Comparing Auditors’ and Users’ Materiality Judgments for ESG and Traditional Financial Disclosures: The Roles of Disclosure Form and Valence

SUMMARY As voluntary assurance over corporate ESG disclosures expands and regulators begin to mandate ESG assurance, understanding the factors influencing ESG materiality assessments can help auditors more effectively assure ESG information. ESG disclosures serve different purposes than financial disclosures and include more positive and qualitative information. We use an experiment to compare professional assurance providers’ and users’ materiality assessments for ESG versus traditional financial disclosures. Results indicate that varying decision context (ESG versus financial), information valence (positive versus negative), and form (qualitative versus quantitative) affects the auditor-user materiality gap. Specifically, we document the materiality gap widening for qualitative and positive disclosures and ESG disclosures generally. Although current ESG materiality guidelines focus on topical materiality, this study documents evidence of other important, theory-based disclosure features that influence materiality judgments. Data Availability: Contact the authors. JEL Classifications: M41; M42; G41; M14.