Non-Financial Disclosure Assurance: Critical Insights from the Italian Financial Services Sector

Abstract

Directive 2014/95/EU was released with the aim of improving the transparency, comparability and harmonization of non-financial reporting among European undertakings. However, the Directive is vague regarding both non-financial disclosure contents and the transposition of its provisions into national European laws, making it somewhat ambiguous. This issue has been underlined by scholars, who have found the comparison of non-financial disclosures challenging and have not seen a considerable improvement in the level of transparency. This is also mirrored in the assurance process, which remains underexplored. The present exploratory study analyses non-financial disclosure assurance in the Italian financial services sector. Content analysis of the level and features of assurance of non-financial disclosures published in 2020 was conducted. The results show that the ambiguity of the Directive also has consequences for assurance outcomes, which remain limited and strictly adhere to provisions provided by national practitioner associations.

Does voluntary non-financial reporting matter for the evaluation of audit risk after a crisis period? Perceptions from Italian auditors

“…Surprisingly, some of the most investigated voluntary non-financial reports, such as CSR and sustainability reports, have been receiving less attention from auditors than other types of reports. This might be because voluntary non-financial reporting is rarely audited (Caglio et al , 2020; Dumay et al , 2016; Pagani et al , 2021), and hence outside the scope of the auditors’ responsibilities. Thus, auditors either rely on mandatory non-financial reporting only or have to provide greater effort in checking for the relevance and reliability of voluntary non-financial reporting (KPMG, 2013; Escrig-Olmedo et al , 2019).…”

The juridification of social accounting and the transposition process of the non-financial reporting directive 2014/95/EU

“…One of the reasons for the perceived vagueness of Directive 2014/95 is that the term “non-financial information” leaves too much space for interpretation (Haller et al , 2017; Tarquinio and Posadas, 2020). A second reason is that the transposition process was based on a vague directive, which, on the one hand, was supposed to enhance the consistency and comparability of the NFI disclosed but, on the other hand, allowed EU members to transpose and interpret it in their own way (Pagani et al , 2021; La Torre et al , 2018). The previous literature shows that many variables can influence the transposition process, such as the translation of EU law into national law in the many different languages of the Member States (Dimitrakopoulos, 2001), existing domestic policies and norms belonging to specific social and cultural context or the lack of a management perspective (Thomas, 2018; Mazzotta et al , 2020; Biondi et al , 2020).…”

impact of ESG strategies integration on the operational and reputational risks

“…The (ESG) strategies and practices aim to show additional dimensions of the performance of companies, which are not indicated and disclosed in the published accounting data. This is because the financial data of companies lack the ability to inform management and investors of the value of reputation and quality, the commercial property rights, the internal culture of the workplace and the quality of operational processes in general, in addition to strategies, resources and other assets, which are more important today than ever in the modern global knowledge-based economy (Pagani et al, 2021;Bawazir et al, 2021). Therefore, the results of ESG strategies practices contribute significantly to the presentation of informal data in a holistic way that is concerned with the performance of the environmental, social and institutional governance.…”

“…Results of the study of (Ren et al, 2022;Lubis & Rokhim, 2021;Mohammad & Wasiuzzaman, 2021) showed that there is a link between the environmental performance and its disclosure in the annual reports of companies and their economic performance and positive impact on the company's reputation in the markets where they operate. The results of the study of (Tasnia et al, 2020;Bătae et al, 2021) showed that there is a relation between the strategic environmental practices carried out by companies and reducing the operational risks and improving their management (Khorin & Krikunov, 2021;Pagani et al, 2021). Meanwhile, the study of (Shodiq, 2021;Al Hawaj & Buallay, 2022) showed that companies which have strategies oriented towards the environmental practices affect positively their economic and social performance and support their competitive advantage (Bătae et al, 2021;Lu et al, 2022).…”

“…Some studies have shown that there is a link between this concept and the agency theory and the cost management (Ferrell et al, 2016;Vitolla et al, 2020;Javed et al, 2020). Meanwhile, studies have proved that there is a positive relation between the social responsibility and its activities and the financial performance (Sarannya Devie et al, 2019;Buallay et al, 2020;Bătae et al, 2021;Pagani et al, 2021). The studies also showed a positive impact of the social responsibility in reducing the reputational risks and improving the image of the companies practicing it (Ashwin Kumar et al, 2016 ;Timofeeva, 2018;Zhang et al, 2020;Del Giudice & Rigamonti, 2020;Lööf et al, 2022 ;Lee & Suh, 2022).…”