Archives For ISAE 3000

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By Terence Jeyaretnam, director, Net Balance

The International Standard on Assurance Engagements (ISAE 3000) is a standard used globally for assurance engagements for audits or reviews of historical non-financial information. Here at Net Balance, a specialist sustainability firm, we use the ASAE3000 (along with the more qualitative AA1000AS), its Australian cousin, generally alike in scope and application. While the ASAE3000 has always allowed non-accountants to use the standard, the IAASB has only recently adopted this provision.

From experience we believe there are numerous benefits when utilising the suite of ISAE/ ASAE 3000 in conjunction with the AA1000 Assurance Standards (AA1000 AS), which has traditionally been the domain of specialist sustainability firms. The AA1000 AS is a holistic sustainability-focussed standard designed specifically for assessing and strengthening the credibility and quality of an organisation’s social, economic and environmental reporting.

Here at Net Balance we encourage the revised ISAE 3000 to be used in conjunction with a detailed approach of the AA1000 AS, and be applied together during the phases of planning, obtaining evidence and establishing quality controls.

Having the experience of successfully completing over 250 Assurance engagements, we believe a more complete assurance can be undertaken by using both the AA1000 AS and the ISAE 3000 in combination.

Accordingly, this revision creates new opportunities for Assurance providers housing subject matter experts in sustainability to provide Assurance to all organisations. Numerous advantages include:

  • Increased representation of materiality – Defined by the assurance provider and the client organisation, subject matter experts using their professional and experienced judgements can now delve deeper into complex topics such as supply chain issues, water, waste management, or even inform clients about the global landscape on human rights.
  • Risk identification – Subject matter experts understand the clients’ business and operations and therefore they can leverage past experience to address existing risks and to identify new sustainability-based risks.
  • Value add – Subject matter experts can provide feasible value adding recommendations. This is an increasingly important factor as most reports received by management from assurance providers should provide strategies to help clients understand both the risks and opportunities in a fast changing regulatory environment.

Read Deloitte’s viewpoint on the matter here

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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.