The audit consideration of environmental matters : Best practice or business as usual?

Purpose – This paper seeks to examine the responses of New Zealand auditors to the promulgation of Audit Guidance Statement (AGS) 1010: The Consideration of Environmental Matters in the Audit of Financial Statements and the consequent impact on audit practice. Design/methodology/approach – This study adopts an interpretive methodology. It draws on dual research methods – interviews with 27 senior auditors, and a critical analysis of AGS‐1010. Legitimacy theory informs the interpretation of the findings. Findings – The findings point to significant gaps in the guidance AGS‐1010 provides and reveal its limited impact on practice, which seems to reflect “business as usual” in regard to the audit of environmental matters. However, AGS‐1010 does appear to serve a ceremonial, legitimating role by supporting practising auditors' efforts to appear responsive to concerns about this emergent accountability issue. Research limitations/implications – The findings highlight the practical challenges that exist in the audit of environmental matters, and point to the need to scrutinise the role of auditors in providing opinions on the financial reports of firms whose activities give rise to material environmental matters. Practical implications – The findings suggest points for reflection for a profession that relies on maintaining its societal legitimacy, but which is failing to pursue or achieve best practice in the audit of environmental matters. Originality/value – This paper presents a novel critique of AGS‐1010 and a first examination of how New Zealand auditors are dealing with environmental matters in light of this professional promulgation. The findings contribute to the international literature by exploring the relatively neglected role of the auditor in advancing the “greening of accounting”.