assurance of social environment and sustainability info Flashcards
what is EER
extended external reporting
includes sustainability info
a requirement for listed and larger private companies in some jurisdictions
why is there a need for companies to produce ESG reports
-national reporting requirements
-stakeholders demands like investors for pension funds
-voluntary disclosure for comp edge
measuring and reporting ESS
-challenging cuz diff standards, lack of consistency,
-ISSB is working on it
challenging because:
-Rapid change in EER requirements and disclosure principles
-Diversity of subject matter
-Lack of single reporting basis for non financial information
-Additional risk of management bias due to the subjective nature of measurement in many cases and selection of the criteria being presented
examples of KPIs and targets that may be adopted by businesses
-GHG emmissions
-waste minimization and management
-finite resource consumption
-supply chain sustainability
-water and pollution
-employee welfare and equality
considerations when planning a ESS engagement
-consider impact of risks on the planning and performance of engagement
-understanding of standards
-risk of expectation gap (not all info is assured by auditor)
clearly state in LOE and auditors report the limitations of our work
types of ESS engagements
1- review of contents of annual report as part of audit of FS
2-independent assurance engagement over non financial info
review of non financial info guidance
-auditor needs to consider if there is a material inconsistency between the other info and the FS
all audit standards are imp but most relevant are:
accounting estimates and disclosures:
-management bias may happen in both calculation and disclosure esp if voluntary info
-appropriateness of methods of calculation and appropriateness of assumptions (an issue if there r no industry standards and mgmnt decides paramters)
laws and regulations:
-if info req by law, penalty and reputation risk for both company + auditor
-if there is a breach of regulations eg. environmental disclosure not given, it may impact FS for eg. provision
indentifying and assessing risks of MM:
-knowledge experience, experts may be required as specialist area
-industry standard measurements like GHG
-internal controls of client must be considered to see if we can rely on info
-information from third parties
evaluation of misstatements:
-ommission risk for eg. of pollution
-consider if it may impact users of FS
challenges in providing assurance on non financial performance measures
-for internally generated info, risk that control deficiencies may not be identified as it is unfamiliar area
-for third party info like supply chain etc we will have to rely on it. judgement of auditor is required, obtain an understanding, use a specialist
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substantive procedures to detect misstatements regarding sustainability matters
-design perform procedures apt to obtain SAE
-SP r designed to detect MM at assertion level
-challenging to obtain SAE as there are a wide range of KPIs
-board minutes and financial evidence may be available
A manufacturer reports on the wastage and pollution in its sustainability report. Audit procedures?
-review lines in FS to see if any legal penalties regarding env breach
-review legal expenses and docs, to check if legal advice was sought
-inquire about waste disposal costs
-press or third party whistle blowers
-increased wastage may increase costs
professional skeptisim in ess assurance
v imp as management bias risk is high
esp if report is relied on by third parties like investors, banks, or license issuers
form and content of independent verification statement
-issues found during engagement shud be reported to TCWG same as any other engagement
-if report is to be included in FS:consider which stakeholders are relying on it, so what is the level of assurance required
-reference should be made to the standards like ISQM and any other
in exam if risks r required to do non financial engagement
-is it a statutory review of annual report or separate assurance engagement?
-any risks? like measuring and reporting the info
-apply knowledge of audit standards
-justify the responses
