Academic journal article Journal of Global Business and Technology

The Influence of Corporate External Auditor on Sustainability Disclosures: A Study of Industrial Goods Companies

Academic journal article Journal of Global Business and Technology

The Influence of Corporate External Auditor on Sustainability Disclosures: A Study of Industrial Goods Companies

Article excerpt

INTRODUCTION

Corporate failures have increased the demand for transparency and disclosure to business stakeholders. The changing business environment has made it imperative for companies to report their sustainability performance while reporting on elements of financial statements such as assets, liabilities, expenses, income and capital. According to Selvanathan (2012), the benefits of improved sustainability performance include financial benefits such as cost savings, revenue and efficient use of materials and resources; corporate transparency and reputation. These benefits are some of the reasons for the practice of improved sustainability performance by companies in economic, social, environmental and governance aspects.

Companies identify and report on sustainability issues in their annual reports and/or stand-alone reports. In line with this, a number of studies that assess the extent of sustainability reporting using internationally recognized guidelines such as Global Reporting Initiative (GRI), United Nations Global Compact (UNGC), and national recognized guidelines such as those emanating from respective governments and stock markets exist (Guthrie & Farneti, 2008, Moneva & Ortas, 2008, Gherardi, Guthrie & Farneti, 2014, Adeniyi, 2016). While majority of these studies focus on developed countries, there is dearth of research on developing ones. Nigeria is a developing country and there is an obvious need for research on sustainability reporting due to transparency and disclosure issues of companies that have been the subject of debate since the financial crisis.

Studies on sustainability reporting could provide useful information about environmental, economic and social performance of organizations.

Accordingly, this current study attempts to achieve two main objectives. The first objective is to assess the level of sustainability reporting of industrial goods companies in Nigeria over the period of 2010 to 2014. The second objective is to assess whether the financial auditor type influences sustainability reporting of industrial goods companies in Nigeria over the same period.

The remaining part of this paper is divided as follows: the second section discusses with the literature review; section three discusses the research method. Section four presents the results. Section five discusses the results and section six provides conclusion and recommendation for further studies.

LITERATURE REVIEW

Nature of Accounting

Accounting is concerned with the collection, recording, analysis and reporting of financial data about organizations. According to Ambashe & Alrawi (2013), accounting is an information system that records and communicates the monetary events of an organization to internal and external users. Although, money is necessary for any business, it does not constitute the sole resource for it to operate successfully. There are environmental resources as well as social resources which are derived from the planet and people. Therefore, these resources need to be accounted for because they can affect the ability of a business to operate successfully.

Traditional accounting is associated with information pertaining to the financial performance of a business. Other information is provided by management in corporate annual reports, where financial information is presented. Okafor & Ogiedu (2011) state that management disclosures are valuable source of information for investors. These disclosures could be mandatory and voluntary. Investors require financial information, information about directors, management, major shareholders, business objectives, research and development, amongst others. Utami (2015) noted that there is also a shift from profit maximization as the sole objective of a business to accounting for the interest of stakeholders. Accounting in the interest of business stakeholders can influence the value of companies. Sustainability reporting meets this need because it includes reporting on economic, environmental and social aspects of a business as well as governance approaches to manage those aspects. …

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