Assurance statement practices of Corporate Social Responsibility reporting
Evidence from Europe

Y.W. Tang
289712

Erasmus University Rotterdam
Erasmus School of Economics
Msc. Accounting, Auditing & Control
Supervisor: Drs. J. Maat

Table of contents

List of tables ........
List of figures ......
Chapter 1.	Introduction
1.1	Introduction
1.2	Research question
1.3	Contribution
1.4	Structure of the thesis
Chapter 2.	Overview of Corporate Social Responsibility Reporting and assurance
2.1	Introduction
2.2	CSR reporting
2.2.1	Definition and history
2.2.2	Trends
2.3	Assurance
2.3.1	Definition and key elements of an assurance engagement
2.3.2	Levels of assurance
2.4	Assurance of CSR reports
2.4.1	Definition
2.4.2	Parties that can provide assurance
2.4.3	Trends
2.4.4	Standards in assurance of CSR reports
2.4.4.1	FEE: Providing Assurance on Sustainability reports
2.4.4.2	GRI: Sustainability Reporting Guidelines
2.4.4.3	AccountAbility: AA1000AS
2.4.4.4	IFAC: ISAE 3000
2.4.4.5	Overview of the various standards
2.5	Summary
Chapter 3.	Literature review of CSR assurance
3.1	Introduction
3.2	Previous literature
3.3	Summary
Chapter 4.	Research method and sample
4.1	Introduction
4.2	Evaluative framework
4.2.1	Section 1: Descriptive information
4.2.2	Section 2: Evaluative information
4.3	Sample of the study
4.4	Summary
Chapter 5.	Results of assurance statements content analysis
5.1	Introduction
5.2 	Information of the assurance provider
5.2.1	Type of assurance provider
5.2.2	Competencies of the assurance provider
5.3	Information of the assurance statement
5.3.1	Assurance statement title and date
5.3.2	Addressee
5.4	Independence of the assurance provider
5.5	Work undertaken during assignment
5.5.1	Objectives
5.5.2	Criteria
5.5.3	Scope
5.5.4	Assurance standards/guidelines
5.5.5	Level of assurance
5.5.6	Nature of work performed
5.5.7	Stakeholder engagement
5.6	Results of the assurance engagement
5.7	Summary
Chapter 6.	Choice of assurance provider
Chapter 7.	Discussion and conclusion
References 
Appendix 1. Overview of reporting organizations and assurance statements included in the sample (2001-2006)
Appendix 2. Evaluative framework

List of tables

Table 2.1: Number of CSR reports with assurance statement by country
Table 2.2: Recommended contents of assurance statements – four pieces of guidance
Table 3.1: Overview of empirical studies in the field of assurance on CSR
Table 5.1: Types of assurance providers of the assured CSR reports
Table 5.2: Competencies of assurance providers
Table 5.3: Terms used in the title of assurance statements by assurance providers
Table 5.4: Terms used in the title of assurance statements
Table 5.5: Addressees of the assurance statements
Table 5.6: Reference to independence
Table 5.7: Ways to express independence by year and by assurance provider
Table 5.8: Disclosures of the work undertaken (which determines the nature of the assurance           
                  exercise)
Table 5.9: Criteria used
Table 5.10: Types of standards/guidelines used
Table 5.11: Level of assurance
Table 5.12: Nature of work performed over the years 2001-2006
Table 5.13: Engagement with the stakeholders
Table 5.14: Term(s) used for the expression of the assurance opinion
Table 6.1: Descriptive statistics
Table 6.2: Logistic regression rsults

List of figures

Figure 2.1: CSR reporting by country (N100), 2002 and 2005
Figure 2.2: Three-party relationship
Figure 2.3: Assurance engagements framework
Figure 3.1: Dimensions of assurance

Chapter 1.	Introduction

1.1	Introduction

Since the beginning of the 1990s, we can observe an increase in the number of organizations that report on their non-financial performance in addition to the traditional annual financial report (KPMG, 2005; Kolk, 2003). Organizations reporting on this issue refer to the terms corporate social responsibility report, sustainability report, environmental report, social report etcetera. For the purpose of this study, all these reports are referred to as corporate social responsibility (CSR) reports. CSR reporting give organizations a means to demonstrate that they not only care about the financial performance, but that they also care about the people and environment they operate in. CSR implies that an organization is responsible for its wider impact on society and it goes beyond the responsibilities owed to shareholders. No longer are only the shareholders crucial but other stakeholders who are affected by the activities of the organization are also important. It could be argued that the CSR report is a tool used to serve society’s needs. Thus, CSR reporting was founded with the aim of achieving accountability through making organizational life more transparent (Gray et al., 1996).
Accompanying the growth in corporate social responsibility reporting, there is an increase in the number of organizations that tend to ask for external assurance on their CSR report, despite the fact that assurance for CSR reports is not mandatory in contrast with financial statements. This reflects stakeholders’ increasingly demand that CSR reports truly and fairly represents the organization’s effort and achievements and what the organization will be able to do in the future (Owen and O’Dwyer, 2005). The aim of a third-party assurance is to increase the credibility of CSR reports. As Adams, Technical Director of the Association of Chartered Certified Accountants (ACCA) notes: 
“All organisations want to show themselves in the best possible light. ACCA believes that independent external assurance is a vital part of the credibility and trust building process. The role of independent assurance is to ensure that the reporter presents an account that is fair, complete, unbiased and relevant.” (see Owen and O’Dwyer, 2004, p.2). 
Although organizations are responding to the information needs of society in the form of CSR reporting, is doesn’t mean that accountability is achieved. Organizations have control over the ultimate decision on the kind of information to include in the CSR report and on the ways of disclosing this information, and hence, the information in the report can be biased. In this vein, assurance can be seen as a mechanism to enforce accountability by assessing and reporting on the completeness and credibility (which are key issues in achieving accountability; Adams and Evans, 2004) of the CSR report and on the extent to which the organization responds to its stakeholders’ concerns and interests. Thus, from a theoretical view, assurance has the possibility to enhance accountability and transparency to stakeholders. However, various empirical studies have raised questions about the quality of assurance practices in the context of CSR reporting and have fundamental doubts concerning any value thereby added to the reports from the stakeholders’ perspective (Ball et al., 2000; Owen and O’Dwyer, 2005; Deegan et al., 2006). Ball et al. (2000) for example, have serious questions whether assurance can enhance accountability to stakeholders. The current study will investigate the contents of assurance statements of CSR reports of organizations in Europe from 2001-2006. The next section outlines the purpose of the study and addresses the research question.

1.2	Research question

Despite the significant increase in the quantity of assurance practices in the field of CSR reporting, there are still concerns about the ability of assurance statements to increase credibility of reported information in the eyes of stakeholders and, hence, the ability of  these statements to enhance organizational accountability and transparency. Concerns were primarily related to the independence of the assurance provider; the absence of stakeholder engagement within the assurance process; poor treatment of completeness and materiality from stakeholders’ point of view; variability in the level of assurance provided; and disclosures made in the assurance statement (see Ball et al., 2000; Kamp-Roelands, 2002; Owen and O’Dwyer, 2005; Deegan et al., 2006). Because it has been a few years ago that the above mentioned issues were in light, it is now a good time to evaluate recent assurance statement practices, whether they still suffer from the concerns that were raised in previous studies. Therefore, the research question of the study is: “To what extent do current assurance practices of corporate social responsibility reports offer in terms of enhancing transparency and accountability?” It’s about the ability of assurance practices to enhance transparency and accountability for organizational stakeholders. To answer this question, assurance statements that are attached to CSR reports will be critical analysed. Previous studies have also noted that there is a high level of variability in the contents of assurance statements. These variations include:  title of the assurance statement, addressees, standards used to govern the assurance process etcetera (see Kamp-Roelands, 2002). Because the contents are ambiguous, the potential value that assurance may bring to CSR reporting process is undermined. While there is no detailed guidance for assurance statements, voluntary guidelines (where general content requirements are captured) have been issued in recent years. By also investigating this issue, we can see whether there has been harmonisation within assurance statements, which facilitates comparison between reports by readers. As noted, standards/guidelines that seek to assist assurance providers in executing their work were developed and issued. The most influential ones (from AccountAbility, IAASB, FEE and GRI) were released in the years 2002 and 2003. These standards/guidelines encompass assurance recommendations with the focus on among others accountability. The critical analysis of assurance statements in the current study is based on an evaluative framework informed by previous studies as well as the most influential standards/guidelines AA1000AS (from AccountAbility), FEE (from FEE), GRI (from GRI) and ISAE3000 (from IAASB).   
In order to answer the main question, several sub-questions will be formulated. The sub-questions are formulated in the way to see whether current assurance practice differ with their predecessors in addressing key accountability focused elements as well as elements that are the basis of AccountAbility, IAASB (only for accountants), FEE and GRI recommendations. This leads to the following two sub-questions:
	“What disclosure is made concerning the assurance provider and the assurance engagement (e.g. title of statement, addressee and competencies of assurance provider)?”
	“To what extent do assurance statements provide information regarding: 
•	the independence of the assurance provider from the reporting organization
•	the work undertaken during the assignment (scope of assurance assignment, criteria used, standards employed, the extent to which materiality, completeness and responsiveness (the three principles of AA1000AS) were addressed) 
•	the results (form of opinion)”
In the first sub-question some descriptive information that is provided in the assurance statement is taken into consideration. From this sub-question, variations in statements disclosure can be derived.  The second sub-question focuses more on the contents of assurance statements. Detailed information concerning crucial accountability and transparency focused elements (derived from the standards/guidelines) are embedded in this sub-question. For example, the level of accountability and transparency is reflected by the extent of addressing the three principles of AA1000AS and by the issues addressed in the opinion. In addition, variations in assurance statements disclosure are also addressed in this sub-question. 
In carrying out the analysis, the practice of earlier researchers (Kamp-Roelands, 2002, Owen and O’Dwyer, 2005) will be followed in looking for variations in approach between different assurance providers. While different parties (e.g. accountancy firms, consultancy firms, certification bodies, non-profit organizations) can act as assurance provider for CSR reports (unlike financial statements, which have to be audited by an accountancy firm), in the current study assurance providers will be categorized in accountancy firms (public accountants) and non-accountancy firms. It is expected that there are differences in approaches, since auditors are bounded by strict quality standards, legislation and regulations, which have impact on the approach undertaken. Accountancy firms probably will adopt a more cautious approach than non-accountancy firms, which will be reflected for example in the reference of independency, documentation of respective responsibilities of report preparers and assurors, wording of opinion and level of assurance. The differences in approaches lead to different addressing areas by the two categories of assurance providers, which will have effect on the extent to which assurance statements enhance organisational transparency and accountability.

1.3	Contribution

External assurance of CSR reports shows a slow but steady growth. The fifth international tri-annual survey of KPMG (2005) shows that 30% of the CSR reports issued by the top 250 companies of the Fortune 500 (Global 250, G250) included a third-party assurance statement (29% in 2002). The number of reports with an assurance statement increased to 33% (from 27% in 2002) for the top 100 companies of 16 countries (N100). The above mentioned trend reflects the increased user’s demand for reliable and credible information. Though assurance of CSR reports is becoming more important and more in quantity, a limited number of empirical researches about this subject have been conducted. This can be explained by the fact that this area of research is relatively new compared with financial statement audit research. The current study will extend the existing empirical studies and aims to contribute to the improvement of this growing and important practice.  
Of the limited number of empirical studies, a great proportion has examined assurance statements that relate to the reporting years before 2002. Especially the years 2003 and 2004 are important since influential reporting guidelines and assurance standards that seek to assist assurance providers in executing their work in the field of CSR were released in this period. These guidelines and standards have gained considerable attention by both reporting organizations and assurance providers. It is therefore essential to assess the influence that these standards may exert on the assurance practice.  Hence, the time period of the study is related to the introduction of several influential assurance standards/guidelines. The period under study is 2001 – 2006. As such, the period wherein the guidelines and standards were released, as well as the period before and after is taken into consideration. The year 2006 has been chosen as the end of study period taking into consideration that after this year, new assurance standards/guidelines are released and/or updates are created. By setting the study period until 2006, we could see whether the first important standards and guidelines (so-called emerging standards) have influenced CSR assurance practice. By selecting an interval time of six years as the research sample period, a trend in the level of accountability and transparency can be derived, which is not the case for earlier studies since these studies only analyzed one or two years of data. 
Previous studies that have examined assurance statements on this topic were primarily focused on those that were issued in the United Kingdom, United Kingdom and Europe together, and Australia (e.g. Deegan et al, 2005, Deegan et al, 2006, Owen and O’Dwyer, 2005). Some of the studies were also primarily focused on the assurance statements that were attached to environmental reports (e.g. Ball et al, 2000, Kamp-Roelands, 2002). The current study will not only analyze assurance statements attached with environmental reports, but also those that were attached with any type of the CSR reports issued (e.g. social and sustainability reports) in Europe. It is important to investigate Europe’s assurance practice, because Europe has the highest productivity in non-financial reporting of any global region . The number of CSR reports which include an assurance statement is still increasing (KPMG, 2005). Almost fifty percent of the reports produced in Europe in 2003 had third-party assurance .  
The purpose of this study is to provide insight into the assurance practices of CSR reports with the opportunity to determine on which area the focus of improvement (still) should be. This is in the interests of standard setters as well as of assurance providers. Based on the results of the study, standard setters and assurance providers can realize how they may improve assurance statements to meet the needs of the stakeholders. Additionally, it might be in the interests of reporting organizations for the selection of a particular type of assurance provider.   

1.4	Structure of the thesis

The thesis is organized as follows. The thesis starts with the chapter ‘introduction’. As is evident, this chapter introduces the research and describes the research problem, the purpose and contribution of the study and how the thesis is organized. Chapter two presents a general overview of CSR reporting and assurance. After a short introduction, the background of CSR reporting will be discussed. Furthermore, attention is given to assurance of CSR reporting. Since the evaluative framework of this study (which will be addressed in chapter four) is partly informed by the most influential standards and guidelines, this chapter also gives an overview of the guidelines and standards from GRI, FEE, AccountAbility and IAASB. Prior literature is the main focus of chapter three. It gives an overview of previous researches that have been conducted in the area of assurance in the field of CSR. In particular, attention will be given to concerns that were identified in prior studies. Chapter four deals with the research method. In this chapter, the research sample of assurance statements, approach for the collection of data and data analysis will be described in detail. Subsequently, the results of the data analysis will be presented in chapter five. Chapter six deals with the choice of assurance provider. Finally the last chapter, the conclusion, includes a summary of the research and an evaluation of the findings. In addition, it outlines recommendations for further research in the field of assurance of CSR reporting.  

Chapter 2.	Overview of Corporate Social Responsibility Reporting and assurance

2.1	Introduction

Corporate Social Responsibility (CSR) is a concept that describes the relationship between the business and the larger society. Because beliefs and attitudes regarding the nature of this association fluctuate with the relevant issues of the day, CSR does not have a standard definition (Snider et al., 2003). While no exact definition being present, CSR is generally understood as a concept whereby organizations integrate social and environmental concerns in their business operations and in their interaction with their stakeholders (on a voluntary basis) . In order to address assurance practices in context, this chapter deals with the background of reporting on CSR and the corresponding assurance. The first part of the chapter focuses on CSR reporting. The definition of CSR reporting and the global trends on CSR reporting practice will be discussed. The second part outlines the definition of assurance, key elements of an assurance engagement and levels of assurance. Subsequently in part three, attention turns in particular to the assurance of CSR reports, where the guidelines and standards for assurance practices will be accentuated. 

2.2	CSR reporting

As we now have a picture of what CSR is, this section gives an overview of what CSR reporting means and the global trends in CSR reporting.

2.2.1	Definition and history

Organizations increasingly recognize their key role in society and that sustainable success requires sound policies with respect to their relationship with society (KPMG, 2006). Next to this, one can note that worldwide, there has been a growing demand for transparency of environmental and social performance of organizations, in addition to its financial performance. Facing these matters, organizations use CSR reporting, defined by Gray et al. (1996) as: “The process of communicating the social and environmental effects of organizations’ economic actions to particular interest groups within society and to society at large. As such, it involves extending the accountability of organizations, beyond the traditional role of providing a financial account to the owners of capital, in particular shareholders.” as a tool for extending a broad dialogue with the stakeholders. According to Gray et al. (1996), CSR reporting was founded with the aim of achieving accountability through making organizational life more transparent. Accountability is the principle of providing to society the information about which has a right to know (Henriques and Richardson, 2004). Gray et al. (1996) further define accountability as “the duty to provide an account (by no means necessarily a financial account) or reckoning of those actions for which one is held responsible”. From this definition, we can note that accountability involves two responsibilities or duties: the responsibility to undertake certain actions (or withhold taking actions) and the responsibility to provide an account of those actions to whom a duty of accountability is owed (Gray et. al, 1996).  
Even though the development of CSR goes back many years, CSR reporting got more practice in the late 1980s in the form of environmental reports (often as a section in the annual report). These reports were primarily published by organizations from the chemistry industry which had serious image problems. From the mid/late 1990s, more and more organizations include next to the environmental performance also aspects of the social impact of organizational operations (social issues) and non-financial key performance indicators in their CSR report. Nowadays, different terminology is used in relation to CSR and for reporting on CSR performance. Common terms used by organizations and in the literature are sustainability, corporate responsibility and triple bottom line (see KPMG, 2005). Despite the fact that there are some perceived differences in the use of these terms, they are often used interchangeably.  Topics of environmental, social and economic performances are broadly comprised by these terms, only the degree of details differs amongst them. As noted, these kinds of activities and relating reports are described as CSR in the current study. 
CSR reports are generally prepared based on reporting criteria launched by an external company or the organization’s internal guidelines. The most dominant reporting regulations at international level are those of the Global Reporting Initiative (GRI) . The GRI is a multi-stakeholder process and independent institution whose mission is to develop globally applicable guidelines for reporting on economic, environmental and social performance. The guidelines are for voluntary use by organizations. The GRI framework (2002) indicates that reporting organizations should design the content of the CSR report in conjunction with stakeholders consultation. From this point of view, one may expect that assurance providers will consider interactions with stakeholders.

2.2.2	Trends

Since the beginning of the 1990s, many surveys have been carried out of CSR reporting (for example SustainAbility and UNEP, 1997; KPMG 2002, 2005). In 1993, KPMG published the first edition of ‘International survey of corporate social responsibility reporting’. Since 1993, KPMG has repeated this international survey, which analyses the trends in corporate responsibility reporting of de biggest international organizations including the top 250 organizations of the Fortune 500 (Global 250, G250) and top 100 organizations in selected countries (National 100, N100), every three years. For the purpose of this study (with reference to the sample period), the survey of 2005 is taken into consideration for identifying trends in CSR reporting regarding countries of reporting.  
According to KPMG’s survey , there’s an overall increase in the number of organizations (both at global and national levels) that has produced a CSR report, whether published in the form of a separate report or as part of the financial report. Giving attention to CSR reporting by country, the survey shows that Japan and the UK belongs to the top two countries of producing CSR reports, with respectively 80 percent and 71 percent of their top organizations issuing CSR reports. European countries are also very active in producing CSR reports. In France for example, the number of organizations that published a CSR report in 2005 has almost doubled comparing with 2002. Figure 2.1 presents the data on the percentage of the N100 companies in 16 countries with an individual CSR report in 2002 and 2005.

(Source: KPMG, 2005, pp. 10)
Figure 2.1: CSR reporting by country (N100), 2002 and 2005

2.3	Assurance

As is evident, CSR reports are becoming an increasingly important source of information for internal and external stakeholders of organizations. Accompanying this development, there is also an increase in the need for assurance that the reported information is reliable. Organizations are responding to this by engaging external parties to review the reports (KPMG, 2006). This section gives an overview of assurance. 

2.3.1	Definition and key elements of an assurance engagement

While assurance is a very broad term (SustainAbility and UNEP, 2004), the dictionary defines this term as ‘statement made to give confidence’ (Oxford advanced learner’s dictionary of current English, 1974, pp. 47). According to Arens et al. (2008) an assurance service is an independent professional service that improves the quality of information for decision makers (pp. 8). Further, in the International Framework for Assurance Engagements (released in 2004) by the International Auditing and Assurance Standards Board (IAASB) , an ‘assurance engagement’ is defined as “an engagement in which a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria” (IAASB, 2004, pp. 283). Thus, an assurance engagement can help individuals who are responsible for making business decisions, by increasing confidence in the reliability and relevance of the information (which is used as the basis for their decisions). According to the IAASB, an assurance engagement would consist of the following elements (IAASB, 2004, pp. 287-300):
i)	a three-party relationship: 
Assurance engagements involve three separate parties: a practitioner (assurance provider), a responsible party who is responsible for the subject matter, and intended users (e.g. stakeholders). In this three-party relationship, one can note that there is an accountability relationship between the responsible party and intended users. The responsible party is accountable to and/or responsible to the intended users for the subject matter either as a result of an agreement between the two parties or required by legislation, or when a party voluntarily chooses to report to another party on a subject matter (e.g. CSR reporting) (Gill et. al., 2001, pp. 12). Figure 2.2 illustrates the three-party relationship. The International Framework for Assurance Engagements requires the assurance provider to be independent from the responsible party. 

Figure 2.2: Three-party relationship

ii)	an appropriate subject matter:
The subject matter can take several forms, such as financial performance (e.g. historical financial position), non-financial performance (e.g. social, environmental performance) and systems and procedures (e.g. internal control) (IAASB, 2004).
iii)	a suitable criteria:
Criteria are the benchmarks used to evaluate or measure the subject matter. IFAC states that suitable criteria are required for reasonably consistent evaluation or
measurement of a subject matter within the context of professional judgment.
iv)	sufficient appropriate evidence:
In order to judge whether the subject matter conforms with identified criteria, the practitioner needs to obtain sufficient appropriate evidence. 
v)	a written assurance report in the form appropriate to a reasonable assurance engagement or a limited assurance engagement:
Upon the completion of the assurance engagement, the practitioner provides a written report containing a conclusion that conveys the assurance obtained about the subject matter information.       
According to the IAASB framework for assurance engagements (see figure 2.3), there is a broad range of assurance engagements. The form of assurance engagements is dependent on the type of subject matter information that is subject to assurance. For example, where the subject matter information is historical financial statements, the assurance engagement can take the form of an audit or review. The framework also incorporates a standard that is specially designed to apply on assurance engagements other than audits or reviews of historical financial information, which is applicable in the area of assurance of CSR reporting, namely ISAE 3000. Further information about the standard ISAE 3000 will be presented later on in this chapter.  

(Source: FEE, 2006, pp. 11)
Figure 2.3: Assurance engagements framework

2.3.2	Levels of assurance

At the completion of the assurance process, the assurance provider has obtained a level of certainty. The purpose of disclosing the assurance level is to enhance the confidence of intended users about the subject matter information (IFAC/IAASB, 2004).The IAASB Framework identifies two types of assurance engagements: reasonable assurance  engagement and limited assurance engagement. The difference between these two assurance engagements is reflected in the amount of evidence needed and therefore in the work performed (Ernst&Young, 2008). In a reasonable assurance engagement, the risk of the assurance engagement  is reduced to an acceptably low level in the circumstances of the engagement (IAASB, 2004, pp. 302). Reasonable assurance engagements provide enough evidence to formulate the conclusion in a positive form . An example of reasonable assurance engagement is audits of historical financial information. On the other hand, the objective of a limited assurance engagement is to reduce the assurance engagement risk to a level that is acceptable in the circumstances of the engagement but where that risk is greater than for a reasonable assurance engagement (IAASB, 2004, pp. 303). This means that the timing and extent of the evidence gathered are more limited than for a reasonable assurance level. The limited procedures therefore only allow for falsification of the information available, which leads to a conclusion formulated in a negative form (Ernst&Young, 2008, pp. 11) . Reviews of information can be considered as a type of limited assurance engagement. With respect to a CSR report, some information may be suitable for a reasonable assurance engagement, even where that level of assurance is not achievable overall (FEE, 2006). This can result in ‘mixed reports’ conveying reasonable and limited assurance. In most of the cases, it is difficult to give a reasonable level of assurance. This is caused by the fact that no generally accepted standards for CSR reporting are present and the difficulty to measure various CSR topics.  

2.4	Assurance of CSR reports

After a discussion of assurance in general, this section deals with assurance of the CSR reports. Attention will be given to the definition of this type of assurance, the assurance providers and the most relevant assurance standards which are relevant for this type of assurance.
	
2.4.1	Definition

While there is no agreed specific definition for assurance practices as it relates to CSR reports, a general description can be formulated based on the defined elements of assurance engagements by the IAASB. In order to formulate this specific definition, the elements are firstly applied to CSR. In the three-party relationship, an accountability relationship exists where the CSR reporting organization (the responsible party) provides information regarding economic, environmental and social performance data (also the underlying systems, processes and competencies that underpin its performance) (the subject matter) to the stakeholders  (the intended users).  The assurance provider (the practitioner), who needs to be independent of the responsible party is responsible for providing an opinion on the reported information. He/she examines the veracity and completeness of the CSR report. The expression of an opinion is aimed to help improve the reliability and relevance of the disclosed information for the intended users (Arens et. al, 2008).  The evaluation of the subject matter is against specified standards and criteria (e.g. the globally used sustainability reporting guidelines of Global Reporting Initiative (GRI)). Findings of the assurance provider are communicated to the intended users by an assurance statement. In the current study, assurance as it relates to CSR is defined as: “an engagement in which an independent assurance provider is appointed by the responsible reporting organization to conduct an assessment and expresses a conclusion about the outcome of the evaluation of a non-financial subject matter against criteria, with the conclusion made available to the stakeholders as usually in the form of an assurance statement .”
Besides the term assurance, a variety of terminology is used to describe the work being undertaken by an external third party, for the purposes of providing an opinion on the CSR activities and performance reports. For example, the terms ‘audit’, ‘review’ and ‘verification’ have all been used to describe fairly similar activities. For the purposes of this study, the term assurance will be adopted for all the work undertaken as described above. 

2.4.2	Parties that can provide assurance

A requirement by law is that financial statements have to be audited by an accountant. However, this is not required for corporate social responsibility reports. At this moment, there is no consensus as to who should provide these assurance services. As such, many different types of organizations and even individuals can act as the assurance provider. As CorporateRegister.com (2008) indicates, the diverse assurance providers that are involved in CSR assurance engagements can be characterised into ten provider types which include accountancy firms, certification bodies, specialist consultancies, government bodies and non-profit organizations. Whatever the type of organization is performing the CSR assurance work, it is important that the assurance provider satisfy generally accepted requirements regarding their independence, integrity and competence. Because a CSR report covers a broad range of complex issues, it is important that the assurance provider has specific knowledge about the topics on which assurance is provided next to knowledge about how to perform an assurance engagement. An option for the assurance provider is to hire or include an expert in the assurance engagement team or perform the assurance engagement together with these experts. In this case, the assurance engagement involves multidisciplinary teams.
The type of assurance provider will determine which approach is used in the assurance process (ENDS Directory, 2003). In a discussion paper , the FEE  identifies three different approaches to assurance on CSR report, namely accountancy, consultancy and social audit. (The last approach is not considered further because it is not relevant for the current study.) The accountancy approach has been applied by accountancy firms. Assurance providers use a structured approach (inspired mainly by their financial statements audit experiences) involving the analysis of risk to gather evidence (FEE, 2002). The consultancy approach evolved out of the use of external consultants by reporting organizations to help improve the systems and performance of the environmental and social issues. Unlike accountancies, consultancies often don’t make use of multidisciplinary teams when performing the engagements. Instead, they rely on expertise in one particular discipline. Therefore, it is difficult for the consultancy approach to be extended to the whole CSR report (FEE, 2002, pp. 20).
While various parties can act as an assurance provider, the major accountancy firms (Big Four) still dominate the assurance market in CSR reporting both at global and national level (KPMG, 2005, pp. 33). However, KPMG’s 2005 survey shows that the market share captured by other providers has increased since 2002. 

2.4.3	Trends

The rise in CSR reporting by organizations goes hand in hand with the growth of assurance practices in this area. The first assurance statements were published as early as 1992 (CorporateRegister.com, 2008). Different bodies have studied the trend of assurance practice and have described the trends that are emerging (see for example KPMG, 1999, 2002, 2005; SustainAbility and UNEP, 2002, 2004; and CorporateRegister.com, 2004). KPMG’s survey results (2005) indicate an increase in the number and proportion of reports with external assurance at global level as well as at national level. Comparing with 2002, the percentage of CSR reports with external assurance has slightly increased with 1 percent to 30 percent for the G250 in 2005. Considering the top 100 organizations from 16 countries, 33 percent have externally assured CSR reports in 2005 compared with 27 percent in 2002. Similarly, the report of CorporateRegister.com (2004)  shows that almost 40 percent of all CSR reports have included external assurance in 2003 compared with only 17 percent ten years earlier. Next to this, the report also indicates that Europe and Australia are leading the field, with nearly half of the reports produced in 2003 had external assurance (CorporateRegister.com, 2004, pp. 8, 45). The results of  KPMG’s survey (2005) for the N100 show that there is an overall increase in assurance on reports. Assurance practices have increased in various European countries, with notably increases in France, Spain and Italy. Of all the countries included in the survey, the United Kingdom has the highest number of CSR reports with assurance statement (38 out of 71 CSR reports were assured). The UK is the only country other than Italy where more than 50 percent of the CSR reports contain an assurance statement (KPMG, 2005, pp. 31). Table 2.1 gives an overview of the number of reports with assurance statements by country. 

(Source: KPMG, 2005, pp. 31)
Table 2.1: Number of CSR reports with assurance statement by country

From table 2.1, one can see that Europe has a high proportion of CSR reports with assurance statements. Compared with other regions, Europe is leading the field in producing assurance statements (CorporateRegister.com, 2004). This gives the motivation for examining Europe’s assurance practice in this study. 

2.4.4	Standards in assurance of CSR reports

ACCA and AccountAbility (2004, pp. 37) state that “a range of principles and standards can be used to govern the assurance process as well as provide benchmarks and guiding for carrying out the assurance engagement”. Various standards and guidelines that seek to provide guidance on the assurance practice of CSR have been released at global as well as at national level. Some of these standards and guidelines are drawn on a body of standards developed for assurance on other subject matters, in particular financial statements and environmental reports (FEE, 2004, pp. 15). At this moment, there are no standards for the assurance of CSR reports which are accepted and used across the spectrum of assurance providers (CorporateRegister.com, 2008). However, there are four individual initiatives (sometimes used in combination) that are accepted and used by some providers. Owen and O’Dwyer (2005) call these initiatives ‘the recent high profile initiatives’. For the purposes of this study, the study draws on elements of these four initiatives. These initiatives are individually issued by the ‘Institute of Social and Ethical AccountAbility’ (AccountAbility), the ‘Fédération des Experts Comptables Européens’ (the European Federation of Accountants, FEE), the ‘Global Reporting Initiative’ (GRI) and the ‘International Auditing and Accounting Standards Board (IAASB) of the International Federation of Accountants’ (IFAC). Because the standards and guidelines issued by these parties are the most influential in the field of assurance of CSR reports at global level (Owen and O’Dwyer, 2005, KPMG, 2005), they are considered in this study. The standards and guidelines of the FEE and GRI were released in the year 2002. Subsequently, the AA1000AS of AccountAbility was launched one year later in 2003. Of the standards and guidelines considered, the ISAE3000 of IFAC is the most recently, which was released in 2004. All these standards and guidelines (only aspects related to guidance of CSR assurance practice) are the focus of the next sub-sections. 

2.4.4.1	FEE: Providing Assurance on Sustainability reports

In 1999, FEE  issued a discussion paper on providing assurance on environmental reports. It was the first time trying to apply the traditional procedures of financial auditing to the environmental reports. Three years later, another discussion paper titled ‘Providing Assurance on Sustainability Reports’  is released by FEE. In contrast with the earlier paper, this paper not only deals with assurance of environmental reports, but it also takes assurance of sustainability reports into consideration. In the 2002 discussion paper, FEE (2002) identifies three different approaches for providing assurance on CSR reports, which was shortly discussed in previous sections. FEE (2002) also discusses various issues related to the assurance process including the acceptability of the engagement, the planning of the assurance process and assurance work strategy. In addition, FEE (2002) draws attention to key aspects related to assurance engagements such as criteria for CSR reporting and assurance, scope of assurance engagement, risk management, stakeholder dialogue  and assurance reporting. According to FEE (2002), stakeholder dialogue is important for the assurance process. As such, FEE (2002) suggests that the assurance provider has to obtain an understanding of the stakeholder relationships of the reporting organization and the outcomes of the stakeholders dialogue. This will facilitate the assurance provider to gain further insight in order to assess the assurance risk (FEE, 2002, pp. 39). The assurance provider may consider the outcomes of the stakeholder dialogue when determining the completeness and balance of the CSR report. 
FEE (2002) states that assurance may be communicated to the intended users of the CSR report in the way of a narrative assurance statement. In this assurance statement, the following minimum set of information should be disclosed (FEE, 2002, pp. 55-56) : title; an addressee; a description of the engagement and identification of the subject matter; a statement to identify the responsible party and to describe assurance provider’s responsibilities; when the statement is for a restricted purpose, identification of the parties to whom the report is restricted and for what purpose it was prepared; identification of the standards under which the engagement was conducted; identification of the criteria; the assurance provider’s conclusion, including any reservations or denial of a conclusion; the assurance statement date; the name of the firm or the assurance provider and the place of issue of the assurance statement. 

2.4.4.2	GRI: Sustainability Reporting Guidelines 

The Sustainability Reporting Guidelines  by GRI (2002) was released in 2002 . Although these GRI guidelines are a framework for reporting on an organization’s non-financial performance, Annex 4 of the guidelines focuses on credibility and assurance. This guidance section encompasses recommendations of the GRI on various aspects such as assurance process considerations, selection of independent assurance providers, responsibilities of organization’s directors regarding independent assurance and assurance statement. As clear from these recommendations, the reporting organization is encouraged to clarify different aspects like subject matter, assurance criteria and evidence, controls and usefulness of reported information with the assurance provider to ensure that a maximum benefit is gained from the assurance engagement (GRI, 2002, pp. 77). Next to this, when selecting an assurance provider, the reporting organization should consider a set of issues and contributes, which include: assurance provider’s degree of independence, assurance provider’s ability to balance consideration of the interest of different stakeholders and whether the assurance provider has been involved in the design, development and or implementation of the reporting organization’s CSR monitoring and reporting systems or assisted in compiling the CSR report (GRI, 2002, pp. 77-78). Furthermore, the effectiveness of the independent assurance engagement is strengthened when reporting organization’s directors recognise their responsibilities and that of the assurance provider. GRI states that the assurance statement should be addressed to the reporting organization’s board of directors or to the stakeholders. Additionally, GRI provides guidance on the contents of the assurance statement. At a minimum, the assurance statement would include (GRI, 2002, pp. 78-79): respective responsibilities of reporting organization and assurance provider; the independence of the assurance provider; the scope and objective of the assurance engagement; criteria used, standards used in carrying out the assurance engagement; a brief description of how the assurance provider obtained qualitative and quantitative evidence to provide the basis for the conclusions or opinion (including  the extent to which different categories of stakeholders participated in the planning and execution of the assurance process and indicate any constraints to this process); assurance provider’s conclusion or opinion regarding the accuracy, completeness, reliability and balance of the CSR report; and the location of the assurance provider and date of assurance statement. 

2.4.4.3	AccountAbility: AA1000AS

AccountAbility  issued an exposure draft titled ‘AccountAbility 1000 (AA1000) Framework:  Standards, guidelines and professional qualification’ in November 1999. This framework focuses on securing the quality of social and ethical accounting, auditing and reporting and it includes the first version of the AccountAbility Principles and guidance on CSR assurance and stakeholder engagement. After an extensive worldwide consultation process and drawing on the practical experience and perspectives of the business, public and civil society sectors, AccountAbility published the AA1000 Assurance Standard (AA1000AS) in March 2003 . This standard “is a generally applicable standard for assessing, attesting to, and strengthening the credibility and quality of organizations’ CSR reporting, and their underlying processes and systems that underpin the data and performance. It provides guidance on key elements of the assurance process” (AccountAbility, 2003, pp. 5). While the AA1000AS is specifically designed to be consistent with, and to enhance, the GRI Sustainability Reporting Guidelines, as well as other related standards (Accountability, 2003, pp. 8), it is substantially different from these guidelines and standards. The AA1000AS stresses the important relation between the organization and its stakeholders as part of responsibility and accountability. Hence, assurance providers are required to judge the CSR report against the information needs of the stakeholders (FEE, 2006, pp. 54). 
For assurance processes undertaken using the AA1000AS, the three assurance principles materiality, completeness and responsiveness must be applied (AccountAbility, 2003, pp. 13). These principles are common across all aspects of the AA1000 Series, but are explained in this section as they relate to the assurance practice. The materiality principle  requires the assurance provider to state whether “the reporting organization has included in the CSR report the information about its sustainability performance required by its stakeholders for them to be able to make informed judgments, decisions and actions” (AccountAbility, 2003, pp. 14). Based on gathered evidence, the assurance provider is supposed to form an opinion as to materiality of possible omissions or misrepresentations in the CSR report (AccountAbility, 2003, pp. 17). The other principle, the completeness principle requires the assurance provider to evaluate “the extent to which the reporting organization can identify and understand material aspects of its sustainability performance” (AccountAbility, 2003, pp. 17). Last but not least, under the responsiveness principle, the assurance provider is required to evaluate “whether the reporting organization has responded to stakeholder concerns, policies and relevant standards, and communicated these responses adequately in its CSR report” (AccountAbility, 2003, pp. 18) . The assurance provider has to form an opinion based on the evidence that is available. “Information regarding evidence is supplied by the reporting organization, in addition to other information concerning stakeholders’ views, as well as industry and other benchmarks” (AccountAbility, 2003, pp. 19). The manner in which these three principles are applied depends on the level of assurance pursued (AccountAbility, 2003, pp. 13). 
AccountAbility (2003, pp.23) notes that “the assurance statement should address the credibility of the CSR report and the underlying systems, processes and competencies that deliver the relevant information and underpin the organization’s performance”. To comply with the AA1000AS, an assurance statement should include: a statement that AA1000AS was used and any special features of how the principles were applied in the assurance engagement; basic description of the work undertaken including the level of assurance and criteria used during the assurance process; conclusions as to the quality of the CSR report and underlying organizational processes, systems and competencies covering aspects of the three principles; additional commentary which could cover progress in CSR reporting since the last report and suggestions for improvements (AccountAbility, 2003, pp. 23-24). The assurance provider is also required to disclose information about its independence from the reporting organization, its impartiality toward stakeholders and its own competencies in the assurance statement (AccountAbility, 2003, pp. 24).  

2.4.4.4	IFAC: ISAE 3000

The ‘International Standard on Assurance Engagements 3000 (ISAE 3000): Assurance
Engagements other than Audits or Reviews of Historical Financial Information’ was introduced by the IAASB of the IFAC. ISAE 3000 has to be used by all professional accountants for all assurance statements issued after January 1, 2005 (IFAC/IAASB, 2004). “The purpose of this standard is to establish basic principles and essential procedures for, and to provide guidance to, professional accountants in public practice” (the practitioners) “for the performance of assurance engagements other than audits or reviews of historical financial information” (IFAC/IAASB, 2004, pp. 907) . Hence, it may be used to support assurance engagements of many kinds, and particularly it is commonly used by accountants as a basis for assurance on CSR reports (CorporateRegister.com, 2008, pp. 22) . ISAE 3000 requires the assurance provider to comply with the requirements of Parts A and B of the IFAC Code  of Ethics for Professional accountants (with the focus on independence) when performing the assurance engagement. A further requirement of the standard is that the assurance provider should accept (or continue) an assurance engagement only if the subject matter is the responsibility of a party other than the intended users of the assurance statement or the assurance provider (IFAC/IAASB, 2004, pp. 908).To conduct an assurance engagement effectively, the assurance provider should plan the assurance engagement . It is important that the assurance provider plans and performs the engagement with an attitude of professional skepticism, which means that the assurance provider makes a critical assessment of the validity of evidence obtained (IFAC/IAASB, 2004, pp. 910-911). Additionally, during the planning and performing process, the assurance provider should consider materiality and assurance engagement risk. Materiality should be considered in the determination of the nature, timing and extent of evidence-gathering procedures, and in the evaluation whether the subject matter information is free of misstatement (IFAC/IAASB, 2003, pp. 913). To support the assurance statement, the assurance provider is required to obtain sufficient appropriate  evidence on which to base the conclusion. During the collection and evaluation of this evidence, the assurance provider may decide to use the work of an expert. The assurance provider is then required to consider “the extent to which it is reasonable to use the work of an expert in forming the conclusion” (IAFC/IAASB, 2004, pp. 914).
Regarding the assurance statement, ISAE 3000 requires that it should be in writing and contain a clear expression of the assurance provider’s conclusion about the subject matter information (IFAC/IAASB, 2004, pp. 918). ISAE 3000 does not require a standardized format for reporting on assurance engagements. However, it identifies the following basic elements to be included in the assurance statement (IFAC/IAASB, 2004, pp. 918-923) : a title that clearly indicates the report is an independent assurance report; an addressee; an identification and description of the subject matter information and, when appropriate, the subject matter; identification of the criteria used; where appropriate, a description of any significant, inherent limitation associated with the evaluation or measurement of the subject matter against the criteria; a statement to identify the responsible party and to describe the responsible party’s and the assurance provider’s responsibilities; a statement that the engagement was performed in accordance with ISAEs; a summary of the work performed; the assurance provider’s conclusion ; the assurance statement date; the name of the firm or the assurance provider, and location. There is an option for the assurance provider to include other information and explanations (e.g. details of the qualifications and experience of the assurance provider; disclosure of materiality levels; and recommendations) that are not intended to affect the conclusion in the assurance statement (IFAC/IAASB, 2004, pp. 922) .    

2.4.4.5	Overview of the various standards

In order to evaluate assurance statements for the purpose of this study, the study draws on elements of the standards and guidelines as discussed in the previous sections. The main characteristics and the minimum contents of the assurance statement as suggested by each piece of guidance are summed up in table 2.2.
The FEE (2002) and GRI (2002) guidelines emphasize the importance of stakeholder dialogue in the CSR reporting process itself and “may therefore be referred to in the assurance statement, and indeed may be necessary in helping determine appropriate wording for the statement” (Owen and O’Dwyer, 2005, pp. 211). As Owen and O’Dwyer (2005) note, these two guidelines “push the business case for CSR reporting, with stakeholder involvement in the assurance process alluded to but seen as far from central to the process” (pp. 212). In contrast, the AA1000AS places the importance on a stakeholder centric approach. “Through its focus on stakeholder based materiality, its concern for reporting on completeness and on the responsiveness of the organization to stakeholders”, “it closely aligns itself with the stakeholder accountability perspective” which motivates the analysis of this study (Owen and O’Dwyer, 2005, pp. 212). The use of ISAE 3000 is obligatory for accountancy firms doing CSR assurance. In addition, ISAE 3000 requires the assurance provider to comply with a code of ethics. Other standards and guidelines only require disclosing some information about the independence of the assurance provider. Disclosure of independency is important, because it would assist intended users to determine the level at which they can rely on the reported information as well as on the assurance statement. All sets of guidance except the AA1000AS draw heavily on existing financial audit guidance on assurance. 

Table 2.2: Recommended contents of assurance statements – four pieces of guidance 

The elements that are required to be included in the assurance statement by the four pieces of guidance are used to construct the research instrument in this study. Aspects of the guidance are used to evaluate assurance practices from a stakeholder accountability perspective. 

2.5	Summary

In this chapter, an overview of the practice of CSR reporting and the corresponding assurance was given. The term CSR reporting as used in the thesis, refers to the process of providing non-financial information (generally environmental, social and economic impacts of business activities) by organizations. According to Gray et al. (1996), CSR reporting was founded with the aim of achieving accountability through making organizational life more transparent. While CSR reporting is overwhelming voluntary, various researches show that the practice is still increasing. Accompanying this growth in reporting, there is also an increase in the need for assurance that the reported information is reliable. Organizations are responding to this by engaging external parties to review the reports (KPMG, 2006). As such, an assurance engagement involves three separate parties, namely an assurance provider, a responsible party and the intended users. Between the responsible party and the intended users, an accountability relationship exists. The responsible party is accountable to and/or responsible to the intended users for the subject matter. The external party in this accountability relationship is the assurance provider, who is independent from the responsible party. 
In recent years, a strong rise in the number of reports with external assurance can be observed (see for example KPMG, 2005). In the light of this development, various standards and guidelines intended to guide the assurance practice have been released by different parties. The standards and guidelines issued by the FEE (2002), GRI (2002), AccountAbility (2003) and IFAC/IAASB (2004) are the most influential ones in the field of assurance of CSR reports at global level (Owen and O’Dwyer, 2005, KPMG, 2005). Of the four pieces of guidance released, AccountAbility’s AA1000AS is most closely aligned with the stakeholder accountability perspective. With the intention of drawing key findings that would guide this study, the next chapter focuses on previous (empirical) researches concerning the practices of assurance of CSR reports.

Chapter 3.	Literature review of CSR assurance

3.1	Introduction

As was discussed in the previous chapter, theoretically an accountability relationship exists between the stakeholders and the reporting organization. The duty to provide information within the context of this relationship is assumed to be achieved by CSR reporting. Assurance practices within CSR reporting can play a role in allowing stakeholders to hold organizations to account by enhancing the confidence that users may have in the reliability of disclosed information. However, the ability of assurance practices to enhance accountability for organizational stakeholders has been called into question by a number of studies. In order to be able to make a judgment whether assurance statements can enhance accountability and transparency for organizational stakeholders, this chapter gives an overview of studies that have been done in the field of CSR assurance practices.   
  	
3.2	Previous literature

Before turning to earlier studies, first we take a view on a framework that was developed by ACCA and AccountAbility (2004). The framework outlines four dimensions of assurance which is illustrated in figure 3.1. From this framework, some fundamental aspects that characterize the practice of CSR

   (Source: ACCA and AccountAbility, 2004, pp. 16)
Figure 3.1: Dimensions of assurance

assurance could be drawn out. These aspects include the function of assurance and the audience of the assurance statement (reflected by dimension 1); standards and principles that can be used during the assurance process and the amount of evidence that can be obtained (reflected by dimension 2); the subject matter and scope of the assurance (reflected by dimension 3); and aspects of the assurance provider (reflected by dimension 4). 
Further to the above framework, CorporateRegister.com (2008) identifies key elements of a meaningful assurance statement. The following elements are emphasized by CorporateRegister.com: reference to standards and level of assurance; specific declaration of intended audience, independence and respective responsibilities of reporting organization and assurance provider; methodology, assurance provider’s opinion and recommendations; and assurance conclusion. All these aspects are also referenced in one or more of the four pieces of guidance. Because these elements are crucial for the assurance practice, it is expected that these issues were investigated in previous researches.  
The art in assurance practices of environmental reports is well covered in the critical study of Ball et al. (2000). Using a content analysis they evaluate the extent to which assurance statements that appear in reports short-listed for the Association of Chartered Certified Accountants (ACCA) Environmental Reporting Awards, promote organizational transparency and empowerment of external parties. The key issues they focus on include the independence of the assurance provider, degree of rigour applied to assurance work, the extent to which the performance dimension is addressed in assurance statements and the extent to which these statements can be considered to add value for external readers. The results show that about half of the assurance statements were judged to be not independent. According to Ball et al. (2000, pp. 7), it seemed that three models of relationships existed, namely the independent verification model, the audit model and the consultancy model. In the first model, the assurance provider is independent from the CSR reporter and comments from this standpoint. As such, an independent assurance process is reflected by this model. In the audit model, the assurance provider performs or “assists in a corporate environmental audit on behalf of” the reporting organization and the assurance statement is “a report on aspects of the audit process or audit findings” (Ball et al., 2000, pp. 8). Within the consultancy model, there are a variety of consultancy relationships between the assurance provider and the reporting organization. It could be that these relationships are ongoing and, as part of this ongoing relationship, the assurance provider assists in producing the CSR report and provides an assurance statement (Ball et al., 2000, pp. 8). What noteworthy is in this regard is that there was no recognition amongst assurance providers “that the dual roles of consultant and ‘independent verifier’ played out by the consultant verifier might introduce an element of tension or conflict vis-à-vis public reporting” (Ball et al., 2000, pp. 9). Ball et al. (2002, pp. 9) further draw attention to the problem that the assurance provider was commissioned by the reporting organization rather than by the stakeholders/readers, which implies that the reporting organization has control over the scope of the assurance process. Furthermore, Ball et al. (2000) note a significant variation regarding the assurance methodology. These include variations in the terminology for work undertaken and variations in the assurance methods. According to them, due to these variations, most assurance statements don’t “provide a basis upon which the reader could assess the extent to which the verifiers’ report provides comfort on the reliability of the environmental report itself” (Ball et al., 2000, pp. 12). Based on the findings, Ball et al. (2000) point out that there was evidence of management control over the assurance process. Additional, there was an overriding emphasis on environmental management systems as opposed to performance based issues. Thus, they conclude that the assurance practice exhibits a ‘managerial turn’ rather than representing a corporate commitment to external transparency and accountability (Ball et al., 2000). 	
Another study that also investigated the first wave of assurance practices on environmental reports was from Kamp-Roelands (2002). This study shares many of the same fundamental concerns about various aspects of assurance practice as the study of Ball et al. (2000). The findings of an exploratory content analysis of 68 assurance statements which were released in Europe show a large degree of variation in the contents within these statements. The major inconsistencies that are highlighted were variation in the definition of assurance scope; variation in the criteria and standards employed in assurance engagement; level of assurance provided; and wording of assurance opinions. Based on these findings, it seems that there is no harmonization within assurance practices. Consequently, Kamp-Roelands (2002) calls for improvements internationally in assurance practices of CSR reports.
According to Dando and Swift (2003, pp.196), to reflect and service the interests and concerns of stakeholders (true accountability), assurance providers of CSR should “go beyond normative audit practice and comment on features of performance that would not normally be commented on in financial accounts”. That is because accuracy focused models of financial audit are inadequate for the broader dimensions that are included within CSR reporting.  Dando and Swift (2003) also argue that current assurance practices have been of questionable robustness, reliability and consistency. Since CSR reporting discloses performance in terms of stakeholders, Dando and Swift (2003) note that reporting then “needs to be assessed in terms of its relevance and usefulness to stakeholders and their decision making” (pp. 199). Furthermore, they emphasize that “the ideology of accountability being made up of compliance, transparency, responsiveness and innovation, must underpin the goals of CSR assurance in order for it to be meaningful” for stakeholders (Dando and Swift, 2003, pp. 199). They further call for a universal standard for the provision of assurance for CSR reporting and for the credibility of assurance providers. 
Adams and Evans (2004) provide a comprehensive assessment of the need for CSR assurance practices “to evolve in a direction focused on allowing stakeholders to hold organizations to account” (Owen and O’Dwyer, 2007, pp. 79). Concerns that are raised in their study include the absence of stakeholder consultation in determining the scope of assurance engagements; appointment of assurance provider by management; assurance provider’s lack of consideration of completeness of reporting; and lack of substantive focus on stakeholders. The usefulness of assurance practices to enable stakeholders to hold organizations to account is therefore questioned by Adams and Evans (2004). Further, Adams and Evans (2004) stress the importance of assurance provider’s independence and advocate that “stakeholders themselves should be the judges of the independence and impartiality of the assurance provider” (pp. 106). 
Owen and O’Dwyer (2005) carry out a critical analysis of assurance statements to assess the extent to which assurance practices enhance transparency and accountability to organizational stakeholders. Their sample consists of 41 assurance statements appeared in CSR reports shortlisted for the 2002 ACCA UK and European Sustainability Reporting Awards. To facilitate the analysis, Owen and O’Dwyer (2005) evaluate the extent to which the contents of assurance statements address key accountability focused elements that were recommended by the recently issued guidance of AccountAbility (2003), FEE (2002) and GRI (2002). The aspects they focus on include the independence of the assurance provider; scope of the engagement; criteria and standards employed; and assurance principles of materiality, completeness and responsiveness. The results of the analysis lead Owen and O’Dwyer (2005) question the transparency and accountability. They raise question marks regarding the independence of the assurance practice and the degree of management control over the assurance process (Owen and O’Dwyer, 2005, pp. 205). While there is indication of improvements in terms of the extent of work undertaken and the degree of independence exhibited as compared to the study of Ball et al. (2000), no evidence was found to support that assurance practices are enhancing accountability to organizational stakeholders. This is clear from evidence that assurance providers were reluctant to address the statements to specific stakeholder constituencies, a general absence of stakeholder participation in the assurance process (although AA1000AS was employed) and the large degree of management control over the assurance process (Owen and O’Dwyer, 2005). Assurance providers are appointed by the management of the reporting organization. Therefore, they may place any restrictions on the assurance exercise (particularly in the assurance scope), hence, assurance providers are effectively reporting to corporate management. This implies that assurance is primarily providing value to management opposed to stakeholders (Owen and O’Dwyer, 2005). All these suggest to Owen and O’Dwyer (2005, pp.224) that accountability to stakeholders is a low priority in assurance exercises. 
Further, evidence was found in this study showing variations in approach between accountant and consultant assurance provider. Accountant assurance providers tended to adopt a cautious approach that focuses on the issue of consistency of information in the CSR report. The completeness issue of information provision was in general not considered by accountants (Owen and O’Dwyer, 2005, pp. 225). On the contrary, consultant assurance providers took a more evaluative approach with the focus “much more on the issues of completeness, fairness and overall balance within their opinion statements” and “they provided more in the way of commentary on systems, reporting and performance weaknesses” (Owen and O’Dwyer, 2005, pp. 225-226). While consultant assurance providers appeared to provide higher level of assurance, Owen and O’Dwyer (2005, pp.205) emphasize that “their focus in aiding corporate strategic direction potentially blurs their independence”.   
A directly related study to the study of Owen and O’Dwyer is from Deegan et al. (2006b). It is the second study that they conduct on assurance statements accompanied with CSR reports. While the first study only focuses on Australia, the second study provides a sample of 52 statements from Europe and 48 statements from the UK. Deegan et al. (2006b) use the GRI and FEE guidance regarding the recommended key elements of the assurance statement to investigate these statements. The results of the analysis, consistent with Kamp-Roelands’ (2002), indicate that there was not only great variation in the contents of assurance statements within countries, but also great variation across countries. Further, according to Deegan et al. (2006b) for there to be credibility added by assurance, “the assurance provider and the assurance statement need to exhibit a number of attributes” (pp.367). These attributes include the appearance of independence and clarity in the contents of the assurance statement. However, such attributes were absent from many assurance statements. Based on the findings, Deegan et al. (2006b) argue that the potential value assurance statements may add to CSR reporting is undermined by the current assurance approaches. Consequently, Deegan et al. (2006b) call for action for generating improvements in assurance practice of CSR by way of clear guidance or regulations in this area. The need for developing guidance is reinforced by findings of differences in the statements between various types of assurance provider. The findings show that accountancy assurance providers were more likely to identify an addressee; to note that the reporting organization is responsible for the contents of the CSR report; and to identify standards used in carrying out the assurance engagement (Deegan et al., 2006b, pp. 368). According to Deegan et al. (2006b), accountancy firms are willing to disclose such information is “due to the guidance that has been generated by the accounting profession in relation to financial statement audits and assurance engagements” (pp. 368). 
A more recent study that critically examines recent assurance statement practice is by Owen and O’Dwyer (2007). Their study is mainly motivated by a concern to empirically examine “the extent to which Adams’ and Evans’ (2004) concerns regarding the inadequate levels of transparency and accountability assurance practice provides for organizational stakeholders persist in practice” (Owen and O’Dwyer, 2007, pp.78). The analysis of 29 assurance statements, which appeared in CSR reports shortlisted for the 2003 ACCA UK and European Sustainability Reporting Awards scheme, extends a prior study in this area (see Owen and O’Dwyer, 2005). The results of the analysis indicate an ongoing trend reflecting a lack of stakeholder involvement in assurance. This is clear from the findings that stakeholder based materiality was not seriously addressed (although some improvement is evident compared to the Owen and O’Dwyer (2005) study). Moreover, “the continuing reluctance to address assurance statements to stakeholders”, the absence of stakeholder judgments of assurance provider’s independence and the lack of evaluations of responsiveness to stakeholders “remain a concern for those committed to making assurance more stakeholder-centric” (Owen and O’Dwyer, 2007, pp. 90). A continuing trend reflecting management control over the assurance process was also evident. As one can note, this sample still suffers from the concerns raised in Owen and O’Dwyer’s (2005) study. Nevertheless, emerging more holistic stakeholder-centered standards (especially AA1000AS) were gaining more prominence among assurance providers. 
Finally, in the analysis of 120 assurance statements on CSR reports of European organizations, Ernst&Young (2008) focuses on aspects that are crucial when providing assurance on CSR. These aspects include the scope of assurance; independence of assurance provider; criteria and standards used; level of assurance; and conclusions. The conclusion that Ernst&Young (2008) draws from the research is that there is a high variety in the contents of assurance statements. Variations in terms of topics discussed and the lack of information are the main factors that create confusion which makes comparison between statements not possible. They argue that transparency in assurance statements can be greatly improved.  	
An overview of the empirical studies in the field of assurance on CSR (as discussed in this section) is provided in table 3.1. 

Table 3.1: Overview of empirical studies in the field of assurance on CSR 

3.3	Summary

In this chapter, an overview of prior literature in the field of assurance on CSR reports was provided. Given that assurance on CSR reports is a relatively new field of work, the number of researches in this area is limited. 
While the focus of the first empirical studies of assurance practices on CSR was on assurance statements of environmental reports issued in UK and Europe (see Ball et. al, 2000; Kamp-Roelands, 2002), later studies examined statements of a diversity of reports (e.g. corporate responsibility, sustainability reports) from organizations all over the world (see Owen and O’Dwyer, 2005, Deegan et al., 2006). All of these studies investigated various aspects of assurance which are considered to be crucial, including the independence of assurance provider; work undertaken in the engagement; stakeholder engagement in assurance process; and assurance conclusion expressed. A number of concerns were raised in the studies. The most important concerns were related to: independence of assurance provider; managerial capture of assurance (reflected by for example limitations on scope of assurance); absence of stakeholder engagement in assurance process; lack of consideration of the issues materiality and completeness from a stakeholder perspective by assurance providers; ambiguity and variation in wording of the conclusion; and variations and/or lack of disclosures in the statement. The value that assurance brings to external parties and the ability of assurance to enhance accountability and transparency for organizational stakeholders is therefore questioned.
Informed by the concerns raised in the prior literature, this study evaluates a more recent and longer sample of assurance statement practices to ascertain to what extent current assurance practices enhance accountability and transparency for organizational stakeholders. In the next chapter, the research method and sample of assurance statements will be discussed. 

Chapter 4.	Research method and sample

4.1	Introduction

The previous chapter reviewed the literature on assurance of CSR reports, with the emphasis on the function of assurance in the accountability process. Before turning to the data analysis, this chapter concentrates on the research method and the sample of the study.  As noted earlier, an evaluative framework will be employed to analyse assurance statements. Section 4.2 describes this in detail. The data-gathering process and the sample of the study is the focus of section 4.3.

4.2	Evaluative framework

Based on the standards and guidelines that were outlined in chapter two and the literature review of earlier studies of chapter three, some elements can be derived that are crucial for assurance in order to function in the accountability relationship. These include: the independence of the assurance provider; work undertaken during the assignment; and stakeholder engagement. The aim is to investigate assurance statements on the disclosures related to these aspects.  The evaluative framework (see Appendix 2) employed for the analysis of the contents of assurance statements is developed drawing on previous studies.
Items that are captured by the evaluative framework consist of two main sections: (i) general information related to the assurance provider and the assurance statement; (ii) detailed information regarding a variety of aspects that are considered to be crucial, as noted above. Section one provides data for categorizing the two categories of assurance providers as well as for variations in the statements disclosure. Section ii of the framework consists of a series of evaluative questions to examine whether assurance statements satisfactorily address the crucial accountability focused elements.

4.2.1	Section 1: Descriptive information

This section of the framework looks at the descriptive information of the assurance statement. The components of this section include information related to the assurance provider and information of the assurance statement.

Information of the assurance provider
This section provides information related to the assurance provider of the CSR report.

Name of the assurance provider: 
The party that carries out the assurance engagement and prepares the assurance statement is captured by this aspect. Disclosure of such information informs the intended users of the party that is responsible for the assurance engagement (IFAC/IAASB, 2004).  Further, based on the name of the assurance provider, readers are able to make distinctions between various types of assurance providers who have different experiences and qualifications. The type of assurance provider has also been investigated in previous studies (e.g. Ball et al., 2000; Owen and O’Dwyer, 2005; Deegan et al., 2006b). Some of these studies have identified two types of assurance providers (accountants and consultants), while others have identified more categories. In this study, the assurance provider is categorized in two types: accountants (public accountancy firm); and non-accountants (including consultancies, certification bodies, non-profit organizations etc.). This distinction is drawn up as the results of previous studies have shown that there are some variations in the approaches and presentations of the assurance statement by these two groups. 
Competencies of assurance provider:
The profile of the assurance provider is crucial to the credibility of assurance. Kamp-Roelands (2002) notes that readers should find some information in the assurance statement to the effect that the assurance provider is sufficiently competent to conduct the assignment. Furthermore, AccountAbility (2003) emphasizes that one of the key characteristics of the AA1000AS is that it “requires disclosure by assurance providers covering their competencies” (pp. 6). Disclosing such information would increase the confidence of readers in the assurance process and in the assurance statement. The ways in which competencies are disclosed generally take two forms: professional qualifications (indicating areas of expertise, past assurance experience and relevant qualifications for undertaking assurance exercise) and multidisciplinary teams (see Owen and O’Dwyer, 2005; Ernst&Young, 2008). 

Information of the assurance statement
Since there is no generally accepted framework for assurance of CSR reports, no standardized format for reporting on the assurance engagement (the assurance statement) is present. However, a majority of the released guidelines and standards (see GRI, 2002; FEE, 2002; AccountAbility, 2003; and IFAC, 2004) require some elements to be included in the assurance statement. Various characteristics of the statement are also investigated in previous studies (e.g. Owen and O’Dwyer, 2005; Deegan et al., 2006b). This section presents information related to the general characteristics of the assurance statement.

Title of assurance statement:
According to IFAC/IAASB (2004), the title helps to identify the nature of the assurance statement, and to distinguish it from statements that are issued by others such as those who don’t have to fulfil the same ethical and professional requirements as the practitioner.
Addressee of assurance statement:
By means of an addressee, the assurance provider identifies the party/parties to whom the assurance statement is directed (IFAC/IAASB, 2004). CSR reporting discloses performance in terms of stakeholders. Since stakeholders want assurance that the CSR report truly represents the organization’s efforts and achievements, assurance of CSR reports is called into the reporting process. From this perspective and for the purposes of accountability, it is reasonable to assume that the assurance statement is aimed at stakeholders. Therefore, it could be expected that the addressee of assurance statements would be the stakeholders.  Various studies (e.g. Owen and O’Dwyer, 2005, 2007; Deegan et al., 2006b) have also dealt with the issue of to whom assurance statements were addressed to.  
Date of the assurance statement:
Dating the assurance statement is required by IFAC/IAASB (2004).  By dating, it informs the intended users that the assurance provider “has considered the effect on the subject matter information and on the assurance report of events that occurred up to that date” (IFAC/IAASB, 2004, pp. 923). 

4.2.2	Section 2: Evaluative information

In this section, the evaluative framework focuses on aspects that are considered to be crucial for assurance. It consists of three parts: independence of the assurance provider; work undertaken; and results of the assurance engagement.
 
Independence of the assurance provider
An assurance statement can only add value to the CSR report if users have faith in the assurance provider. The readers of CSR reports should perceive the assurance provider to be credible. In order to increase confidence in the objectivity of the conclusions offered in the assurance statement, assurance providers may choose to include an explicit statement of their independence. FEE (2003, pp. 4) also argues that a statement issued by an independent assurance provider should enable users to place more credibility on the reported information of the organization. Besides explicitly making reference to their independence by assurance providers, certain disclosures in the assurance statement also implicate the independence of the assurance provider. IFAC/IAASB (2004) states that the assurance statement should include a paragraph that describes the responsibilities of the reporting organization (who is responsible for the subject matter) and of the assurance provider (who is solely responsible for expressing an independent conclusion about the subject matter information). The GRI guidelines also adopt this view. To confirm their independence, there is an argument that assurance providers should clearly express the respective responsibilities in the assurance statement. 
There are many codes/ethical guidelines that usefully guide assurance providers in ensuring users of their independence (AccountAbility, 2003). Reference to such a code of conduct (such as IFAC’s Code of Ethics for Professional Accountants) can let the user place more trust in the assurance provider and hence, the statement. Furthermore, it is important that assurance providers do not have any recent, ongoing or potential financial or commercial relationship with the reporting organization. As AccountAbility (2003) states, assurance providers should explicitly disclose information on this matter to demonstrate their independence. While it is clearly stated that no financial or commercial relationship exists, stakeholders may still perceive the assurance provider as lacking independence, as the reporting organization is the one who pays for the assurance provider’s service. In order to demonstrate their independence, assurance providers may disclose details of assurance fees (which is rarely the case) to demonstrate that there is no material relationship that threats their independence. 
In summary, the evaluative framework captures aspects of independence of the assurance provider by dealing with the question: (i) Does the assurance statement referred in one or several ways (as described above) to the independence of the assurance provider? 

Work undertaken during the assignment
The final conclusion in the assurance statement formed by the assurance provider is based on the findings obtained during the assurance process (Kamp-Roelands, 2002). As so, the statements often describe the nature of work undertaken by the assurance provider. Communication of this item provides intended readers an insight into the assurance process and sets the context for the assurance conclusions. Before turning to the actual assurance process (stage of collection and evaluation of evidence), the assurance provider should undertake some activities in order to decide the nature and extent to which assurance procedures will be employed in the assurance exercise. Within this stage, the assurance provider specifies the objective(s) of the assurance engagement; determines the criteria to be used to assess the subject matter; determines the scope of assurance; determines the assurance standards to be employed in conducting the assurance exercise; and sets the level of assurance to be provided (Kamp-Roelands, 2002; Ernst&Young, 2008). Documentation of these aspects in the assurance statement gives the intended users insight to the conditions under which the engagement has been performed. It helps the user in understanding the assurance statement and is therefore important. These elements will also be investigated in this study by addressing the following questions: (i) Are the objectives of the assurance engagement determined? (ii) Does the assurance statement provide information on the criteria used? (iii) Is the scope of assurance clearly described in the assurance statement? (iv) Does the assurance statement refer to the guidelines/standards used during the assurance exercise? (v) Is a clear description of the level of assurance being given provided?     
Subsequent to the activities described above, the actual assurance process can be started with evidence gathering procedures. The assurance provider should obtain sufficient appropriate evidence to support the conclusion to be expressed in the assurance statement about the information appearing in the CSR report (IFAC/IAASB, 2004; Deegan et al., 2006b). Evidence can be obtained using different assurance procedures and techniques. In the context of CSR, stakeholders want to be assured of more than the accuracy of data.  Therefore, the traditional audit model (which only assesses the truth and fairness of a set of accounts) would not best serve the interests of organizational accountability (Dando and Swift, 2003). 
Because no generally framework for evidence gathering of CSR assurance exists, several previous studies will be employed in order to identify the assurance procedures that will be examined in the current study (see Ball et al., 2000; Owen and O’Dwyer, 2005; Deegan et al., 2006b; KPMG, 2006; CorporateRegister.com, 2008).  Prior studies have examined whether assurance statements made disclosure of performance of the following assurance procedures: validation of data in report; validation of data collection systems; document review; site visits; interviewing employees. Drawing from this, the evaluative framework captures these disclosures by addressing the question: (vi) Is a clear description of the exact nature of work undertaken provided? If yes, what kinds of work were performed by the assurance provider to reach the conclusion?
Engaging stakeholders in the assurance process is also important within the assurance exercise. As AccountAbility and KPMG (2005, pp.12) note, the assurance process needs to examine the quality of processes such as stakeholder engagement and the way in which organizations align strategy with the expectations of key stakeholders. Further, Park (2004) states that involving stakeholders in the assurance process will have “a potential to make the assurance function as accountability process” (pp. v). Stakeholder engagement in assurance is also one of the key focal points of AccountAbility’s assurance standard. In particular, AA1000AS requires assurance providers to examine whether the reporting organization has addressed the three principles of materiality, completeness and responsiveness  in its choice of information to disclose, and to report their findings on these principles in the assurance statement (AccountAbility and KPMG, 2005). Hence, these principles are central to the examination of the main question of the current study. The issues of materiality, completeness and responsiveness are therefore also captured by the evaluative framework by asking the following questions (AccountAbility, 2003; 2007):  (vii) Does the assurance provider interviewed stakeholders (e.g. about matters of interests to them) (viii) Does the assurance statement made reference to materiality issues? (e.g. the robustness of process used by the reporting organization in determining materiality and whether stakeholders have been involved in this process) (ix) Does the assurance statement include discussion of completeness of the CSR report? (x) Does the assurance statement include discussion of responsiveness to stakeholders? (e.g. the robustness of process used by the reporting organization to identify and respond to stakeholders’ interests and concerns; the sets of targets and policies set by the reporting organization in response to stakeholders’ views).

Results of the assurance engagement
One of the key elements of the assurance statement is the conclusion or opinion provided by the assurance provider (Deegan et al., 2006b). IFAC/IAASB (2004, pp. 918) specifies that the assurance statement “should be in writing and should contain a clear expression” of the assurance provider’s conclusion about the subject matter information. As GRI (2002) points out, conclusions reached are supposed to address issues like accuracy, completeness, reliability and balance of the CSR report, relative to the scope and objective of the assurance engagement. This is exactly what stakeholders want to know about the reported information. But how do assurance providers describe their conclusions/opinions in their assurance statement? The current study will investigate this by addressing the question: (i) Does the assurance statement contain a clear conclusion/opinion about the subject matter? (ii) In what form are conclusions/opinions stated (terminology, issues addressed, expressions of limitations)?

4.3	Sample of the study

As mentioned before, the focus of this study is on Europe. Therefore, it analyzes assurance statements of CSR reports published by organizations that are listed on the Dow Jones STOXX Europe Sustainability Index (DJSI STOXX)  during the years 2001-2006. European organizations that are leading in terms of economic, environmental and social criteria are represented by this index, and thus is it appropriate to use within the CSR context. The DJSI STOXX covers stocks from eighteen countries . Organizations from the United Kingdom will not be considered in this study as the United Kingdom has been seen as separate from Europe in some studies (e.g. Deegan et al.2006) and none of previous studies have specifically considered assurance statements of CSR reports issued in Europe (ex. UK). 
In order to collect the assurance statements, the organizations that are listed on the DJSI STOXX should be identified first. Considering the variable number of components in the DJSI STOXX, the list of organizations that are listed in the index in the month December  (obtained from Datastream ) is used as the point of membership for each year. Thus the organizations that are included in the December list are presumed to be present in the index for the whole year and are thus included in the population. As a result, it turns out that the index included 604 organizations in total for the years 2001-2006 . To identify whether these organizations have published a CSR report with an accompanying assurance statement for each year of the study, the website of the corresponding organization and the files of CorporateRegister.com , an online directory of CSR reports, are checked. Financial reports that only exploit a section for the CSR performance, but which do have individual assurance statements, are included in the sample as well. Further, only statements resulting from an assurance process that are provided by an external third-party which are readable , and published in English  are included in the sample. Hence, statements that are issued by the internal audit/assurance department of the reporting organization, commentary statements by (non-)assurance providers and statements resulting from agreed-upon procedures , are excluded from the sample. The outcome of the data selection process is that out of the 372 CSR reports identified, 166 are assured, which means that a percentage of up to 45% is assured. A number of these 166 reports contain more than one assurance statement. As a result, the final sample consists of 173 assurance statements (an overview of the organizations and assurance statements are made available in Appendix 1). 

4.4	Summary

This chapter described the research method. The evaluative framework employed for the analysis of assurance statements was outlined in two main sections. The first section seeks to capture data about the assurance provider and the assurance statement, while section 2 seeks to capture data about the presence of various key aspects that are crucial to assurance processes in order to function in the accountability process. 
Further, the process for collecting data was outlined. 173 assurance statements attached to CSR reports that were published by organizations listed on the Dow Jones STOXX Europe Sustainability Index (DJSI STOXX) during the reporting years 2001-2006 forms the sample for analysis. The focus of the next chapter is on the results of the data analysis.

Chapter 5.	Results of assurance statements content analysis

5.1	Introduction

This chapter presents the results of the data analysis. The first two paragraphs describe the results related to the descriptive information of the assurance statement. This part considers the information related to the assurance provider and to the assurance statement. Hereafter, the results with respect to the evaluative information are discussed. Consideration is given to the independence of the assurance provider (paragraph 5.4), work undertaken during the assignment (paragraph 5.5) and last but not least the results of the assurance engagement (paragraph 5.6). 

5.2 	Information of the assurance provider

This section deals with the information provided on the assurance provider. It focuses particularly on the type of party that provides assurance and on the competencies of the assurance provider.

5.2.1	Type of assurance provider

Unlike financial reporting, there are no explicit requirements on the party that can act as an assurance provider in the area of CSR reporting. As such, various parties are involved in providing third-party assurance (Deegan et. al, 2006b). In this sample, all assurance providers clearly identified themselves in the assurance statement. Based on their names, the type of assurance provider was identified. As indicated in table 5.1, most assurance statements (136) were provided by accountants. Out of these 136 assurance statements, 132 were from the ‘Big Four’ firms  and the remaining four statements were a result of the assurance service from a ‘Big Four’ firm together with an accountancy firm. 37 statements were from parties other than accountants including consultancy firms and certification bodies, which are categorized as non-accountants in this study. The results of table 5.1 indicate that accountants are dominating the assurance market in the field of CSR reporting, which is in line with the KPMG International Survey of Corporate Responsibility Reporting 2005 (KPMG, 2005). While it is out of the scope of this study, it would be interesting to examine what the incentives are for selecting a particular type of assurance provider. 

Table 5.1: Types of assurance providers of the assured CSR reports

5.2.2	Competencies of the assurance provider

Whether the assurance exercise is carried out by accountants or non-accountants, it is important that the assurance provider have specific knowledge on the subject matter as well as on the assurance process and have skills in order to be competent for undertaking the assurance engagement. Disclosing information on competencies within the assurance statement would increase its credibility and contribute to the quality of the statement. 
The results show that 45 (26%) assurance statements  clearly made reference to the competencies of the assurance provider. In a few assurance statements, the assurance provider only states that a statement of the competencies relating to the team can be found at the website or somewhere else. All assurance statements provided by CSR Network contain such a statement. As illustrated in table 5.2, the ways in which competencies were disclosed generally took two forms. The first one is related to professional qualifications, where areas of expertise, past assurance experience or relevant qualifications for undertaking the assurance exercise is indicated. The other type is related to the involvement of multidisciplinary teams. An example of the former one is the assurance statement of SGS for Inditex’ Sustainability Report Inditex 2003, where SGS states that “The verification team was formed by SGS personnel and it was assembled based on their knowledge, experience and qualifications for the accomplishment of this task”. 

Table 5.2: Competencies of assurance providers 
Compared to non-accountants, accountants were more likely to disclose information on their competencies, with 37 (27%) assurance statements referring to one of the two forms of competencies and one assurance statement referring to both professional qualifications and multidisciplinary teams. In addition, disclosure of multidisciplinary teams was far more found in assurance statements of accountants, with 16% of all assurance statements provided by them against 5% for non-accountants. CSR report readers may have the perception that accountants’ expertise is primarily in the audit of financial statements. By disclosing their competencies, accountants are emphasizing that they are competent for conducting the CSR assurance exercise. This might explain why the percentage of statements containing competencies is higher for accountants than for non-accountants. When comparing the percentage of assurance statements disclosing information on competencies of the year 2001 and 2006, it has been increased from 22% to 35%. 

5.3	Information of the assurance statement

This section describes the results regarding the general characteristics of the assurance statement. These characteristics are the title and date of the assurance statement and the addressee of the assurance statement.

5.3.1	Assurance statement title and date

According to IFAC/IAASB, the assurance statement date informs the intended users that the assurance provider “has considered the effect on the subject matter information and in the assurance report of events that occurred up to that date” (IFAC/IAASB, 2004, pp. 923).  The results show that 94% and 98% of the assurance statements were given a date and a title respectively. As is evident in previous studies, the current study also shows that assurance providers use a wide variety of terminology in labeling their assurance statements. The results indicate that where a title has been given to the assurance statement, 29 different titles are used, which can be classified under eight major groups as illustrated in table 5.3. In contrast to the findings of Owen and O’Dwyer (2005), the term ‘verification’ is not the most frequently used term. The most commonly used term is ‘assurance’ (87 out of 169 titled statements). This is consistent with the view of FEE (2002) that “the term ‘assurance’ is preferable to terms such as ‘verification’ or ‘review’, which are also in use. This is because it avoids confusion with terms such as ‘audit’ and ‘verification’ that have more specialized meanings” (FEE, 2002, pp. 9). Accountants were more likely to use the term ‘assurance’ to label their assurance statement, whereas non-accountants prefer to use the term ‘verification’. The reason why accountants use the term ‘assurance’ might be due to the requirement of ISAE 3000 to name their assurance statement by specific terms. While the majority (almost 50%) of the assurance statements provided by non-accountants used the term ‘verification’ in the statement’s title, the most frequently used term in the whole sample ‘assurance’ was also used in 11 instances, accounting for 33% of the assurance statement provided by this type of assurance provider. 
About 36% of the titled assurance statements included the term ‘independent’ in the title. Furthermore, some assurance statements mentioned in the title the level of assurance provided, including terms like ‘limited assurance’, ‘moderate assurance’ and ‘review’. All these terms in the title help to identify the nature of the assurance engagement (IFAC/IAASB, 2004).

Table 5.3: Terms used in the title of assurance statements by assurance providers

Turning to the terms used in labeling assurance statements over years of the study, the results in table 5.4 indicate that assurance providers still use a variety of terms. This is consistent with the view of ACCA and Accountability (2004) that “Variety in use of terms to describe ‘assurance’ and related statements may continue and will obviously vary according to the subject matter in question. Homogeneity may come about as sustainability reporting and assurance become more standardized” (ACCA and Accountabilty, 2004, pp. 30). However, it should be noted that the term ‘assurance’ has been becoming more prevalent over the period of study. Nevertheless, the great variability in the titles may confuse readers who are comparing assurance statements of different reporting organizations since different terms may convey different levels of assurance (Deegan et. al, 2006b). 

Table 5.4: Terms used in the title of assurance statements 

5.3.2	Addressee

The addressee identifies the party/parties to whom the assurance statement is directed. In financial reporting, there are requirements that audit reports should be addressed to the financial stakeholders. However, no such requirement exists in the field of CSR reporting as to who should be the addressee of the assurance statement. In the AA1000AS it was mentioned that “assurance should provide confidence in the report’s underlying information to the reporting organization’s stakeholders, particularly the direct users of the report” (AccountAbility, 2003, pp.31). From this viewpoint and given that CSR reports are aimed at stakeholders, it could be expected that the addressee of assurance statements would be the stakeholders of the reporting organization.
While the guidelines of GRI and FEE stress the importance of mentioning an addressee within the assurance statement, table 5.5 shows that 52% of the assurance statements did not make reference to an addressee.  This fraction is pretty low compared to the results in the studies of Deegan et al. (2006b) and Owen and O’Dwyer (2007), which shows that 82% and 72% respectively of the assurance statements did not indicate an addressee.  Further, an improvement can be observed in respect of the percentage of addressed assurance statements. In 2001, 89% of the statements did not refer to an addressee, while in 2006, this percentage was dropped to 39%. Consistent with previous studies, where addressees were identified, the greater part of these assurance statements were provided by accountants (96%) and the majority (55%) were addressed to a party internal to the reporting organization, rather than to external stakeholders. In a few instances, the assurance provider states clearly in the assurance statement that the statement is solely to the reporting organization. An example is Deloitte’s ‘Independent assurance report’ on the Endesa 05 Sustainability report where the

Table 5.5: Addressees of the assurance statements

assurance provider says “This report was prepared solely for the interests of Endesa”. A clearer example was found in the ‘Independent assurance report’ which appeared with Kesko’s 2006 Corporate Responsibility Report where PricewaterhouseCoopers makes clear that “we do not accept, or assume responsibility to anyone other than Kesko Corporation for our work, for this report, or for the conclusions that we have reached”.  Just 16% of the assurance statements which referred to an addressee were addressed to stakeholders. It is therefore questionable whether the assurance provider’s primary concern is the interests of stakeholders. According to Owen and O’Dwyer (2005), in cases where addressees are restricted to internal parties, an impression could easily be created “that an internal assurance exercise is simply being released publicly with limited considerations being given to the information demands and expectations of external stakeholders” (in Deegan et. al, 2006b, pp. 341). In 22 cases, assurance statements were directed to the readers of the statement. This term is quite vague since readers cover a broad public and not just a specific group of persons. However, it can be derived that these assurance statements are also externally focused. 

5.4	Independence of the assurance provider

The independence of the assurance provider plays an important role for the credibility of the assurance statement. Some of the guidelines and standards deal with the declaration of independence. The AA1000AS for example, requires the assurance provider to make information available about his/her independence, as it builds credibility. FEE (2002, pp.57) points out that such a statement “may need to be set out to add credibility to the assurance”. Further, Ball et al. (2000, pp.7) argue that the most telling indication of the quality of assurance lies in the degree of independence exhibited by the assurance provider.
As discussed earlier, assurance providers can use a variety of ways to express their independence, which is illustrated in table 5.7. Table 5.6 shows the number of assurance statements that made some reference (in one or several ways) to the assurance provider’s independence. Of the 173 assurance statements, 153 (88%) disclosed information regarding independence of the assurance provider. The results suggest that the number of assurance statements referring to independence increases over the period of six years, starting with 67% in 2001 to 94% in 2006.  Further, accountants were more likely to refer to their independence (93%) than non-accountants (73%). 

Table 5.6: Reference to independence 

When examining the various ways to express independence in depth, 47 % of the assurance statements explicitly referred to independence in the statement (see table 5.7). However, a majority of these statements made minimal reference to independence just by incorporating the term independent in the title of the statement or in its text.  An example is KPMG’s ‘Verification report’ of Endesa’s Sustainability report 2003 where KPMG states that “We have been asked to carry out an independent verification of …”.  In these assurance statements, the assurance provider indicates to be independent, while no such formal statement is provided.  Nevertheless, few assurance statements incorporated a paragraph for the discussion of their independence (for example, Ernst&Young’s assurance on Telefónica’s Annual Corporate Responsibility Report 2006). 
As Deegan et al. mention, separation of responsibilities forms a cornerstone of auditor  independence. Therefore, such responsibilities should be clearly enunciated in the assurance statement. As shown in table 5.7, 83% of the assurance statements described the respective responsibilities of the reporting organization and the assurance provider. This relatively high percentage is probably because the influence of the standards and guidelines (e.g. GRI, ISAE3000) that require the assurance provider to include a statement that identifies the responsible party and describes the responsibilities of the responsible party and of the assurance provider. As is evident, there is a considerable improvement in the disclosure of information of respective responsibilities. Notable is that a number of assurance

 Table 5.7: Ways to express independence by year and by assurance provider

statements only identified the responsibilities of the reporting organization, without mentioning assurance provider’s responsibilities. This appears only in the statements provided by accountants. Besides stating the respective responsibilities, some non-accountants emphasized their independence by also stating in one or other way that they were not involved in the preparation of the CSR report. As so, a more elaborate explanation of the degree of independence is offered (Owen and O’Dwyer, 2005; 2007). 
Another way for assurance providers to express their independence is to state that they comply with ethical requirements that are set out in specific standards or guidelines (namely ISAE3000), which ensures their independence. The results indicate that on average 17% disclosed such a statement. An example can be found in the assurance statement of Deloitte on BBVA’s Corporate Responsibility Report 2006 where Deloitte states “We conducted our work in accordance with Deloitte’s independence standards, which meet the Code of Ethics of the International Federation of Accountants (IFAC)”. The Code of Ethics was by far most mentioned, followed by the firm’s own independence policies/Code of Ethics and ethical requirements within other standards and guidelines. Given that the ISAE3000 came into force in 2004, there were no assurance statements that disclose information on the compliance with independent requirement in the years before 2004. An increased trend can be observed in the number of assurance statements that disclose such information and accountants accounts for the biggest part of these 30 assurance statements. This is not unexpected since these ethical requirements only apply to those who are governed by their professional body that issued the standard. 
Finally, as can be drawn from table 5.7, 4% of the assurance statements indicated that there is no commercial or financial relationship between the assurance provider and the reporting organization. All these statements were provided by non-accountants. 
Although the majority state that they are independent, can we assume that they are really independent? A relationship between the assurance provider and the reporting organization always exists, since the assurance provider is paid for their services by the reporting client. From this view, it’s hard to claim that assurance providers are independent. Aside from this, we could suppose that assurance providers are independent when disclosures of independency are made. It could be stated that such disclosures have been improved over years of the study. But still 12% did not include any information regarding the independence of the assurance provider.

5.5	Work undertaken during assignment

This section focuses on what the assurance provider has done to reach its conclusion. It addresses issues like the objectives of the assurance engagement, the scope of assurance, the assurance level and also the different kinds of work performed. As was noted, engaging stakeholders in the assurance process is important within the assurance exercise. The last part of this paragraph addresses the issue of stakeholder engagement by assessing the extent to which assurance statements addressed AccountAbility’s (2003) core principles of materiality, completeness and responsiveness. 

5.5.1	Objectives

In contrast with financial statements auditing, there is no uniform objective for CSR assurance practices. Deegan et al. (2006b, pp.344) note that various objectives can be agreed upon within different engagements as the reporting organization determines the objective of the assurance engagement. The importance of describing the objectives of the assurance engagement is to help the readers to understand the role of the assurance provider as well as the purpose of the assurance statement. 
Table 5.8 shows that information regarding objectives was disclosed in 68% of the assurance statements. This percentage can be further split up into 74% and 46% for respectively accountants and non-accountants. The objectives show large variations, with expressing an opinion/conclusion on the information in the CSR report as the most common objective identified. Other objectives identified in the assurance statement include: to check claims and review arrangements for the management of CSR issues, to assess CSR report of compliance with stated criteria, to assess controls in place, to provide assurance on data and information in the CSR report, and to verify the reliability of data and information. None of the assurance statements specified that the objectives were determined through a consultative approach with stakeholders. Hereby it raises the question whether the assurance exercise meets the assurance requirements of the stakeholders

Table 5.8: Disclosures of the work undertaken (which determines the nature of the assurance exercise)

5.5.2	Criteria

The disclosure of the criteria used in the assurance process is important, because it informs the readers of the basis on which the subject matter has been measured or evaluated and helps them to assess the conclusions in the assurance statement and to understand its context. The IAASB (2004) standard on the ‘International Framework for Assurance Engagements’ points out that without the appropriate frame of reference provided by suitable reporting criteria, any conclusion given by the assurance provider is open to individual interpretation and misunderstanding. In the area of CSR reporting, the CSR report can be assessed against various criteria. These criteria are often already available and generally accepted. Examples include the sustainability reporting guidelines of the GRI (2002) and the ISO. 
Table 5.8 shows that overall 62% of the assurance statements identified the criteria used. These statements were mainly provided by accountants. The majority of statements provided by non-accountants fail to identify that any criteria was used. As can be seen, there is an increasing incidence in disclosing the criteria used by the assurance provider. In 2001, just 11% mentioned the criteria used. This percentage has been increased to 76% in 2006. While in 2001 it was not usually to disclose the criteria used, more than half of the assurance statements did this in 2002. This dramatic increase may be attributed to the release of guidelines that guide the preparation of the CSR reports, for example the GRI guidelines. As indicated in table 5.9, 63 assurance statements out of 108 assurance statements that disclosed the criteria used, were performed against the GRI guidelines or against the GRI in combination with other types of guidelines. Further, some assurance statements mentioned the use of internal reporting criteria, which are criteria established by the reporting organization. Examples of this kind include the calculation and disclosure principles of CSR data and information and the Group’s reporting Protocol. As specified in the table, internal reporting criteria were used in combination with external criteria in a few cases. According to Ernst&Young (2008, pp.10), criteria that can be used are not always reporting criteria, “but also criteria described in the assurance standard itself reflecting the principles of the stakeholder engagement process impacting the content of the CSR report”. In this regard, 20 assurance statements made reference to the AA1000 principles as the criteria used. 

Table 5.9: Criteria used
	
5.5.3	Scope 

Since there are no regulations on the scope of the assurance engagement, it is often up to the reporting organization to decide the information that will be covered by assurance.  It is crucial for the readers to know whether assurance has been applied to the entire CSR report or is only given on selected parts of it. KPMG (2006, pp.14) notes that assurance that does not cover the entire CSR report poses a risk that the reporting organization only has those parts assessed that best suits it. Further, Owen and O’Dwyer (2005) argue that limitations “indicate that the issue of completeness is effectively ignored, thereby raising severe questions as to the usefulness of the exercise from a stakeholder perspective”. However, sometimes there may be valid reasons for having only part(s) of the report verified. Any scope limitation, whether imposed by the reporting organization or of inherent nature should be corresponded in the assurance statement. 
Nearly all assurance statements (99%) described the scope of the assurance engagement. This finding is consistent with the studies of Deegan et al. (2006) and Owen and O’Dwyer (2007). The chosen scope includes: the whole CSR report (including the underlying systems, structures and processes); specified sections in the CSR report; qualitative information regarding CSR aspects; specified key performance indicators; systems and procedures (data collection systems/procedures, internal control system, CSR management systems/processes, reporting procedures); specific type of data and figures (economic, environmental, SHE, social); and  CSR report with respect to the scope of activities performed in selected countries. Deegan et al. (2006b) mention that the scope should be determined by the reporting organization in consultation with its stakeholders. AccountAbility (2003) also adopts this view. However, none of the assurance statements indicated that stakeholders were involved in the determination of the scope. 
Although a very large proportion made reference to the scope, scope limitations and restrictions (imposed by management) were also prevalent, with 55% of the assurance statements referring to it. No trends can be observed over the period of study. In 2001, scope limitations were found in 56% of the assurance statements and this percentage decreased and increased subsequently in the following years. Limitations in the scope appeared in different forms, such as excluding specific section(s) of the CSR report; excluding quantitative or financial information/data; excluding information regarding past periods or future periods (e.g. information in respect of future projections, expectations and targets); excluding data and information related to specific sites and entities; excluding case studies; excluding specific data presented in the CSR report. Ernst&Young and Deloitte&Touche’s assurance of Suez’s 2002 Activities and Sustainable Development Report states that “Our findings and conclusions below relate to the selected entities and data. However, the work performed does not provide assurance on the proper application of procedures nor on the accuracy or completeness of data and reported information for the Group as a whole”. Another example is PricewaterhouseCooper’s ‘Statement’ on Stora Enso’s Environment and Resources 2002 Report where PWC states that “two sites visits selected by Stora Enso were conducted”. This clearly indicates an imposition of limitations and restrictions on the scope.  While scope limitations were evident, assurance providers were not keen to refer to the areas not reviewed. In just a few assurance statements, the reason for the existence of such limitations was explained. For example, CSR Network’s ‘Independent Assurance Statement’ on Kesko’s 2006 Corporate Responsibility Report notes that “Economic information presented in the report is excluded as it is the subject of a separate assurance process by PricewaterhouseCoopers Oy”.  The fact that scope limitations and restrictions exists and that stakeholders were not involved in determining the scope suggest that the management exercises influence on the assurance exercise. 

5.5.4	Assurance standards/guidelines 

References to the assurance standards/guidelines used which governed the assurance process provide the readers with insights into the rules that has been applied and therefore may help them to understand the work performed and the nature of the engagement. As was discussed in chapter 2, various globally standards/guidelines in the field of assurance of CSR reports were introduced over the period of this study, for example the AA1000AS and the ISAE 3000. Table 5.8 presents the results of the disclosure of the guidance used. 
The results show that 76% of the assurance statements made reference to the standards or guidelines used. This is broadly consistent with the results that were found in previous studies of Deegan et al. (2006b), Owen and O’Dwyer (2007), and Ernst&Young (2008). Deegan et al. (2006b) found that 63% of their European sample mentioned the standards used and this number was 71% in the study of Ernst&Young (2008). While Owen and O’Dwyer (2005) found that just 29% of the assurance statements indicated the standards used, the findings in the Owen and O’Dwyer (2007) study show that this percentage has been increased to 79%. This suggests that the use of and the reference to standards/guidelines is growing over time, which is also observable in table 5.8. 
Table 5.10 shows that some assurance statements made reference to more than one assurance standard. As Owen and O’Dwyer’s (2007) study, there appears to be pre-eminence in the use of the AA1000AS and the ISAE 3000 in the current study.  These were also the most common standards referred to with 38 and 73 out of 131assurance statements mentioning the use of the AA1000AS and the ISAE 3000 respectively. Further, a national assurance standard that was issued within a particular country was used in 25 cases. Although accountants and non-accountants both were almost the same likely to disclose information on the standards used, they differ in the types used. The ISO and the firm’s specific guidance were only used by non-accountants. The AA1000AS was also referred in 14 (58%) assurance statements provided by them. Accountants primarily used the International Standard on Assurance Engagements (ISAE/ISAE 3000), with 72 (67%) assurance statements mentioning this type. They also referred to the AA1000AS, but in all cases, this standard was used in combination with another. This is in line with the paper of AccountAbility and KPMG (2005) where it is stated that the AA1000AS can complement other related assurance standards, which is likely to deliver enhanced results. 

Table 5.10: Types of standards/guidelines used 
5.5.5	Level of assurance

The level of assurance identifies the level of work performed behind an assurance engagement.  CorporateRegister.com (2008, pp.14) states that a reasonable or a limited assurance level may be referenced to “based on the quality of systems and evidence, scope of work and time invested in the task” (therefore resulting in a differing degree of assurance engagement risk).  These two levels of assurance are also identified by the ‘International Framework for Assurance Engagements’.  A statement of reasonable assurance reflects a broader scope of work than one to a level of limited assurance. Due to the difference in the work performed, the assurance engagement risk is also different, hence the form of conclusion (positive vs. negative) is also different. Disclosing the level of assurance may inform the readers the degree of reliance they may place on the contents of the CSR report. 
The results in table 5.8 show that the level of assurance provided was addressed in 110 (64%) assurance statements.  Over the period of study, disclosures of assurance level have been increased (from 33% in 2001 to 71% in 2006). As indicated in table 5.11, level of assurance provided appears in five forms. Of the 110 assurance statements that made reference to the assurance level, 14 referred to reasonable, 48 to limited, 14 to a combination of the former two, 28 to moderate, and 6 to other levels. The standard issued by the IAASB (2004) on the ‘International Framework for Assurance Engagements’ notes that the evidence-gathering procedures of a moderate assurance engagement are limited. As such, the term moderate assurance could be changed into limited assurance, leading up to 76 (69%) assurance statements indicating the assurance level as limited. The reason why a reasonable level of assurance is provided in limited cases is because the absence of generally accepted criteria for CSR reporting and the inherent limitations of CSR data. This explains why the majority referenced to a limited level of assurance.  Owen and O’Dwyer (2007) note that assurance providers are trying to downplay any expectations through the provision of low levels of assurance. For example, URSVL in its limited assurance on Unilever’s 2004 Environmental Report makes clear that “The verification statement provided herein by URSVL is not intended to be used as advice or as the basis for any decisions, including, without limitation, financial or investment decisions”.

Table 5.11: Level of assurance 
According to IAASB (2004), sometimes two levels of assurance can be provided in one assurance assignment. As is evident in this sample, reasonable assurance is often given on financial data and figures, while limited assurance is provided on the other information in the CSR report. For example, in its ‘assurance report’ on Philips’ Sustainability Report 2004, KPMG indicates that “Our engagement was designed to provide the readers of The Report with: reasonable assurance on the data on financial performance and limited assurance on the data on total energy consumption, total water intake, total waste and total direct CO2 emissions and the other information in The Report”. As could be derived from table 5.11, accountants (76%) were much more likely than non-accountants (19%) to indicate the level of assurance provided. The level of assurance seems to be less relevant to non-accountants. This is consistent with the findings of studies of Owen an O’Dwyer (2007) and Ernst&Young (2008).

5.5.6	Nature of work performed

Disclosing information on the work performed may help the readers to understand the nature of the assurance conveyed by the assurance statement (IAASB, 2004). Table 5.12 illustrates the results as found in the current study. It seems that there is no clear trend in the disclosures on the work

Table 5.12: Nature of work performed over the years 2001-2006

performed, however, improvements in the extent of work performed are observable. Consistent with the findings of Ball et al. (2000) and Owen and O’Dwyer (2005;2007), the majority of assurance providers have interviewed key personnel (87%) and reviewed the data and figures in the CSR report (71%).  The results indicate that just 58% of the assurance statements mentioned that data collection and reporting systems have been reviewed, which is in contrast with Owen and O’Dwyer (2005; 2007). This number was 85% and 90% respectively in their study.  Further, 55% mentioned the review of the documentary system or documents as the work performed, while site visits were carried out by 47% of the assurance providers. Compared to the study of Ball et al. (2000), disclosures regarding the work performed have been improved.  Other methodologies mentioned by assurance providers were the review of internal control system (7%); the review of reporting criteria (10%) and the review of stakeholders’ involvement process (14%). 

5.5.7	Stakeholder engagement

Just as CSR reporting discloses CSR performance of an organization in terms of stakeholders, then it is essential to involve stakeholders in identifying and addressing the major CSR issues. In this regard, the AA1000AS assumes that accountability for CSR means that the reporting organization: addresses the issues that are important to stakeholders; recognizes these issues in all the relevant places within the organization; and engages in a dialogue with the stakeholders and responds to their needs (KPMG, 2006, pp.25). As so, assurance providers are expected to have an insight on this accountability process of the reporting organization and hence, they are expected to assess these aspects. Some standards and guidelines refer to the importance of involving stakeholders in the assurance process. Further, Park (2004) argues that involving stakeholders could make the assurance task part of an accountability process. The AA1000AS provides guidance to assurance providers in reaching an opinion on the three key principles materiality, completeness and responsiveness, which are centrally concerned with issues of stakeholder engagement. Before turning to these three principles, the results of direct communication with stakeholders will be considered first.
As part of the assurance process, assurance providers may interview the stakeholders of the reporting organization to obtain views on what they find important regarding CSR issues and what their main concerns are. While 87% of the assurance statements referred to interviewing key personnel in the assurance process, the results in table 5.13 shows that only 8% (compared to 10% and 17% in Owen and O’Dwyer, 2005; 2007 and 12% in CorporateRegister.com, 2008) indicated that stakeholders were interviewed. 

Table 5.13: Engagement with the stakeholders 
Materiality
The materiality principle requires the assurance provider to evaluate whether the reporting organization’s CSR report incorporates the “information about its ‘sustainability performance’ required by its stakeholders for them to be able to make informed judgments, decisions and actions” (AccountAbility, 2003, pp.14). Information is considered material “if its omission or misrepresentation in the Report could influence the decisions and actions of the Reporting Organization’s Stakeholders” (AccountAbility, 2003, pp.15).
In this study, 58% of the assurance statements made some reference to materiality issues. Consistent with the studies of Owen and O’Dwyer (2005; 2007), the majority of these disclosures were very broad statements rather than detailed indications of how materiality had been set or what exactly ‘material’ meant. For example, Ernst&Young and Deloitte&Touche’s joint assurance on Suez’s 2003 Activities and Sustainable Development Report states that “Based on our review, we did not identify any material anomalies likely to call into question the data examined in the entities under review in relation to the reporting criteria ……”. While some assurance statements clearly dealt with the issue of materiality, a number of them addressed materiality from the reporting organization’s perspective (e.g. it is the reporting organization’s duty for the identification of material issues) rather than considering it in terms of stakeholders’ needs. The latter one was only found in 29 assurance statements. For instance, CSR Network’s ‘Independent assurance statement’ included in Danisco’s Sustainability report 2005 notes under the heading ‘materiality’ that “…… the Report and web text include information on Danisco’s main sustainability performance issues and should enable stakeholders to make informed judgements”. In its ‘Independent Assurance Report on Novozymes' Environmental and Social Responsibility Reporting’ as it appears in The Novozymes Report 2005, PricewaterhouseCoopers formed the opinion “The presentation of data and information related to Novozymes’ social and environmental performance assists key stakeholders in interpreting the reporting in relation to their decision-making needs ...... In our opinion, the environmental and social responsibility data and information in the Annual Report address aspects material to Novozymes’ key stakeholders”. While it was more common for accountants (compared to non-accountants) to address materiality in their assurance statements, non-accountants were more likely to address materiality from a stakeholder’s perspective. 
As can be derived from table 5.13, there is progress in information disclosures with respect to materiality. Such disclosures have improved from 29% in 2002 to 67% in 2006. The explanation for such improvements may be the influence of standards/guidelines that were released over that time in the area of assurance on CSR reports (especially AA1000AS).

Completeness
Stakeholders are interested in whether the CSR report has included all the relevant information. According to KPMG (2006), assurance providers have a duty to evaluate the completeness of the CSR report. In a similar vein, AccountAbility (2003) incorporated completeness as one of the core principles in its AA1000 Series of standards. The completeness principle focuses on the evaluation of “the extent to which the reporting organization can identify and understand material aspects of its sustainability performance associated with activities, products, services, sites and subsidiaries, for which it has management and legal responsibility” (AccountAbility, 2003, pp. 17). 
As indicated in table 5.13, 67 (39%) assurance statements provided some information regarding the completeness of the CSR report. In more than half (58%) of these assurance statements , AccountAbility’s AA1000AS was noted as the assurance standard employed in the assurance exercise. It was often the case that a greater clarity on completeness was provided in the statements in which the AA1000AS was mentioned.  Consistent with the findings of Owen and O’Dwyer (2005; 2007), non-accountants (61% of their statements) were much more likely than accountants (32%) to address the issue of completeness. A clear example of such a disclosure was found in PricewaterhouseCoopers’  ‘Independent assurance report on Novozymes’ Environmental and Social Responsibility Reporting’ included in The Novozymes Report 2005 where they state that “In our opinion, the environmental and social responsibility data and information in the Annual Report have been included as a result of relevant activities for identifying and understanding environmental and social performance, impacts and key stakeholder views”.  Some assurance providers consider completeness by offering comments (usually in the form of recommendations) on this matter. This was for example illustrated in the ‘Independent verification statement 2005’ on ABB Annual Report 2005-Sustainability review provided by Det Norske Veritas where they state that “……, there are projects in countries with potential social risks, and which are not a part of the internal reporting system. Therefore, in our opinion, ABB should strive to further extend the boundaries of the Review to enhance transparency and inclusiveness”. 
In a few cases, assurance providers expressed reservations with regard to areas of incompleteness in reporting. For example, KPMG states in their ‘Assurance Report’ on Fortis’ Sustainability Report 2005 that “Compared with 2004, the scope of the Report has been extended to operations outside the Benelux countries. However, the Report does not yet provide comprehensive information on the sustainability performance of Fortis as a whole. We recommend that Fortis step up its efforts to ensure complete and consistent reporting across all businesses and countries in 2006”.   
Some assurance providers recognized the inherent difficulties of providing assurance on completeness.   In a number of assurance statements it was clearly emphasized that there was no assessment of the completeness of the information in the CSR report. For example, in their joint assurance on Royal Dutch Petroleum’s The Shell report 2004 – Meeting the energy challenge – our progress in contributing to sustainable development, KPMG and PricewaterhouseCoopers explicitly state that “We have not undertaken any work to confirm that all relevant issues are included or that the balance of the Report is appropriate”. 

Responsiveness
Last but not least, the responsiveness principle requires the assurance provider to evaluate “whether the reporting organization has responded to stakeholder concerns, policies and relevant standards, and adequately communicated these responses in its report” (AccountAbility, 2003, pp. 18). 
The results in table 5.13 indicate that in 29% (the same as Owen and O’Dwyer, 2005; 38% compared to Owen and O’Dwyer, 2007) of the assurance statements, reference was made that an evaluation had been carried out regarding the extent to which the reporting organization sought to identify and respond to the interest and concerns of its stakeholders. A very clear and detailed example appeared in the assurance statement provided by PricewaterhouseCoopers on Novo Nordisk’s Annual report-financial, social and environmental performance 2006. In their conclusion in relation to responsiveness, they state: 
“ - through the Annual Report, the online report and other communications, Novo Nordisk is responsive to significant issues raised by corporate stakeholders in an accessible manner.
- Novo Nordisk has an effective process and relevant governance structures in place for defining its response to corporate stakeholders as well as processes in place to promote integration in management and business processes although registration, controls and reporting processes for some environmental and health and safety data at site level can be strengthened.
- Novo Nordisk has policies, programmes and procedures to address material stakeholder concerns and recently processes have been initiated to develop a response to the issue of ‘responsible lobbying’ as well as a comprehensive approach to human rights beyond existing key human rights initiatives relating to diversity, including non-discrimination, access to health and responsible purchasing.”
Sometimes, comments as to responsiveness were in the form of recommendations. Assurance providers usually suggest that the reporting organization should do more on this aspect. As is specified in AccountAbility’s (2003) AA1000AS, some assurance providers have indeed considered and made reference to the timeliness and accessibility of the CSR report to stakeholders as well.   
The overall results show that addressing the issue of responsiveness to stakeholders in assurance statements has improved over the period of the study, with the number of assurance statements that address responsiveness increasing from 0% in 2001 to 35% in 2006. Further, non-accountants (46%) were more likely to assess the responsiveness issue than accountants (24%). 

5.6	Results of the assurance engagement

It could be said that the conclusion or opinion provided by the assurance provider is the most important component of the assurance statement as it ultimately provides the intended readers with the essential assurance. Disclosures on the results of the assurance engagement is the subject of this section.
The wording of the opinion is determined by the level of assurance provided. In a reasonable assurance engagement, the conclusion should be stated in a positive form, while a limited assurance engagement leads to a conclusion that is negatively formulated (IAASB/IFAC, 2004). The results show that in 97% of the assurance statements from which the level of assurance could be derived, the form of conclusion was in conformity with the stated level of assurance. As noted earlier, the level of assurance could not be derived in 36% of the cases. For these assurance statements, the majority of the assurance providers expressed a conclusion in a positive form. The question here is whether readers can assume that a reasonable level of assurance was achieved or not. Further, in three assurance statements, the conclusion was not stated in agreement with the level of assurance. One was provided by an accountant and the remaining two were provided by non-accountants. For example, a negatively conclusion was formulated while it was indicated that a reasonable level of assurance was achieved for one subject matter and limited assurance for another subject matter. This will probably create confusion among readers. 
Although nearly all assurance statements (99%) contain a conclusion, the terms used in describing the conclusion vary considerably. Deegan et al. (2006b, pp.359) state that “the greater the variation in terminology, the greater the ambiguity in the meanings of assurance conclusions”. Table 5.14 shows the different terms used by the two types of assurance providers within the conclusions of assurance statements. The results indicate that accountants favored to use the terms ‘consistent’, ‘in accordance with’ and ‘not unfairly stated’ in their conclusion. The last-mentioned term was used to express a conclusion in a negative form. Further, the above mentioned terms were only used by accountants. A typical example is PricewaterhouseCoopers’ assurance on SCA Sustainability Report 2006 where they state that “Based on our limited review procedures, nothing has come to our attention that ……have not, in all material aspects, been prepared in accordance with the above stated criteria”. In the studies of Owen and O’Dwyer (2005; 2007, pp.89), there was an absence of the use of the words ‘true and 

Table 5.14: Term(s) used for the expression of the assurance opinion

Table 5.14 continued

fair’, ‘which are prevalent in financial statement opinions’. By contrast, this study indicates that the term ‘true and fair’ was referred to in 3 assurance statements, all provided by non-accountants. The reason for the reluctance of using these terms by accountants is perhaps because these terms are reserved specially for the opinion on financial statements. 
Non-accountants preferred to use terms such as ‘balanced’, ‘fair and balanced’, ‘robust’ and ‘reliable and coherent’ in their conclusions. For example, in their ‘verifier’s statement’ on Unilever’s Environmental Performance Report 2003 – report on progress and 2002 data, URSVL states under the heading ‘opinion’ on completeness that “URSVL considers that the report text and data relating to environmental performance and management addresses the significant environmental aspects of the business and these have been reported in a fair and balanced manner”. Consistent with the findings of Owen and O’Dwyer (2005; 2007), non-accountants were more likely than accountants to focus on performance issues in their opinion. The majority of assurance statements provided by non-accountants addressed the issue of completeness of reporting and balance of the CSR report in the opinion. It could be noted that more and more accountants provide comments on the performance of the reporting organization instead of only on the accuracy of reported data in their conclusions. For example, PricewaterhouseCoopers forms the following conclusion in their assurance on Syngenta’s Corporate Responsibility Report 2006: “Based on our work described in this report, nothing has come to our attention that causes us to believe that the CR information based on the subject matter defined above does not give a fair picture of CR performance, in all material respects”. Some assurance providers that dealt with performance issues also referred to the assessment of the CSR report against the three AA1000 principles in their opinion consistent with their adoption of AA1000AS. In 41% of the cases that focus on performance, the AA1000AS was employed. It is likely to suspect that the new standard AA1000AS has an influential role in the improvement of providing comments on performance. 
While various studies (such as Kamp-Roelands, 2002; Deegan et. al, 2006b) calls for the use of more uniform terms within the conclusion, this is not apparent in the current study. There is still great variability in the terms that assurance providers use to express their opinions. In 2006, for example, 30 different terms were used within the conclusion. It seems that the terminology of the assurance opinion is far from being harmonized. 
Some assurance providers, especially accountants, tended to limit the reliance that readers may place on their conclusion by the expression of limitations (on the scope or of inherent nature) in the assurance statement. A clear example was found in Bureau Veritas Quality International’s (BVQI) ‘Independent attestation statement’ on STMicroelectronics’ Corporate Responsibility Report 2004. Under the heading ‘Considerations and limitations’ they state: “In relation to our work and conclusions, the following considerations and limitations should be noted: Certain information is excluded from the scope of our work, as stated above. Environmental and social data are subject to inherent limitations due to their nature and the methods used for determining, calculating or estimating such data. Therefore this independent attestation statement should not be relied upon to detect all errors, omissions or misstatements in the reported data”. 

5.7	Summary

The focus of this chapter was on the analysis of the data. In the first part of the chapter, consideration was given to the type of assurance provider and their competencies and the general characteristics of the assurance statement such as the title and addressee of the statement. While all assurance providers clearly identified themselves in the assurance statement, only 27% have disclosed their competencies. When the 29 different titles that were given to assurance statements were classified in eight major groups, the term ‘assurance’ was most frequently used by assurance providers to title their statement. 
Although various guidelines stress the importance to specify an addressee within the assurance statement, more than half of the assurance providers were reluctant to do this. Consistent with previous studies (e.g. Owen et. al, 2005; 2007; Deegan et. al, 2006), where addressees were identified, the majority were addressed to an internal party rather than to stakeholders.   
The second part focused on aspects that are considered to be crucial for assurance. Specifically, the disclosures on the independence of the assurance provider, work undertaken during the assignment and the results of the assurance engagement were investigated. The results show that 88% of the assurance statements made some reference to the independence of the assurance provider. The number of assurance statements referring to independence has significantly improved over the years of the study. 
Turning to the work undertaken during the assignment, accountants were more likely than non-accountants to disclose information regarding objectives, criteria and standards used, scope, and level of assurance. Notable is that none of the assurance providers have indicated that the objective and scope of the assurance engagement were determined through a consultative approach with stakeholders. For the evaluation of the subject matter, the majority of assurance providers disclosed that they have interviewed key personnel and reviewed the data and figures of the CSR report. There is an improvement in the number of assurance statements that addressed the issues of materiality, completeness and responsiveness. These are centrally concerned with issues of stakeholder engagement. 
There was a great variation in the terminology used for the expression of the assurance opinion. Further, the term(s) used differ between the two types assurance providers. It was more common for non-accountants to focus on performance issues in their opinion. However, more and more accountants were addressing performance issues instead of only focusing on data accuracy in their opinion. 

Chapter 6.	Choice of assurance provider

As was showed in chapter five, a greater part of the assurance statements analyzed in this study were provided by accountants. It is interesting to explore what factors might be related to the choice of assurance provider.  
Hypotheses
It was apparent from several studies (e.g. CPA Australia, 2004; Deegan et al., 2006b) that variations exist across countries in the type of assurance provider for CSR reports.  It has been argued that the corporate governance structure of countries has an influence on the demand for assurance. Hence, this country-level factor might also have an influence on the type of assurance provider. As such, countries in this sample are classified into 4 groups according to their corporate governance system: Anglo-American; French; German; and Scandinavian legal traditions ; . In general, countries with an Anglo-American legal tradition are defined as countries with a shareholder orientation, whereas countries with a German legal tradition are typified by a stakeholder centered approach. Countries following the remaining two legal traditions are more difficult to classify purely as shareholder or stakeholder oriented. However, these countries are generally defined as non-shareholder oriented economies that embrace most of the elements of the stakeholder model. Both the studies of CPA Australia (2004) and Deegan et al. (2006b) shows that in the Anglo-American countries United Kingdom and Australia the majority of the assurance statements were provided by a party other than accountants, while the level of accountants participation  in CSR assurance was much higher in continental European countries. From this, it is expected that CSR reports of  organizations in countries with a stakeholder orientation are more likely to be assured by an accountancy firm. This leads to the following hypothesis: 
H1: Organizations in countries with a stakeholder orientation are more likely to choose accountants as the assurance provider for their CSR report.
Another factor that might be related to the choice of assurance provider is the industry in which the reporting organization is operating in. Due to their greater environmental and/or social impact, some industries are more exposed to environmental and social risks and thus organizations in these industries will need more user credibility. It is reasonable to assume that these organizations choose assurance from accountants. This type of assurance provider is member of the auditing profession, who has well-developed global standards and specific guidelines which govern the conduct of an audit or assurance engagement. It is also a profession with an established history and credible reputation. Further, accountants also possess a lot of experience with providing assurance. While non-accountants (specialists consultancies) may have a higher level of specific expertise in the subject matter, such expertise could be obtained by accountancy firms by including a multidisciplinary team, which is very common nowadays. These factors help increase public confidence in the quality of the work of accountants. Due to these factors, accountants are usually perceived as the higher quality assurance provider (as compared to other types of assurance providers). As a result, it is expected that organizations in sensitive industries (who need more user credibility) would be more likely to choose assurance from accountants. This leads to the following hypothesis:
H2: Organizations in sensitive industries are more likely to select accountants as the assurance provider.
It is commonly believed that the fees of CSR assurance services charged are higher for accountants than other assurance providers. Large organizations can sustain higher assurance fees than small organizations. This suggests that large organizations, compared to small organizations, would be more likely to choose accountants. Another factor that might be related to why large organizations would select accountants above other assurance providers for their CSR report is the fact that they already have a (Big Four) accounting firm for the audit of their financial statements. It is likely that these organizations would select the same accounting firm for their CSR reports because the accounting firm already knows the organization. The above discussion leads to the following hypothesis:
H3: Organizations of a larger size are more likely to choose accountants as the assurance provider compared with organizations of a smaller size.
In order to test the above formulated hypotheses, required information is obtained from Datastream database, Compustat global database and the website of STOXX . The hypotheses are tested using a logistic regression model. This type of regression is commonly used in the analysis of binary response problems. Since the response variable in the regression is a binary variable (assurance provider is accountant or assurance provider is non-accountant), the use of logistic regression is very suitable. The model tested is as follows:
Assurance provider = f (Industry, Country, Size)
The dependent variable Assurance provider is a binary variable which takes the value of 0 if assurance is provided by a non-accountant and the value of 1 in the case of assurance provided by an accountant. The first independent variable Industry is a dummy variable representing the category of industry to which the organization belongs. Each organization is classified in one of the ten Industry Classification Benchmark (ICB)  industries based on their classification on the website of STOXX. Four of the ten industries are considered to be a sensitive industry in this study. Organizations in oil&gas, basic materials, utilities and financials industries are generally considered as operating in environmentally/socially high impact industries. Organizations of oil&gas and basic materials industries extract non-renewable natural resources with major consequences for the environment as well as the community. The oil&gas industry is also under increased public attention due to problems such as oil spills. Utilities organizations produce high levels of greenhouse gas emissions. As such, they are exposed to community concerns about the effects of these greenhouse gas emissions on the environment and human health.  Finally, the financials industry indirectly exerts critical impacts on the environment and community through a range of activities including project financing and investing. The variable Industry takes the value of 1 if the organization operates in a sensitive industry and otherwise 0. For the second independent variable Country three dummy variables are created. Corresponding to previous discussion, this variable describes the four categories of corporate governance model. It is expected that organizations in countries with a stakeholder orientation (German legal tradition) are more likely to choose accountants as the assurance provider than organizations in countries following the remaining three legal traditions.  The variable Country equals 0 for French legal tradition; 1 for Anglo-American legal tradition; 2 for German legal tradition; and 3 for Scandinavian legal tradition. The last independent variable Size represents the size of the organization measured by the natural logarithm of total sales over the corresponding year. The variable total sales has high standard deviations (see table 6.1), indicating a wide range of total sales values. By transforming these original total sales values into natural logarithm values (which is a common rescaling approach), the mean and median values are brought closer together. As such, the influence of extremely large values is neutralized. In this study, a significance level of 5% is maintained for the statistical tests.

Results
Table 6.1 presents the descriptive statistics of the variables. For 136 assurance statements, the assurance provider was an accountant. Except 4 cases, all assurance by accountants was provided by the Big Four . The remaining assurance statements were provided by non-accountants. Further, reporting organizations are divided over two groups of industry, with 45,7% of the organizations operating in a sensitive industry and 54,3% in others. Considering the country aspect, more than half of the organizations operate in a country with a French legal tradition, while respectively 3 (1,7%), 27 (15,6%) and 50 (28,9%) organizations operate in a country with an Anglo-American, German and Scandinavian legal tradition. With respect to the sales, it has a mean of 30764,67 millions U.S. dollars with a standard deviation of 34827,28 millions U.S. dollars. 

Table 6.1: Descriptive statistics

The results for the logistic regression with assurance provider as dependent variable are reported in table 6.2. The model Chi-square of 28,715 is highly significant, which means that there is adequate fit of data to the model. Further, the R2 is 0,237, meaning that 23,7 percent of the variation in the dependent variable assurance provider is explained by the independent variables Industry, Country, and Size. With respect to the variables of interest, table 6.2 illustrates that none of the coefficients of the variable Country are statistically significant. This means that the overall effect of Country is not significant, indicating no significant relationships between Country and Assurance provider. Therefore,  H1is not supported by the results. However, the results show strong support for H2, i.e. that organizations operating in sensitive industries are more likely to choose assurance from accountants compared with organizations operating in non-sensitive industries. The variable Industry is positively significant at the 1% level. Finally, the analysis shows a positive coefficient of Size (p = 0,040). As predicted in H3, the likelihood of having a CSR report assured by accountants significantly increases for larger organizations. Thus, Size is significantly predicting whether an organization seeks assurance from accountants instead of other assurance providers. 

Table 6.2: Logistic regression results

This chapter dealt with the factors that might be related to the choice of a particular type of assurance provider for the CSR report. Firstly, three hypotheses are formulated. Thereafter, the logistic model specification was dealt with. At last, the results of the model are presented. Based on the results of chapter 5 and this chapter, some conclusions can be drawn. These will be given in the next chapter. 

 

Chapter 7.	Discussion and conclusion 

This study has been conducted in order to investigate the ability of assurance practices in enhancing transparency and accountability for organizational stakeholders by the examination of assurance statements that appeared in CSR reports of organizations listed on the Dow Jones STOXX Europe Sustainability Index during the years 2001-2006.
From a theoretical view, assurance has the possibility to enhance accountability and transparency to stakeholders. However, various studies have raised questions about the extent to which it actually succeeds in this function. The concerns raised are primarily related to the independence of the assurance provider; scope limitations by reporting organizations; absence of stakeholder engagement within the assurance process; lack of consideration of the issues materiality and completeness (from a stakeholder perspective) by assurance providers; and ambiguity and variation in wording of the conclusion. Using an evaluative framework that has been developed drawing on previous studies and the GRI, FEE, AccountAbility, and IFAC standards/guidelines, this study has tried to evaluate a more up to date and longer sample of assurance statements to see whether they still suffer from the concerns raised. 
Independence is a cornerstone of the performance of assurance activities. If the assurance provider is not independent, the assurance statement provided by him/her would be lacking of credibility. As such, the majority of assurance providers (88%) have referred to their independence (in one or several ways) in the assurance statement. Although accountants were more likely to refer to their independence than non-accountants, the latter group tended to provide a greater detail on this matter instead of only making minimal reference to it. To demonstrate their independence, both type of assurance providers primarily described the respective responsibilities of the reporting organization and themselves. While improvements in disclosing information on independence was observable in the sample, it should be noted that only a limited number of assurance providers clarify their independence and/or explain how this is accomplished in addition to the statement that they are independent.
Compared to previous studies (see Owen and O’Dwyer, 2005; 2007; Deegan et al., 2006), the number of assurance statements containing an addressee has been improved. In 95% of the cases, these were provided by accountants. It is questionable whether the assurance provider’s primary concern is the interests of stakeholders since only 16% of the assurance statements which referred to an addressee were addressed to them. It was more common to specify a party internal to the reporting organization (e.g. management, Board of Directors and the organization itself) as the addressee. As Owen and O’Dwyer (2005) state, such a reference may create an impression “that an internal assurance exercise is simply being released publicly with limited considerations being given to the information demands and expectations of external stakeholders” (in Deegan et. al, 2006b, pp. 341). A managerial turn was also evident in the lack of a consultative approach with stakeholders in the determination of the objectives and the scope of the assurance engagement. Although nearly all assurance statements have made reference to the scope, scope limitations and restrictions (imposed by management) were also prevalent (55%). All these suggest a continuing trend reflecting managerial control over the assurance practice. An option to overcome this problem would be that stakeholders (in the form of a stakeholder panel) select and commission the assurance provider and they should determine in consultation with the reporting organization the scope of the assurance engagement and the level of assurance to be provided by the assurance provider. 
Further, a considerable part of the assurance statements have failed to disclose information that give context to the work performed. These statements fell short in indicating the criteria that have been used to assess the CSR report (with 38% making no reference to it); the standards employed which governed the assurance process (with 24% making no reference to it); and the level of assurance (with 36% making no reference to it). As found in previous studies (see Owen and O’Dwyer, 2007; Ernst&Young, 2008), the level of assurance seems to be less relevant to non-accountants since only 19% made reference to it compared to 76% for accountants. It was common practice for assurance providers to provide a limited rather than a reasonable level of assurance. This may be caused by the absence of generally accepted criteria for CSR reporting and the inherent limitations of CSR data. As found in previous studies, this sample also shows a high variety in the terms used to describe assurance statements. This was also the case for the wording of the conclusion/opinion. For example, within those assurance statements where a title has been given, 29 different titles were used. The great variability in the terms that assurance providers used to label their statements and to express their opinions may cause great confusion to readers of CSR reports and assurance statements when making comparisons between different organizations. In addition, the great variability suggests that assurance statement’s title and assurance opinion’s terminology is far from being standardized. All these shortcomings have obvious implications for the value of assurance practices from the perspective of stakeholders. It could be expected that assurance statements will continue to suffer from these shortcomings unless an universal standard or guideline is established that serve as a framework for assurance practices of CSR which need to be followed by all assurance providers. 
A major concern of prior studies is the lack of stakeholders’ engagement. The failure to engage stakeholders in the assurance process was also present in the results found. Despite evidence of improvements in the number of assurance statements that addressed the issues of materiality, completeness and responsiveness during the period of study, overall there is still a lack of evaluations of these issues. In assurance statements where references were made to issues related to materiality, very broad statements were offered rather than detailed indication of for instance what materiality meant. Further, in numerous cases, the issue of materiality was not addressed from a stakeholder’s perspective. This was more common among accountants. If the assurance statement is to give assurance with regard to the completeness of the information in the CSR report, interviewing stakeholders (e.g. about what they consider to be important) would be essential in the assurance process. However, just a few assurance statements (8%) have indicated that stakeholders were interviewed during the assurance process. Stakeholders are interested in whether the CSR report has addressed all the important issues. But the results showed that the issue of completeness of reporting seemed to be less relevant to assurance providers, since only 39% have considered this issue. Further, while scope limitations and restrictions were prevalent, assurance providers have failed to consider whether these are justified and/or to draw attention to incomplete reporting.  Non-accountants were not only more likely than accountants to address issues of completeness and responsiveness, they have also focused much more on performance issues within their opinions. However, more and more accountants are moving beyond an opinion on the accuracy of reported data by also referring to the completeness, fairness and overall balance of the issues dealt with within the CSR report. 
Taking all together, the effectiveness of assurance practices in discharging stakeholder accountability still remains a concern. However, although a lack of independence, a reluctance to address assurance statements to stakeholders, a managerial control over the assurance practice, and an absence of stakeholder engagement in the assurance process were also found in this study, various improvements have been identified over the period of study. It can be suggested that the new standards/guidelines in the area of assurance on CSR reports (in particular AA1000AS and ISAE 3000) may have contributed to these improvements. The results revealed that it frequently appeared to be the case that disclosures concerning stakeholders were found in assurance statements in which the AA1000AS was noted as the assurance standard used. For example, in 58% and 76% of the assurance statements where information is disclosed respectively regarding the completeness and responsiveness issue, the AA1000AS was noted as the assurance standard employed. 
As additional analysis, the factors that might be related to the choice of accountants as assurance provider was examined. The results of the logistic regression model with Assurance provider as dependent variable showed that organizations operating in sensitive industries are more likely to choose assurance from accountants compared with organizations operating in non-sensitive industries. Further, the likelihood of having a CSR report assured by accountants significantly increases for larger organizations.
It can be concluded that current CSR assurance practices has failed to enhance organizational transparency and accountability.  There is the need for improvements on this point. In my opinion, the desired effect can be reached through the development of a suitable international standard governing CSR assurance practices that will be adopted by all assurance providers or through legislation. 

Limitations and future research

This study is subject to several limitations. First, there is a certain amount of subjectivity in the interpretation of assurance statements. Such an inherent limitation always exists in this kind of research. Second, the results might be different when also including assurance statements in the sample which have been left out for a certain reason as described in section 4.3. Third, the examination of assurance practices was through an analysis of assurance statements disclosures. As such, perceptions of various parties regarding the effectiveness of assurance practices could have not been obtained. Future studies might undertake interviews or conduct surveys with assurance providers and stakeholders to obtain their views on the effectiveness of recent assurance practices in enhancing transparency and accountability for organizational stakeholders. Furthermore, the challenges that assurance providers may face in their commitment to assure accountability might become clear from these interviews. As is evident in this study, reporting organizations primarily engage accountants as the assurance provider of their CSR reports, while the results indicate that non-accountants are more likely to address accountability focused elements. Future work could examine what the true incentives of reporting organizations are for selecting or not selecting a particular type of assurance provider. 

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Appendix 1	Overview of reporting organizations and assurance statements included in the sample (2001-2006)

Overview of reporting organizations and assurance statements included in the sample 2001

Overview of reporting organizations and assurance statements included in the sample 2002

Overview of reporting organizations and assurance statements included in the sample 2003

Overview of reporting organizations and assurance statements included in the sample 2004

Overview of reporting organizations and assurance statements included in the sample 2005

Overview of reporting organizations and assurance statements included in the sample 2006

Appendix 2		Evaluative framework