Outline Research

“Effect of sustainability assurance on sustainability reports in reducing information

asymmetry”

I. Introduction
Sustainability reporting in Indonesia still has many challenges, both in terms of
measurable and clear sustainability reports, as well as increasing sustainability
reports for companies in Indonesia. One of the challenges being faced - according
to Badan Pemeriksa Keuangan (BPK) - is increasing assurance on existing
sustainability reports. Initiatives in providing independent assurance on
sustainability reports are still lacking. Badan Pemeriksa Keuangan ( BPK ), Task
Force Integrity & Compliance (TFIC) B20, Dewan Pengawas Nasional Ikatan
Akuntansi Indonesia (DPN IAI), as well as G20 country leaders and other global
business communities continue to strive to encourage and improve initiatives to
provide assurance on established sustainability reports.
In addition, sustainability assurance has a positive effect on investors. If investors
consider the information provided by the company to be reliable, they will
consider it in assessing the company. By providing an assurance sustainability
report, the company's management intends to convince investors that the
sustainability report information can be trusted. The share of guaranteed
(compared to non-guaranteed) sustainability reports issued by the world's 250
largest companies increased from 29% in 2002 to 59% in 2013 (KPMG 2013).

II. Literature Review/ Questions

The managers possess superior information regarding the company’s
sustainability performance. Although such information may be useful for valuing
the company, the disclosure of such information is not mandatory (Dhaliwal et al.
2012, Moser and Martin 2012). The information asymmetry between the
company’s management and its investors creates a demand for voluntary
disclosures such as sustainability reports. Prior analytical accounting research
argues that voluntary disclosures reduce this information asymmetry and thereby
stimulate an optimal allocation of capital (e.g. Verrecchia 2001). Empirical studies
confirm this inverse relationship for voluntary disclosures, in general, and for
sustainability reporting, in particular. The most dominant proxy for information
asymmetry is the bid-ask spread (e.g. Leuz and Verrecchia 2000). Prior research
shows that sustainability reporting and other voluntary disclosures reduce the bid-
ask spread (Cormier et al. 2011). Furthermore, companies that provide
sustainability reports and other voluntary disclosures are rewarded with lower
costs of capital (e.g. Dhaliwal et al. 2011, El Ghoul et al. 2011, Campbell et al.
2014).
 Assurance standards enhance the comparability of different assurance
engagements (Simnett et al. 2009a). The International Standard on Assurance
Engagements 3000 (ISAE 3000) and the AccountAbility 1000 Assurance
Standard (AA1000AS) are currently the preferably applied assurance standards
(CorporateRegister.com 2008, KPMG 2008). The International Auditing and
Assurance Standards Board (IAASB) under the control of the International
Federation of Accountants (IFAC) issued ISAE 3000 in 2008 (IFAC 2008, 2011).
ISAE 3000 applies to all assurance engagements that do not concern the assurance
of historical financial information and that are undertaken by professional
accountants in public practice (IFAC 2008, 2011). Assurance statements provided
according to ISAE 3000 focus mainly on the procedural details of the assurance
process (Oelschlaegel 2005).

Both assurance standards have similar requirements regarding the contents of

assurance statements. Because assurance providers can be engaged for tests of
details (i.e. verification of the data contained in the sustainability report) or
analytical procedures, these providers must specify the scope of the assurance
engagement and the work performed (O’Dwyer and Owen 2005).

Based on explanation above , the following question can be formulated:

Q: what is the effect of voluntary assurance of corporate sustainability information
on information asymmetry

III. Methodology
The population on this study used company that listed on Bursa Efek Indonesia
(BEI) and published their sustainability reports during 2017 – 2021. This study
will used regression model and measured by bid-asks spread.

Variables on this study consist of:

a) Depend variables: information asymmetric
b) Independent variables: sustainability report, sustainability assurance and their
attributes

References
Ballesteros, BeatrizCuadrado, JenniferMartínez-Ferrero and Isabel MaríaGarcía-Sánchez.
2017. Mitigating information asymmetry through sustainability assurance: The role of
accountants and levels of assurance. Elsevier: International Business Review. Vol 26,
issue 6 :1141-1156.
https://doi.org/10.1016/j.ibusrev.2017.04.009
Fuhrmann, Stephan , Christian Ott, Elisabeth Looks & Thomas W. Guenther. 2016. The
contents of assurance statements for sustainability reports and information
asymmetry. Accounting and Business Research.
DOI: 10.1080/00014788.2016.1263550
Sellami, Yosra Mnif and Nada Damak Ben Hlima. 2019. The effect of sustainability
assurance demand on information asymmetry: evidence from French companies. Int.
J. Monetary Economics and Finance, Vol. 12, No. 1, pp.25–38.
https://www.antaranews.com/berita/3303391/ketua-bpk-minta-iai-kembangkan-
sustainability-reporting-yang-terukur
https://infobanknews.com/peran-akuntan-mitigasi-perubahan-iklim-global-dengan-pelaporan-
keberlanjutan/