The Impact of ESG Disclosure on Audit Processes: Optimizing Risk Identification from a Sustainability Perspective

Abstract

With Environmental, Social, and Governance (ESG) disclosures at the center of corporate transparency and accountability, their influence on audit procedures has increasingly gained prominence. This paper investigates the influence of ESG disclosure on audit practice, focusing on how it enhances risk identification efficacy within sustainability-based frameworks. Employing a meta-analytic approach, this study integrates the findings of peer-reviewed empirical research to critically investigate the relationship between ESG transparency and audit judgment quality. The results indicate a statistically significant positive association between high-quality ESG reporting and better audit quality, particularly regarding risk identification, checking for compliance, and stakeholder assurance. Drawing from agency theory, legitimacy theory, and stakeholder theory, this paper constructs ESG disclosure as a tool for reputation management and a mechanism for risk mitigation through audit enhancement. The findings also indicate a higher probability of focused audit testing, risk-salient engagements, and greater auditor accountability for companies with high transparency in ESG, especially when ESG data are embedded in the overall corporate reporting framework. External audit functions and audit committees are increasingly employing ESG metrics as leading warning signs for operational risks, regulatory risks, and reputational risks. The study emphasizes the need for mandatory uniform ESG reporting guidelines towards comparability and consistency to optimize audit efficiency and strategic management. Recommendations are extended to auditors, regulators, and corporate governance stakeholders aiming to resynchronize audit planning with evolving ESG accountability systems. The findings also support policy initiatives to bring ESG assurance within audit mandates globally.