Does Corporate Accountability Towards Biodiversity Loss and Species Extinction Protection Account for Audit Efforts: New Insights from External Auditing

This study investigates whether and how corporate biodiversity disclosure affects external audit efforts. Using a deep‐learning‐expanded text analysis of corporate social responsibility reports for heavily polluting Chinese companies from 2009 to 2021, this paper examines the relation between biodiversity disclosure and audit efforts. The empirical evidence reveals that firms with more extensive biodiversity disclosure exhibit significantly greater external audit efforts. The results remain robust to a series of endogeneity checks, including two‐stage least squares estimation and a combined propensity score matching and difference‐in‐differences analysis. Further analyses show that this positive relation is more pronounced for non‐state‐owned enterprises and firms located in eastern China. Mechanism tests reveal that biodiversity disclosure by heavy polluters triggers a ‘horn effect’, which elevates auditors' perceptions of composite audit risk, thereby driving greater audit effort. Interestingly, while biodiversity disclosures increase audit duration, they do not translate into higher audit fees. Collectively, the findings demonstrate that corporate biodiversity accountability increases audit risk and effort, highlighting the economic consequences of sustainability reporting within the auditing context.