What a Waste : Audit Quality and Perceptions of Waste Management

Drawing insights from the stakeholder and legitimacy theory, we investigate the role of audit quality in promoting sustainable waste management in firms. Using a sample of 8,100 firm-year observations for the period 2002‒2017 from 34 countries, we provide empirical evidence that good audit quality significantly reduces total corporate waste production. Further, our results are robust to alternate proxies of audit quality, waste management, and endogeneity concerns. Altogether, these findings demonstrate that Big4 auditing firms ensure the credibility and reliability of the non-financial disclosures of their auditees as apparent by their rigorous auditing processes. Moreover, the main implication of our study is that firms are subject to a decrease in their overall waste production when their external assurer is one of the BIG4 auditing firms