THE RISKS OF ENVIRONMENTAL ACTIVITIES : How are these risks handled by the corporate governance and the external auditor?

Abstract: The purpose of this study is to examine external auditors´ current practices when performing an audit of companies with environmentally hazardous activities, i.e. if the environmental risks are taken into account by the auditor of an audit. To understand what the auditors should review, this study also examines how these companies control their environmental risks. A qualitative method has been conducted based on ten semi-structured interviews, consisting of auditors experienced in auditing industrial companies as well as corporate managers of the largest industrial companies within the Stockholm Stock Exchange. Furthermore, information has also been obtained from annual reports of the companies. This study shows that the auditors` practices, when conducting audits of environmental hazardous companies, do not include a comprehensive investigation of risks arising from environmental hazardous activities. Furthermore, the study shows that big, listed industrial companies have a strong internal control that manages their environmental risks. The companies are aware that they are exposed to risks due to their operations and they are taking adequate actions to control them such as different management systems.