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Voluntary corporate social responsibility reporting and financial statement auditing in China

Version 2 2024-06-03, 16:32
Version 1 2017-07-27, 12:02
journal contribution
posted on 2024-06-03, 16:32 authored by Peter CareyPeter Carey, Li LiuLi Liu, W Qu
This study finds a positive association between voluntary corporate social responsibility (CSR) reporting and audit fees in China. In contrast to prior research from the US, CSR reporting in China is associated with greater earnings management. Results suggest that Chinese firms use CSR reporting as a strategic device for window dressing, and that auditors charge higher fees in response to heightened audit risk and greater audit effort. Further, the positive effects of CSR reporting on audit fees and earnings management are more significant for non-state-owned enterprises (non-SOEs) than for state-owned enterprises, which suggests that non-SOEs have not fully embraced the principles of CSR and essentially use CSR reporting to create the appearance of legitimacy. In additional tests, we find that non-SOEs with more highly rated CSR performance or longer CSR reports are associated with lower audit fees and less earnings management.

History

Journal

Journal of Contemporary Accounting and Economics

Volume

13

Pagination

244-262

Location

London, Eng.

ISSN

1815-5669

eISSN

2352-3298

Language

English

Notes

JEL classification: D21 D8 M42 O1

Publication classification

C1 Refereed article in a scholarly journal, C Journal article

Copyright notice

2017, Elsevier

Issue

3

Publisher

ELSEVIER SCI LTD