IAASB Proposes Assurance Standard to Strengthen Reporting on Greenhouse Gases

The Proposed International Standard on Assurance Engagements “ISAE3410, Assurance Engagements on Green House Gas Statements” (Exposure Draft) was approved for publication by the International Auditing and Assurance Standards Board in January 2011. Comments are sought by June 2011.

Many professional accountants practise in the field of assurance on sustainability and similar reports. This exposure draft provides relevant standards specifically designed for such work.

The robustness of carbon taxes or carbon trading schemes is subject to the rigour with which emissions are measured, which in turn is affected by the measurement criteria and the assurance systems used.

In addition to reporting to comply with these taxes / schemes, other significant uses of carbon emissions information include:
* The preparation of GHG statements as part of regulatory disclosure regimes, such as Australia’s National Greenhouse and Energy Reporting Act 2007; and
* To inform investors and others on a voluntary basis. Voluntary disclosures are becoming increasingly common. Such disclosures may be, for example, published as a stand-alone document, included as part of a broader sustainability report or in an entity’s annual report, or made to support inclusion in a carbon register.‖

The exposure draft (ED) provides guidance for practitioners in preparing an assurance report on Green House Gas Statements prepared by entities. The ED recognises that practitioners have to select approaches appropriate to the circumstances of the engagement based on assessment of the risks of material misstatement. An explicit risk assessment is necessary and certain procedures cannot be mandated as they are for limited assurance engagement on historical financial information.

Engagements can be for limited assurance or reasonable assurance.

For both engagements, the practitioner’s report is required to include a summary of the practitioner’s procedures.

The ED includes guidance on:

• Acceptance and Continuance
• Planning
• Materiality in Planning and Performing the Engagement
• Understanding the Entity and its Environment
• Procedures to Obtain an Understanding and to Identify and Assess Risks
• Identifying and Assessing Risks of Material Misstatement
• Overall Responses to Assessed Risks and Further Procedures
• Using the Work of Competent Practitioners
• Written Representations
• Subsequent Events
• Comparative Information
• Other Information
• Documentation
• Engagement Quality Control Review
• Forming the Assurance Conclusion
• Assurance Report Content
• Other Communication Requirements.

Examples of practitioner’s reports are included in the ED.

For further details, see a copy of the Exposure Draft at the International Federation of Accountant’s website.