Climate risk disclosures and auditor expertise

Ly Pham, David Hay*, Antti Miihkinen, Emma Riikka Myllymäki, Lasse Niemi, Jukka Sihvonen

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Many jurisdictions are establishing requirements for corporations to disclose climate-related risks, and for those disclosures to be audited. One of the first jurisdictions to do so is Australia, where the Australian Accounting Standards Board (AASB) and Auditing and Assurance Standards Board (AUASB) issued a Joint Bulletin in 2018 stating that both preparers and auditors should consider the impact of climate risks on the company's financials. Utilising the Australian setting, this paper introduces a new measure of audit partner expertise, namely expertise in climate-related issues, and examines whether it is associated with the client company's climate risk reporting. We define audit partner expertise in climate-related issues based on their client portfolio composition in terms of greenhouse gas emissions. We find that the likelihood and quality of climate risk disclosures is higher when the audit partner has climate risk expertise, and this finding is driven by clients in industries with material climate risks.

Original languageEnglish
Article number101439
JournalBritish Accounting Review
Early online date27 Jun 2024
DOIs
Publication statusE-pub ahead of print - 27 Jun 2024
MoE publication typeA1 Journal article-refereed

Keywords

  • Auditing
  • Auditor specialization
  • Climate
  • Climate risk disclosure
  • Climate-related financial disclosure
  • Emissions

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