This study reports an experiment conducted to examine auditors' materiality judgments for nonfinancial performance information (NFPI) in the context of Integrated Reporting; a setting where auditors do not have well-established guidelines or benchmarks. We examine two fundamental factors underlying Integrated Reporting that are predicted to influence auditors' NFPI materiality judgments, namely, the level of strategic relevance associated with the NFPI being assessed, and the provision of a strategy map (a visual representation of linkages between the firm's strategic objectives) to auditors. Our study provides evidence that while auditors judge misstated NFPI of low strategic relevance to be less material than misstated NFPI with high strategic relevance, they only make this distinction when a strategy map is present. As integrating a client's strategy in the process of evaluating materiality is important, our result suggests that the presence of a strategy map potentially improves the efficient allocation of assurance resources. The importance of understanding how qualitative factors affect materiality judgments in nonfinancial assurance engagements is reflected in the fact that accounting firms view such assurance as mainstream. Our findings not only have implications for standard setters developing further guidance for determining audit materiality under Integrated Reporting, but also more generally for auditors who are providing assurance services for NFPI.

Managers are increasingly aware that strategic judgments need to be made in the context of risk assessments. It has been proposed that strategic performance management systems, such as the balanced scorecard (BSC), offer a useful framework for integrating strategic risk and performance information to provide managers with a more comprehensive overview of their strategy. In this study, we conduct an experiment to investigate whether integrating strategic risk information in a BSC affects managers' responses to different strategic risk profiles when making strategy evaluation and recommendation judgments. Specifically, we provide strategic risk information either as a stand-alone list (a stand-alone approach), or incorporated in a BSC (an integrated approach). We also vary the risk profile of the strategy provided, by manipulating whether the strategy has relatively higher risks associated with performance drivers (high performance driver risks) or relatively higher risks associated with performance outcomes (high performance outcome risks). Our results show that managers make less favorable strategy evaluation and recommendation judgments with high performance driver risks than with high performance outcome risks when strategic risk information is integrated in a BSC, but not when the strategic risks are presented as a stand-alone list. While we find a significant difference in strategic risk profile effects between the two presentation formats for strategy recommendation judgments, this difference is not significant for strategy evaluation judgments. Overall, our study shows that how organizations choose to combine the reporting of strategic risk and performance information is important for managers making strategic judgments.

Consistent with the prevailing socio-political ideology of China, the Chinese government offers financial assistance to firms, including many listed companies. Government subsidies are provided for several reasons including support for investment, support to enable firms to pursue social objectives, and support to prop up ailing firms in order to protect jobs. We examine the value relevance of government subsidies for Chinese listed companies and structure our study around three questions. First, whether the subsidies received by Chinese listed companies are value relevant consistent with their time-series properties. Second, whether the value relevance of subsidies depends on the purpose for which they are used. Third, whether the value relevance of subsidies depends on the channel through which they are granted. We motivate these research questions through interviews of accountants, managers, academics, government officials and financial analysts. Through large sample analyses, we confirm that subsidies are positively related to firm value, but less so for distressed firms and subsidies granted through non-tax channels. Our study contributes to improved understanding of Chinese-style capitalism.