Citing the nascent state of climate reporting and the resulting confusion by stakeholders of internal control requirements, the American Bankers Association today urged the International Auditing and Assurance Standards Board “to take a leading role in educating stakeholders as to the many demands of the assurance process, including the related costs and internal controls that will likely be needed” by companies reporting sustainability-related information.
ABA’s comments came in response to the IAASB’s recent proposal on sustainability auditing standards that will likely influence auditing standard-setters worldwide, including the Auditing Standards Board and the Public Company Accounting Oversight Board in the U.S. “Requirements similar to the Sarbanes-Oxley Act in the U.S. for robust systems of internal controls and correspondingly stringent auditing could prove onerous to implement…without a significant transition period and expected users of such information may want to reconsider specific assurance requirements in light of updated estimates of costs and length of needed transition,” the association said.
While internal controls over financial reporting are part of an overall economic environment of financial accountability, “an economy-wide infrastructure, where there is high accountability related to individual transactions and periodic reporting and is accompanied by significant penalties for noncompliance, has yet to be developed around sustainability issues,” ABA said. Such a difference must be addressed either within the final standards or within implementation guidance, the association added. Other ABA recommendations include addressing the expectation of the wide use of third-party data, safe harbors granted in certain jurisdictions, and certain concerns related to so-called “greenwashing.”