Early evidence on auditor’s intentions and readiness to provide mandatory sustainability reporting assurance services in the European Union: A study of regulatory effect in Lithuania

Download This Article

This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

Sustainability reporting has expanded in recent years making a major impact on financial markets (Hazaea et al., 2022). Yet, the credibility of sustainability reports remains an issue (Bernini & La Rosa, 2024) due to greenwashing and a lack of oversight. The European Union’s (EU’s) new Corporate Sustainability Reporting Directive (CSRD) introduces mandatory sustainability reporting assurance (SRA), establishing a new regulated SRA market whose characteristics are not yet clear. This study aims to identify the intentions and readiness of Lithuanian audit firms to provide SRA services under CSRD. It employed a survey method and collected data from 74 Lithuanian audit firms. The results show that only 29.73 percent of sample companies intend to enter the SRA market indicating a relatively low interest in providing such services, mainly due to a lack of resources, expertise, and underdeveloped regulations. Those interested are either large audit firms with an existing base of clients compliant with CSRD or small local companies seeking new business opportunities. Our findings show a generally low level of readiness, with only a few companies having made arrangements to start providing new services. It underscores the need for in-depth training, methodological guidance, and supervision to ensure the efficient functioning of the Lithuanian SRA market.

Keywords: Sustainability Reporting, Sustainability Reporting Assurance, Audit Firms, CSRD, Big 6

Authors’ individual contribution: Conceptualization — R.L. and D.R.; Methodology — R.L. and D.R.; Formal Analysis — R.L. and D.R.; Investigation — R.L.; Resources — R.L.; Data Curation — D.R.; Writing — Original Draft — D.R.; Writing — Review & Editing — R.L.; Visualization — R.L. and D.R.; Project Administration — R.L.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: L84, M42, M48

Received: 14.05.2024
Accepted: 15.01.2025
Published online: 17.01.2025

How to cite this paper: Legenzova, R., & Raudonienė, D. (2025). Early evidence on auditor’s intentions and readiness to provide mandatory sustainability reporting assurance services in the European Union: A study of regulatory effect in Lithuania. Journal of Governance & Regulation, 14(1), 139–149. https://doi.org/10.22495/jgrv14i1art13