Assessing the Influence of Auditor Quality on the Magnitude of Sustainability Disclosure During a Disclosure Regime Change

Our study examines the proposition that auditor quality was a significant determinant of the magnitude of sustainability disclosure during the transition from a ‘voluntary' to ‘comply or explain' mandated disclosure regime in the Singapore context. In addition, we also examine the influence of auditor quality features on (a) the annual change in sustainability disclosure and (b) the option after enforcement of the ‘comply or explain' mandate for a firm to issue a standalone or integrated sustainability report. The observation period for our study is from April 1, 2014 to March 31, 2019, with data collected from 436 SGX public firms listed continuous during the observation period enabling empirical analysis to be based on 1,744 firm-year observations. Evidence presented in our paper indicates that the extent and range of sustainability disclosure in the annual reports of SGX publicly listed companies increased significantly across the entire observation window. Regression and fixed-effects panel data analysis indicates firms engaging a Big4 audit firm and/or industry specialist disclosed significantly more sustainability information. Meanwhile, we find a significant negative association between the delay in issuing the independent audit report and the magnitude of sustainability disclosure. Auditor independence is found to be insignificant. Auditor quality features, meanwhile, did not appear to be significant determinants of the annual change in sustainability disclosure during the observation window, or the decision of a firm to issue a standalone sustainability report versus an integrated sustainability/annual report