The University of Sydney Business School

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ACCT3014 - Auditing and Assurance
Semester 1, 2013

Week 13 Lecture Other Assurance Engagements

Business School Auditing and Assurance

Overview of Sustainability Assurance New Auditing Standards

Lecture Outline
Overview of Sustainability Reporting GHG New Auditing Standard

Compliments Google Images May 2013

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Overview of Assurance of Sustainability Reporting What 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

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

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.

Characteristics of Assurance
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

Attributes to Perform Assurance

Assurance creates confidence by reducing information risk: Subject matter knowledge Independence Agreed-upon criteria to evaluate Expertise in gathering/evaluating evidence What areas can and should be verified?

Levels of Assurance
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

13% 41%

13%

Providers of Assurance

Accountants (Big 4), Certification Bodies, and Specialist Consultancies, together they account for 89% of the market

Value of Assurance
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.

Smorgasbord of Assurance Standards

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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Similar Standards?
ISAE3000 For all assurance other than historical info Required for professional accountants (mandatory) Scope is report or specified info in the report Two levels-reasonable and limited AA1000AS For assurance of principles and performance info Can be used by any accredited providers Scope is systems, performance and report Two levels-high and moderate

Supported by IFAC Code of Ethics

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Supported by IRCA Code of Conduct

Sustainability Assurance Standards and Guidelines

Assurance Statement Lecture Examples

Compare both Statements Westpac Vs NAB

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

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

Renewable Energy Target (RET) The RET scheme encourages additional generation of electricity from renewable sources and reduced GHG emissions in the electricity sector. RET is split into
Large-scale Renewable Energy Target Small-scale Renewable Energy Scheme

Carbon Farming Initiative (CFI)

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

This Act established the legislative framework for eligible carbon offset projects to create Australian Carbon Credit Units (ACCUs) for trading in carbon markets.
Essentially, the CFI is a carbon offsets scheme.

Assurance Requirements
The National Greenhouse and Energy Reporting Scheme requires reasonable assurance, limited assurance or verification reports The carbon pricing mechanism requires reasonable assurance 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

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

GHG Disclosures in Australia

Scope 1 Emissions: produced from a source controlled by entity e.g. fuel burned in the entitys machinery Production of energy, including electricity/heating/cooling and steam all indirect emissions e.g. employee travel

Scope 2 Emissions:

Scope 3 Emissions:

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

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 of Historical 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

Lecture Example Compare PwC Rio Tinto Assurance Statement

With
Ernst & Young Santos Assurance Statement

Future Directions for Assurance

Increased disclosures of assurance engagement objectives 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
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What's on Next Week

Course Review
Current audit issues Final Exam Details

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