Do assurance and assurance providers enhance COVID-related disclosures in CSR reports? An examination in the UK context

• DOI: https://doi.org/10.1108/IJAIM-01-2021-0020
• Published date: 19 May 2021
• Date: 19 May 2021
• Pages: 410-428
• Subject Matter: Accounting & finance,Accounting/accountancy,Accounting methods/systems
• Author: Khaldoon Albitar,Habiba Al-Shaer,Mahmoud Elmarzouky

Do assurance and assurance

providers enhance COVID-related

disclosures in CSR reports? An

examination in the UK context

Khaldoon Albitar

Faculty of Business and Law, University of Portsmouth, Portsmouth, UK

Habiba Al-Shaer

Newcastle University Business School, Newcastle Upon Tyne, UK, and

Mahmoud Elmarzouky

Westminster Business School, University of Westminster, London, UK

Abstract

Purpose –The COVID-19 pandemichas been adding pressures on companies to commit to theirsocial and

ethical responsibilities. Corporate social responsibility (CSR) reporting is the main tool through which

companies communicatetheir social behaviour and the need for credible information is censoriousduring the

crisis. This paper aims to measure the levelof COVID-19 disclosures in CSR reports by using an automated

textual analysistechnique based on a sample of UK companies and investigate whether the levelof disclosure

is enhancedfor companies that subject their CSR reports to an assuranceprocess.

Design/methodology/approach –The study sample consists of FTSE All-share non-f‌inancial listed

companies. The authorsuse a computer-aidedtextual analysis, and we use a bag of words to capture COVID-

related informationin the CSR section of the f‌irm’s annual reports.

Findings –The results suggest that the existence of independent external assurance is signif‌icantly and

positively associat ed with the provision of COVID-19 informati on in CSR reports. The authors also f‌ind

that when assurance is provided by Big 4 accountancy f‌irms,thedisclosureofCOVID-relatedinformation

is enhanced. Furthermore, large companies are more likely to disclose COVID-related information in their

CSR reports that are ex ternally assured from top-tier ac countancy f‌irms, suggesting that assurance could

be a burden for smaller f‌irms. Overall, the f‌indings suggest that assurance on CSR reports provides an

“insurance-like”protection that miti gates the risks and sign als the management’s ethical behaviour

during the pandemic.

Practical implications –The study approach helps to assess the level of corporate engagement with

COVID-19 practices and the extent of related disclosures in CSR reports based on the COVID-19 Secure

Guidelines published by the UK government. This helps to emphasise how companies engage and

communicate COVID-19-relatedinformation to stakeholders through CSR reports andensure a safe working

environment during this pandemic. Managers will need to assess the costs and benef‌its of purchasing

assuranceon CSR disclosures,giving the ethical signal that assurance sends to the market and protection that

it covers duringthe crisis.

Originality/value –This paper provides a shred of unique evidence of the impact of the existence of

external assuranceand the type of assurer on the disclosure of COVID-related information in CSR reports. To

the best of authors’knowledge,no study has yet investigated the corporate disclosureon an unforeseen event

in CSR reports and therole of CSR assurance in this respect.

Keywords Assurance, Corporate social responsibility (CSR), Disclosure, COVID-19,

Textual analysis

Paper type Research paper

IJAIM

29,3

410

Received22 January 2021

Revised16 February 2021

Accepted26 February 2021

InternationalJournal of

Accounting& Information

Management

Vol.29 No. 3, 2021

pp. 410-428

© Emerald Publishing Limited

1834-7649

DOI 10.1108/IJAIM-01-2021-0020

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1834-7649.htm

1. Introduction

COVID-19 pandemic has had considerable economic and f‌inancial effects worldwide and is

considered the toughest challenge sincethe Great Depression (He and Harris, 2020;Goodell,

2020;Albitar et al., 2020a;Amankwah-Amoah, 2020). Managers are facing challenging

decisions regardingtheir social and ethical behaviour during the pandemic, and they need to

respond proactively to protect their employees and customers (Levy, 2020). Governments

and decision-makers worldwide have established economic and f‌inancial measures to help

companies under strain from the COVID-19 pandemic. These measures should encourage

companies to maintain ethical business practices and fulf‌il their corporate social

responsibility (CSR) commitments to all stakeholders (He and Harris, 2020). The UK

government has issued COVID-19 safety guidelines to ensure a safe working environment

(GOV.UK, 2020), and companies will need to follow these guidelines to ensure the safety of

their employees, customersand work environment. Nevertheless, companies are expectedto

disclose information related to COVID-19 prevention strategies to reduce information

asymmetry and signal theirperformance to the market. Despite the fact that these practices

are not strictly enforced, companies’provision of COVID-related information signals their

ethical behaviourand how they operate during such a turbulent environmentdue to COVID-

19 pandemic.

Recent research investigating the effect of COVID-19 pandemic has mostly focused on

market reactions (Erdem, 2020;Mazur et al.,2020;Salisu and Vo, 2020;Hossain, 2020) and

provided theoretical perceptionsof the impact of COVID-19 pandemic on f‌inancial markets,

banking and insurance companies, CSR, auditing and government and public sector

(Goodell, 2020;Donthu and Gustafsson, 2020;Albitar et al., 2020a;He and Harris, 2020;

Levy, 2020). Other work has focusedon the impact of COVID-19 pandemic on environmental

awareness, sustainable consumption and social responsibility (Severo et al., 2020) and the

effect of environmental, social, and corporate governance (ESG) disclosures on corporate

f‌inancial performance during the COVID-19 crisis (Broadstock et al.,2020). To the best of

our knowledge, no study has yet investigated the corporate disclosure on an unforeseen

event in CSR reports andthe role of CSR assurance in this respect.

Our paper adds to the existingliterature on the external assurance of CSR reports (Cohen

and Simnett, 2015;Ballou et al.,2018;Clarkson et al., 2019;Du and Wu, 2019;Hassan et al.,

2020;Ruiz-Barbadilloand Martínez-Ferrero, 2020) and is motivated by studies that ref‌lecton

the role of CSR assurance in negative event situations. For example, Pf‌lugrath et al. (2011)

show that CSR assurance enhancescredibility of CSR reports issued after a negative event,

and Stuart et al. (2020) show that purchasing assurance on CSR reports signals

management’s ethical culture and provides “insurance-like”protection from any potential

reaction to future negative incidents. The motivation of our study is to examine whether

CSR assurance choices (i.e. the purchase of assurance and assurance provider) enhance the

extent of COVID-related disclosures in CSR reports during the COVID-19 crisis. The

incentive to purchase voluntary assurance services can be framed in the context of

the signalling theory. Assurance can signal that CSR information is reliable and increases

the transparency and credibility of information (Simnett et al., 2009;Cohen and Simnett,

2015;Peters and Romi, 2015).

Due to the COVID-19 pandemic, companies face challenging decisions regarding social

performance and ethical thinking,and they need to conduct COVID prevention strategies to

protect their employees and customers (Levy, 2020;Manuel and Herron, 2020). This paper

aims to assess the degree of corporate disclosureon the COVID-19 pandemic in CSR reports

and investigate whether such disclosure is improved for companies that subject their CSR

reports to an assurance process. We contribute to the CSR assurance literature in several

COVID-related

disclosures

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