Environmental Audit and Compliance: the Role of Audit Policies in Inducing Audit Adoption and Compliance Behavior

Compliance with environmental regulations in the US has traditionally been enforced through a system of monitoring and penalties. While the system has resulted in environmental improvement in air quality, violations of the Clean Air Act still occur. This book evaluates the effectiveness of environmental auditing and audit policies in the US in inducing compliance behavior of the firms. We find facilities that self-audit are more likely to be and stay longer in compliance with Clean Air Act regulations. Audit privilege and immunity policies have significant and opposite effects on facilities. While audit privilege policies reduce incentives for compliance, audit immunity policies significantly increase them, particularly for firms that have high costs of abatement and would otherwise have a higher likelihood of being in violation.