Archives For Deloitte

HBarton

By Helena Barton, Partner – Sustainability, Deloitte Denmark
Member, ACCA Global Forum for Sustainability
Chair, GRI Stakeholder Council

The revised ISAE 3000 standard brings welcome guidance to assurance practitioners engaged to obtain assurance on sustainability reports.

A key feature is that the ISAE 3000 now ‘stands alone’, i.e. practitioners can use it without reference to other auditing standards. One of the other changes is the ‘opening up’ of the standard to use by non-accountants, who are not subject to the same independence and ethics codes as professional accountants. It was clear that a growing number of non-accountants were (and are) declaring that they “complied with” or performed the assurance engagement “in accordance with” ISAE 3000, without stating which independence requirements and ethical frameworks they had complied with to perform the engagement – or perhaps without even realising that some significant ethics requirements and quality control standards underpinned ISAE 3000.

So to encourage greater transparency and correct misapplication of the standard, the IAASB decided to make it explicit that non-professional accountants can use ISAE 3000 as a standard for performing assurance engagements provided that they comply with professional or legal requirements for independence and ethics which are at least as demanding as those in the IESBA Code of Ethics for professional accountants and that they identify such requirements in the assurance report.

However, this revision might present a hurdle for some assurance practitioners who have not yet put in place the comprehensive ethics frameworks and quality control programmes that enable compliance. We may therefore continue to see unsupported formulations of reports which reference ISAE 3000 – and they may go unchallenged, unless somebody takes it upon themselves to do so.

The revised ISAE 3000 clarifies the scope and work effort for limited assurance engagements through the inclusion of tables which allow practitioners to more clearly see how a limited assurance engagement differs from a reasonable assurance engagement in practice.

It also provides more guidance for limited assurance engagements, which includes a better understanding of risk and response. And it requires practitioners to provide more detail in the assurance report on the actual work performed. Particularly for a Limited Assurance engagement, a description of the “nature, timing and extent of procedures performed” helps the users to really understand the conclusion made in the assurance report.

All in all, these are good developments, which we welcome. Users are entitled to expect objectivity, quality and professional scepticism to underpin any independent assurance engagement, and increased transparency around the work effort and controls to ensure this.

Advertisements

Jamie Lyon

By Jamie Lyon, head of corporate sector, ACCA

We’ve been talking about finance transformation for some time. The early 1990s witnessed the first moves towards business shared service operations, and yet our programme of work suggests many finance departments are still in the early years of adoption; remarkably some haven’t even started yet.

You could be forgiven for thinking finance transformation should be an art that has been mastered by now. It hasn’t, because enterprise change is difficult and amongst many other things, it’s about people change. All the experience and all the evidence continues to point to massive change challenges in changing the finance enterprise to drive down cost (and yes, its still a cost play, contrary to what some may say), and improve efficiency and value. ACCA is currently leading a global programme of research on how finance functions can become more effective. Its smart finance function campaign seeks to understand what practices the CFO organisation is adopting to drive more value for the organisation. Finance transformation has been, and continues to be, one of the ways in which the value equation can be addressed. But truth be told, many enterprises and CFOs continue to struggle to deliver all the benefits once promised. So what goes wrong? Perhaps my colleague Deborah Kops of Sourcing Change hits the nail on the head: ‘One of the biggest challenges for finance leaders is acknowledging that there’s no set of regulations for change. Mastering what is often considered ‘soft stuff’ is key to transformation success. It’s generally not comfortable for a profession that lives by rules.’

ACCA’s think-tank on business and finance transformation, which includes senior executives from some of the world’s leading enterprises that has decades of change experience such as Deloitte, Shell, Accenture, Unisys, Pearson, and GSK, has just released its latest report on finance change, and identifies 10 key requirements needed for effective finance function change to take place.

They are:

  1. Establishing the vision – the criticality of spending time conveying the transformation vision and goal.
  2. Buy in – The importance of CEO and senior management support and sponsorship of the programme.
  3. Communication – The need for constant communication on what is changing and the rationale for change.
  4. Preparation – Ensuring finance teams are bought in and committed to the change, and having an effective plan to manage the change process.
  5. Resources – Access to adequate programme resources at each critical stage of the transformation process, from developing strategy to achieving ‘business as usual’ acceptance.
  6. Patience – Accepting that large finance transformation initiatives can be revolutionary and evolutionary with most change processes taking longer than expected.
  7. Organisation redesign – Remembering that redesign and use of finance shared services or outsourcing necessitates change in the retained finance function too – the imperative of changing the finance enterprise in its entirety.
  8. Maintaining middle management – Successful change management is key to retaining the middle layer of finance management that is critical to core processes. Yet all too often, middle managers’ numbers are aggressively reduced to justify a business case for shared services and outsourcing, or they are lost in the shuffle.
  9. Alignment between capability and ambition – Often finance leaders overstretch themselves to realise a vision that is way beyond their, or their enterprises’, ability to achieve. Being realistic about the organisation’s change potential is essential.
  10. Working within the culture – Those who implement complex, multi-scope, multi-geography finance transformation programmes, particularly in business-line-led organisations, will experience the greatest change challenges. Gauging the type of change the culture will allow is an imperative.

Find out more about our Smart Finance Function campaign at www.accaglobal.com/smart.

This blogpost was first featured in CFO World in July 2014 

Sustainability

By Patrick Crawford, corporate engagement, Climate Disclosure Standards Board (CDSB)

At the recent non-financial reporting conference in London, in association with ACCA and Deloitte, commentators including Richard Howitt MEP, noted that 80% of shareholder value is now from intangible rather than physical and financial assets.

Coincident with this conference, Eurosif and ACCA launched their investor survey on non-financial reporting. The key findings from 90 investors support the need for integrating non-financial and financial reporting:

  • Non-financial reporting must be comparable across companies.
  • Non-financial information should be better integrated with financial information
  • Quantitative key performance indicators (KPIs) are essential and Qualitative policy statements are very important to assess financial materiality.

Rather than information that simply complies with reporting requirements, investors are seeking reports that communicate performance, including clear insights into issues that have a material impact on a company’s current and future performance. Communicating performance is of value to investor decision-making but equally to businesses as the integration of non-financial and financial information opens up new avenues of communication within the company, providing additional perspectives to their Boards.

My clear sense on leaving the non-financial conference was that investors are using this non-financial information now but they need more help in understanding the impacts on the business. A company’s response to these issues adds value by reducing risks and creating opportunities for the future. Placing ‘sustainability’ into its own report has been a useful first step for companies but there are still many people who say they do not know what ‘sustainability’ means. However, they all have views on what is needed for a business to be ‘sustainable’ in the long-term. Connecting these material issues with financial results requires integrated thinking as much as integrated reporting.

We know that many companies are taking these issues seriously, but until now there has been no structured means of communicating performance in mainstream reports in a consistent and compatible way with financial accounting standards.

The Climate Disclosure Standards Board (CDSB) was created at the World Economic Forum at Davos in 2007 by a group of international business organisations in response to the absence of a structured means of providing climate change-related information in mainstream reports. CDSB’s Technical Working Group drives its work and includes representatives from key global institutions including the main accountancy firms, professional accountancy institutions, investors, report preparers and governments. CDSB’s Reporting Framework is designed to integrate non-financial and financial information in a credible and standardised way.

As the CDSB Framework adopts relevant principles from existing financial standards, companies, accountants and corporate report preparers will find the Framework familiar and useable. CDSB works closely and collaboratively with other global sustainability bodies such as World Business Council for Sustainable Development (WBCSD) and World Resource Institute (WRI). In addition CDSB and CDP (formerly Carbon Disclosure Project) have MoUs with the International Integrated Reporting Council (IIRC), Global Reporting Initiative (GRI) and the US Sustainability Accounting Standards Board (SASB).

CDSB is managed as a special project of CDP. More than 4,200 companies who report their climate change emissions using the CDP process are already ahead of the game. By using CDSB’s Framework they can apply the lens of materiality to their CDP response, incorporating the risks and opportunities from climate change and the growing scarcity of natural resources in their annual reports in a transparent, consistent and comparable way.

The Framework is designed to be ‘Standards Ready’, ready to be adopted by governments in support of the introduction of national regulation on disclosure of climate change and other non-financial impacts. DEFRA’s official guidance cites CDSB’s Reporting Framework as one mean of compliance with UK mandatory requirements to report GHG emissions. Using the Framework provides a means of preparing a company for the increasing amount of regulation that is being discussed and drafted around the world.

To assist companies and report preparers in using the Framework CDSB, with the support of ACCA, has produced a guidance document available here. The CDSB website includes other resources, including recordings of recent webinars introducing the Framework.

  • If you would like any further information about integrating non-financial with financial information using CDSB’s Framework, please contact Patrick.crawford@cdsb.net, or visit www.CDSB.net to download CDSB’s Framework and Guidance.