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One Attestation Engagement that Can Save the Planet

SustainabilitySustainability assurance is a growing field for CPAs. While reporting on this topic remains voluntary, over 82% of the S&P 500 publish some type of sustainability report, up from 20% in 2011. Furthermore, 73% of portfolio managers and research analysts take sustainability matters into account when making investment decisions and 69% of them believe it is important that such information be subject to independent assurance.   

Sustainability reporting encompasses information about an organization’s environmental, social and governance performance and can range from a full sustainability report to a greenhouse gas statement to information about select sustainability topics. As companies look to increase the credibility and reliability of their reported sustainability information, they are engaging CPAs to provide assurance on this information.  

Like other attestation engagements, sustainability attestation engagements are performed in accordance with the AICPA Statement on Standards for Attestation Engagements (AICPA, Professional Standards). So, you may be wondering, how exactly are sustainability attestation engagements unique? Outlined below are a few key ways.  

Measurement uncertainty. Similar to certain accounts in financial statement audits, significant uncertainty often exists about the exact value of information reported in sustainability information. For example, greenhouse gas emissions might be reported as 200 tons, but could reasonably be between 160 and 240 tons given the use of the selected measurement techniques and conversion factors.  As a result, CPAs may need to consider how to approach measurement uncertainty in planning and performing the engagement, as well as in reporting.

Use of specialists. Given the wide-ranging nature of sustainability information, CPAs may turn to a various types of experts for assistance in areas that they do not have as much expertise including those with scientific and engineering expertise. These include specialists on subject matter that is not seen in financial statement reporting, such as greenhouse gas emissions, water usage, and health and safety issues. 

Consistency. Sustainability information often focuses on the level of improvement over time, which means that the criteria used from period to period needs to be consistent. In a sustainability attestation engagement, CPAs may have to consider biases by management in selecting criteria from an earlier period; whether consistent methodologies were used; and whether there is sufficient disclosure about any lack of comparability.

Material misstatements in previously issued information. Finding material misstatements in sustainability reporting is more common since the processes and systems used to gather and report the information generally are less advanced than those for financial reporting. CPAs will have to evaluate the effect of material misstatements in previously issued information on the current engagement and consider whether an explanatory paragraph on the matter is called for.

In an effort to support the growing demand for sustainability attestation engagements, a new AICPA guide, Attestation Engagements on Sustainability Information (Including Greenhouse Gas Emissions Information), offers comprehensive guidance on the matters outlined above and provides guidance on how to perform examinations or reviews of sustainability information. The guide equips CPAs for engagement acceptance, planning and performing the engagement as well as reporting. You may be interested in attending an upcoming webcast on September 14 at 1 p.m. ET, discussing this exciting service opportunity.   

Desire Carroll, Senior Manager, Assurance & Advisory Innovation, Association of International Certified Professional Accountants.

Sustainability courtesy of Shutterstock.


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