With global assets in sustainability and ESG-related investment vehicles due to surpass $53 trillion by 2025, the need for reliable, neutral, and comprehensive frameworks for reporting sustainability information is evident. And policymakers and regulatory bodies have taken note. The European Union (EU) continues to negotiate terms for its Corporate Sustainability Reporting Directive. This past March, the U.S. Securities and Exchange Commission proposed new rules regarding disclosure of climate-related risks. The newly formed International Sustainability Standards Board (ISSB), which has support of the G20 and others, issued their exposure drafts for sustainability reporting for public comment. The International Organization of Securities Commissions and Financial Stability Board weighed in on climate-related disclosures as well.

As a result, we face a critical moment: the growing desire globally to develop reliable, high-quality sustainability reporting as a key element of corporate reporting is leading to new requirements and heightened expectations. This will be a journey, and some level of patience is needed. The data capture, information systems, and processes within many organizations needed to report reliably on sustainability are, understandably, in the process of maturing.

Like in the world of financial reporting, external assurance has a key role in contributing to reporting reliability. Supporting investors and regulators’ trust in the sustainability information reported is the goal. Robust assurance standards that offer a consistent approach across borders for opining on organizations’ sustainability reports should facilitate that goal.

We at the International Audit Assurance and Standards Board (IAASB) hear the need for a global assurance standards solution. The IAASB already has well-established principles-based and subject-specific standards and guidance that are being effectively applied. But we know there is further work to be done in bringing the existing standards and guidance together and supplementing them to address assurance of sustainability reporting specifically.

We’ve recently taken a big step forward; our March 2022 meeting provided our first opportunity to discuss the IAASB’s actions in responding to the urgent need for an international assurance framework for sustainability reporting. In the discussion, the IAASB heard directly from investors that the reliability of sustainability reporting is crucial for decision making. The need for urgent and effective action, which balances global consistency and flexibility to accommodate regional variations, was clear.

The IAASB is committed to leading this effort to create new “sustainability bespoke” assurance standards. We are now in the process of identifying the specific approach to building these standards that will have the greatest impact on establishing high-quality assurance to support reliable sustainability reporting. We have determined that the new sustainability assurance standards will need to be framework-agnostic and principles-based—they will need to work with all sustainability/ESG reporting frameworks. We also expect that the sustainability assurance standards will need to be developed in a phased approach. Initial actions shall focus on an overarching standard that addresses all areas of the engagement in principle, with specificity provided on key areas. Specificity across non-key areas of the assurance engagement will develop over a longer time horizon, factoring in the maturity and evolution of sustainability reporting and assurance.

We will be discussing the approach to standard-setting on sustainability assurance at our IAASB meeting next week. The IAASB is hoping to have the proposed new sustainability assurance standards ready for public comment during the second half of 2023. Moving at this speed is possible in part because the current International Standards on Assurance Engagements (ISAEs), together with the non-authoritative sustainability assurance guidance, provide a robust starting point. We also plan to leverage the principles embedded in our International Standards on Auditing (ISAs), which are already used in 130 countries, are well known throughout the marketplace, and are trusted by investors and regulators.

Building a mature reporting and assurance ecosystem for sustainability will not happen overnight. The evolution of the ISAs, for example, has been an iterative affair since the 1970s. The process will—and should—take time. Nevertheless, to make progress, we cannot let perfect be the enemy of the good. Over time, as preparers, auditors, regulators, and investors gain experience, we can expect reporting frameworks and assurance standards to become increasingly refined, just as financial standards have evolved.

To continue to make progress, all stakeholders will need to remain in close collaboration. This will enable us to move quickly and boldly where and when we can. We expect a rapid transformation to occur in this space over the next decade. From there, global sustainability standards, like global financial audit standards, will be a stable platform, and our focus will on almost certainly be on continuous improvement.

The International Auditing and Assurance Standards Board (IAASB) is pleased to announce the reappointment of Tom Seidenstein as IAASB Chair for a further three-year term commencing July 1, 2022.

Mr. Seidenstein has chaired the IAASB since July 2019 and has been instrumental in the delivery of milestone projects, such as the new quality management standards, and addressing the issue of standards for less complex entities.

“We are delighted with Tom's reappointment as Chair of the IAASB,” said Linda de Beer, Chair of the Public Interest Oversight Board (PIOB). “He has proven himself to be an effective, strategic leader, who is focused on delivering results in the public interest.  He has the confidence of the PIOB to lead the IAASB on the next chapter of its journey to prioritize standards development in a timely manner to respond to the needs and challenges of the market.”  

The reappointment comes at a pivotal time for the IAASB. The Board has released an ambitious work plan (A Public Interest Focus in Uncertain Times) and is active and engaged on trending topics such as fraud, going concern, sustainability reporting and assurance, and technology.

“It is an honor to continue the work we’ve started at the IAASB,” said Mr. Seidenstein. “Together with a great staff and Board, we’ve delivered on our work plan commitments. We provided real help to the market during the pandemic by publishing real-time guidance to the accountancy profession. Now, as the public interest demands evolve with issues such as sustainability assurance and technological innovation, the IAASB must remain resolute in delivering globally accepted standards in a timely manner that respond to changing public interest needs. I’m excited for the next three years!”

Prior to joining the IAASB, Mr. Seidenstein has held senior strategic leadership positions at the Federal National Mortgage Association, commonly known as Fannie Mae, and the IFRS Foundation. Mr. Seidenstein has also served as a Trustee of the International Valuation Standards Council (IVSC) and on XBRL International’s Board of Advisors. He holds a Master in Public Policy from the Kennedy School of Government at Harvard University and an undergraduate degree from the School of Public and International Affairs at Princeton University.

About the IAASB

The International Auditing and Assurance Standards Board develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by the International Federation of Accountants (IFAC). For copyright, trademark, and permissions information, please go to permissions or contact permissions@ifac.org.

Today, the International Auditing and Assurance Standards Board (IAASB) published key takeaways from its recent Paris conference on the audits of financial statements of less complex entities (LCEs). Drawn from two days of discussions with more than 130 participants from 33 jurisdictions, the takeaways indicate a strong steer for the IAASB to finalize the develop of a separate standard for audits of financial statements of LCEs in the public interest.

Key takeaways focus on themes around the continuing need for a timely global solution comprising a separate, standalone standard; working towards a common understanding of what an ‘LCE’ is and that this should also appropriately include audits of group financial statements; ways to support adoption and implementation of the standard; and the importance of communication about how the standard helps serve the public interest.

Along with the feedback from the public consultation on the exposure draft of the landmark new LCE standard, the key takeaways will help shape the draft standard and IAASB actions. The IAASB will next discuss the proposed LCE standard at its June meeting, which will be livestreamed on YouTube.

The International Auditing and Assurance Standards Board (IAASB) today released non-authoritative guidance, The Fraud Lens – Interactions Between ISA 240 and Other ISAs. The guidance illustrates the relationship and linkages between International Standard on Auditing (ISA) 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements, and other ISAs when planning and performing an audit engagement and reporting thereon.

The IAASB recently approved a project proposal to revise ISA 240 to enhance or clarify an auditor’s responsibilities on fraud in an audit of financial statements. In the interim, this non-authoritative guidance illustrates how extant ISA 240 is to be applied in conjunction with the full suite of ISAs. As part of the project, additional non-authoritative guidance may be developed to further support the implementation and application of the proposed revised standard, once developed.

This non-authoritative guidance illustrates the relationship between International Standard on Auditing (ISA) 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements, and other ISAs when planning and performing an audit engagement and reporting thereon. It also illustrates how ISA 240 is currently applied in conjunction with the full suite of ISAs.

To help users of its standards adapt to the clarified and updated definition of “engagement team”, the International Auditing and Assurance Standards Board (IAASB) has released a new fact sheet. The new fact sheet addresses the clarified definition and its possible impacts, including recognition that engagement teams may be organized in a variety of ways, including across different locations or by the activity they are performing. The fact sheet also includes a diagram that walks users through who specifically is included and excluded.

This new engagement team definition applies to the International Standards on Auditing and International Standards on Quality Management. 

To help users adapt to the clarified and updated definition of “engagement team”, this fact sheet addresses the clarified definition and its possible impacts, including recognition that engagement teams may be organized in a variety of ways, including across different locations or by the activity they are performing. The fact sheet also includes a diagram that walks users through who specifically is included and excluded.

The International Auditing and Assurance Standards Board (IAASB) today released International Standard on Auditing (ISA) 600 (Revised). The revised standard addresses special considerations that apply to audits of group financial statements (group audits). Group audits are often more complex and challenging than single-entity audits because a group may have many entities or business units across multiple jurisdictions, and component auditors may be involved. The revised standard becomes effective for audits of group financial statements for periods beginning on or after December 15, 2023.

“ISA 600 (Revised) is a significant step forward to enhance the consistent performance of quality group audit engagements and thereby supports users’ interests and broader financial stability,” said Tom Seidenstein, IAASB Chair. “Group audits is an area identified by regulators requiring attention. The changes in the standard build off other recent IAASB revisions, such as the revisions to the quality management standards, and should enhance audit quality by strengthening the accountability of group auditors and clarifying the interactive relationship between group and component auditors.”

ISA 600 (Revised) includes a robust risk-based approach to planning and performing a group audit. The approach focuses the group auditor’s attention and work effort on identifying and assessing the risks of material misstatement of the group financial statements and designing and performing further audit procedures to respond to those assessed risks. It also recognizes that component auditors can be, and often are, involved in all phases of the group audit. The standard furthermore promotes a clear, proactive and scalable approach for group audits that can be applied to today’s evolving group audit structures.

The IAASB also developed a Basis for Conclusions and factsheet to support the implementation, which are also available on the IAASB’s website.

About the IAASB
The International Auditing and Assurance Standards Board develops auditing and assurance standards and guidance for use by all professional accountants under a shared standard-setting process involving the Public Interest Oversight Board, which oversees the activities of the IAASB, and the IAASB Consultative Advisory Group, which provides public interest input into the development of the standards and guidance. The structures and processes that support the operations of the IAASB are facilitated by the International Federation of Accountants (IFAC). For copyright, trademark, and permissions information, please go to permissions or contact permissions@ifac.org.

The IAASB is pleased to announce that its 2022-2023 Work Plan, A Public Interest Focus in Uncertain Times, has been approved by the Public Interest Oversight Board, which is a key element of the IAASB’s due process. The Work Plan was previously approved by the IAASB during its December 2021 meeting.

Sustainability and environmental, social, and governance (ESG) assurance are a prominent addition to the new work plan and will see increased time and resourcing for 2022–2023. The new Work Plan also highlights candidate topics in the Audit and Review space (e.g., responding to assessed risks of material misstatement and the impact of technology on various standards) that will be considered for a further project to begin in 2023. A key focus will remain the progression and completion of projects underway at the start of 2022, including audits of financial statements of less complex entities, audit evidence, going concern and fraud.

ISA 600 (Revised) deals with special considerations that apply to a group audit, including when component auditors are involved. The standard includes new and revised requirements and application material that better aligns the standard with recently revised standards, such as International Standard on Quality Management 1 and International Standards on Auditing 220 (Revised) and ISA 315 (Revised 2019).