Flying semi-blind: an empirical study on auditors’ effort in auditing climate risks - Ruby Brownen-Trinh, University of Bristol Business School

Event Date: 12 February 2025

Speaker: Ruby Brownen-Trinh, University of Bristol Business School

Venue: Strathclyde Business School, Cathedral Wing, CW404A

Time: 2pm

Abstract:

This study examines auditor’s engagement in climate risk. Using natural language processing programs, we propose a novel framework to identify and evaluate the quality of climate risk discussion in the independent auditor reports of FTSE350 constituents. We find that Big 4 auditors are more likely to consider climate risk in their independent auditor reports and as a key audit matter (KAM), while a climate specialist auditor is more likely to discuss climate risk as KAM. Furthermore, we find that when an auditor is also the assurer for the company’s sustainability report, they are more likely to discuss climate risk in their independent auditor report before firms even mention it in their financial statements. Finally, we document a positive association between the quality of climate risk discussion in the scope of an audit report and audit fee, suggesting a greater level of effort is exerted when evaluating the materiality of climate risks.

Published: 6 February 2025