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External Assurance on Non-Financial Information: Providing Confidence

Noémi Robert, Senior Manager, Accountancy Europe & Vita Ramanauskaité, Advisor, Accountancy Europe  | 

How do professional accountants respond to the growing demand for assurance on non-financial information (NFI)? Accountancy Europe‘s latest publication sets out the context for NFI reporting and assurance and discusses the role of the accountancy profession. It provides six key steps for professional accountants to conduct an NFI assurance engagement and ask for experts’ input on the challenges faced in practice.

NFI Reporting Journey

Across the globe, companies increasingly report on NFI. Companies’ stakeholders, such as investors and clients, increasingly seek such information for their decision making.

In Europe, reporting on environmental, social, and governance matters has recently taken a major step forward with the publication of the European Directive 2014/95/EU on non-financial and diversity information. Approximately 6,000 companies are now required to report NFI under the Directive from 2017 on. These companies shall disclose information on, at a minimum, environmental, social and employee, respect for human rights, anti-money laundering, and bribery matters.

While a significant number of these 6,000 companies have long-standing experience in NFI disclosures, other companies face it for the first time. With a previous project, Disclose What Truly Matters, Accountancy Europe demonstrates how to apply these requirements in a “mock-up” management report.

Stakeholders are interested in this piece of information but they want to know if they can trust it. This trust can be provided by external assurance.

External Assurance Aspects

The Directive does not mandate external assurance on NFI. According to the legislative text, the statutory auditor shall “check” if the NFI is disclosed.

The role of the statutory auditor on other information is addressed in International Standard on Auditing 720, The Auditor’s Responsibilities Related to Other Information. Does complying with this standard mean complying with the Directive’s requirement for the statutory auditor to check if the NFI has been provided? Further analysis is required to fully understand the practical implications of the Directive on the statutory auditor’s involvement. But we can already state that such a “check” exercise does not provide assurance over the NFI reported. The auditor does not perform specific audit procedures designed to obtain assurance on other information.

In the Directive, it is a country’s option to have the NFI “verified” by an independent assurance service provider. If taken up, this verification results in an assurance engagement that adds value and increases stakeholders’ confidence in NFI.

To date, it remains unclear how this option has been used in different European countries. Accountancy Europe plans to work on this question as it requires further analysis. Indeed, some countries, for example Italy and France, have opted for mandatory verification. But it may mean a different work effort performed by the assurance practitioner.

It is worth noting that even without any legal obligation, many large European corporates engage an independent third party to provide assurance on NFI disclosed as in sustainability report, management report, specific key performance indicators (KPIs), etc.

The Role of the Assurance Practitioner

The accountancy profession is equipped to respond to assurance needs on NFI, but first NFI needs to be properly reported. As the role of the accountancy profession on NFI is not clearly defined, it gives an opportunity for the profession to engage with companies on these matters to make sure data reported is reliable, complete, and supported by appropriate evidence.

The most commonly used standard for assurance on NFI is the International Standard on Assurance Engagements (ISAE) 3000 Revised, Assurance Engagements Other than Audits or Reviews of Historical Financial Information. Other standards may also be used to deal with specific matters on NFI, for example, ISAE 3410, Assurance Engagements on Greenhouse Gas, for assurance engagements relating to greenhouse gas statements. There are also specific legislation or regulatory requirements applicable at national level in certain jurisdictions.

As NFI reporting and assurance thereon are still on a journey, there is some de facto divergence in practice in the way assurance practitioners approach their work. We have identified important challenges that impact assurance engagements on NFI and want to explore them further.

First, the variety of existing reporting standards and frameworks can cause a practical issue for the assurance practitioners to determine their approach and scope of their work.

Second, the maturity of the reporting process affects the assurance process. Establishing appropriate reporting systems is the challenge of preparers. As the information collected through evolving reporting systems can result in incomplete or unreliable information, it may make the assurance engagement subject to inherent limitations. The absence of robust reporting systems impacts whether sufficient appropriate evidence can be gathered.

Furthermore, the management of the company determines the scope, subject matter, and what the suitable criteria are for reporting purposes. However, assessing whether those are appropriate and suitable for an assurance engagement can be challenging.

These practical challenges surrounding assurance over NFI are detailed in our publication.

Request for Feedback

To progress this important discussion, we ask experts on this matter to provide feedback and share views on NFI assurance. Please send us your responses to Vita Ramanauskaite ( by December 1, 2017.