top of page
Search
  • Writer's pictureDaniel Goelzer

IAASB Issues Proposed Sustainability Auditing Standard

On August 2, the International Auditing and Assurance Standards Board (IAASB) issued Proposed International Standard on Sustainability Assurance 5000, General Requirements for Sustainability Assurance Engagements (Proposed ISSA 5000). Proposed ISSA 5000 would provide a framework for third-party assurance on sustainability reporting and would serve as a comprehensive, stand-alone standard suitable for any sustainability assurance engagements. The comment period on the proposal is open until December 1, and the IAASB plans to issue a final standard before the end of 2024.

  • Scope. The IAASB’s web page for this project states that ISSA 5000 “will apply to sustainability information reported across any sustainability topic and prepared under multiple frameworks, including the recently released IFRS Sustainability Disclosure Standards S1 and S2.” (Regarding these new standards, see ISSB Issues its Inaugural Disclosure Standards, July 2023 Update.) The information as to which assurance is provided must be prepared in accordance with a sustainability reporting framework, standard or other suitable criteria. The proposal defines “sustainability matters” as “Environmental, social, economic and cultural matters, including: (i) The impacts of an entity's activities, products and services on the environment, society, economy or culture, or the impacts on the entity, and (ii) The entity’s policies, performance, plans, goals and governance relating to such matters.”

  • Profession agnostic. The IAASB notes that the proposed standard is “profession agnostic, supporting its use by both professional accountant and non-accountant assurance practitioners.” While any type of assurance provider could issue an ISSA 5000 report, practitioners would be required to comply with relevant ethical requirements and apply a system of quality management at least as rigorous as is required by the International Code of Ethics for Professional Accountants and by the IAASB’s quality management standards.

  • Principles-based. Proposed ISSA 5000 focuses on principles or outcomes rather than procedures or steps. The IAASB states that this “allows the assurance practitioner to apply their professional judgment in planning and performing the assurance engagement.” The principles-based approach also “supports the scalability and comprehensiveness of the standard by limiting possible exceptions from the principles that apply and demonstrating how a requirement applies to all entities regardless of, for example, the type of entity, industry, or sector, and whether their nature and circumstances are less complex or more complex.”

  • Reporting. Proposed ISSA 5000 could be used regardless of how or where the sustainability information is reported and would be available for either limited or reasonable assurance engagements.

While assurance over sustainability reporting is not currently required in the United States, the standards under which such assurance is available are likely to be on the agenda for an increasing number of audit committees. A recent study found that 64 percent of companies that report sustainability information also provide some level of third-party assurance over at least some of the information. See IFAC Issues Third Report on ESG Disclosure and Assurance, February-March 2023 Update. Further, if the SEC’s climate disclosure proposals are adopted, auditors will be required to provide assurance on GHG emissions disclosures for certain large companies, and the audited financial statements of all public companies will be required to include footnote disclosure on some climate-related matters. See SEC Unveils its Climate Disclosure Proposals, March 2022 Update. Audit committees may therefore want to monitor standard setting in this area.


9 views0 comments

Recent Posts

See All

PCAOB Reworks the Foundations of Auditing

The Public Company Accounting Oversight Board has adopted a new auditing standard, AS 1000, General Responsibilities of the Auditor in Conducting an Audit, and related amendments to other auditing sta

Comments


bottom of page