In August, the International Auditing and Assurance Standards Board (IAASB) opened a public consultation on its proposed sustainability assurance standard. International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements, is a watershed moment for the accountancy profession.
But what does it mean for those involved in educating auditors? In this article, we’re going to help educators navigate the International Education Standards and how they connect to elements of proposed ISSA 5000.
The early evidence suggests that sustainability reporting, and, thus, assurance services, are no longer a niche area of focus for investors, those charged with governance, and regulators. In addition to the public interest aspect of strong assurance services supporting sustainability reporting, we also know that for many joining the accounting profession today there is a high attachment to climate change and broader sustainability agendas.
It is likely that in the coming years sustainability assurance services will move from being a specialized offering—delivered by a small number of dedicated, passionate auditors—to an integral part of the assurance services provided to most organizations. So, with such an emphasis on new standards and likely new skills, how do we teach the sustainability assurance standard to today’s auditors and those of tomorrow?
In this short article, we explore what the proposed new sustainability assurance standard could mean for the education of auditors—and the actions required of those providing or involved in auditor education (including academia, professional accounting organizations, CPD providers, governments, regulators and employers) who rely on the International Education Standards as a basis for their curricula.
As explained in the IAASB’s ISSA 5000 explanatory memorandum, sustainability reporting has become a matter of global importance, and its reliability is a key issue for many stakeholders, including investors, regulators and non-governmental organizations. Sustainability assurance can enhance the reliability of sustainability reporting and reduce the extent of “greenwashing”, helping entities drive towards net zero commitments and support the public interest.
Existing IAASB standards and guidance on the assurance of non-financial information, namely International Standard on Assurance Engagements 3000, ISAE 3410 on greenhouse gas statements, and non-authoritative ISAE guidance, have typically not been considered core auditing curriculum during the pre-qualification phase—also known as Initial Professional Development (IPD)—although practitioners may have historically gone on to specialize in these other types of assurance as their careers developed through Continuing Professional Development (CPD).
As sustainability assurance becomes required for many entities, standards such as ISSA 5000 will likely become a core element of all auditors’ education. Engagement leaders will need to understand how to determine that their engagement teams collectively “…have the appropriate sustainability competence, competence and capabilities in assurance skills and techniques” to perform a sustainability assurance engagement (proposed ISSA 5000 paragraph 41).
For those involved in auditor education, action is needed now to help build assurance capacity through a generation of practitioners with the necessary sustainability and sustainability assurance competencies to be able to perform these engagements. Equally important as the pre-qualification learning of future practitioners is the need to invest in on-going professional development for those who provide assurance services. Fortunately, professional accountants have a strong foundation of competencies to build on to.
But as auditing educators, where do we start? In this article we describe three actions auditing educators can take to prepare their curricula and educational programing for proposed ISSA 5000. Under each action, learning outcomes from current IFAC International Education Standards (IESs) are used to demonstrate how the proposed standard can influence auditing curricula. This analysis is also linked to a much wider project being performed by IFAC’s International Panel on Accountancy Education to look at the sustainability reporting and assurance competency requirements for all professional accountants.
Use Sustainability Assurance to Enhance the Public Interest Focus of Auditing Curricula
Bruce Vivian, Head of Accountancy Education, IFAC: "The development of ISSA 5000 provides us with an opportunity to consider if sustainability assurance should be a part of core accountancy education curricula and/or electives. The link between this emerging discipline and our role as an accounting profession in addressing broader environmental and societal issues can attract talented individuals to pursue a career in auditing—and could go some way to help us solve part of the “attractiveness of the profession” conundrum."
IES 4: Professional Values, Ethics & Attitudes identifies “Commitment to the Public Interest” as a competence area required of all accountants. The following three examples demonstrate how these important principals could be enhanced by ISSA 5000.
Extract from IES learning outcomes
Implications of the proposed ISSA 5000
IES 4 (c)(i) Explain the role and importance of ethics within the profession and in relation to the concept of social responsibility.
The concept of social responsibility extends to an auditor’s role in sustainability assurance engagements. Education programs can emphasize the link between ethics, social responsibility, and sustainability assurance engagements, providing meaning and purpose to learners and equipping them to make those ethical judgments in a fast-moving area when they themselves are providing assurance.
IES 4 (c)(ii) Explain the role and importance of ethics in relation to business and good governance.
Education programs can expand on this concept to ensure auditors understand conceptually how sustainability reporting is strengthened when delivered in the context of strong ethical foundations and under an umbrella of good governance that oversees sustainability reporting and assurance. This could include thinking about the pressures that lead to “greenwashing” and the red flags for assurance practitioners to consider as part of good governance.
IES 4 (c)(iii) Analyze the interrelationship of ethics and law, including the relationship between laws, regulations, and the public interest.
Education programs should be updated to reflect the new laws and regulations governing sustainability reporting and assurance, providing opportunities for learners to explore the relationships between these new laws and regulations, their professional ethics, and the public interest.
Develop Auditors' Understanding of How Conceptual Assurance Principles Apply to Sustainability Assurance Engagements
The IAASB has used the requirements and application material in the proposed ISSA 5000 to provide more specificity to six priority areas:
Greg Owens, Deputy Chair, IFAC International Panel on Accountancy Education: "As auditors we have a professional responsibility to develop and maintain our skills and these six priority areas are helpful signposts for all those involved in the training and education of auditors. Curricula can be boosted by addressing these issues through a sustainability lens and using the proposed ISSA 5000 as a rich resource to help us incorporate these priorities in educational programs for aspiring and professional accountants."
- The difference in work effort between limited and reasonable assurance, including sufficiency of evidence.
- The scope of the assurance engagement.
- The suitability of the reporting criteria including addressing concepts such as “double materiality.”
- Evidence, including the reliability of information and what comprises sufficient appropriate evidence.
- Materiality in the context of the assurance engagement, including in the context of narrative and qualitative information.
- The entity’s system of internal control and its impact on the ability of the practitioner to obtain sufficient appropriate evidence.
IES 2: Technical Competence includes competence areas for “Audit and Assurance” and “Governance, Risk Management and Internal Control”. The examples below show how these important principals can be enhanced by the ISSA 5000’s priority areas.
Extract from IES learning outcomes
Implications of the proposed ISSA 5000
IES 2 (e)(vii) Explain the key elements of assurance engagements and applicable standards that are relevant to such engagements.
The lens of sustainability assurance provides a relevant and meaningful way to teach the key elements of assurance engagements. Understanding of principles such as scope, limited and reasonable assurance, and materiality, can be enhanced when developed in the context of sustainability information needs that have high currency in today’s society.
IES 2 (e)(v) Identify relevant audit evidence, including contradictory evidence, to inform judgments, make decisions, and reach well-reasoned conclusions.
Sustainability information is supported by a varied and complex array of evidence, including some that can only be evaluated with the support of experts. There will be value in increasing the amount of time spent with learning to develop the skills described in this learning outcome, in the context of sustainability reporting.
IES 2 (f)(v) Analyze the adequacy of systems, processes and controls for collecting, generating, storing, accessing, using or sharing data and information
Similar to the International Standards on Auditing, proposed ISSA 5000 includes a requirement for the auditor to understand relevant components of the entity’s systems of internal control and to evaluate its effectiveness (see paragraphs 102L and 102R in proposed ISSA 5000). It will take time for entities to develop sufficiently robust systems of internal control to support reliable sustainability reporting. This is a key area where education can prepare auditors to play their role in analyzing an entity’s internal controls and identifying control deficiencies that need to be addressed. Recent guidance published by the Committee of Sponsoring Organizations (COSO), Achieving Effective Internal Control over Sustainability Reporting, is an excellent starting point for educators and auditors alike.
Contextualize Ethical and Behavioral Competence to Support Quality Sustainability Assurance Engagements
Adriana Florina Popa, Member, IFAC International Panel on Accountancy Education: "Auditors who form part of sustainability assurance engagement teams will need to fully exploit their professional skills to be successful. These ethical and behavioral competencies can be difficult to develop in a classroom, and already require creative and innovative educational approaches to allow students to learn and practice. There is nothing new here. But when we contextualize these skillsets to sustainability assurance, we find new opportunities to allow students to demonstrate their proficiency and identify where they need further development."
IES 3: Professional Skills and IES 4: Professional Value, Ethics & Attitudes include many learning outcomes that aspiring professional accountants need to develop and demonstrate by the end of their pre-qualification training. The following examples illustrate how these learning outcomes can be contextualized in an education program in support of quality sustainability assurance engagements.
Extract from IES learning outcomes
Implications of the proposed ISSA 5000
IES 3 (a)(iii) Identify when it is appropriate to consult with specialists.
Developing auditors’ sustainability competence is crucial. But there will be many occasions on a sustainability assurance engagement where an auditor will need to work with an expert, especially in more technical subject matters. Engagement teams may also include members with specialized expertise in relevant subject matters. Getting this right starts with the professional accountant knowing when to ask for help. Educators can develop this behavior in their students through practical case studies, research exercises, and team projects.
IES 4 (a)(ii) Apply techniques to reduce bias when solving problems, informing judgments, making decisions and reaching well-reasoned conclusions.
An auditor’s professional skepticism and professional judgment will be under a public interest microscope when it comes to sustainability assurance. Both concepts are featured widely in the proposed ISSA 5000 (with more than 100 mentions in the exposure draft!). Both are already developed through accountancy education, and educators are encouraged to keep innovating and finding new ways to develop these behaviors in aspiring and practicing professional accountants, using the context of sustainability assurance as a new medium.
IES 4 (b)(iii) Identify threats to compliance with the fundamental principles of ethics.
ISSA 5000 does not in any way change the fundamental principles of ethics. But the nature of ethical dilemmas and threats to compliance with the principles that an auditor could encounter may be different. Education materials should include case studies that incorporate some of the unique dilemmas and threats that arise on sustainability assurance engagements.
The time is now for educators to prepare for sustainability assurance to become mainstream. With the release of proposed ISSA 5000 by the IAASB, educators can take action today:
- Familiarize yourself with the exposure draft.
- Upskill yourself on sustainability reporting more broadly (IFAC video “Upskilling to Meet the Sustainability Era, Where to Start” and IFAC’s web page with links to sustainability courses and certificates are great ways to get started).
- Evaluate where sustainability assurance can be integrated into your existing curricula, taking consideration of the three opportunities described in this article.
- Participate in the IAASB’s consultation process (deadline is December 1, 2023).
IFAC's International Panel on Accountancy Education is considering the implications of sustainability reporting and assurance for professional accountants’ knowledge, skills and behaviors. This includes consideration of revising the International Education Standards. You can learn more about the IES Sustainability Reporting Project here.