IAASB Webinar on Sustainability Assurance Reporting
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IAASB Webinar on Assurance on Sustainability Reporting In September, the IAASB held two webinars on its recently proposed International Standard on Sustainability Assurance 5000. The webinars featured presentations and discussions from IAASB members, including those who helped draft the standard. Find more information on ISSA 5000 on the IAASB website: iaasb.org/ISSA5000
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IAASB Webinar on Sustainability Assurance Reporting
- 1. IAASB Webinar Assurance on Sustainability Reporting Global Webinar Series 6 September 2023 Diane Larsen IAASB Board Member 1
- 2. Agenda Materiality, Risk and Response Key Principles, Concepts and Definitions Introduction Misstatements, Other Information, Communication and Reporting Global Outreach
- 3. Introduction Tom Seidenstein IAASB Chair & Co-CEO, International Foundation for Ethics and Audit 3
- 4. Global Baseline for Sustainability Assurance: Timely Standard-Setting Action Page 4 Respond to emerging issues and stakeholder feedback More specificity than ISAE 3000 (Revised) and ISAE 3410 for sustainability priority areas Possible future projects: Provide more specificity than overarching standard Current project: Overarching standard ISSA 5000 General Requirements for Sustainability Assurance Engagements
- 5. Scope of Overarching Standard: Proposed ISSA 5000 Page 5 ALL Information disclosed about topics ALL Mechanisms for reporting ALL Users / stakeholders ALL Sustainability topics ALL Reporting standards Suitable for engagements of all sustainability information; principles-based requirements that can be applied for Addresses limited and reasonable assurance Stand-alone Not required to apply ISAE 3000 (Revised) Page 5 For use by all assurance practitioners Relevant quality management and ethical requirements apply
- 6. Key Principles, Concepts and Definitions Dan Montgomery IAASB Consultant 6
- 7. Key Principles, Concepts and Definitions Page 7 Topics (e.g., climate, labor practices, economic impacts, biodiversity) Aspects of topics (e.g., governance, risks and opportunities, metrics and key performance indicators) Sustainability matters Disclosures Specific information about an aspect of a topic Sustainability information Measure or evaluate against framework (applicable criteria )
- 8. Key Principles, Concepts and Definitions Page 8 Criteria Framework criteria Entity – developed criteria Topics (climate, labor practices, economic impacts, biodiversity) Aspects of topics (governance, risks and opportunities, metrics and key performance indicators) Sustainability matters Disclosures Specific information about an aspect of a topic Sustainability information Assertions (e.g., completeness; occurrence and responsibility; accuracy and quantification; cut- off; classification and understandability; consistency ) Characteristics E.g., qualitative / quantitative; judgmental / factual; historical / forward-looking; related to a point in time / covers a period “Materiality process” incl. double materiality
- 9. Key Principles, Concepts and Definitions Page 9 Criteria Framework criteria Entity – developed criteria Assurance Engagement Scope of the assurance engagement E.g., all of the sustainability information expected to be reported by the entity or only part(s) of that information The conclusion to be expressed in the assurance report E.g., one conclusion for all sustainability information being assured, or separate conclusions for different disclosures Sustainability information as a whole Topics (climate, labor practices, economic impacts, biodiversity) Aspects of topics (governance, risks and opportunities, metrics and key performance indicators) Sustainability matters Disclosures Specific information about an aspect of a topic Sustainability information Assertions (e.g., completeness; occurrence and responsibility; accuracy and quantification; cut- off; classification and understandability; consistency) Characteristics E.g., qualitative / quantitative; judgmental / factual; historical / forward-looking; related to a point in time / covers a period GHG Statement? “Materiality process” incl. double materiality
- 10. Individuals Involved in The Engagement Page 10 Who Practitioner is able to be sufficiently and appropriately involved in the work Practitioner is unable to be sufficiently and appropriately involved in the work Firm Personnel Engagement Team Member Direction, Supervision & Review (DS&R) applies (ED-5000, paragraphs 45-48) N/A Practitioner’s Internal Expert Engagement Team Member DS&R applies (ED-5000, paragraphs 45-48) N/A Practitioner’s External Expert Using the Work of a Practitioner’ External Expert (ED-5000, paragraphs 42, 49-50) N/A Other Practitioners (including Network Firms and Non- Network Firms) Engagement Team Member DS&R applies (ED-5000, paragraphs 45-48) Using the Work of Another Practitioner (ED-5000, paragraphs 42, 51-54)
- 11. Feedback 11
- 12. Materiality, Risk and Response Susan Jones IAASB Technical Advisor 12
- 13. Materiality Page 13 Consider materiality for qualitative disclosures Determine materiality & performance materiality for quantitative disclosures Not for SI as a whole, but for each disclosure Professional judgment
- 14. Understand Understanding Page 14 • Identify disclosures in the sustainability information where material misstatements are likely to arise • Design procedures to focus on those disclosures • Identify and assess ROMM at assertion level for the disclosures • Design of further procedures U R L The entity and its environment Applicable criteria System of Internal Control Understand
- 15. Understanding the Components of Internal Control Page 15 15 Understand The control environment The information system The entity’s risk assessment process Limited Assurance Reasonable Assurance Understand & evaluate Control activities The entity’s process to monitor the system of internal control Only the results Application material includes further specific aspects of the component for obtaining an understanding (adapted from ISA 315 (Revised 2019)) Reasonable assurance: More detailed requirements that specify either what needs to be understood or evaluated Maybe
- 16. Designing & Performing Further Procedures Overall Responses Responses Page 16 Limited Assurance Reasonable Assurance NTE are focused on the disclosures where material misstatements are likely to arise • Tests of controls – ONLY IF – obtaining evidence about operating effectiveness • Substantive procedures Overall responses ONLY IF : • The practitioner identifies • Control deficiencies in the control environment that undermine the other internal control components • Identified or suspected fraud or NOCLAR • Material misstatements that are likely to arise pervasively throughout the SI NTE responsive to the assessed risks of material misstatement at the assertion level • Tests of controls – ONLY IF – obtaining evidence about operating effectiveness • Substantive Procedures Overall responses to address RoMM ONLY IF: • Practitioner’s evaluation of the control environment indicates: • No culture of honesty and ethical behavior • Control environment does not provide an appropriate foundation for the other internal control components • Control deficiencies identified in the control environment undermine the other components • The practitioner identifies: • Identified or suspected fraud or NOCLAR • Identified RoMM pervasively throughout the SI
- 17. Determining Whether Additional Procedures Are Necessary in a Limited Assurance Engagement If the practitioner becomes aware of a matter(s) that causes the practitioner to believe the sustainability information may be materially misstated Design and perform additional procedures to obtain further evidence until the practitioner is able to A. Conclude that the matter(s) is not likely to cause the sustainability information to be materially misstated; or B. Determine that the matter(s) causes the sustainability information to be materially misstated. Responses Page 17 Limited Assurance
- 18. Response to Risks Page 18 IF Estimates & Forward – Looking Information (FLI) Limited Assurance Reasonable Assurance Practitioner shall evaluate appropriateness of: • Management’s application of criteria • Methods used to develop estimate and FLI (and applied consistently) • Changes from prior period in reported estimates/FLI Changes from prior period in method used Consider whether other procedures are necessary Practitioner shall undertake one or more of the following: • Test how management developed estimate/FLI and related disclosures, and underlying information … • Develop a point estimate or range to evaluate management estimate/FLI … • Obtain evidence from events occurring up to assurance report date …
- 19. Fraud and Professional Skepticism Page 19 Design and perform procedures in an unbiased manner; and to meet the intended purpose of performing those procedures Doubts about relevance and reliability of information Evaluate whether evidence met intended purpose Respond appropriately to fraud or suspected fraud Address inconsistent evidence, respond to management bias Maintain professional skepticism throughout the engagement
- 20. Feedback 20
- 22. Material Misstatements and Other Information Page 22 Example: Performing procedures on the disclosure “work- related injuries” Each disclosure Evaluate individual and combined effect of identified misstatements on that disclosure Disclosures in aggregate Example: Conclusion on “occupational health and safety” including work- related injuries Evaluate all misstatements related to “occupational health and safety” including work-related injuries Material misstatements Information not subject to the assurance engagement Available at the date of the assurance report Included in a document(s) containing the sustainability information subject to the assurances Misstatement of the other information
- 23. Communication with TCWG and Reporting Page 23 TCWG Significant matters e.g. • Identified or suspected fraud or NOCLAR • Identified deficiencies in internal control • Management bias in the preparation of the sustainability information • Uncorrected material misstatements Assurance Report • Based on ISAE 3000 and ISAE 3410 • Practitioner’s opinion to be included first (ISA 700 (Revised)) • Name of the engagement leader (Listed entity) • Separate section on other information
- 24. Feedback 24
- 26. Comprehensive Global Outreach to Gain Broad Feedback Page 26 Leveraging engagement opportunities • Existing jurisdictional events and global bodies’ meetings – present face-to-face or virtually • Continue key stakeholder engagement Direct engagement with key stakeholders • Face-to-face focus groups and meetings with target stakeholder groups or key bodies • Aligned with global roundtables and regional outreach events Email relevant events and stakeholders in your region to MichelleHarrison@iaasb.org Global roundtables and regional outreach events • 4 global roundtables led by IAASB • 4 regional events hosted by National Standard-setters or regulators • Board members and NSS cascade to reach other stakeholders or locations Virtual awareness raising and information sharing • This and other informational webinar • Messaging to target stakeholder groups through multiple channels
- 27. Register & Subscribe for updates: www.iaasb.org @International Auditing and Assurance Standards Board @IAASB_News @International Auditing & Assurance Standards Board Page 27 Follow Us