Since the IAASB issued for public comment its proposed International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements, on 2 August 2023 the IAASB has been undertaking an intensive publicity and outreach campaign.
The deadline for comments is 1 December 2023. EFAA plans to respond. In addition to the comprehensive Explanatory Memorandum and Response Template, the IAASB has created a stakeholder survey which SMPs are strongly encouraged to answer.
To learn more about ISSA 5000 consider the following: watching this short video that introduces the proposed standard. watching the IAASB’s webinar recordings on YouTube here; exploring the IAASB’s dedicated web page with comprehensive materials here; viewing the Corporate Disclosures’ webinar featuring the IAASB’s leadership here; reading the in-depth article on IFAC’s Knowledge Gateway here; and watching the ISSA 5000 session at IFAC’s Sustainability Summit’s session here.
As part of its intensive outreach campaign the IAASB has heard many requests to provide additional information on materiality matters to better help them navigate ISSA 5000. Accordingly, a comprehensive set of Frequently Asked Questions (FAQs), The Application of Materiality by the Entity and the Assurance Practitioner, has been developed. The FAQ compilation addresses a variety of questions, including how the concept of materiality applies to sustainability reporting and assurance; the definition of double materiality; and how an assurance practitioner considers an organization’s “materiality process” during a sustainability assurance engagement, among other questions and answers.
As the project page explains ISSA 5000 will be ‘profession agnostic’ – for use by all assurance practitioners - and apply to sustainability information reported about any appropriate sustainability matter and prepared under any suitable framework across the globe including ESRS, LSME ESRS and VSME. It will also apply for both limited and reasonable assurance engagements.
The EC sees assurance as the key to ensuring the reliability of sustainability reports. In the EU sustainability assurance standards will be the subject of an EC Delegated Act, in the same way as Set 1 ESRS is for sustainability reporting. But unlike reporting (for which there is EFRAG) there is no EU entity to develop sustainability assurance standards. Hence, it is vital that European stakeholders input to the ISSA 5000 consultation to help ensure it is ‘fit for purpose’ in the EU as well as scalable and proportionate for the benefit of SMEs. In the meantime, assurance providers can continue to use ISAE 3000 or appropriate national standards.
The accountancy media has been full of news and analysis on the proposed sustainability standard. As the IAASB Chair explains in this article that the ISSA is highly flexible. It is designed to be profession agnostic, framework agnostic and framework neutral. According to an EC senior expert speaking at a conference on 3 October 2023 the EC will use the years leading up to the 2026 Delegated Act to "absorb" the developments with ISSA 5000 and will judge whether to adapt or gold plate the standard to fit Europe's unique reporting regime. According to this article many attending the conference told Corporate Disclosures they hoped any changes to ISSA 5000 would be kept to a minimum.
The EC wants to ‘open up’ the assurance market so that both auditors and other independent assurance service providers can carry out sustainability assurance. Read more here. Speaking at a sustainability assurance conference on 3 October 2023, Jose Maria Hinojal, a member of EFAA’s Assurance Expert Group, said SMPs face a challenge building the necessary capacity and capability to provide high quality sustainability assurance.
Preparers are also facing challenges with the onset of assurance. Most of the 50,000 companies in scope of the CSRD will likely be reporting for the first time. Many will struggle to be ready to have these reports ready for assurance as this article explains.