Do Audit Committees and External Auditors Enhance CSR Disclosure?
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Purpose: This research aims to assess the impact of audit committee (AC) characteristics and external auditors on corporate social responsibility (CSR) disclosure, with a particular focus on Indonesia, a developing country. The characteristics of the AC are defined by financial expertise, gender, size, and meeting frequency. Design/methodology/approach: The study sample consists of manufacturing companies listed on the stock exchange over six periods, selected through purposive sampling. Panel data were analyzed using the Eviews application. Findings: The study demonstrates that financial expertise and the presence of female committee members significantly enhance CSR disclosure. Additionally, the frequency of committee meetings consistently correlates with increased CSR disclosure. However, the size of the committee does significantly impact CSR disclosure. Furthermore, external auditors act as moderators in the relationship between AC characteristics and CSR disclosure. Thus, AC and external auditors are crucial governance mechanisms for improving CSR disclosures. Research limitations/implications: The findings contribute to agency theory by showing how AC and external auditors reduce information asymmetry, which can potentially lead to agency problems. These governance mechanisms are particularly effective in monitoring CSR reporting, especially for reports not verified by external assurance. Originality/value: First, the majority of sustainability reports lack external assurance from independent parties, underscoring the importance of AC and external auditors in enhancing CSR disclosures. Second, empirical studies examining the influence of AC on CSR are limited, particularly in developing countries. Third, previous research on the relationship between external auditors and CSR disclosure has yielded inconsistent results. This study addresses this gap by analyzing the role of external auditors as moderating variables in the relationship between AC characteristics and CSR disclosure.
Abstract
Purpose: This research aims to assess the impact of audit committee (AC) characteristics and external auditors on corporate social responsibility (CSR) disclosure, with a particular focus on Indonesia, a developing country. The characteristics of the AC are defined by financial expertise, gender, size, and meeting frequency. Design/methodology/approach: The study sample consists of manufacturing companies listed on the stock exchange over six periods, selected through purposive sampling. Panel data were analyzed using the Eviews application. Findings: The study demonstrates that financial expertise and the presence of female committee members significantly enhance CSR disclosure. Additionally, the frequency of committee meetings consistently correlates with increased CSR disclosure. However, the size of the committee does significantly impact CSR disclosure. Furthermore, external auditors act as moderators in the relationship between AC characteristics and CSR disclosure. Thus, AC and external auditors are crucial governance mechanisms for improving CSR disclosures. Research limitations/implications: The findings contribute to agency theory by showing how AC and external auditors reduce information asymmetry, which can potentially lead to agency problems. These governance mechanisms are particularly effective in monitoring CSR reporting, especially for reports not verified by external assurance. Originality/value: First, the majority of sustainability reports lack external assurance from independent parties, underscoring the importance of AC and external auditors in enhancing CSR disclosures. Second, empirical studies examining the influence of AC on CSR are limited, particularly in developing countries. Third, previous research on the relationship between external auditors and CSR disclosure has yielded inconsistent results. This study addresses this gap by analyzing the role of external auditors as moderating variables in the relationship between AC characteristics and CSR disclosure.
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