Climate reporting timeline to ‘exacerbate auditor shortages’: Joint bodies
Audit firms are concerned about the proposed timelines for phasing in assurance requirements for mandatory climate-related disclosures, according to major professional bodies.
The timeframes set by Treasury for achieving reasonable assurance over all mandatory climate disclosure are ambitious and will make meeting the requirements difficult for audit firms and preparers, CA ANZ and CPA Australia have warned.
The Auditing and Assurance Standards Board (AUASB) recently released a consultation on a proposed timeline for phasing in audits and reviews of sustainability information reported under the new reporting requirements.
In a joint submission, the major accounting bodies warned that the timeframe for the phasing in of reasonable assurance in relation to the new standards would impact resourcing and the capacity of audit firms, preparers and sustainability experts.
"There are still auditor shortages in financial reporting and the need for more staff and expertise to meet the demand for sustainability assurance will only exacerbate this," the submission said.
The professional bodies explained that overseas recruitment would not be able to meet all of the demand due to both the limitations in the migration processes and visa allocations and other jurisdictions competing for talent.
"In the absence of being able to increase the talent pool by utilising additional resources from outside Australia, time will be needed for capability building locally," they said.
The submission also outlined other factors which would make Treasury's time frame for achieving full reasonable assurance by 2030 challenging, especially for group 3.
The bodies said the relative immaturity of sustainability reporting and concerns about the readiness and preparedness of entities to obtain the data they will require to report will make the timeframes difficult.
"We note that New Zealand has delayed some climate-related disclosures to year 3 of reporting, so the challenges of implementing both the reporting and assurance should not be underestimated," CPA Australia and CA ANZ said.
The bodies also outlined their concerns about moving to reasonable assurance over scope 1 and 2 emissions in year 2 as it will not give entities time to address issues identified in year 1.
"Preparers, especially in the Group 2 and 3 cohorts, will be dealing with new systems and processes that may need more time to establish to provide sufficient appropriate audit evidence for reasonable assurance," the submission said.
"Moving to reasonable assurance too quickly will only result in large numbers of qualifications if the entities cannot implement the necessary systems and processes."
CA ANZ and CPA Australia have recommended that assurance for scope 1 and scope 2 be delayed until year 3.
"This will give the entities time to address any issues identified with their systems, processes and data in year 2 before there is an uplift in the assurance requirements in year 3," they said.
"Group 1 entities who have the required systems and processes in place earlier, can voluntarily request reasonable assurance ahead of schedule if desired their systems and processes are adequately established."
The professional bodies said phasing in assurance in stages from year 3 rather than moving from full limited assurance to full reasonable is a suitable approach.
"The gradual introduction of reasonable assurance will allow preparers to understand and prepare for the differing levels of documented evidence required between limited and reasonable assurance engagements," they said.
"This phased approach will also support further refinement of systems and processes to enable reasonable assurance for all disclosure elements to be obtained over time."
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