Relationship Between Integrated Reporting and Audit Risk in the European Setting: The Empirical Results

Abstract

Empirical results from the whole datasets of firms in 2014 demonstrated that Quantitative Audit Risk is affected by the quality of some components of integrated reporting (IR). Specifically, the empirical results show that if the quality of Financial increases, Quantitative Audit Risk worsens, whereas if the quality of Human—Corporate Governance, Natural and Intellectual increases, Quantitative Audit Risk is enhanced. Empirical results from the entire dataset of firms in 2014 also showed that Audit Fees are affected by the quality of some components of IR; in particular, by the quality of the following components of IR: Human—Accidents, Training and Health & Safety; Natural; Social; and Intellectual. The relationships among Audit Fees and the components of IR are always positive, when they are statistically significant. This means that when the quality of Human—Accidents, Training and Health & Safety; Natural; Social; and Intellectual increases, Audit Fees increase as well. Furthermore, Quantitative Audit Risk is not correlated with Audit Fees, whereas Qualitative Audit Risk is negatively associated with Audit Fees. We discuss the empirical results regarding the entire dataset of firms and carry out additional analysis on sub-datasets of the firms.