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Business School

Auditing and Assurance

Overview of Sustainability Assurance

New Auditing Standards

The University of SydneyBusiness School

WELCOME

ACCT3014 - Auditing and AssuranceSemester 1, 2013

Week 13 LectureOther Assurance Engagements

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2

Lecture Outline

Overview of Sustainability Reporting

GHG New Auditing Standard

Compliments Google Images May 2013

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Overview of Assurance of Sustainability

ReportingWhat is Assurance?CSR Reporting Assurance Developments

Characteristics of Assurance

Levels of Assurance

Providers of Assurance services

Value of Assurance

Frameworks for Assurance

Developments in Assurance practice

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What is Assurance?The Australian Auditing and Assurance Standards Board (AUASB)

in their Framework for Assurance Engagements, issued 2007

states:

Assurance engagement means an engagement in which an

assurance practitioner expresses a conclusion designed to

enhance the degree of confidence of the intended users other

than the responsible party about the outcome of the evaluation

or measurement of a subject matter against criteria

Assurance is a broader concept than Audit, attestation services

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CSR Assurance Developments

In Australia, which is within the top 10 countries for report assurance,only half the ASX 100 companies obtain assurance over sustainability

reports. This reflects the current voluntary nature of reporting

............ACCA 2012

Banking and Telecommunications groups had the highest take up of

assurance

The authoring of assurance statements was evenly spread between

accounting firms and specialist consultancies.

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Components of Assurance include:

An assurance service provider

A user or group of users who obtain value

from the assurance service provided

Information or a process on which the

assurance service is provided

Characteristics of Assurance

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Assurance creates confidence by reducinginformation risk:

Subject matter knowledge Independence

Agreed-upon criteria to evaluate

Expertise in gathering/evaluating evidence

What areas can and should be verified?

Attributes to Perform Assurance

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Reasonable or positive assurance (audit opinion)

Limited or negative assurance (review of interim

report under Corporations Act2001) No assurance (e.g. where a practitioner is engaged

to compile financial statements)

The most common level of assurance provided was moderate or limited

rather than a high or reasonable level (including statements with mixed

levels of assurance for varying subject matter), which was only attained by

18% of companies that sought assurance.....ACCA 2012 Report

Levels of Assurance

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Providers of Assurance13%

13%41%

Accountants (Big 4), Certification Bodies,and Specialist Consultancies, together

they account for 89% of the market

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to improve the credibility of the reporting among their

stakeholders (including investors)

to ensure that what is addressed in the report is responding

to the issues that are important and relevant

to improve the quality and reliability of their reported

information

to identify areas where internal and external sustainability

management systems could be improved, and

to improve operational and risk-management practices.

Value of Assurance

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Smorgasbord of Assurance Standards

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Auditors can only provide assurance if they have a clear framework for assessing information

Sustainability Reporting & Assurance: Accountability (2008a,b)-AA1000AS/APS

International Standard on Assurance Engagements (ISAE 3000) or

ASAE 3500 in Australia

Global Reporting Initiative (GRI 2006) with G4 New Generation in 2013!

Various perspectives/standards & guidelines: ISO26000

Global Compact

Management systems (ISO14001)

Sustainable supply chain (e.g. SA8000)

Indices (e.g. Dow Jones Sustainability Index) Product labeling (e.g. good environmental choice)

Internal Standards

Nivra Guide non-financial information reporting/assurance for public sector

.list goes on.

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ISAE3000 AA1000AS

For all assurance other than

historical info

For assurance of principles and

performance info

Required for professionalaccountants (mandatory) Can be used by any accreditedproviders

Scope is report or specified info

in the report

Scope is systems, performance

and report

Two levels-reasonable andlimited

Two levels-high and moderate

Supported by IFAC Code of

Ethics

Supported by IRCA Code of

Conduct

Similar Standards?

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Sustainability Assurance Standards and GuidelinesAssurance Statement Lecture

Examples

Compare both Statements

WestpacVs

NAB

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Assurance for GHG

Australias Clean Energy Scheme National Greenhouse and Energy Reporting Scheme

(NGERS) Carbon pricing mechanism

Renewable Energy Target (RET)

Carbon Farming Initiative (CFI)

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National Greenhouse and Energy Reporting

Scheme (NGERS)

Established by the National Greenhouse

and Energy Reporting Act 2007 (NGER Act)

for reporting on:

GHG emissions

GHG projects (abatement actions)

Energy consumption and production

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Carbon Pricing Mechanism

The Clean Energy Act 2011 created

Australias carbon pricing mechanism.

Under this scheme:

Large businesses must purchase carbon credits against

their GHG emissions

Entities with facilities that have created emissions

exceeding 25 000 tonnes CO2-e are required to surrender

carbon units

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Renewable Energy Target (RET)

The RET scheme encourages additional

generation of electricity from renewable

sources and reduced GHG emissions in theelectricity sector.

RET is split into Large-scale Renewable Energy Target

Small-scale Renewable Energy Scheme

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Carbon Farming Initiative (CFI)

The CFI was established by the Carbon Credits(Carbon Farming Initiative) Act 2011.

This Act established the legislative framework foreligible carbon offset projects to create Australian

Carbon Credit Units (ACCUs) for trading in carbon

markets.

Essentially, the CFI is a carbon offsets scheme.

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Assurance Requirements

The National Greenhouse and Energy Reporting Schemerequires reasonable assurance, limited assurance or

verification reports

The carbon pricing mechanism requires reasonableassurance reports to be submitted with s.22A Scope 1

emissions reports

Carbon offsets scheme requires reasonable assurance,limited assurance or verification engagements initiated by

the Carbon Credits Administrator in compliance with the

Act

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Guidelines and Standards

Section 75 of the NGER Act requires an external auditor to conduct an audit

and prepare a report in accordance with guidelines determined by the

Regulator

Audit Team Leaders must for example:

ensure that selected audit team members for a particular audit have

the knowledge, skills and availability

be personally involved

sign an independence and conduct declaration

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GHG Disclosures in Australia

Scope 1 Emissions: produced from a source controlled by entity e.g.

fuel burned in the entitys machinery

Scope 2 Emissions: Production of energy, includingelectricity/heating/cooling and steam

Scope 3 Emissions: all indirect emissions e.g. employee travel

Emissions disclosed in GHG Statement

ISAE 3410 Recognise different methods an entity may measure GHG

emissions

Assurance enhances the credibility of an entitys GHG disclosures

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Guidelines and Standards

AUASB Framework for Assurance Engagements

ASAE 3410 Assurance Engagements on Greenhouse Gas

Statements

ASAE 3000 Assurance Engagements other than Audits or Reviews ofHistorical Financial Information

ASAE 3100 Compliance Engagements

ISO 14064-3:2006 Greenhouse GasesPart 3: Specification with

Guidance for the Validation and Verification of Greenhouse Gas

Assertions

ISO 19011:2002(E) Guidelines for Quality and/or Environmental

Management Systems Auditing

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Lecture Example

Compare PwC Rio Tinto Assurance Statement

With

Ernst & Young Santos Assurance Statement

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Increased disclosures of assurance engagementobjectives and procedures-levels of assurance

Emergence of NGERS and carbon requirements-focus

on assurance of specific subject matter

Integrated Reporting within core business

Identification of improvement opportunities will be

demanded by the client

Increased presence of Big 4 Assurance providers and

possible dominance

Streamlining of Standards, Guidelines in terms of

Assurance Reports

Future Directions for Assurance

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What's on Next Week

Course Review

Current audit issues

Final Exam Details