Dr. Appelbaum Publishes Groundbreaking Study on ESG Audits in Top Accounting Journal
Posted in: Accounting & Finance

Dr. Deniz Appelbaum, Feliciano School of Business Associate Professor in the Accounting and Finance department, wrote a paper that was accepted for publication in Accounting Horizons, an A-rated journal on the ABDC list. The publication, The Double Materiality Audit: Assurance of ESG Disclosure, examines the evolving role of auditors in assessing Environmental, Social, and Governance (ESG) disclosures alongside traditional financial audits. The concept of double materiality is central to this discussion, requiring auditors to evaluate not only the financial impact of ESG factors on a company but also the company’s broader ESG impact on stakeholders. The paper highlights current challenges in ESG reporting, such as the lack of standardized frameworks, the absence of mandatory assurance requirements, and difficulties in handling big ESG data. The authors argue that as regulatory bodies like the SEC propose stricter ESG disclosure mandates, external auditors will play a crucial role in ensuring the reliability and accuracy of such reports.
A key focus of the paper is the development of an audit approach incorporating a double materiality lens, integrating financial data, ESG indices, and external datasets for more robust assurance. The authors propose an audit roadmap that aligns financial audits with ESG assurance, emphasizing the use of analytics, scenario modeling, and expert consultation. They discuss the growing demand for ESG transparency among investors and regulators, outlining the need for enhanced methodologies in risk assessment, internal controls, and data verification. The research suggests that auditors should leverage advanced technologies, including machine learning and predictive analytics, to process vast amounts of ESG-related information effectively.
The paper also acknowledges significant challenges in ESG assurance, including auditor independence concerns, the reliability of ESG ratings, and the complexity of integrating ESG risk assessments into financial audits. The authors emphasize that the increasing intersection of financial and ESG disclosures necessitates a shift in auditing practices, requiring new skills, tools, and regulatory adaptations. Ultimately, the study underscores the growing importance of ESG audits in financial reporting and corporate accountability, positioning the double materiality framework as essential for future audit practices.