Issuer, assurance provider participation key in assurance and ethics standards reporting development, as independent ethics and audit entity launches.
The International Organization of Securities Commissions (IOSCO) has published a report on international work to develop a global assurance framework for sustainability-related corporate reporting.
Through its fact-finding work and engagement with stakeholders internationally, IOSCO has observed growing demand among investors for high-quality assurance and ethics standards for sustainability-related information.
The report discusses the current global regulatory landscape for assurance over sustainability-related information, saying it relies mainly on voluntary use of assurance, and that practices vary widely.
IOSCO elaborates on its support for the ongoing work of the international standard setters – the International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA) – to develop profession-agnostic assurance and ethics (including independence) standards over sustainability-related information.
Both standard setters aim to issue exposure drafts in H2 2023, approving the standards in time for the FY 2024 reporting period.
IOSCO is calling on issuers, assurance providers and others across the sustainability reporting ecosystem to engage with the IAASB and IESBA throughout the development of the standards.
Stakeholders are asked to consider ways to enhance the connectivity between sustainability-related information and financial statements, and to help ensure that the global assurance framework promotes a high degree of transparency.
Rodrigo Buenaventura, Chair of the Sustainable Finance Task Force, said: “The finalisation of these standards will be an important milestone. But the standards can only deliver on their promise if they are applicable for all assurance providers, irrespective of their profession, and subject to established robust due processes ensuring the development of high-quality standards.”
According to the report, IOSCO’s fact-finding work also identified a need for the entire sustainability reporting ecosystem to enhance its capabilities to support effective assurance over sustainability-related information. IOSCO therefore also calls on issuers and assurance providers to build and maintain appropriate knowledge of sustainability-related reporting, and related skills, capabilities, processes and controls to support reporting and assurance.
IOSCO encourages the IAASB and IESBA to support these efforts, also taking account of the needs of emerging markets and other stakeholders that may be less familiar with assurance over sustainability-related information.
The IAASB and IESBA are now being housed under a new independent entity, known as International Foundation for Ethics and Audit (IFEA).
Previously both were housed within the International Federation of Accountants (IFAC) structure.
The change was recommended in July 2020 by the Monitoring Group (MG), the body responsible for the overall governance of the international audit and ethics standard-setting system, to strengthen the independence of the international system for ethics, audit and assurance.
The MG said that the creation of IFEA “marks a significant milestone” in the implementation of its recommendations that look to “create a more independent and inclusive standard-setting structure that is responsive to the public interest in the development of timely, high-quality audit, assurance, ethics, and independence standards”.
Under the new structure, IESBA Chair Gabriela Figueiredo Dias and IAASB Chair Tom Seidenstein will serve as Co-CEOs of the IFEA.
The Public Interest Oversight Board (PIOB) will continue its role as an independent oversight board, supporting the public interest responsiveness of the international standards and the effective delivery of the boards’ strategies.
Linda de Beer, Chair of the PIOB, said: “We are confident that the revised structure – with IFEA as the home of the standard-setting boards governed by a board of trustees that includes both PIOB and IFAC appointed trustees – is an important mechanism created by the MG to reform with the profession and simultaneously enhance the independence of the standard-setting boards.”
“This will continue to enhance the trust and confidence in the standard-setting process,” she added.