internal audit function on the relationship between corporate governance characteristics and level of sustainability disclosure of 120 public listed company from manufacturing industry in 2015.

Literature Review

Sustainability Reporting Practices

Sustainability activities and practices are important to companies to ensure that their business is running at sustainable way as well as the environment they operate is preserve in sustainable methods (Zainab et al. 2015). In recent years, some of the companies have significantly contributed to the economy and technology but at the same time, they had also been targeted for creating unsustainability problems. These problems included waste generation, source of pollution, unethical product issue, uncontrollable resources mining, human rights especially those large companies who had monopoly on the market (Hussainey & Walker, 2009). One of important ways to resolve those problems is by incorporating sustainability practices in company's value and culture (Zainab et al. 2015).

According to Corina (2014), sustainability reporting is also used synonymously with other terms such as corporate social responsibility reporting, corporate responsibility reporting and triple bottom line (TBL) reporting that covered mostly the aspect of economic, environmental, and social (Hahn & Kuhnen, 2013). KPMG (2015) highlighted that sustainability report is an unbiased, fair, and reasonable disclosure of the company. It should have reported positive and negative issue of the company. Meanwhile, sustainability reporting assists the organisation to set objective, measure performance, change the operation to be more sustainable and communicate the impacts of activities on the society, environment and economy to stakeholders. (GRI, 2013).

Corporate Governance and Sustainability Reporting Practices

The relationship of corporate governance and sustainability reporting is an important area to study as both these are able to bring benefits such as increasing the company's reputation and profits, improve transparency of company, improve investor's confidence, and many other benefits. Corporate governance and sustainability practices are very closely related to each other (Bhimani & Soonawalla, 2005). Corporate governance and sustainability practices also emphasize on the importance of achieving long term social, environment, and business value which in turn will help to promote a business continued acceptance and existence (Esa & Ghazali, 2012). …

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