In the context of natural capital management and its reporting, ACCA (The Association of Chartered Certified Accountants), the European Confederation of Institutes of Internal Auditing (ECIIA) and Deloitte outline the core principles governing the approach that auditors should take.
In the context of natural capital management and its reporting, ACCA
(The Association of Chartered Certified Accountants), the European
Confederation of Institutes of Internal Auditing (ECIIA) and Deloitte
outline the core principles governing the approach that auditors should
take, highlighting the importance of governance, and setting out the
required policy support, as well as mindset and skills of the auditors.
Nature is an increasingly material risk for business
and society and there are calls for credible business activity to better
manage natural capital impact, with true and fair reporting suitable
for a wide range of stakeholders.
However, issuing a sustainability report is not always enough if an
organisation wants to gain credibility and trust, and attract investors.
Audit and Assurance on high-quality non-financial information (NFI) are
an essential step in enhancing relevance, reliability, comparability
and therefore confidence and trust in an organisation’s sustainability
content, data and processes portrayed in both internal and external
report.
Ahead of COP 26, as the European Commission is about to issue its
eagerly awaited review of the Non-Financial Reporting Directive, and the
IAASB has recently released its EER assurance Guidance, ACCA,
ECIIA and Deloitte have developed the key principles that should govern
the natural capital internal audit assignments or external assurance
engagements in a new Guide on Natural Capital Management Working Together for the Planet: Audit & assurance of sustainability information.
Sharon Machado, head of business reporting at ACCA and lead author of the guide says: ‘This new guide for internal and external auditors is part of a series produced by ACCA under the heading Professional accountants changing business for the planet
that helps professional accountants - and in this guide, auditors -
serve their public interest remit. It outlines the practical application
principles, supported by examples, that underpin the achievement of
relevant and reliable natural capital management audit, advisory or
assurance. Many of these principles can equally be applied to other
sustainability and non-financial information work. The guide draws on
the recommendations from, and is intended to complement the IAASB and
European Commission initiatives.’
The guide recommends employing a case-by-case and risk-based approach
that reflects materiality, understands the control environment with a
view to completing assurance mapping, deemed to be a key step to
integrated assurance. Auditors already value the importance of
collaboration with experts, for example with natural capital experts.
Here the value of collaboration between internal and external auditors
should not be underestimated, for example to deliver against the
European Commission’s entity, sector specific and agnostic reporting or
the IAASB’s EER guidance requirements.
Julien Rivals, Deloitte France Sustainability Practice Co-Lead,
Vice-Chair of Accountancy Europe’s sustainability Working Group said: ‘ESG Information
has become as important as financial information, therefore raising the
question on how to ensure its reliability and give confidence to
decision makers and other users of this information. External assurance
is part of the answer, but we need to ask ourselves: Why do we want
assurance? What do we want to assure? How do we want to provide
assurance so that we avoid an expectation gap? And who will provide the assurance?’
Thierry Thouvenot, President, European Confederation of Institutes on Internal Auditing (ECIIA) said: ’Sustainability
is a key risk in organisations, as stated in our recent Risk in Focus
survey, and it is important for internal auditors to embed this new
risk in their work, enhance their skills and coordinate the efforts with
the other assurance providers, on the sustainable trust journey’.
Highlighting the importance of governance, the guide also urges auditors to adapt
their mindset and skills to meet the broad and exciting challenges of
sustainability assignments. ACCA, ECIIA and Deloitte also argue
that policymakers have a crucial role in supporting the organisation
and auditors’ role with investment and guidance for sustainable strategy
setting and implementation, governance, accounting, reporting and
assurance.
The new guide will be launched at a joint ACCA, ECIIA, Deloitte and AccountancyEurope thought-provoking event called Working Together for the Planet: Audit & assurance of sustainability information on 29 April 2021.
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