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Does Corporate Citizenship Influence Auditors’ Perceptions of the Credibility of Management in Relation to Financial Reports?

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  • Sarini Azizan
  • Greg Shailer

Abstract

This paper examines whether the distributional fairness dimensions of corporate citizenship influence auditors’ assessments of source credibility in relation to financial reporting, as reflected in audit fees. Grounded in the traditional view of corporate citizenship as social contributions that reflect distributional fairness, the analysis uses three measures that are not widely considered in the corporate social responsibility literature: tax fairness, wage fairness and philanthropy. We obtain robust evidence that tax fairness and philanthropy, and some evidence that wage fairness, are negatively related to audit fees. It appears that the philanthropy effect may be dominated by domestic philanthropy. Overall, the results are consistent with the proposition that auditors attach more credibility (or less risk of misstatement) to management assertions when a corporation demonstrates a higher level of corporate citizenship in terms of distributional fairness.

Suggested Citation

  • Sarini Azizan & Greg Shailer, 2023. "Does Corporate Citizenship Influence Auditors’ Perceptions of the Credibility of Management in Relation to Financial Reports?," European Accounting Review, Taylor & Francis Journals, vol. 32(1), pages 217-238, January.
  • Handle: RePEc:taf:euract:v:32:y:2023:i:1:p:217-238
    DOI: 10.1080/09638180.2021.1950022
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    Cited by:

    1. Bai, Min & Shen, Luxi & Li, Yue & Yu, Chia-Feng (Jeffrey), 2024. "Does legal justice promote stakeholder justice? Evidence from a judicial reform in China," International Review of Financial Analysis, Elsevier, vol. 94(C).

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