The Role of the Auditor in Climate Disclosure
A new Center for Audit Quality (CAQ) publication discusses the role that auditors can play in public company reporting of climate-related information. The Role of the Auditor in Climate-Related Information considers the impact of climate-related risks on the financial statement audit and on attestation engagements to provide assurance with respect to separate climate reports. The CAQs’ paper, which is nontechnical and quite readable, is organized around six questions:
What is driving demand for climate-related information?
What types of climate-related information are companies disclosing?
Why do companies seek assurance over climate-related information?
What is the role of public company auditors in climate-related information?
What factors and skillsets enable auditors to perform attestation engagements over climate-related information?
Can a public company use the same independent accounting firm for its financial statement audit and attestation over its climate-related information?
The publication also contains an appendix describing the SEC’s climate disclosure proposals and the EU’s Corporate Sustainability Reporting Directive.
While the CAQ’s paper is aimed at providing auditors with insight concerning their role in climate disclosure, it could also be useful to an audit committee that is considering how their auditor can aid in the company’s climate disclosure initiatives. As the CAQ observes, “With significant growing demand for reliable climate-related information set to continue, regardless of how the various regulatory developments proceed, it is important for auditors to understand and embrace the role they can play in an SEC registrant’s reporting of climate-related information not only as it affects the financial statements and ICFR but also the separate, standalone reporting of climate-related information.” Similarly, audit committees need to understand the role that auditors can play.