ESG assurance: An emerging opportunity for CPAs

Interest in virontal, , and governance (ESG) disclosures has ris dramatically during the past year, presting great pottial for CPAs to provide assurance on these disclosures as they become more common and as stakeholders are focusing on the quality of such disclosures.

It’s an area of opportunity for CPAs to meet the public interest and provide value. Although reporting of and assurance on ESG information in the Unit States is on the rise, this is an evolving area in the Unit States. In Europe and other parts of the world, many organizations are requir to report on ESG information, and a significant portion of ESG assurance is being perform by an audit firm or an d provider, according to The State of Play in Sustainability Assurance: Benchmarking Global Practice

The report looks at the extt to which companies around the world are reporting and obtaining assurance for sustainability disclosures and the assurance standards they are using. And in the Unit States, in relation to the limit number of organizations that seek assurance on ESG disclosures, the overwhelming majority of them have their ESG disclosures assur by non-CPAs.

That means there are practice opportunities for CPAs in this area. Practitioners can help ucate clits about ESG reporting and disclosures, including the consideration of risks relat to climate that can be material to the financial statets, said Jnifer Burns, CPA, the AICPA’s chief auditor.

“CPAs are uniquely qualifi, bas on their understanding of their clits, to hance the reliability of ESG-relat disclosures. The auditor’s knowlge should be leverag to deler assurance over ESG,” she said.

Interest in ESG reporting applies to prate companies as well as public companies, since they both will be held accountable by their stakeholders.

In the Unit States, rect actions relat to climate change include an executive order from Presidt Joe Bid, legislation pass in the House of Represtates, and a request for input on climate change disclosures from the SEC (see the AICPA comts to the SEC here

It found that 90% of the 1,400 companies includ had report some type of ESG disclosure. Much of that reporting was done through stand-alone sustainability reports, with some disclos in integrat reporting and some within the annual report. There was great dersity in the reporting standards being us, with 68% relying on mulle standards and many using one or more establish frameworks.

“This lack of consistcy can have an impact on the quality of information and its comparability and consistcy,” Beers said.

The same problem exists wh it comes to assurance. Although about 51% of companies globally are obtaining assurance on their sustainability reporting, there is not consistcy in the type of assurance involv. The Unit States is a good example, where non-CPAs dominate the field and differt assurance standards are being us on gagets.

“It’s possible to find reliable and comparable financial information for large companies in the Unit States, Indonesia, and Brazil because financial reporting practices are harmoniz and they are all audit,” Hanson said. “That’s not the case for ESG disclosures.”

international sustainability reporting standards board.

If the new board comes to fruition, the existce of one set of standards could create consistcy and comparability that currtly is lacking in sustainability reporting. Indepdt assurance can increase the reliability of this reporting, and CPAs have an opportunity to play a critical role in this process.

“As companies develop their reporting and assurance approach, CPAs have the standards and expertise to help them,” Burns said. “CPAs are indepdt, follow a consistt set of assurance standards, and are subject to quality control rules and monitoring due to their professional requirets.”

AICPACIMA have resources to help practitioners as well as accountants in companies who will be developing their organizations’ metrics and reporting. Organizations can also turn to the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Framework in considering ESG control and information nes and to the Institute of Internal Auditors’ Three Lines Model to address relat governance and risk managet concerns, Burns advis. In addition, COSO and the World Business Council for Sustainable Developt have provid guidance for applying terprise risk managet to ESG-relat risks, which also may be helpful.

“We’re experts on what to disclose and provide assurance,” Burns said. “The profession is .”

Anita Dnis is a freelance writer bas in New Jersey. To comt on this article or to suggest an idea for another article, contact K Tysiac, the JofA’s itorial director, at Kenneth.Tysiac@aicpa-cima.com.


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