AUASB consults on proposed assurance over climate and other sustainability information

The Auditing and Assurance Standards Board (AUASB) published its Consultation Paper, Assurance over Climate and Other Sustainability Information on 20 March 2024 (and revised on 4 April 2024 following the government’s announcement on 27 March 2024 that mandatory climate reporting for Group 1 entities will be deferred at least six months). It seeks input from auditors, experts, directors, preparers and users of sustainability information about a proposed timeline for assurance over climate reporting, adoption of ISSA 5000 General Requirements for Sustainability Assurance Engagements, and whether an additional pronouncement is needed to supplement ISSA 5000 in Australia. Please watch this short video for more information about the AUASB’s consultation process.

Phasing in assurance requirements

In developing a phasing in model for assurance requirements, the AUASB needs to understand the impact of the likely future demand for assurance (how many audit clients will have to prepare a climate statement and when). It also needs to understand whether auditors and their experts think they will be able to service such demand. The phasing in of assurance requirements from no assurance, to limited assurance, and finally reasonable assurance, will influence whether auditors are likely to have the necessary skills and capacity when the time comes.

The AUASB is proposing a tentative phasing in timeline contained in Attachment 1 to the Consultation Paper so that auditors can indicate whether or not they think they will be able to meet demand, and any expected pressure points. The AUASB will use this feedback to develop a timeline for a future assurance exposure draft.

It is worth noting that the government’s January 2024 Policy Statement merely referred to assurance on Scope 1 and Scope 2 emissions for years beginning on or after 1 July 2024, proceeding to assurance of all climate disclosures for years beginning on or after 1 July 2030. However, the January 2024 Exposure Draft proposals to amend the Corporations Act 2001 for mandatory climate reporting provided for a transitional period where only limited assurance would be required until 2030, and only for Scope 1 and Scope 2 emissions.

These transitional requirements have been removed from climate reporting legislation currently before Parliament (Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill), leaving it up to the AUASB to determine appropriate phasing in of limited versus reasonable assurance. It appears that in compiling Attachment 1, the AUASB has attempted to bring forward reasonable assurance for disclosures that are a matter of fact and based on historical information.

Adoption of ISSA 5000

The International Auditing and Assurance Standards Board (IAASB) expects to finalise ISSA 5000, a sector neutral standard, in September 2024. The AUASB is seeking feedback about its proposal to adopt ISSA 5000 in full for both mandatory and voluntary assurance regarding sustainability disclosures. The phasing in timelines referred to above would be contained in an Australian pronouncement that would supplement ISSA 5000.

Additional Australian pronouncement

Lastly, the AUASB is asking respondents whether they consider an additional Australian pronouncement is needed to supplement ISSA 5000. A list of possible local requirements is outlined in Attachment 2. The AUASB is asking whether these items should be included in a local pronouncement, and whether any items need to be added to this list.

Comments close

Comments on the Consultation Paper close 3 May 2024.

Next steps

The AUASB is expected to release an exposure draft in July or August 2024, with the aim of issuing an assurance standard by the end of 2024. Given the expectation that the Government could pass mandatory climate reporting legislation by December 2024, with a start date of 1 January 2025, it is imperative that the AUASB stick to this timeline. This is because the responsibility for making assurance standards lies with the AUASB and there is an expectation from the Government that as a minimum, parts of the climate statements will be subject to a review engagement (limited assurance) for financial years commencing after the start date of the legislation.