IESBA publishes new exposure drafts on ‘Sustainability’ and ‘Using the work of an external expert
With the backdrop of an ever-changing sustainability reporting landscape and an emphasis on companies to act ethically, we look at IESBA’s latest exposure drafts, ‘Sustainability’ and ‘Using the work of an external expert’.
Society is changing. There is an ever-growing emphasis on sustainability at government and regulatory level, as well as increased expectations for organisations to behave responsibly. There are increasing calls for the disclosure of sustainability information, and for assurance to be provided on such information, and practitioners outside the accounting profession are also playing a role in providing sustainability assurance.
In response, the International Ethics Standards Board for Accountants (IESBA) has published two exposure drafts. The IESBA explains that these are intended to offer a suite of global standards on ethical considerations in sustainability reporting and assurance with the aim of fostering greater trust in all publicly communicated sustainability information through the application of a consistent ethical approach:
- Proposed International Ethics Standards for Sustainability Assurance (including International Independence Standards) (IESSA) and Other Revisions to the Code Relating to Sustainability Assurance and Reporting (comment deadline 10 May 2024); and
- Using the work of an external expert (comment deadline 30 April 2024).
Proposed International Ethics Standards for Sustainability Assurance (IESSA) and other revisions to the Code relating to sustainability assurance and reporting
This exposure draft proposes additions and revisions to the International Code of Ethics for Professional Accountants (including International Independence Standards) (‘the Code’) (which the ICAS Code of Ethics is substantively based on) relating to sustainability assurance and reporting.
There are currently different types of practitioners performing sustainability assurance engagements, and in a number of jurisdictions they are mostly not professional accountants. The IESBA agreed that the public interest would best be served by having the same or equivalent ethics and independence standards apply to all parties providing assurance on sustainability related information, regardless of their professional backgrounds.
As such, a new Part 5 to the Code is proposed in this exposure draft: The International Ethics Standards for Sustainability Assurance (including International Independence Standards) (IESSA), which provides ethics and independence standards for use and implementation by all sustainability assurance practitioners. The IESBA has developed the proposed IESSA using terminology that it intends to be understandable by all sustainability assurance practitioners.
In addition, revisions are also being proposed to Parts 1 to 3 of the Code to address the ethics issues that might arise for professional accountants involved in sustainability reporting. The IESBA believes that substantial changes don’t need to be made to the Code as the extant Parts 1 to 3 of the Code already address issues that might arise when performing financial or non-financial reporting. However, to ensure the Code remains fit for purpose, the IESBA proposes to include sustainability references where applicable, and to revise existing, and add new, examples.
Using the work of an external expert
There is a risk that when information is received from an external expert there might be an assumption that the information is accurate; however, in reality, this might not necessarily be the case. Using the work of an external expert might create threats to a professional accountant’s (PA’s), or a sustainability assurance practitioner’s (SAP’s), compliance with the fundamental principles because there might be over-reliance on the external expert’s work. This might be a particular risk to the principles of integrity, objectivity and professional competence and due care.
This exposure draft proposes a framework to assist PAs, or SAPs, in evaluating whether an external expert has the necessary competence, capabilities and objectivity in order to use that expert’s work for the intended purposes. In particular, if the PA or SAP deems that the external expert is not competent, capable or objective, it is proposed that the Code would prohibit the PA or SAP from using the external expert’s work.
ICAS will be responding to both exposure drafts.
ICAS ethics resources
Find out more about the ethics resources ICAS provides to support its members here.
