The Effect of Auditing on Corporate Social Responsibility

ABSTRACT Debate on whether firms' corporate social responsibility (CSR) is driven by agency problems or value enhancement is ongoing. This work examines the influence of the implementation of key audit matter (KAM) standards on corporate social activities and finds that after the adoption of KAMs, companies enhance their overall social performance through environment, employee, community and product categories. The enhancement of social activities is mostly due to improvements in advantages rather than reductions in disadvantages. This research also identifies information transparency is one possible explanation for the positive relationship between the adoption of KAMs and CSR performance. The findings of this study support the value maximization perspective.