External assurance on non-financial information
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Companies purchase assurance when the fee is lower than the benefit. The fee increases with the inherent risk of an engagement. The assurance of quantitative as opposed to qualitative, and environmental as opposed to social indicators has less risk, because respectively more evidence is available and more familiarity exists with the indicators. As lower fees increase the probability that the benefit of assurance exceeds the cost, the expectation is that quantitative and environmental indicators are more often assured. This relationship is expected to be more prevalent for companies with superior sustainability performance, because their benefit of assurance is lower. Inferior companies can get insights about their not already good performance with assurance. In a sample of mandated firms, the percentage of quantitative indicators explains the increase in probability of assurance, with a larger effect for companies with better sustainability performance. However, this effect seems to be only present when the indicator is also environmental. Providers have more experience and more expertise, such as ISO 14064, for quantitative environmental indicators. Furthermore, the interaction is not significant for assurance providers using AA1000AS. This can be attributed to standard AA1000AS requiring more disclosures, which improves the probability of assurance for qualitative indicators.
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