The Process of Sustainability Reporting Assurance: Exploring The Big-4 Firms As Third-Party Assurers - A qualitative interview study of Big-4 accounting firms in Europe

Abstract

Background, Problematization, and Purpose: The pressing need to achieve sustainable development demands significant changes and stronger commitments to sustainability communication. The verification of the sustainability reports of organisations therefore becomes crucial, causing standard-setters to put in place legislations that mandates external assurance of the sustainability reports of organisations. The Big-4 firms as third-party assurance providers can play a pivotal role in this new auditing space as they can leverage their extensive expertise in the traditional financial auditing to assure non-financial information. However, research on the processes employed by the Big-4 firms in sustainability assurance engagement is limited, necessitating further investigation. Sustainability information is qualitative and subjective and demands a lot of professional judgements from the Big-4 assurors, potentially causing tension that requires a deeper empirical research for a comprehensive understanding of the steps employed in the Sustainability reporting assurance process. The purpose of this master thesis project is to get an understanding of the processes employed by Big-4 firms when they provide sustainability assurance services to enhance proper sustainability communication. Research Questions: The study addresses two questions: 1) What are the processes and methodologies employed by the Big-4 accounting firms when carrying out sustainability reporting assurance services? and 2) What are the challenges and opportunities/benefits faced by Big-4 accounting firms in providing third-party assurance for sustainability reporting?. Methodology: The authors performed a qualitative interview study where 9 semi-structured interviews were conducted with respondents from the Big-4 firms operating across European countries. All 9 respondents are working in the audit and assurance departments of their respective accounting firms. The study uses a theoretical thematic analysis with the lens of institutional theory. Conclusion: The results reveal that the process of Sustainability Reporting Assurance in B4s consists of similar but slightly different steps. These differences reflect variations in priorities that can be attributed to local regulations or client type. The most prevalent 7 steps employed are: Engagement acceptance and Planning; Understanding the client and Risk assessment; Evidence gathering and Testing; Evaluation and Analysis; Issue identification and Resolution; Conclusion and Reporting; and Follow-up and Continues improvement. The results further highlight several challenges that the Big-4 firms face in the process of sustainability assurance services. They include a) data quality & standardization issues, assuring qualitative and subjective data, b) internal control & governance structure, c) Gaps in reporting standards and metrics and knowledge gap and resistance to change. To overcome the challenges, B-4s employ early engagement and risk identification, engagements in training and capacity building programs and specialist involvement and continuous learning of sustainability discourse to mitigate the challenges. Lastly, the results shed light on the opportunities/benefits of SRA for Big-4s, such as reinforcing reputation, increasing market share and an opportunity to develop knowledge and expertise.