The Influence of Sustainability Assurance Report Level and Format on Investor Judgments

Abstract

Many companies now provide integrated reports linking financial performance information with non-financial information and some investors perceive the need for assurance on these reports. This study examines whether the level (limited versus reasonable) and format (presented separately or combined with financial information assurance) of sustainability information assurance contained in integrated reports influences investor judgments. Nonprofessional investors viewed integrated financial and sustainability performance information accompanied by assurance reports and made investment judgments based on this information. Assurance level only influences investment judgments when the sustainability assurance report is presented separately, as opposed to combined with the financial assurance report. Participants made higher investment judgments when limited rather than reasonable assurance was provided on the sustainability information. Further, supplemental analyses show that contrary to what professional standards indicate, participants perceive that a limited assurance report conveys a higher degree of assurance than a reasonable assurance report. Participants also perceive combined assurance reports to be more difficult to understand and perceive sustainability information accompanied by a combined assurance report to be less credible and reliable. Results suggest a need for standard setters to carefully consider the possible influence of assurance report wording and formats on investor judgments as they proceed to develop guidelines for assurance on integrated reports.