MHA, Baker Tilly International’s UK member firm, has published its response to the International Auditing and Assurance Standards Board (IAASB) on recent proposals for a new sustainability assurance standard, ISSA 5000. In an official statement, MHA noted that it “welcomed the proposed new standard which will revolutionise and enhance the quality of assurance engagements as companies increasingly opt for independent assurance on their ESG data and disclosures”.
The letter makes a number of recommendations to enhance the proposed standard and deliver an assurance engagement to the highest quality and ethical standards.
Commenting on this, MHA head of ESG and partner, Mark Lumsdon-Taylor, said: “The proposed standard provides assurance practitioners and clients with confidence that the engagement will be performed to the highest professional standards.
“We need to be careful that ISSA 5000 is truly interoperable across professions – as is the IAASB’s ambition.”
MHA audit and assurance technical partner, Matt Howells, further said: “ISSA 5000 is a high-quality standard that will elevate the assurance market for sustainability engagements. The first of its kind, it can be applied across the complete spectrum of environmental, social and governance topics. It specifically addresses the risk of ‘greenwashing’ in sustainability reporting and will enhance the quality of assurance engagements.”
MHA has further stated that it ‘strongly encourages’ the IAASB to work with the International Standards Organisation and IOSCO to identify relevant professional ethical and quality management standards to ensure that all sustainability assurance practitioners understand the IAASB’s expectations.
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Speaking on this, MHA sustainability and ESG technical director, Tim Dee-McCullough, said: “I have seen a slew of mediocre assurance reports prepared under the existing assurance standards, ISAE 3000/3410, from both audit firms and environmental consultants.”
“It is imperative that the IAASB collaborates with its international peers to reinforce ethical and quality requirements.”
A critical concern is the onset of ‘double materiality’ under a recent EU directive and other sustainability frameworks, whereby a wider group of stakeholders and the impact of a company’s activities on them is considered together with the traditional investor and lender perspective.
MHA technical director, Chisomo Kaferawanthu, added: “Management and assurance practitioners can often form different views of which topics are material and likely to influence the decisions made by users of the sustainability information being assured.
“Practitioners will need to ensure they address any differences in views prior to accepting the engagement – increased guidance from the IAASB would certainly be helpful.”
Lumsdon-Taylor concluded: “The proposed standard elevates the assurance landscape for users of sustainability reports with its focus on the risk of greenwashing and requiring assurance practitioners to consider the risk of fraud on an assurance engagement. As we have recommended to the IAASB that needs to be reinforced with a focus on dealing with the risk of a two-tier assurance market, where unregulated practitioners provide assurance without appropriate ethical or quality management systems in place.”