3.1. Audit quality and ESG

Agency theory is one of the most significant theories used in auditing [40]. According to the theory developed by Jensen and Meckling [38], auditing is one of the most vital means of reducing information asymmetry, minimizing opportunistic behaviour of any party, including managers and owners, and serves as a crucial means for enhancing ESG practices [11, 41]. According to DeAngelo [42] the audit can be deemed of high quality if it contributes to reducing the risk of misinterpretation and misconduct. While Qader et al. [43] and Taha, Alaa [44] confirm that the quality of auditing plays an important and vital role in ensuring compliance with the regulations, laws and accounting standards governing it, thereby reducing reputational risks and the likelihood of penalties. Thus, audit quality expertise reflects the ability of auditors to discover errors that seriously affect financial reports. Watkins et al. [45] indicate that the quality of auditing aims to enhance confidence, restrict self-exploitation, and provide highly accurate financial reports. Auditing theory indicates that audit quality is based on the effectiveness of the external auditor [46]. Hammami and Zadeh [47] demonstrated that auditing quality effectively helps reduce information asymmetry between company management and stakeholders. Similarly, disclosing non-financial information such as ESG enhances the credibility and reliability of the information obtained by stakeholders [48]. In this context, audit quality is the key factor that enhances the credibility and reliability of the data that company managers share with all stakeholders regarding the company’s status and the level of commitment to implementing ESG activities [47]. In this regard, numerous studies have proposed different measures to assess audit quality. Based on the results of DeFond andZhang [49] the audit quality measures can be categorized into three groups: measures based on outputs, measures based on inputs, and other measures. Therefore, we use two basic metrics to evaluate audit quality in this study: the Big 4 and audit fees. Rajgopal et al. [25] highlight that the most significant input measure of audit quality is audit fees.

3.2. Audit quality (Big 4) and ESG

Agency theory is one of the most significant theories applied in the field of auditing [40]. This theory posits that there is a conflict of interest between shareholders and company managers. In this regard, Big 4 auditors are regarded as delivering high-quality auditing processes and practices as a result of the availability of technology, modern auditing methods, and continuous training, and they are not directly linked to clients [50, 51]. Likewise, Bacha et al. [52] and Le and Moor [53] indicate that Big 4 auditors provide high-quality auditing due to their great independence, stemming from their exposure to greater risks if they fail to perform their work accurately. They rely on revenues from the organization rather than directly from a client, exposing them to high risks of litigation and decreasing the cost of debt. The findings of Gong et al. [54] confirm that one of the reasons for the low quality of auditing is the implementation by auditors who are not part of the Big 4. Likewise, the results of Zahid et al. [14] indicate that the Big 4 ensures transparency, reliability, and value in companies’ financial statements, as a result of their commitment to high auditing standards. Ado et al. [55] indicate that the Big 4 seeks to protect its reputation and is diligently working to implement auditing standards without breaching them. On the other hand, Agyei-Mensah [41] highlights that the Big 4 performs significantly in social responsibility. In this regard, Zahid et al. [14] argues that the Big 4 substantial investment in technology and human capital enhances corporate social responsibility more credibly. On the other hand, Xiao et al. [56] argues that the Big 4 can effectively contribute to the preparation of social responsibility reports in a way that strengthens their accountability regarding information and assurance. The results of Saeed et al. [57] confirm that the Big 4 ensures the reliability and credibility of disclosing non-financial information or sustainability reports. In contrast, the findings of Chung et al. [58] indicate that the reporting of ESG practices increases if sustainability reports are audited by the Big 4. Diab Eissa [59] highlights that companies that engage in ESG practices typically hire auditors from the Big 4. This aligns with the results of Zhang and Guo [60] study, which showed that the Big4 have extensive experience in providing ESG auditing services due to their robust internal control systems, highly qualified auditors and clear regulations. These insights are consistent with the assumption of stakeholder theory, which assumes that companies have obligations to all parties, including shareholders, customers, suppliers, and society. Therefore, this theory supports the notion that companies whose ESG reports are audited by the Big 4 tend to demonstrate high ESG performance. As a result, we anticipate that audit quality as measured by the Big 4 will play a crucial role in diminishing information asymmetry between management and stakeholders. Consequently, company managers will disclose both basic and private information about the company to the owners, including disclosure of ESG practices. However, managers require a mechanism and means to validate the credibility and reliability of ESG practices, which may indicate the presence of the Big 4 in these companies. Therefore, we expect that the presence of high-quality audits through the Big 4 will enhance ESG practices by improving the transparency and credibility of information thereby legitimizing it through its contribution to environmental and social initiatives. According to the above, we formulate the following hypothesis.

1. H1: Audit quality, as measured by (Big 4), positively impacts ESG performance.

3.3. Audit quality (Audit fees) and ESG

In recent years, significant attention has been directed towards the relationship between audit fees and ESG practices. While audit fees are usually charged for traditional financial reporting audits, some studies suggest a link between audit fees and corporate performance concerning ESG. The findings of Song et al. [61] indicate that better ESG performance results in lower audit fees for Chinese companies. Similarly, the findings of Valls Martínez et al. [62] reveal a significant and widespread association between large audit fees and companies’ implementation of ESG practices. Audits entail a thorough evaluation of the company, including risk assessment, ESG practices, resource allocation, and profitability audit [63]. Therefore, auditors are required to assess ESG reports, in addition to evaluating other company behaviors. This ensures that companies receive support in enhancing their implementation of ESG initiatives and working towards reducing reputational risks [64]. Hence, it can be asserted that higher audit fees, as a measure of audit quality, diminish information asymmetry and improve the transparency of reports. Consequently, the effectiveness of ESG practices and the transparency of companies’ operations are closely linked to higher audit quality, which correlates with increased audit fees ultimately bolstering the legitimacy and reputation of companies [7, 62].

DeFond and Zhang [49] reported that audit fees are among the most significant indicators of audit quality based on inputs. Asante-appiah and Lambert [65] also state that audit fees are one of the key variables in ensuring high quality. The results also demonstrate a strong correlation between fluctuations in audit quality and audit fees. Therefore, companies invest in high audit quality by paying higher fees to enhance the credibility and transparency of their information and reports, including ESG reports [17, 66]. In this regard, Chen et al. [66] argue that paying higher audit fees improves audit quality, which reflects positively on the honesty and reliability of the ESG report. This aligns with the resource-based theory perspective that companies’ disclosure of ESG-related reports is evidence of intangible resources, which requires more audits to investigate and thus higher audit fees [67]. On the contrary, Chen et al. [66] indicate that companies’ involvement in social and environmental activities and initiatives correlates with lower fees. Similarly, Song et al. [61] using a sample of Chinese companies, show a relationship between lower audit fees and better ESG practices. This supports the institutional theory perspective that companies aim to legitimize themselves and meet the goals and expectations of stakeholders by participating in ESG initiatives, so these companies may have lower audit fees as a result of their commitment, participation, and transparency towards stakeholders [67, 68].

Despite the varying results in the literature, we contend that the rise in audit fees stems from increased auditing of the company’s operations, which leads to obtaining results with high transparency and credibility. Therefore, it is anticipated that enhanced audit quality will improve the transparency and credibility of ESG reports. This paper posits that higher audit fees, as an indicator of audit quality, bolster the credibility and transparency of ESG reports. This contributes to gaining investors’ confidence and enhancing the legitimacy of the company’s work. Conversely, in the absence of transparent and highly credible reports, the company’s work may lack legitimacy. We formulate the second hypothesis as follows:

1. H2: Audit quality, as measured by audit fees, positively impacts ESG performance.

3.4. Media coverage

Media controversy surrounding a company’s activities and practices significantly impacts the risk assessment and audit efforts of financial reporting auditors. Consequently, auditors perceive an increased risk of errors or fraud when a company is involved in media controversy. This compels them to enhance their audit procedures, implement a more rigorous audit, invest additional time and effort, and consequently charge higher fees. The objective of this response is to ensure the accuracy and reliability of financial statements, financial reports and ESG reports. In support of this, Koh and Tong [69] found that companies exposed to media controversy tend to pay higher audit fees compared to those not involved in or associated with controversial activities. Similarly, the findings of Burke and Hoitash [70] indicate that negative media coverage of a company’s ESG practices is primarily linked to an increase in audit fees, which is a direct result of the heightened risks auditors must address. Additionally, Moalla and Dammak [17] demonstrate that high audit fees promote greater disclosure of companies’ practices regarding ESG activities. Thus, auditors respond to media controversy by intensifying their procedures and ensuring high audit quality to maintain the credibility and reliability of financial statements, thereby leading to increased audit fees.

This study proposes that controversies surrounding ESG can influence the correlation between audit quality and ESG performance. When negative ESG information concerning a company, such as media reports of questionable actions or product scandals, emerges, it can impact ESG practices. This study suggests that ESG controversies play a moderating role in the relationship between audit quality and the disclosure of more transparent ESG information.

According to, Moalla and Dammak [17] the performance and legitimacy of companies are continually assessed based on knowledge, norms, values, and the extent of their contribution to environmental and social activities. All stakeholders, such as investors, customers, and society, regard media coverage as a more credible source of data compared to corporate or analyst reports [71]. The results of the literature indicate that media coverage affects companies’ behaviours and practices, acting as a control tool [72], enhancing transparency and protecting the interests of external agents [73], brooding the impact of regulatory procedures within the company [19], and reducing agency costs [74]. This aligns with media agenda-setting theory, which suggests that media coverage plays a significant role in improving companies’ performance concerning ESG activities. However, media coverage can yield both positive and negative effects [17]. Companies enhance their reputation and legitimacy through ESG practices [75, 76]. Positive media coverage motivates them to improve their ESG-related practices to sustain their legitimacy [17, 77]. Conversely, negative coverage can harm a company’s reputation and lead to a decline in performance, prompting defensive and adaptive mechanisms to restore legitimacy [7, 74]. Following legitimacy theory, exposure to media coverage aids companies in enhancing their ESG-related practices, thereby enhancing reputation and legitimacy [17, 78]. This fosters transparency and delivers information to stakeholders such as investors, consumers, governments, and society [79]. Therefore, increased media pressure is anticipated to further stimulate demand for ESG practices [17], and media coverage is positively correlated with increased ESG practices [80]. Media coverage can function as a mechanism for monitoring auditors’ work, ensuring performance enhancement and improvement behaviour [19]. Media pressure is thought to positively influence auditors’ commitment to independent and efficient work out of fear of damaging their reputation. According to Sharma and Song [81], auditors leverage media coverage to understand how ESG practices affect financial reporting. Moalla and Dammak [17] and Burke and Hoitash [70] indicate a connection between rising audit fees, audit time, greater effort in auditing ESG reports, and reputational risks resulting from negative media coverage. In contrast, Emma et al. [82] confirm that the use of sustainability assurance and auditing is a crucial factor in bolstering the company’s legitimacy and confronting negative media coverage regarding ESG reports. Therefore, media coverage as an external governance factor is expected to play an important role in strengthening the relationship between audit quality and ESG practices. Based on the above, we present the following hypotheses:

1. H3: Media coverage plays a moderating role in the relationship between audit quality (Big4) and ESG performance.
2. H4: Media coverage plays a moderating role in the relationship between audit quality (audit fees) and ESG performance.

3.5. Chinese context of audit quality and ESG

With the Chinese government’s emphasis on green finance, ESG and sustainability reports have seen significant development. According to Zahid et al. [83] the continued growth of ESG activities in China is attributed to two main factors: first, the commitment of Chinese organizations and the government to promoting green finance to ensure harmonious economic and environmental development in the world’s second-largest economy. Second, China is working to attract global investment, so it is mandating listed companies to disclose ESG activities [84]. Despite the progress in the application and implementation of ESG activities by Chinese companies, specific standards for evaluating these practices are still lacking alongside the necessity for companies to conduct independent audits of ESG reports to ensure the enhancement of information. In addition, accounting firms should develop and enhance auditor talent to ensure effective auditing of ESG reports. This can be achieved by appointing highly qualified auditors who can practice effective auditing and identify risks through ESG reports [60]. In this regard, the results of Wang et al. [85] confirm that promoting robust development in the Chinese economy is linked to enhancing ESG performance and ensuring this performance through auditing. Effective scrutiny of ESG reporting adds credibility, enhances investor confidence, and supports sustainable economic growth. Finally, the results of Shen et al. [9] confirm that the rise in regulations and regulatory procedures in China, which call for the engagement of Chinese companies in ESG activities was significantly associated with increased audit implementation. This regulatory impetus emphasizes the critical role of audit quality in enhancing the credibility and reliability of ESG reporting.

4.1. Sample

We utilized the Refinitiv Eikon database to gather the sample used in this study, which comprises 377 companies with a total of 2,639 observations during the period from 2017 to 2023. Following Zahid et al. [83] we excluded all companies operating in the insurance and banking sectors due to the unique regulatory environments, business models, and financial characteristics of these entities, which can significantly differ from those of non-financial companies. Additionally, companies with missing data were removed. The final dataset includes 303 firms, corresponding to 2121 observations. Table 1 and S1 Appendix provide information on the distribution of the sample of companies used in this study based on the annual distribution and industry type.

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Table 1. Sample selection.

https://doi.org/10.1371/journal.pone.0312510.t001

4.2. Variable measurements

4.2.3. Moderating and controlling variables.

We utilize media coverage as a moderating variable in this study, which is measured through the ESG controversy score. The controversy surrounding ESG issues includes negative news related to company product scandals and undesirable activities in the media that adversely affect the market value [91, 92]. According to, Refinitiv Eikon Datastream [93] the score is calculated by considering negative media coverage such as legislative disputes, fines, and lawsuits filed against companies. The final result is derived from assessing 23 diverse controversial topics about ESG activities and practices, and this is measured by a percentage, which reflects the level of disagreement or controversy that occurred in the company during a specific period, usually a financial year [94]. Finally, following Hammami and Hendijani Zadeh [7], Moalla and Dammak [17] and Zahid et al. [83] we have included some factors as controlling variables that have an impact on the relationship between audit quality and ESG performance. Table 2 presents the definition of all variables used in this paper.

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Table 2. Definition of variables.

https://doi.org/10.1371/journal.pone.0312510.t002

4.3. Empirical model

Based on the theoretical foundation of this study and the description of the variables, we established the study model using four different models. Model 1 demonstrates the direct relationship between audit quality (BIG4) and ESG performance. Model 2 outlines the direct relationship between audit quality (AUDFEE) and the transparency of ESG practices. Through this analysis, we seek to determine how the influence of audit quality on ESG transparency varies or remains consistent based on the use of two different variables.

Model 1 and Model 2: Direct effect (BIG 4, AUDFEE and ESG)

ESGit = β0+ β1 BIG4 it + β2 AUDFEEit +β3 AUDTE it + β4 BBSit + β5 BGDit + β6 CSRAUD it + β7 ROA it + β8 FSIZE it + β9 LEV it + β10 CURit + YEAR_dummiesit + INDUSTRY_ dummiesit + COMPANY_dummiesit + ε it (1)

In addition to that we used media coverage, measured by ESG controversy as a moderating variable (BIG4 * MedCo it and AUDFEE* MedCo it) and it was used in models 3 and 4.

Model 3 and Model 4: The moderating effect of MedCo (BIG4 and AUDFEE)

ESGiit = β0+ β1 BIG4it + β2 BIG4 * MedCoit + β3 AUDFEE * MedCoit + β4 AUDTEit + β5 BBSit + β6 BGDit + β7 CSRAUDit + β8 ROAit + β9 FSIZEit + β10 LEVit + β11 CURit + YEAR_dummiesit + INDUSTRY_ dummiesit + COMPANY_dummiesit + εit (2)

We employ the stepwise estimation method to develop the model and include variables to mitigate any potential bias caused by omitted variables. We have also constructed earlier models (1–4) that encompass all variables. It is important to note that the symbol i denotes the firm, t signifies the years, and ε represents the error term. Finally, to prevent common endogeneity problems resulting from the passage of time across industries and companies, we include year, industry, and company dummies.

4.4. Ethics approval

This article does not contain any studies with human participants or animals performed by any of the authors.

5.1. Descriptive statistics

Using STATA version 17 software all statistical analyses, tests, and regressions were conducted. The descriptive statistics presented in Table 3 indicate a moderate level of ESG practices 39.58, among the sampled companies. This score suggests that the ESG practices of Chinese companies are acceptable and satisfactory [90]. This score differs from the results reported by Zhang et al. [96] who discussed the relationship between ESG practices and audit fees using a sample of Chinese companies from 2011 to 2020. They reported a score of 20.93. Therefore, the ESG score shown in Table 3 indicates that Chinese companies require further improvement in their ESG practices to ensure and improve their informational capability. The results also indicate a significant discrepancy between the ESG practices implemented by Chinese companies. The lowest value for the ESG score reached 0.99, while the highest value reached 93.31. These findings align with Zahid et al. [83] and Zhang et al. [84] which confirm that the degree of ESG practices in Chinese companies is lower than in the United States and Europe. This indicates a lack of focus and incentives to encourage companies to disclose ESG practices. In addition, the variable exhibits a standard deviation of 17.36, which is less than the mean. This indicates the diversity of the sample as well as the different levels of ESG practices across the companies in the sample.

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Table 3. Descriptive statistics.

https://doi.org/10.1371/journal.pone.0312510.t003

Table 3 also indicates that a few Chinese companies (mean = 0.17) are audited by the Big 4. These findings align with Zahid et al. [83] which shows a lack of commitment from Chinese companies toward Big 4 audit services. This suggests that Chinese companies have relatively low-level auditing operations despite the perception that Big 4 audits are of high quality due to the experience, independence, and professionalism of their members as well as the credibility and reliability of their reports [53, 57]. The average score of audit fees for these firms stands at 12.96, characterized by a low standard deviation of 1.19, indicating that most of these companies undergo costly audit processes [17]. We standardize the audit fees by converting them to thousands of US Dollars and calculating the natural logarithm of the fees paid by client companies to audit firms or auditors. It is important to note that, the level of financial statement authentication, reliability of internal control, and the assessment of fraud risk including fraudulent transactions are some of the elements that determine the range of AUDFEE, values from the minimum to the maximum. Furthermore, the sample firms’ media coverage of ESG practices, or MECOV, has a mean value of 97.57 and a standard deviation of 11.94. The average percentage of women serving on the board is 51.29%, while the proportion of board members with significant expertise in finance or specialized industry knowledge is 36.74%. Additionally, the average audit tenure AUDTE, representing the duration of the auditor’s engagement with the company, stands at 5.67. Moreover, the average proportion of companies with an external auditor for their CSR sustainability report is 0.06. This indicates that there are a limited number of Chinese companies that have external auditors to review CSR reports. The average ROA is 0.05, and the average firm size is 9.60. Furthermore, the mean of LEV is 0.20 and the mean of CUR is 4.94.

5.2. Correlation

S2 Appendix presents the findings of a correlation analysis. The results indicate a positive (0.278***) and significant correlation (p-value <0.01) between audit fees and ESG. This suggests that companies paying higher audit fees are more likely to provide thorough and transparent disclosures regarding ESG activities [96]. Moreover, the correlation analysis reveals a significant negative correlation between MEDCOV and ESG (-0.104***). This indicates that companies facing more controversies related to ESG matters tend to exhibit lower levels of ESG practices. In contrast, firms with higher ESG practices are less vulnerable to controversies highlighted in media coverage. Regarding the control variables, AUDTE shows a positive and significant correlation with one audit quality measure by Big 4 firms. This suggests that extended AUDTE may enhance audit quality, as evidenced by the increased preference for Big 4 auditors. This contradicts the findings of previous studies, which show that AUDTE is negatively related to audit quality [50, 103]. Additionally, the relationship between AUDTE and MEDCO is negative, indicating that companies experiencing more ESG-related controversies tend to have shorter AUDTE. Furthermore, FSIZE demonstrates a positive association with ESG practices, suggesting that larger firms are more likely to be transparent and disclose information regarding ESG issues. Moreover, the presence of external CSR audits shows a positive association with ESG practices, suggesting that companies tend to disclose information on ESG issues when they undergo external audits for CSR reporting.

The results indicate that all correlation values are below the multicollinearity threshold of 0.80, suggesting no concerns about multicollinearity. The highest value reached 0.66 for the control variable FSIZE and its relationship with AUDFEE [104]. Conversely, we utilized the VIF, and the results indicate that all values are below the critical level of 10 [105] and also below 5 [106]. We also use Tolerance (TOL) known as the inverse of VIF, to evaluate the linear relationship. TOL values below 0.1, approaching 0, indicate the possibility of a linear relationship between the study variables. In contrast, TOL values close to 1 suggest no linear relationship between the study variables. The results presented in S2 Appendix indicate that all TOL values are close to 1, providing further evidence that there is no multicollinearity issue among all variables of our study [107–109].

After conducting individual tests on effects, residual normality, heteroscedasticity, and autocorrelation, we have identified issues in several areas. Based on the results, we found non-normality of residuals as indicated by skewness and kurtosis tests, heteroscedasticity based on the Breusch–Pagan/Cook–Weisberg tests, and autocorrelation detected through the Wooldridge test across all models. Therefore, to address issues related to normality, heteroscedasticity, and autocorrelation of errors in estimating the presented models, the generalized least squares (GLS) method is more suitable [17].

5.3. Generalized least squares (GLS)

5.3.1.Audit quality and ESG.

Using the Big 4 and audit fees to measure the direct effect of audit quality on the ESG performance in Chinese companies, we analyzed two models (Model 1) and (Model 2) (see Table 4). The results indicated a positive effect of the Big 4 on ESG practices but it was not statistically significant at its value (Coeff = 0.391). This suggests that the Big 4 does not significantly impact enhancing ESG practices in Chinese companies. These results confirm the findings from the descriptive test in Table 3, which indicated that few Chinese companies use Big 4 services. Instead, they rely on other auditing firms. These results are consistent with the findings by Zahid et al. [83] who also found no effect of audit quality as measured by the Big 4 on enhancing ESG. This result contradicts the view of Dakhli [104] who emphasizes the importance of the Big 4 in enhancing ESG practices. These results align with the institutional theory perspective. Therefore, in the Chinese context, regulatory pressures may not prioritize the use of Big 4 auditors. Instead, firms rely on other audit firms. However, these results contradict the view of legitimacy theory, which suggests that companies seek to legitimize their operations through practices that are acceptable to society [7]. So, the use of Big 4 auditors may be seen as part of that.

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Table 4. Regression results using generalized least square.

https://doi.org/10.1371/journal.pone.0312510.t004

Additionally, in Model 2, the results indicate that the effect of audit fees (AUDFEE) on ESG practices is positive but statistically insignificant (Coeff = 0.392). These findings suggest that companies do not recognize the importance of comprehensive and professional auditing practices in showcasing their dedication to implementing ESG principles and fulfilling the expectations of all stakeholders. This outcome does not support the perspective of agency theory, which asserts that enhancing audit quality contributes to restricting opportunistic corporate behaviour, alleviating information asymmetry, and enhancing ESG practice [41, 110, 111]. Thus, H2 is rejected. Logically, the increase in audit fees paid by companies reflects their intention to improve the transparency and credibility of financial reporting which ignores ESG reporting. These results contradict with Chen et al. [66] those who confirm that companies that pay higher audit fees seek to enhance the credibility and transparency of their reports in a way that instils the confidence of investors and stakeholders. Likewise, Zhang et al. [96] assert that companies that disclose their ESG practices pay high audit fees. Therefore, companies that wish to demonstrate a high degree of disclosure of ESG practices face high audit risks, necessitating higher fees. This is consistent with the risk premium theory, which indicates that increasing audit fees contributes to a high allocation of resources and enhances the credibility of auditors’ high professional and ethical commitment. This, in turn, affects the promotion of the disclosure of ESG practices by companies [112].

Following Hammami and Hendijani Zadeh [7], Moalla and Dammak [17] and Zahid et al. [83] we have included several factors as controlling variables that have an impact on the relationship between audit quality and ESG practices. To address endogeneity issues, we employed panel GLS regression with fixed effects (year, industry, and company). The results indicate that the presence of a CSR external auditor (CSRAUD) has a positive and significant impact at a 1% level of significance (p-value < 0.01) across all models. These findings suggest that companies benefit from the expertise, support, credibility, alignment with stakeholder expectations, risk management, and the competitive advantage provided by CSR external auditors, leading to enhanced ESG practices. These auditors possess specialized knowledge and professional skills in evaluating and auditing ESG-related issues, which contributes to the transparency and accuracy of ESG practices. Additionally, when considering all the models, FSIZE shows a positive and statistically significant (p-value < 0.01) influence on ESG performance. These findings suggest that larger firms tend to exhibit greater ESG practices. This aligns with the findings of Chung et al. [58] which indicate that large companies whether voluntarily or mandatorily tend to have greater ESG practices. The results of the remaining control variables are presented in Table 4.

5.4. Additional analysis

5.4.1.Robustness check.

5.4.1.1. Generalized Method of Moments (GMM). To address endogeneity concerns, we employed GMM as illustrated in Table 5. The application of GMM is one of the most effective statistical methods used to investigate key sources of endogeneity, such as simultaneity, dynamic homogeneity, and unobserved heterogeneity [114, 115]. The results presented in Table 5 reveal that the p-values of AR (2) are non-significant across all models (M1 to M4). Therefore, these values are not influenced by second-order autocorrelation. Furthermore, the GMM indicates a significant positive moderating effect of media coverage on the relationship between audit fees and ESG practices. This result contrasts with the main analysis shown in Table 4. suggesting that further investigation in future research is warranted. Nevertheless, the overall results shown in Table 5 closely align with those of the main analysis presented in Table 5, indicating the reliability and robustness of our findings. The insignificant p-values of the Hansen statistic test for instruments across all models confirm the validity of the instruments utilized. On the other hand, the GMM approach effectively addresses the issues of simultaneity, endogeneity, and unobserved heterogeneity, which are common challenges when using audit fees as a proxy for audit quality in investigations of the concerns of using Big4 and audit fees as indicators of audit quality. Therefore, the results from GMM presented in Table 5 align closely with the main findings in Table 4, reinforcing the robustness of our model. Thus, using audit fees as a proxy for audit quality is particularly significant in the context of business scale. In this regard, larger companies tend to incur higher audit fees due to the complexity and scope of their operations [116]. To differentiate audit fees from merely reflecting business scale, our models control for firm size (FSIZE) and other relevant variables such as industry and company effects. Additionally, we employed fixed effects models and incorporated (CSRAUD), whose positive and significant results further validate the use of audit quality proxies. Therefore, while audit fees may reflect business scale to some extent, our inclusion of firm size and industry-specific control ensures that audit fees still provide meaningful insight into audit quality. Finally, the consistency of results between the GMM approach and the main analysis further supports the robustness of Big 4 and audit fees as effective proxies for audit quality, reinforcing their role in ESG performance evaluation.

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Table 5. Regression results using GMM.

https://doi.org/10.1371/journal.pone.0312510.t005

6.1. Managerial implications

Based on the results of the study, the theoretical and managerial implications can be presented as follows:

1. Due to growing investor interest in companies that engage in ESG activities, Chinese companies must integrate these principles into their operations. Our sample results indicated a limited number of companies using the Big 4, indicating a positive but not significant effect of the Big 4 on enhancing ESG practices. This suggests that Chinese companies should focus on improving ESG outcomes by expanding their use of reputable Big 4 services. This can enhance the company’s reputation and attract more investors.
2. Given the overall trend towards achieving sustainability, Chinese organizations and the government should ensure the standardization of ESG standards and encourage the use of governance tools, such as Big 4 services, to enhanced reporting transparency and attract international investors.
3. The Chinese government should strive to improve the ESG classification and implementation scores of listed companies by taking steps and enacting incentive legislation that encourages companies to adopt ESG practices. Moreover, the Chinese government can develop an audit and assurance system that reliably and independently identifies and classifies various ESG activities.

6.2. Practical implications

The findings of this study also have practical implications, the most important of which are:

1. There is a need to improve the disclosure of Chinese companies’ adoption and implementation of ESG activities. This requires regulators to require companies to issue ESG reports transparently and comprehensively.
2. To enhance the reliability of companies’ reports regarding ESG activities, these companies’ reports must be audited by independent auditing firms thereby enhancing investor confidence.
3. Regulators should standardize the criteria for evaluating ESG reports, and this is fundamentally linked to the global trend towards achieving sustainability. Therefore, clear mechanisms and policies can be developed for companies to follow and implement to ensure that they reliably engage in ESG activities.
4. The study results showed a significant impact of audit fees on ESG performance, so companies should prioritize this as a crucial factor to ensure ESG reporting, which means conducting more independent and thorough audits.
5. Companies should actively engage and participate in media strategies to enhance their reputation. In return, they should continuously monitor the negative effects of media coverage and address challenges to ensure their reputation is enhanced and their efforts to achieve sustainability are demonstrated.

Note: The results of skewness and kurtosis, Breusch–Pagan/Cook–Weisberg, and Wooldridge tests are available upon request