Does Communication Between External Auditors and Those Charged With Governance Positively Affect Corporate Social Responsibility? Evidence From Korea

Abstract

We examine the effect of communication between external auditors and those charged with governance has on corporate social responsibility (CSR), focusing on amendment of the Act on External Audit of Stock Companies of Korea which emphasizes communication. We find that higher frequency of communication increases CSR, with faceto-face meetings having a stronger positive effect than text-based. This finding emphasizes the need for auditors to actively communicate face-to-face with those charged with governance, as this will increase the auditors’ accurate grasp of the firm and improve the quality of the audit services and financial reporting, leading to improved CSR.