This paper focuses on how the decision by a firm between substantive corporate social responsibility (CSR) and greenwashing could depend on auditor compensation for CSR audits. I build a model where a firm chooses between substantive CSR or greenwashing, discloses information for this decision, and hires an independent third party ("auditor") to do a CSR audit of this disclosure. For this audit, the auditor chooses the probability of detecting greenwashing by the firm. The fee that the firm pays to the auditor has two parts - a fixed part that is paid regardless of whether the auditor detects greenwashing, and a variable part that is paid only if the auditor detects greenwashing. The model yields two sets of results. First, when the variable part of the fee is higher, the auditor has stronger incentives to detect greenwashing. Therefore, the probability that the firm chooses greenwashing is lower. Second, the firm maximizes expected profit by setting the variable part of the fee at its maximum value. These results show how a firm can structure auditor compensation for CSR audits in a way that affects its choice between substantive CSR and greenwashing and maximizes its benefits from CSR audits.

Program:

17:00 – 17:10 – opening speech by Elena Rogova, Professor, Department of Finance and Accounting, GSOM SPbU

17:10 – 17:55 – presentation by Jeffrey Downing, topic: “Audit of corporate social responsibility of companies, remuneration of auditors and marketing tricks”

17:55 – 18:25 – discussion

18:25 – 18:30 Closing remarks: announcements of the next workshops

Jeffrey Dale Downing, Ph.D., Associate Professor, Department of Finance and Accounting, GSOM SPbU. Ph.D. in accounting — Norwegian School of Economics (Norway). Since 2013 Associate Professor Jeffrey Dale Downing has worked in Norwegian and Russian universities.

Anna V. Kuznetsova

Chief Specialist of the Department of Strategic Planning and Analytics of SPbU

menshikova@gsom.spbu.ru