Momentum is gathering for increased sustainability/environmental, social, and governance (ESG) reporting requirements for companies. Investors, policymakers, and a broad range of stakeholders seek higher quality, increasingly standardized reporting on companies’ performance on non-financial measure. And with this, demand for assurance engagements that enhance the degree of confidence of the intended users of sustainability/ESG reporting is growing.

We at the International Auditing and Assurance Standards Board (IAASB), the independent audit and assurance standard setter serving more than 130 countries, expect the drive for added corporate reporting and disclosure on sustainability and climate-related information only to accelerate. We see the trend moving from voluntary reporting commitments to requirements mandated by jurisdictions throughout the world. The European Union’s proposed Corporate Sustainability Reporting Directive is an important example in that direction. The establishment of the International Sustainability Standards Board (ISSB) by our counterpart organization, the IFRS Foundation, enhances the likelihood of a trusted and independent source developing globally accepted reporting standards as the basis of requirements.

As with financial reporting, the IAASB believes that market participants are best served when financial and other reported information benefits from external assurance, provided by professionals committed to the public interest and highest ethical standards. For this reason, in the past the IAASB has devoted significant energy to creating standards to govern assurance of non-financial information. We have a well-established umbrella standard, International Standard on Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information, and subject-matter specific standards such as, ISAE 3410, Assurance Engagements on Greenhouse Gas Statements. In April of this year, we published guidance aimed at helping assurance professionals apply our umbrella standard to sustainability and other non-financial (or extended external reporting) assurance engagements.

We know that our work is only the beginning, a solid foundation to build upon. This is why we committed to do more work to enhance the assurance of sustainability/ESG reporting when we approved our new 2022-2023 work plan last week.

The IAASB agreed to dedicate capacity and resources to the assurance of sustainability/ESG reporting. Information gathering and research activities, using dedicated staff resources, to determine future IAASB action will commence in January 2022. This initial work will also determine the precise scope and timing of the IAASB’s efforts. The initial work will also include a willingness to collaborate with key stakeholders throughout the world, including the standard-setting and regulatory communities.

We recognize that our initial consultations could lead to:

• Developing new subject-matter specific standard(s) that build on and supplement ISAE 3000 (Revised);
• Targeted enhancements to ISAE 3000 (Revised), as necessary; or
• Other related actions that are necessary in the public interest. For example, revising our existing guidance or developing new guidance.

Our March 2022 IAASB meeting will the first opportunity to provide feedback, share views and discuss next steps (you can listen to our discussions via YouTube).

We are conscious that demand for enhanced requirements and guidance is high; it is why we are positioning the IAASB to act in a coordinated and responsive manner. 

The IPSASB held its fourth meeting of the year virtually on December 7-10 and 14-15, 2021.

The Technology Working Group of the International Auditing and Assurance Standards Board (IAASB) today released non-authoritative support material to help auditors understand how to plan an audit under International Standard on Auditing (ISA) 300, Planning an Audit of Financial Statements, when using automated tools and techniques (ATT).

The publication does not amend or override the ISAs, the texts of which alone are authoritative. Reading the publication is not a substitute for reading the ISAs. 

This publication highlights the impact of technology when applying certain aspects of the International Standards on Auditing (ISAs). It focuses on specific considerations for planning an audit in accordance with ISA 300, Planning an Audit of Financial Statements, that may be relevant when using automated tools and techniques.

This publication does not amend or override the ISAs, the texts of which alone are authoritative. Reading the publication is not a substitute for reading the ISAs.

A fundamental tenant of IFAC’s vision about the information companies provide to investors and stakeholders is that reporting and disclosure should capture all relevant information about organizations. To be accountable, companies need to provide a clear and comprehensive picture of their organization’s ability to create sustainable value over time.

This vision addresses the importance of global standards, regulation that supports decision-useful disclosure, and the value of an interconnected approach to sustainability and financial information reporting and assurance.

Today, the International Federation of Accountants (IFAC) published its vision for high-quality assurance of sustainability information—calling out best practices identified during its year-long, global engagement campaign related to the State of Play in Sustainability Assurance. This vision addresses the importance of global standards, regulation that supports decision-useful disclosure, and the value of an interconnected approach to sustainability and financial information reporting and assurance.

“In order to be trusted, sustainability disclosure must be subject to high-quality, independent, external assurance,” said IFAC CEO Kevin Dancey. “Sustainability information must take its rightful place in the corporate reporting ecosystem and stakeholder confidence must be on par with financial reporting. Given the announcement of the International Sustainability Standards Board, the publication of a Climate Prototype, and IOSCO’s continued support for the initiative, it’s an appropriate time for regulators and authorities to put sustainability assurance on the agenda, as already proposed in the EU’s Corporate Sustainability Reporting Directive. We urge IFAC member organizations to promote high-quality reporting and assurance through discussions with policymakers, regulators, investors, and other stakeholders.”

As a harmonized, global reporting system for reporting sustainability information takes shape, based on the Building Blocks Approach, emerging regulatory frameworks should be designed to promote robust, decision-useful disclosure and disincentivize a compliance-based approach to both reporting and assurance. Aligning sustainability disclosure with financial reporting and connecting sustainability assurance engagements with financial statement audits will maximize value to reporting entities and their stakeholders. High-quality, global standards—for reporting, assurance, and ethical professional conduct—play a key role in meeting this objective and in avoiding unnecessary costs and reduced comparability and consistency that result from regulatory fragmentation.

Read more about IFAC’s support for global sustainability-related standard on the IFAC website.

About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 180 members and associates in 135 countries and jurisdictions, representing more than 3 million accountants in public practice, education, government service, industry, and commerce.

Today, IFAC released a publication, “Sustainability Information for Small Businesses: The Opportunity for Practitioners,” exploring the diverse benefits of embracing sustainability information. 

The report examines the importance of readily available, relevant, and reliable sustainability information for achieving better-informed decisions, enhanced strategic and risk management, and more thorough and valuable reporting to external stakeholders. It also highlights a range of emerging services that practitioners can provide to their clients, including advisory services, reporting, agreed-upon procedures (AUP) engagements, and assurance services.

Small businesses make up more than 90 percent of businesses worldwide; they are critical to achieving sustainable outcomes for economies, the environment and society. They can find significant advantages from establishing (or enhancing) processes, systems and controls for identifying, measuring, and analyzing sustainability information. This can include improved efficiencies and performance, as well as differentiation from competitors. Small businesses are also likely to be subject to sustainability-related reporting information requests from a diverse range of stakeholders, including large companies, banks, and suppliers—if they are not already. 

This publication was developed with advice and guidance from the IFAC Small and Medium Practices (SMP) Advisory Group and builds on the Advisory Group’s work on practice transformation. 

Although focusing on sustainability information and related services may seem premature for some small businesses and practitioners, the field is growing quickly. To speak to different practitioners’ unique circumstances, the publication includes suggestions on building knowledge and competencies and taking initial steps. 

IFAC will explore these issues further in a webinar on December 15 titled “Sustainability Offers New Opportunities for SMPs” (with simultaneous translation into Spanish and French). The webinar will feature a panel discussion with practitioners who are providing services in this space.

About IFAC
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 180 members and associates in 135 countries and jurisdictions, representing more than 3 million accountants in public practice, education, government service, industry, and commerce.

This report examines the importance of readily available, relevant, and reliable sustainability information for achieving better-informed decisions, enhanced strategic and risk management, and more thorough and valuable reporting to external stakeholders. It also highlights a range of emerging services that practitioners can provide to their clients, including advisory services, reporting, agreed-upon procedures (AUP) engagements, and assurance services.