The effect of Sustainability Accounting Standards Board (SASB) standards adoption on audit report lags: the moderating effect of ESG performance

Purpose This study aims to examine how voluntary disclosure of environmental, social and governance (ESG) information aligned with Sustainability Accounting Standards Board (SASB) standards affects audit report lag (ARL) and whether ESG performance moderates this relationship. Design/methodology/approach This study uses 2,142 firm-year observations from the S&P 500 between 2015 and 2020. To analyze data, the current study uses STATA software to perform panel-corrected standard errors to account for heteroskedasticity and correlation across panels, propensity score matching, generalized method of moments and industry sensitivity analysis. Findings The findings reveal that companies adopting SASB standards have significantly shorter ARLs. This reduction is more pronounced for firms with high ESG performance but less evident for those with low ESG performance. These findings suggest that greater transparency through SASB-aligned reporting expedites the audit process, although poor ESG performance can diminish this benefit. Originality/value With respect to researchers, this study extends audit report lag literature by identifying sustainability reporting standards as a determinant of ARL and highlighting the importance of ESG performance as a potential moderator. With respect to investors and managers, the evidence that SASB-aligned ESG disclosures are associated with faster audit completion is highly relevant. A shorter ARL means that timely disclosure of audited financial statements may reduce information asymmetry and uncertainty in capital markets. With respect to regulators, the results provide empirical support for the ongoing efforts to formalize and mandate SASB standards.