At its March 2021 meeting last week, the IAASB approved Non-Authoritative Guidance on Applying ISAE 3000 (Revised) to Extended External Reporting (EER) Assurance Engagements, which will be published in April. This guidance marks a significant step forward in supporting the evolving field of assurance for non-financial reporting. EER encapsulates many different forms of reporting, including, but not limited to, sustainability or ESG (environmental, social and governance) reporting, integrated reporting, reporting on corporate social responsibility, greenhouse gas statements, and service performance reporting in the public sector.

The Guidance builds on our existing, well-tested assurance standard, International Standard on Assurance Engagements 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information. The Guidance responds to practitioner and user-identified challenges in the practical application of the standard to assurance engagements on EER.

Together with ISAE 3000 (Revised) and ISAE 3410, Assurance Engagements on Greenhouse Gas Statements, the Guidance forms a strong package aimed at enhancing confidence in and improving the reliability of assurance reports for their intended users. We believe this package of standards and Guidance is sufficiently robust to enable practitioners to respond to new reporting regimes, including those under consideration in the European Union and elsewhere. However, as gaps emerge, the IAASB remains ready to act.

Benefitting from our due process, the approval of the Guidance completes the work that we commenced in 2017 with the support of the World Business Council for Sustainable Development (WBCSD).

The Guidance Addresses Growing Demands for Extended External Reporting & Non-Financial Information Reporting

Non-financial information has become an important topic in reporting circles. As reporting evolves, auditors are increasingly asked to provide assurance on sustainability or ESG reporting. Where this type of reporting, and assurance thereon, have often been undertaken on a voluntary basis by entities, there is an increasing (and nowadays, urgent) focus on this being mandated by law or regulation. We at the IAASB have taken the view that we must rise to the challenge and assist, particularly as users of corporate reports are demanding a broader base of information to inform capital allocation decisions.

The Guidance responds to ten key stakeholder-identified challenges commonly encountered in applying ISAE 3000 (Revised), the umbrella standard for assurance engagements, in EER assurance engagements.

In response to strong requests from stakeholders, the Guidance also provides further explanation and examples to facilitate a better understanding of the distinction between limited assurance and reasonable assurance engagements as contemplated in ISAE 3000 (Revised).

Some may wonder why we chose the term “Extended External Reporting (EER)” rather than ESG or other forms of reporting now in common parlance. We chose EER to ensure broad-based impact of the Guidance. ISAE 3000 (Revised) applies to any assurance engagement other than an audit or review of historical financial information, including different forms of reporting of non-financial information as I have highlighted at the start.

EER information may be presented as a section(s) in an entity’s annual report or other mainstream periodic report, or in a regulatory filing, or it may be presented as a separate report(s) or statement(s) issued by an entity. Similarly, when an assurance engagement is requested, the EER information subject to assurance may be the whole report or may be one or more metric(s), section(s) or statement(s) within a report. ISAE 3000 (Revised) and the Guidance accommodate all these variations.

EER Engagements Must Include a Commitment to Quality and the Highest Ethical Standards

The Guidance supports the application of ISAE 3000 (Revised), which is the IAASB’s authoritative pronouncement. The Guidance does not introduce any further requirements beyond those in the standard or override or change any of the requirements or application material in the standard. Importantly, requirements related to quality and ethics are already deeply embedded in the standard.

ISAE 3000 (Revised) requires that:

• The practitioner is a member of a firm that is subject to International Standard on Quality Control 1, or other professional requirements or legal or regulatory requirements that are at least as demanding. This requirement will be updated and aligned with our new and revised quality management standards that were issued in December 2020.
• The practitioner and members of the engagement team are subject to the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants or other professional requirements or legal or regulatory requirements that are at least as demanding.
• The practitioner complies with the requirements of the standard addressing their own competence (including assurance skills and techniques) and the competence of others who perform the engagement.

Ensuring the Right Conditions Exist

The practitioner is only permitted to accept or continue an assurance engagement in accordance with ISAE 3000 (Revised) when the preconditions for an assurance engagement are present. Such preconditions relate to, among other matters, whether the engagement has a rational purpose taking into account, for example, the needs of users of the subject matter information, and the suitability of the criteria applied in the preparation of the information (e.g., a reporting framework or set of reporting standards that satisfies the requirements of the standard).

A significant part of the Guidance is devoted to supporting practitioners as they navigate the requirements of ISAE 3000 (Revised) relating to determining whether the preconditions are present.

The current global developments to establish a coherent set of sustainability reporting standards also will go a long way to address the preconditions for assurance engagements by providing suitable criteria.

Additional Support Material

We received considerable encouragement from respondents to our public consultation on the Guidance, which was accompanied by two supplements, to advance the development of certain elements of the supplements for publication; in particular, the supplement that provides longer worked examples relating to EER assurance engagements. Therefore, two additional items of non-authoritative support material will be published at the same time as the Guidance (note, these are not integral to the Guidance; the Guidance can be used without the need to refer to these materials, but they are available as additional resources, should practitioners wish to refer to them): (1) Credibility and Trust Model Relating to EER Reporting, and (2) Illustrative Examples of Selected Aspects of EER Assurance Engagements. The latter includes examples that cover a broad range of reporting frameworks.

What Lies Ahead

Together with ISAE 3000 (Revised) and ISAE 3410, the Guidance provides a solid foundation for consistent performance of quality assurance engagements relating to non-financial information reporting. At the same time, we know that this will not be our last action in this rapidly evolving area.

The IAASB is prepared to act to enhance our standards, frameworks and guidance to support progress. We will closely monitor relevant developments, engage with our stakeholders as part of our outreach program and seek a place at the table involving policy discussions that may impact our standards and our role as global auditing and assurance standard setter.

IFAC supports steps announced today by the IFRS Foundation in its ongoing consideration of whether to establish a new Sustainability Standards Board (SSB) alongside the IASB and under the existing governance structure of the IFRS Foundation. IFAC welcomes the engagement of IOSCO in this important initiative, as outlined in the IFRS Trustee statement as well as in IOSCO’s February 24 media release.

We agree with the Trustees’ strategic views that the new SSB should focus on information material to decisions of investors and other providers of capital and that the new board would initially focus its efforts on climate-related reporting, while also working toward meeting the information needs of investors on other ESG (environmental, social and governance) matters.

Likewise, we agree that a building blocks approach facilitates both the use of existing standards and frameworks (including TCFD) and the flexibility for coordination on reporting requirements that capture wider sustainability impacts, as IFAC articulated in its Way Forward roadmap.

IFAC CEO Kevin Dancey said, “IFAC continues to support the ongoing rationalization of a coherent global system. The IFRS Foundation is uniquely qualified and positioned to lead here, including engagement with existing sustainability-related initiatives and standard setters from key jurisdictions. IFAC looks forward to providing input to the forthcoming IFRS Foundation Constitution consultation and encourages our member bodies and stakeholders to take an active interest in these next steps.”

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.

The Technology Working Group of the International Auditing and Assurance Standards Board (IAASB) today released non-authoritative support material to help auditors address the risk of overreliance on technology, whether it arises from using automated tools and techniques or from using information produced by an entity’s systems.  

The publication does not amend or override the International Standards on Auditing (ISAs), the texts of which alone are authoritative. Reading the publication is not a substitute for reading the ISAs.

A global pathway to integrated reporting assurance needs to develop to reinforce both advancements in integrated reporting and in global standard setting for corporate reporting and assurance. The International Integrated Reporting Council and IFAC’s initial thinking, outlined here, is aimed at starting a discussion with the accountancy profession and its key stakeholders on further progressing integrated reporting assurance, with the goal of enhancing confidence in integrated reporting and integrated thinking, and ultimately business resilience and sustainability.

This syllabus and competency matrix for a three-level qualification for professional accountants was developed by the Institute of Chartered Accountants in England and Wales under the IFAC Professional Accountancy Organization Capacity Building Program funded by the UK Aid from the UK Government. The original Russian version is also available.

The syllabus helps prepare well-rounded advisors who:

Together with ICAEW, The International Federation of Accountants (IFAC) today released the fifth installment in its Anti-Money Laundering: The Basics educational series: Installment 5: Tax Advice.  

The publication is part of a 6-month short series helping accountants enhance their understanding of how money laundering works, the risks they face, and what they can do to mitigate these risks and make a positive contribution to the public interest. Installment five examines tax advice and the multiple ways in which tax services may be vulnerable to money laundering.

The installment series, with its focus on accessibility and ease of use, will be a resource for Small and Medium Practices (SMPs,) and accountants less familiar with AML, while also providing guidance for those looking for a quick refresher or reference.

Anti-Money Laundering: The Basics is featured on both the IFAC (landing page) and ICAEW websites and available for download for free. To be globally relevant, the series uses the risk-based approach of the Financial Action Task Force (FATF) -- the global money laundering and terrorist financing watchdog -- as a starting point. 

For more information about IFAC, visit www.ifac.org.

For more information about ICAEW, visit https://www.icaew.com/.

This is the fifth installment of a 6-month publication series titled Anti-Money Laundering, The Basics.

The series provides professional accountants with a better understanding of how money laundering works, the risks they face, and what they can do to mitigate these risks and make a positive contribution to the public interest. 

The International Auditing and Assurance Standards Board (IAASB) is requesting public comments on its Exposure Draft addressing changes in some of its standards and framework resulting from the new and revised quality management standards. Comments are requested by May 24, 2021.

The Exposure Draft aligns the IAASB’s standards related to review, assurance and related services, as well as its framework, with the quality management standards through conforming amendments. This will ensure that the IAASB's international standards continue to be applied as intended. The proposed changes will also modify IAASB standards to reflect aspects of the new quality management approach and emphasize the importance of firm-level quality management to consistent quality engagements.

Please submit your comments via the IAASB website.

About the IAASB
The International Auditing and Assurance Standards Board develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by the International Federation of Accountants (IFAC). For copyright, trademark, and permissions information, please go to permissions or contact permissions@ifac.org.

The Monitoring Group (MG), the International Federation of Accountants (IFAC), and the Public Interest Oversight Board (PIOB) are pleased to announce the establishment of an Interim Nominating Committee to select the Chair of the International Ethics Standards Board for Accountants (IESBA) for the 2022-2024 term. This appointee will succeed Dr. Stavros B. Thomadakis, who has been the IESBA Chair since 2015.

The Interim Nominating Committee will be chaired by Mr. Makoto Sonoda, chair of IOSCO’s Committee on Issuer Accounting, Auditing and Disclosure, and will include Ms. Kathryn Byrne, Dr. Simon Longstaff, Sir David Tweedie, and Mr. Eddy Wymeersch. The Interim Nominating Committee meetings will be observed by MG representative, Jonathan Bravo of the IOSCO general secretariat, IFAC President, Alan Johnson and Chair of the PIOB, Linda de Beer.

By establishing an Interim[1] Nominating Committee for the selection of the next IESBA Chair, the MG has designed a nominating process based on the principles of the MG Recommendations published in July 2020.[2]  The next IESBA Chair will be nominated through an open call, appointed using a skills matrix that prioritizes the public interest and fosters a strategic mindset, and selected by a majority vote of the Interim Nominating Committee.

Sagar Teotia and Jean-Paul Servais, Co-Chairs of the MG stated: “The Chair of the IESBA plays a crucial role in ensuring that high quality ethics and independence standards and other pronouncements for professional accountants worldwide are developed in the public interest.  The new Chair will, amongst other key tasks, lead the strategic priorities of IESBA and its standard-setting agenda.  With the Interim Nominating Committee’s multi-stakeholder composition described above, we are confident this will contribute to a selection of the next IESBA Chair that is in the public interest.”

Alan Johnson, IFAC President stated: “Ethics and the public interest are the foundations on which the accountancy profession is built.  IFAC continues to support robust processes and strong governance in the selection of the standard setting board members and chairs. As such, we also strongly support the establishment of the Interim Nominating Committee, which further advances this important objective.”

Linda de Beer, PIOB Chair stated: “The PIOB very much welcomes the MG initiative to set up an independent nominating committee to select the next IESBA Chair. The prioritization of the public interest in the selection of this important role cannot be overstated, as the PIOB collaborates with stakeholders to strengthen public interest in international audit and ethics standard-setting.”

MEDIA ENQUIRIES

Mr. Jonathan Bravo
Email: j.bravo@iosco.org
Website: www.iosco.org/about/?subsection=monitoring_group

Ms. Jennifer DiClerico
Email: Jenniferdiclerico@ifac.org
Website: www.ifac.org

Ms. Rocio Goudie
Email: rgoudie@ipiob.org
Website: www.ipiob.org

IFAC welcomes today’s announcement from the IFRS Foundation Trustees to take further, timely steps to assess the possibility of establishing a new Sustainability Standards Board (SSB). We concur that there is “broad demand for the IFRS Foundation to play a role.” A Sustainability Standards Board is best positioned to lead the ongoing rationalization of a coherent global system for reporting requirements addressing enterprise value creation, sustainable development, and evolving stakeholder expectations. We agree with the Trustees’ conclusion that moving with urgency is a key factor for success. This can be accomplished by leveraging the expertise and standards that already exist as a result of the work by CDP, CDSB, GRI, IIRC, SASB, as well as the TCFD. For example, the recently released report on climate-related disclosure demonstrates the value of their continued collaboration to this global system.  

IFAC CEO Kevin Dancey, said “IFAC encourages our members and stakeholders to remain focused on this important initiative, to continue to engage in discussions and consultations that foster greater alignment and harmonization, and to offer their expertise to the establishment of this new Sustainability Standards Board and a global solution to the current fragmented reporting ecosystem.”

IFAC reiterates its support for this initiative, and stands ready to assist the Trustees as they move forward on this important work.

See IFAC's response to the IFRS Foundation's Consultation Paper on Sustainability Reporting and Enhanced Corporate Reporting: The Way Forward.