Deakin University

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Assurance of environmental, social and sustainability information

posted on 2023-01-30, 01:40 authored by Roger SimnettRoger Simnett
This chapter outlines issues and identifies research opportunities for assurance of general purpose stand-alone reports whose subject matter covers environmental, social and sustainability issues. The focus of this chapter is assurance of general purpose reports because these reports are made available to shareholders (or more broadly stakeholders), rather than being available only for internal or specific regulatory purposes, and therefore assurance of these reports is a matter of broader public interest. Stand-alone reports are examined as they can give rise to assurance engagements separate from the audits of general purpose financial reports (GPFRs), even though GPFRs can sometimes include elements of nonfinancial performance. Two main categories of stand-alone general purpose environmental, social and sustainability reports are identified which give rise to separate assurance engagements, have significantly increased in frequency internationally over the last ten years, and for which separate subject matter reports and assurance reports are observable. These are analyzed separately as they comprise separate markets, are subject to different regulatory and standard-setting initiatives and give rise to different research opportunities. The first of these are assurance on general purpose reports which are voluntarily prepared and involve the public dissemination of information about an organization’s nonfinancial performance, including environmental, social and governance considerations, to produce what are commonly known as sustainability reports (a terminology used throughout this chapter). The second type of assurance engagement is on a specific aspect of environmental reporting which has gained increased attention over the last ten years, assurance on greenhouse gas (GhG) emissions reports. Throughout the world, there have been many regulatory initiatives which have led to reporting regulations being implemented by specific countries or regions, and global initiatives on disclosure and assurance by international bodies such as the Carbon Disclosure Standards Board (CDSB). A need for credible emissions figures has created a strong demand for assurance of GhG emission reports and this is further evidenced by the recent release from the International Auditing and Assurance Standards Board (IAASB) of an assurance standard providing comprehensive guidance on GhG assurance engagements, ISAE 3410 “Assurance on a Greenhouse Gas Statement” (IAASB 2012). At the same time that more organizations are publicly reporting these types of information, report users are demanding that the information reported be relevant and reliable. One of the main ways of demonstrating this is through having information independently assured. Providing assurance on environmental, social and sustainability reports is one way to mitigate the skepticism with which they are often received. Thus, around the world we have seen significant growth in the assurance of these stand-alone reports. Research on these two types of assurance engagements has the ability to contribute significantly to, or challenge, current knowledge about the assurance function. While research on financial statement audits is a mature area, with the knowledge gained from research adding to what is an extensive existing body of knowledge, research on assurance of sustainability and GhG information is in its infancy and offers many opportunities and abilities to challenge or extend existing knowledge of the assurance function. For example, the nature of the assurance market is different from that of the financial statement audit market, as it is potentially more competitive in structure; assurance is not mandatory and is therefore subject to (and is capable of being shaped by) a market evaluation. Thus, if it is determined that the benefits of assurance exceed the costs, there is then a choice of type of assurance provider from either within or outside the accounting profession. Further,



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