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The IAASB takes Action to Initiate Developing a Sustainability Assurance Standard
In its Work Plan for 2022-2023, the IAASB committed to a workstream to address assurance on sustainability reporting. After initiating this project in early 2022, the IAASB has expediated its thinking and decisions regarding matters such as the scope of the IAASB’s work and key challenges that need to be addressed. In a recent article, Tom Seidenstein, IAASB Chair, explains the IAASB’s developments and planned actions for assurance on sustainability reporting.
At the IAASB June 2022 meeting, the IAASB enthusiastically supported initiating work to develop an assurance standard for sustainability reporting. This immediate action would initially focus on developing an overarching standard that would provide a complete assurance solution covering all areas of the engagement. |
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While recognizing the standard is in initial development, and decisions may change as work progresses, the overarching standard would:
- Standalone from ISAE 3000 (Revised), Assurance Engagements Other Than Audits or Reviews of Historical Financial Information.
- Address both limited and reasonable assurance.
- Be developed using the requirements and principles of ISAE 3000 (Revised), ISAE 3410, Assurance Engagements on Greenhouse Gas Statements, and the IAASB’s non-authoritative guidance on sustainability and other extended external reporting (EER) assurance engagements. In doing so, the requirements and guidance would be enhanced and specified for assurance on sustainability reporting.
- Focus initially on providing specificity to address certain priority challenges.
- Be suitable for assurance engagements across all sustainability topics and information about those topics. The standard would also be framework-neutral and neutral regarding the users or stakeholders of the sustainability information.
The IAASB envisages that future standard-setting action could be undertaken to further develop a suite of standards to meet emerging priorities as reporting and assurance mature, and address other challenges not included as part of the initial standard-setting effort.
Interested parties can follow along this project by visiting the Sustainability Assurance project page. |
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IAASB Issues Exposure Draft Proposing Changes to the Auditor’s Report Regarding the Independence Requirements Applied
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The proposals include revisions to the “Basis for Opinion” section of the auditor’s report. They would require an auditor to specifically indicate which independence requirements were applied in circumstances when the relevant ethical requirements require public disclosure about whether differential independence requirements for certain entities (such as PIEs) were applied.
The Exposure Draft is open for a 90-day public comment period.
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IAASB Continues Its Work on the Proposed Standard for Less Complex Entities
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In its June 2022 meeting the IAASB discussed key feedback received and determined a path forward on several key issues, including:
- Continuation of the project: the IAASB will continue its project to develop a separate standard for LCEs.
- The authority of the standard: the IAASB will explore the description of what an “LCE” is (for the purpose of the standard) in order to provide a common understanding on which entities the standard is applicable for. This clarification will also support the IAASB’s deliberations on further revisions.
- Less complex group audits: the IAASB will explore the inclusion of procedures for group audits in the scope of the standard.
The IAASB will continue to analyze responses to the exposure draft and commence drafting to the revised standard in priority areas. Follow the project on the LCE project web page.
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Reappointment of IAASB Chair
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The IAASB is pleased to announce the reappointment of Tom Seidenstein as IAASB Chair for a further three-year term commencing July 1, 2022. Mr. Seidenstein has chaired the IAASB since July 2019 and has been instrumental in the delivery of milestone projects, such as the new quality management standards, and addressing the issue of standards for less complex entities and the initial work on standardizing sustainability assurance. |
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Get to Know the IAASB Staff
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Claire Grayston FCA(Aus), FCPA(Aus) (Principal, Non-financial Information Assurance)
Claire joined as Principal in February 2022, and is a key member of the IAASB Staff Team driving the project on sustainability assurance. Claire has advocated for the profession to embrace assurance on sustainability and other non-financial information for over 16 years.
How do you see sustainability reporting and the role of assurance evolving in the next 5-10 years?
Whilst raising awareness of the impact of sustainability issues, whether climate change, modern slavery, biodiversity loss or others, has been a slow burn over past decades, the momentum we see now is building exponentially.
This momentum is not likely to slow as national jurisdictions start to recognize the need to consider entities’ impacts on the economy, society, and the environment and introduce requirements for reporting on some or all sustainability topics.
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As investors demand consideration of entities’ value beyond financial measures and societies push for a more holistic perspective of entities impacts on stakeholders, sustainability reporting will increasingly be mandated. It is already widely recognized that requirements for sustainability reporting need to go hand in hand with assurance to provide confidence in the reliability of the information reported. So, in the next 5-10 years I anticipate the preeminence of sustainability reporting and assurance to the point where they are on a par with financial statements and audit, which over time will become integrated. We at the IAASB are setting the foundation now in assurance standards to provide a robust basis for these far-reaching developments.
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Other Documents Recently Published
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Coming Soon
- Support materials for implementing ISA 315 (Revised 2019)
- Technology FAQ: Addressing Exceptions & Planning Materiality when Using Automated Tools and Techniques
- Going Concern Non-Authoritative Guidance: FAQ
- IAASB 2021 Public Report
- 2021 IAASB Handbook
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