CSR ASSURANCE IN SENSITIVE SECTORS A WORLDWIDE ANALYSIS OF FINANCIAL SERVICES INDUSTRY. Elies Seguí-Mas Universitat Politècnica de València

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1 19h CSR ASSURANCE IN SENSITIVE SECTORS A WORLDWIDE ANALYSIS OF FINANCIAL SERVICES INDUSTRY Elies Seguí-Mas Universitat Politècnica de València Fernando Polo-Garrido Universitat Politècnica de València Helena María Bollas-Araya Universitat Politècnica de València Thematic area: h) Corporate Social Responsibility Key words: CSR, sustainability, assurance, financial services.

2 CSR ASSURANCE IN SENSITIVE SECTORS A WORLDWIDE ANALYSIS OF FINANCIAL SERVICES INDUSTRY Abstract Corporate Social Responsibility (CSR) reporting and assurance has achieved a great relevance, and the financial services industry is a CSR-sensitive sector, which needs to increase user confidence in the credibility of their reported activities. Our aim is to analyse assurance practices in this sector. Thus, we study what factors are associated with the adoption of assurance and choice of assuror, and whether the type of assurance provider affects characteristics of assurance. The findings indicate that the financial services industry leads the adoption of assurance, which is associated with the country and listing status, and different characteristics by type of provider. VERIFICACIÓN DE LA RSC EN SECTORES SENSIBLES UN ANÁLISIS MUNDIAL DEL SECTOR DE SERVICIOS FINANCIEROS Resumen La presentación y verificación de informes de Responsabilidad Social Corporativa (RSC) ha alcanzado una gran relevancia, y la industria de servicios financieros es un sector sensible a la RSC, que necesita incrementar la confianza de los usuarios en la credibilidad de sus actividades. Nuestro objetivo es analizar las prácticas de verificación en dicho sector. Así, estudiamos qué factores están asociados con la adopción de la verificación y la elección del tipo de verificador, y cómo éste afecta en el proceso. Los resultados indican que el sector es líder en adoptar verificación, la cual depende del país y de si la empresa cotiza, y que el proceso difiere según el tipo de proveedor.

3 1. INTRODUCTION Despite many studies that have aimed to conceptualise CSR, it is still a complex evolving concept although the trend is focused on a firm s responsibility with its stakeholders (Sweeney and Coughlan, 2008). The stakeholder theory understands companies as a part of a wider social system in which their commercial activities affect, and are affected by, other stakeholder groups within society (Freeman, 1983). Several authors have pointed out how the financial industry has been partly responsible for the current crisis in regulatory failure and over-optimistic policies terms (Davis, 2009; Fligstein and Goldstein, 2010). Thus, the crisis has brought vast social impact costs, not only for the financial system, but also for taxpayers and recipients of welfare subsidies (Herzig and Moon, 2013). The unfavourable situation experienced by financial companies in this context has caused discredit in and distrust of society. Consequently, CSR is necessary to generate and maintain trust (Rodríguez-Gutiérrez et al., 2013), and it is an effective instrument that offers confidence to stakeholders as the company is perceived as being responsible and trustworthy (Fernández and Souto, 2009). The financial services industry is highly exposed to environmental and social risks, and the need to increase user confidence in the credibility of their reported activities is great (Simnett et al., 2009; Kolk and Perego, 2010). Therefore, in line with Sierra et al. (2014), it is considered an industry that is CSR-sensitive. Due to accountability pressures and the demand for transparency (Kolk, 2008), sustainability or CSR reporting has proliferated in response to stakeholders concerns about environmental and social issues, governance and responsibility (Kolk and Perego, 2010; Simnett, 2012). Among other factors, risk and reputation management, external pressure, moral reasons, and promotion of better investor relations and corporate performance have traditionally determined reporting (Spence and Gray, 2007). In order to ensure the homogeneity and quality of CSR reports, standards for reporting were developed. The most commonly used is the GRI Sustainability Reporting Guidelines from the Global Reporting Initiative (GRI). According to KPMG (2013), it has achieved widespread adoption with 82% of the Global 250 (G250: the top 250 companies of the Fortune 500 Index) and 71% of the National 100 (N100: the top 100 companies in 16 countries where KPMG operates). In the GRI Database universe, the financial services industry represented the highest percentage (14%) of published

4 reports in 2011 (GRI, 2011a). GRI also provide Sector Supplements to cover the needs of specific industries, such as the financial services. Thus the Financial Services Sector Supplement complements guidelines with interpretations and guidance as to how to apply it in this particular sector, and it includes sector-specific performance indicators (GRI, 2011b). In 2012, 34% of the GRI-based reports published by financial services companies followed the sector supplement (GRI, 2013). Nevertheless, researchers have criticised sustainability reporting because of lack of accountability and transparency (Owen et al., 2000; Dando and Swift, 2003; Adams and Evans, 2004), which have created a need for credible reported information in this area, known as the so-called credibility gap. Consequently, stakeholders wish to be sure that CSR reports are more than just public relations instruments (KPMG, 2006). In line with this, Adams and Evans (2004) argued that voluntary assurance enhances the credibility of such reporting. The need for credibility has accelerated the development of relevant assurance frameworks (FEE, 2004, 2006), such as the AA1000 Assurance Standard (AA1000AS) from AccountAbility, and the International Standard of Assurance Engagements Other Than Audits or Reviews of Historical Financial Information (ISAE 3000) from the IAASB. Neither standard is conflicting nor a substitute, but both are complementary in terms of providing comprehensive and robust assurance (Accountability and KPMG, 2005). The 2013 KPMG Survey of Corporate Responsibility Reporting (KPMG, 2013) noted that 59% of G250 companies and 38% of N100 companies use assurance as a strategy to verify and assess their corporate responsibility information. According to GRI (2013), among all the 2012 GRI-based reports, the percentage of external assurance was 46% on a global scale and 50% in the financial services industry. This shows that assurance represents the next stage of development of sustainability reporting (ACCA, 2004). Very few authors have assessed assurance practices in sensitive sectors like the financial services sector, and this paper addresses this research gap. Thus our aim was to develop an exploratory analysis about CSR or sustainability assurance in the financial services industry. We firstly made a comparison between this industry and other industries as to adoption of assurance and choice of assuror. Secondly, we studied what determinants influence the decision to adopt assurance and to choose assuror. Finally, we investigated whether assurance differ across assurance providers.

5 The paper proceeds as follows. First, we present a literature review on the field of assurance on CSR reports. In the following section, we describe the sample and the methodology employed. Afterwards we discuss the results of our analysis and we present our conclusions. 2. LITERATURE REVIEW The Financial Services Sector Supplement (GRI, 2011c) classifies the financial services into four categories: retail banking, commercial and corporate banking, asset management and insurance. These institutions strongly influence society by performing their activities: they play the role of financial intermediaries in society pricing and valuing financial assets, monitoring borrowers, managing financial risks, organising the payment system and covering for the financial consequences of situations that people try to avoid (Scholtens, 2009, 2011). The financial system performs a relevant and positive role in economic development (Levine, 2004). As economic development is directly related to human, social and environmental development, financial institutions can also influence sustainable development. Unlike other industries however, this impact can be mainly indirect because they ease the growth and development of other companies and individuals (Scholtens, 2006). According to Day and Woodward (2009), this is an industry of interest in the CSR and organisational reporting context because of its size and the role it plays in easing economic transactions for both companies and individuals. This is a sensitive sector because of its influence on financial well-being and its large social footprint. As a result, stakeholder groups are deeply interested in its activities (Simnett et al., 2009). The financial crisis has brought about dramatic consequences for the economy and society, and the financial industry has been accused of being responsible for it (Herzig and Moon, 2011). One of the most serious consequences of this situation has been loss of trust, which is caused by lack of transparency, which is one of the main requirements to be promoted for more sustainable economic growth (Rodríguez- Gutiérrez et al., 2013). It has increased stakeholders demand for accountability and credible information, which has resulted in companies reporting their CSR. CSR reporting is the process through which organisations communicate the social and environmental effects of their economic actions to stakeholder groups within society and to society at large (Gray et al., 1996). It has commonly been understood as a way of ensuring the legitimacy of organisations, a tool to manage stakeholder relationships, or a process to build good impressions and/or to hide conflicts (Spence and Gray,

6 2007). According to ACCA (2004), it is the main way through which companies can show their corporate legitimacy to stakeholders. Perego and Kolk (2012) confirmed the increasing number of CSR reports published by multinational financial corporations in the last decade. In the same line, Simnett et al. (2009) found that the financial industry was more likely to produce CSR reports. However, CSR reporting is subject to concerns as regards to the completeness and credibility of the information (Adams and Evans, 2004; Dando and Swift, 2003). Enterprises disclose only appropriate information to gain corporate advantage and a good reputation instead of looking for transparency and accountability for stakeholders (Owen et al., 2000). In accordance with Simnett (2012), provision of external assurance on the content and structure of CSR reports improves the relevance, reliability and comparability of reports and, therefore, enhances their overall credibility. Benefits of assurance are stakeholders confidence in the quality of the sustainability information provided and/or more stakeholder trust in the level of commitment to sustainability agendas. Thus companies that wish to enhance the credibility of their reports and build their corporate reputation are more likely to adopt assurance (Simnett et al., 2009). Recent studies have investigated the factors that influence adoption of assurance. Simnett et al. (2009) made an international comparison and found that the companies located in stakeholder-oriented countries and stronger legal environments are more likely to assure their CSR reports. They also identified that the companies that have engaged in more visible industrial activity and those with a larger social footprint, like the financial industry, are more likely to adopt assurance. Moreover, they pointed out that large companies are more likely to have their reports assured. Kolk and Perego (2010) analysed the behaviour of G250 firms and found that the likelihood of assuring is greater for firms domiciled in stakeholder-oriented countries and countries with weaker enforcement mechanisms. Zorio et al. (2013) underlined the inclusion in a stock exchange as another determinant for the companies listed on the Spanish capital market. Sierra et al. (2013) highlighted that the decision to adopt assurance depends on company size, and is positively associated with ROA and negatively associated with ROE and leverage in the case of IBEX-35 companies. Similarly, determinants of choice of assuror have been analysed. The findings showed that the likelihood of choosing a large accounting firm as an assurance provider is greater for larger firms (Simnett et al., 2009; Kolk and Perego, 2010). Simnett et al.

7 (2009) found that companies with lower leverage are also more likely to choose a member of the auditing profession, and that companies domiciled in stakeholderorientated countries are more likely to choose assurance from the auditing profession. In contrast, Kolk and Perego (2010) affirmed that the likelihood of choosing a large accounting firm as an assurance provider increases for the companies domiciled in shareholder-oriented countries. Perego (2009) sustained that among the firms listed for the 2005 ACCA Sustainability Reporting Awards, those domiciled in weaker legal systems are more likely to choose a large accounting firm as assuror. According to Sierra et al. (2013), the financial services industry significantly tends to hire auditors as assurance providers, unlike Simnett et al. (2009). Zorio et al. (2013) also found that the inclusion in a stock exchange is clearly significant. Furthermore, some academics have studied the content of assurance statements and have reported differences across assurors. O Dwyer and Owen (2005) analysed the assurance statements included in environmental, social and sustainability reports short-listed for the 2002 ACCA UK and European Sustainability Reporting Awards, and they found that accountants are more likely than consultants to indicate the assurance level. They pointed out that accountants employed criteria that are generally stated as reflecting emerging best practices, together with the underlying principles in international standards, while consultants were the forerunners of using AA1000AS, and the assurors who have used it provide a higher assurance level. Deegan et al. (2006) investigated whether the UK and European assurance statements included the key elements suggested by GRI and FEE, and found considerable variability in presentation formats and contents across assurors. They highlighted that accounting firms are more likely to identify assurance standards. Perego and Kolk (2012) indicated that the most frequent adoption of standards among providers of the firms included in the G250 is a combination of the AA1000AS, the ISAE 3000 and GRI guidelines, and that accounting firms use the ISAE 3000 more frequently. Perego (2009) provided evidence that Big-4 firms positively affect assurance quality in reporting format and assurance procedures terms, but the quality of recommendations and opinions is positively associated with non-accountants. As far as we know however, no previous research works focused on assurance in the financial services industry. Only Fonseca (2010) centred on a specific industry, the mining industry. It is another sensitive sector according to Sierra et al. (2014), who found that the companies from Latin America that better favour adoption of assurance belong to sensitive sectors.

8 Consequently, our study focussed on the financial services industry not only because of its special link to CSR, but also because we considered it an interesting research gap to examine. We explored whether a sensitive sector like the financial services industry is more likely to adopt assurance than other industries. In the same context, we analysed the determinants that influence the decision to adopt voluntarily assurance on CSR reports and choice of assuror, and how assurance differ according to provider type. Based on the literature, we posed the following research questions: RQ1: As a sensitive sector, are there significant differences between the adoption of assurance in the financial services industry and in other industries? Is the decision to adopt assurance associated with the status of the country where the company is located, company size, listing status and the use of the supplement sector in the financial services industry? RQ2: As a sensitive sector, are there significant differences between choice of assuror in the financial services industry and in other industries? Is the choice of assurance provider associated with the status of the country where the company is located, company size, listing status and the use of the supplement sector in the financial services industry? RQ3: Does the type of assurance provider influence assurance in the financial services industry? 3. METHODOLOGY 3.1. Sample and data collection To collect data, we employed the GRI s Sustainability Disclosure Database to look for financial services companies worldwide that disclosed a GRI-based sustainability report between 2012 and In accordance with GRI (2013), we selected only those companies whose reports followed guidelines G3, G3.1 or G4, and we excluded no- GRI and GRI-referenced reports. As shown in Table 1, CSR reporting is more frequent in OECD countries, although the relative number of reporters slightly lowered between 2012 and 2013, as opposed to the relative number of reporters in non-oecd countries, which slightly increased. Most reports pertained to large companies, although the percentage lowered throughout the period, in contrast to MNEs (multinational enterprises) and SMEs (small and medium-sized enterprises). Regarding

9 listing status, listed companies represented the highest percentage among CSR reporters, although it lowered over 2 years, unlike non-listed companies. Most companies used the financial services supplement, and almost half the companies adopted assurance. Table 2 reveals that it is more commonplace among companies from OECD countries, large companies and listed companies, and most of them used the sector supplement and opted for an accountant as assurance provider. Proportions were similar over 2 years. Table 1- CSR reporters (sample 1) n % n % Country status Non-OECD OECD Size SME Large MNE Listed Non-listed Listed Sector supplement Not used Financial services Assurance Non-adopter Adopter Total Table 2- Assurance adopters (sample 2) n % n % Country status Non-OECD OECD Size SME Large MNE Listed Non-listed Listed

10 Sector supplement Not used Financial services Assuror Non-accountant Accountant Total Variables measurement To achieve our purpose, we employed cross tabulations and Pearson s chi-square test to analyse whether the adoption of assurance and choice of assuror are significantly associated with the financial services industry, country status, company size, listing status and use of the sector supplement, and we checked whether the type of assuror is significantly associated with the assurance scope, assurance level and assurance standards. We defined variables by adapting the GRI data legend (GRI, 2012). Thus, the INDUSTRY variable refers to the industry in which the company operates. It takes the value 0 if the company does not operate in the financial services industry and a value of 1 if it does. The ASSURANCE variable indicates whether a company adopts external assurance. It takes the value 0 if the company is a non-adopter and 1 if it is an adopter. The ASSUROR variable indicates the type of firm that provides the external assurance. It takes a value of 0 if the assurance provider does not belong to the accountant profession (including engineering firms and small consultancies/boutique firms) and a value of 1 when the assurance provider is an accountant. The COUNTRY STATUS variable shows whether the country where the company is located is an OECD member or not. It takes the value of 0 if it is a non- OECD country and 1 if it is an OECD country. The SIZE variable follows EU definitions of organisation size. It takes a value of 0 for SMEs (fewer than 250 employees, with a turnover below 50 million or with assets below 43 million ), 1 for large enterprises (more than 250 employees and more than 50 million in turnover or 43 million in assets), and 2 for MNEs (large and multinational). The LISTED variable refers to the listing status. It takes a value of 0 if the company is not listed and 1 if it is. The SECTOR SUPPLEMENT variable indicates whether a company uses, or not, the financial services sector supplement. It takes a value of 0 if a company does not use the supplement and 1 if it does. The ASSURANCE SCOPE variables takes a value of 0 when scope is not specified, 1 when scope specifies sections or greenhouse gas only, and 2 when scope is the entire report. The LEVEL OF

11 ASSURANCE takes a value of 0 when the level is not specified, 1 when it is limited/moderate and 2 when it is reasonable/high or a combination of both levels. The ASSURANCE STANDARD variable takes a value of 0 when no standard is used, 1 when the AA1000AS is applied, 2 when the ISAE 3000 is applied, and 3 when they are combined. 4. RESULTS Findings in Table 3 refer to the adoption of assurance and are related to the sample of CSR reporters (sample 1). As we can see, 48.7% of the GRI-based reports published in 2013 by financial services companies underwent external assurance compared to 41.1% in other industries and to 42.1% on a global scale. Financial services companies are more likely to adopt assurance than companies from other industries, whereby the industry is significantly associated with assurance (p < 0.01). The relative number of companies that adopted assurance increased from 2012 to 2013, but this increase was higher in the financial services industry (1.8 points) than in other industries (0.2 points). According to the results, 43.3% of the companies domiciled in non-oecd countries adopted assurance in 2013 in comparison to 52.5% of companies from OECD countries. Thus we found a significant association between country status and the decision to adopt assurance (p < 0.10). Specifically, the companies located in OECD countries are more likely to assure their CSR reports. We also found that differences were more significant in 2012, when adopters represented 33.8% of the companies from non-oecd countries and 56% of companies from OECD countries. In relative terms, the number of assurance adopters rose by 9.5 points in non-oecd countries, while it decreased by 3.8 points in OECD countries. The percentage of assurance adopters in 2013 was higher for SMEs (52.9%) than for large companies (48.7%) and MNEs (46.5%). However, no significant association was found between company size and assurance (p > 0.10). Compared with 2012, the relative number of adopters grew by 2.9 points for SMEs, 0.4 for large companies and 6.8 for MNEs. When differentiating between large companies (which include large and MNEs) and SMEs, we found no significant association with assurance. Once again we found no significant differences when separating MNEs and non-mnes. It is revealed that 54% of listed companies adopted assurance in 2013 in comparison to 40.8% of non-listed companies. These differences are significant for adoption of

12 assurance (p < 0.05), whereby listed companies are more favourable to assuring their CSR reports. Between 2012 and 2013, the relative number of adopters grew by 5.2 points among the listed companies and fell by 3.1 points among the non-listed ones. The data show that the companies using the financial services sector supplement are more likely to adopt assurance (52.2%) than those not using it (37.2%). It indicates a significant association between both factors (p < 0.05). As regards 2012, it should be noted that assurance went up among the companies that did not use the sector supplement. Table 3- Factors associated with assurance Nonadopter Adopter Total Nonadopter Adopter Total n % n % n % % % n % n % Industry Otherwise 1, , , , , Financial Services Total 1, , , , , , Pearson Chi-Square = 7.686; p = Pearson Chi-Square = 4.284; p = Country status Non-OECD OECD Total Pearson Chi-Square = 3.094; p = Pearson Chi-Square = ; p = Size SME Large MNE Total Pearson Chi-Square = 0.385; p = Pearson Chi-Square = 1.523; p = Listing status Non-listed Listed Total Pearson Chi-Square = 6.331; p = Pearson Chi-Square = 0.722; p = Sector supplement Not used Financial services

13 Total Pearson Chi-Square = 6.558; p = Pearson Chi-Square = ; p = In Table 4, we present findings related to the choice of assuror, which refer to the sample of assurance adopters (sample 2). In 2013, 70.1% of the companies from the financial services industry preferred accountants to apply assurance compared to 59.2% of companies from other industries and to 60.8% on a global scale. Therefore, financial companies are more likely to choose an accountant as an assurance provider, whereby a significant association exists between the industry and the assurance provider (p < 0.01). From 2012 to 2013, the number of assurances carried out by accountants increased in all industries, although this number was lower in relative terms in the financial services industry (2.3 points). Most assurance adopters located in non-oecd countries (72.1%) opted for a professional accountant to assure their CSR reports. Similarly, adopters from OECD countries preferred accountants to carry out external assurance (69%). Yet regardless of country status, most companies chose accountants as assurance providers in In line with this, we did not find a significant association between country status and choice of assuror (p > 0.10). With regards to 2012, the percentage of companies that opted for accountants lowered, especially in non-oecd countries. So, there are fewer differences between countries, and companies show certain movement towards nonaccountant providers. Table 4 Factors associated with assurance provider Nonaccountant Accountant Total Nonaccountant Accountant Total n % n % n % % % n % n % Industry Otherwise , Financial Services Total , , Pearson Chi-Square = 7.847; p = Pearson Chi-Square = ; p = Country status Non-OECD OECD Total

14 Pearson Chi-Square = 0.196; p = Pearson Chi-Square = 0.935; p = Size SME Large MNE Total Pearson Chi-Square = 0.212; p = Pearson Chi-Square = 0.362; p = Listing status Non-listed Listed Total Pearson Chi-Square = 2.385; p = Pearson Chi-Square = 2.208; p = Sector supplement Not used Financial services Total Pearson Chi-Square = 0.360; p = Pearson Chi-Square = 0.030; p = MNEs better favoured accountants (72.7%) than large companies (69.9%) and SMEs (66.7%) in However, company size was not significantly associated with choice of assuror (p > 0.10). Compared with 2012, the relative number of accountant providers dropped by 11.9 and 2.3 points for SMEs and large companies, respectively, while it rose by 3.1 points for MNEs. When separating large companies (including large and MNEs) and SMEs, no significant differences were noted as regards choice of assurance provider. Similarly, when differentiating between MNEs and no-mnes, no significant association was observed. In view of the results presented, 77.4% of the non-listed companies moved towards professional accountants in 2013 compared to 66.4% of the listed companies. We found no significant association between listing status and choice of assuror (p > 0.10). In comparison to 2012, the number of external assurances carried out by accountants increased in both listed and non-listed companies. However in relative terms, it went down to 79.6% in non-listed companies and down to 68.4% in listed ones. Regarding the use of the financial services sector supplement, no significant association between this factor and the choice of assuror was observed (p > 0.10). The relative number of assurance engagements performed by accountants rose from 2012 and 2013 among the companies that did not use the sector supplement, unlike those using the supplement.

15 Next results refer to the associations between type of provider and features of assurance (scope, level and standards). As shown in Table 5, among the assurance engagements carried out by accountants, 53.5% aimed to assure the entire report, 37.2% focused on specified sections and 9.3% did not specify scope. Similarly, among the assurance engagements performed by non-accountants, 54.5% focused on the entire report, 32.7% on specified sections and 12.7% did not define scope. The proportions were similar, so we did not find a significant association between provider type and scope (p > 0.10). Between 2012 and 2013, the number of assurance engagements that did not define scope declined, especially among accountants, whereas the growth of the assurance engagements that aimed to assure entire CSR reports was stronger for non-accountants (11.6 points), and the rise in those which focused on specified sections was more noticeable among accountants (13.6 points). When testing the differences between the assurance engagements that defined scope or did not, none were significant. Similarly, when excluding assurance engagements where scope was not specified and comparing the other two categories, we found no association. Table 5 - Assuror * Assurance scope Panel A: 2013 Nonaccountant Not specified Specified sections Entire report Total n % n % n % n % Accountant Total Pearson Chi-Square = 0.662; p = Panel B: 2012 Nonaccountant Accountant Total Pearson Chi-Square = 0.674; p = Table 6 reveals that 57.4% of the assurance engagements performed by accountants in 2013 indicated a limited/moderate level, while 20.2% specified a reasonable/high level or a combination of two levels. Among the assurance engagements carried out by

16 non-accountants, 41.8% declared a limited level and 14.5% the reasonable level or a combination. These results indicate a significant association between provider type and assurance level (p < 0.05). Between 2012 and 2013, the relative number of limited assurances increased by 6.1 points for non-accountants, while it went down in 11.7 for accountants. However, the relative number of reasonable or combined assurances dropped by 14.1 points for non-accountants, while it rose by 6.6 points for accountants. When testing differences as to whether the level was specified or not, we found that accountants were more in favour of defining the level, while it was also significant. Table 6 - Assuror * Level of assurance Panel A: 2013 Nonaccountant Not specified Limited/modera Reasonable/High or Total te Combination n % n % n % n % Accountant Total Pearson Chi-Square = 8.416; p = Panel B: 2012 Nonaccountant Accountant Total Pearson Chi-Square = ; p = As we can see in Table 7, almost half the assurance engagements performed in 2013 did not refer to any standard (44.6%), the use of the AA1000AS was more frequent among non-accountants (29.1%), the ISAE 3000 was more widely used by accountants (42.6%) and standards were combined in very few engagements (9.8%). Differences between assurors were significant with regards to the application of assurance standards (p < 0.001). Accountants used mainly the ISAE 3000, while non-accountants applied the AA1000AS more, although they were more likely to not use standards. The combination of standards was slightly more common among accountants. Compared with 2012, the use of the ISAE 3000 rose, the application of the AA1000AS fell among non-accountants, but increased among accountants, and the combination of standards grew among all the providers, while the relative number of accountants who did not use standards considerably declined, unlike the number of non-accountants which went up.

17 Table 7 - Assuror * Assurance standard Not used AA1000 AS ISAE 3000 Combination Total n % n % n % n % n % Panel A: 2013 Nonaccountant Accountant Total Pearson Chi-Square = ; p = Panel B: 2012 Nonaccountant Accountant Total Pearson Chi-Square = ; p = CONCLUSIONS This research has attempted to study whether the fact of being a company from a sensitive sector is associated with the adoption of assurance and choice of assuror. It also analysed whether these decisions are associated with the factors country status, company size, listing status and use of sector supplement. Moreover, we attempted to find differences among assurance across assurors. The findings indicate that most financial services companies that disclosed a GRIbased report in 2013 were large and listed companies from OECD countries, most used the financial services sector supplement and almost half adopted assurance. Similarly, most assurance adopters were large and listed companies domiciled in OECD countries, used the sector supplement and chose mainly accountants as assurance providers. As to our first research question, significant differences were found between the financial services industry and other industries with regards to adoption of assurance. As a sensitive sector, its likelihood of assuring reports is greater than in other industries, which is consistent with Simnett et al. (2009). It also shows the willingness of companies to be accountable and to enhance their credibility towards their stakeholders. We found that the status of the country where companies are located, listing status and use of the sector supplement were significantly associated with the decision to adopt assurance. Specifically, companies from OECD member countries

18 better favour assuring their reports, which is in line with Kolk and Perego (2010) and Simnett et al. (2009), who found the country level factor to be a determinant of adoption of assurance. The results also showed that listing status is positively associated with assurance, which coincides with Zorio et al. (2013), but not with Castelo et al. (2014). We also observed that the companies using the financial services sector supplement are more likely to consider assurance. However, we found no association with company size, unlike Sierra et al. (2013) and Simnett et al. (2009). To answer our second research question, similarly to Sierra et al. (2013), we found that the companies belonging to the financial services industry are more likely to choose an accountant as an assurance provider. However, no significant associations appeared between choice of assuror and country status or company size, which goes against the findings posited by the existing literature, e.g., Simnett et al. (2013) or Perego (2009), who established that the country level factor and size affect the selection of assuror. Nor did we did find a connection between the assuror and listing status, unlike Zorio et al (2013), or an association with use of the sector supplement. Finally, in response to the third and last research question, we found that different characteristics of assurance are inherent to the assurance provider type, which is in line with Deegan et al. (2006). As regards the level of assurance, we found a significant association with the assuror, which is due to the fact that accountants are more likely to specify the assurance level than non-accountants, as pointed out by O Dwyer and Owen (2005). Yet even though accountants applied mainly the limited/moderate level, there were no significant differences seen between the limited/moderate level and the reasonable/high level or a combination of both. We also confirm that provider type is connected with use of assurance standards. More accountants specified the standard used, which is consistent with Deegan et al. (2006). According to O Dwyer and Owen (2005) and Perego (2009), non-accountants extensively use the AA1000AS approach, which shows a greater interest in stakeholders as this standard is based on their inclusivity and responsiveness to their concerns, and also on identifying material issues to them. In contrast, accountants use mostly the ISAE 3000 approach. However, no significant association between provider type and assurance scope was observed. In conclusion, the financial services industry leads adoption of assurance compared to other industries, which is a reflection of concern on demands of transparency and need for credibility. Nonetheless, reports are continually being added to the GRI Database, so the results are dynamic and constantly evolving (GRI North America, 2014).

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