Assurance On Social & Environmental Info Flashcards
What are the two types of engagement
Review the contents of the annual report-so rather than a separate engagements, when the auditors are reviewing the financial statements they will also review the annual reports specifically in regards to social and environmental sections
Independent assurance engagement- This is a separate engagement to the annual audit
Why do managements complete social environmental reports as part of the annual report ?
National reporting requirements - mandatory
Stakeholder needs - growing pressure to publish these reports
Voluntary disclosures - trying to increase reputation
How does the company measure and report on social environmental performance?
As this is a non financial performance area we don’t have standards like IFRS regarding the financial performance
There is much subjectivity regarding how to report
Usually no benchmarks, how to compare against other companies as there are no standards like with IFRS
There is a need for an environmental expert (eg how much reduction in co2)
Availability of data - do we have proper records like we do for financial performance ? Usually it is much weaker eg controls etc
What are some examples of benchmarks
Greenhouse gas emissions
Waste minimisations
Resource consumptions (oil, gas, forestry)
Supplier chan - how is supplier chain environmentally friendly
Waste & pollution
Employee welfare and equality
How does an auditor to review the social and environmental performance as part of the annual report (part of the annual report)
The auditors primarily responsibility is to audit the financial statements only and provide opinion if they give a true and fair view. We are not focused on the annual report
ISA 720 requires auditor to review / or read the other information (eg social and environmental) in the annual report
Why do we review & read other information if we are not giving an opinion ?
There may be inconsistencies between report & FS (eg a fine about an environment breach on FS but not included in environmental section of report). Therefore they must read to ensure no inconsistencies.
If there is an inconsistency, the other information in report needs to be changed and not the FS by management or TCWG
What happens if an inconsistency does not get corrected between report & financial statement
FS stays same as it’s true and fair, it’s the report that needs correcting but if they won’t then technically it won’t change the opinion as the FS is correct and it is confined to the FS. It will however affect the audit report. It will be highlighted in “other information” paragraph in the audit report
What are the risks for the auditor of non financial information
ISA States the disclosure all the calculation of the information could contain a risk of management highest from management to obtain competitive advantage especially when information is voluntarily presented within the annual report
E.g. management may only focus on the positives and ignore the negatives or perhaps due to much of the environmental issues being estimates they may inflate the estimates for example carbon dioxide emissions
When can misstatements within the annual report cause a change of auditor opinion
ISA 450 States a mission of disclosure required by laws can affect the financial statements and later the opinion of the auditor
What should the auditor do before starting an independent assurance engagement on sustainability information ?
The auditor Will need to consider the scope of the assurance engagement. Whether reasonable or moderate.
The auditor should plan, scope, timing and direction of the engagement accordingly and ensure adequate time and resources
Ensure whether the auditor need an expert in this engagement 
What statement / report do you give for an assurance on something that isn’t the FS ( eg sustainability report)
Any issues found during engagement will be charged with those charge with governance
The content and scope (assurance) of the audit report on intervention or sustainability must be considered
Who will use the report ?
