Section 5300: Applying the Conceptual Framework

Section 5300: Applying the Conceptual Framework · Complied AI

(d)

Which is a public interest entity.

For example, providing a non-assurance service to a

sustainability assurance client that is a public interest entity might be perceived to result in a higher level of threat to compliance with the principle of objectivity with respect to the sustainability assurance engagement. 5300.7 A4 The corporate governance structure, including the leadership of a sustainability assurance client, might promote compliance with the fundamental principles. Accordingly, a sustainability assurance provider’s evaluation of the level of a threat might also be impacted by a client’s operating environment. For example: • The client requires appropriate individuals other than management to ratify or approve the appointment of a firm to perform an engagement. • The client has competent employees with experience and seniority to make managerial decisions. • The client has implemented internal procedures that facilitate objective choices in tendering non- assurance engagements. • The client has a corporate governance structure that provides appropriate oversight and communications regarding the firm’s services. 5300.7 A4a The sustainability assurance provider’s evaluation of the level of a threat might be impacted by the quantitative and qualitative characteristics of a sustainability assurance client’s value chain. For example, the evaluation of a threat to compliance with the principle of professional competence and due care might be impacted if the sustainability information that is subject to assurance comes from multiple suppliers that are geographically dispersed or is prepared in accordance with different reporting frameworks.

The Firm and its Operating Environment

5300.7 A5 A sustainability assurance provider’s evaluation of the level of a threat might be impacted by the work environment within the practitioner’s firm and its operating environment. For example: • Leadership of the firm that promotes compliance with the fundamental principles and establishes the expectation that sustainability assurance team members will act in the public interest when providing sustainability assurance. • Policies or procedures for establishing and monitoring compliance with the fundamental principles by all personnel. • Compensation, performance appraisal and disciplinary policies and procedures that promote compliance with the fundamental principles. • Management of the reliance on revenue received from a single sustainability assurance client. • The engagement leader having authority within the firm for decisions concerning compliance with the fundamental principles, including any decisions about accepting or providing services to a sustainability assurance client. • Educational, training and experience requirements. • Processes to facilitate and address internal and external concerns or complaints. 5300.7 A6 The sustainability assurance provider’s evaluation of the level of a threat associated with the use of technology might also be impacted by the work environment within the practitioner’s firm and its operating environment. For example: • Level of corporate oversight and internal controls over the technology. • Assessments of the quality and functionality of technology that are undertaken by a third-party. • Training that is provided regularly to all relevant employees so they obtain and maintain the professional competence to sufficiently understand, use and explain the technology and its appropriateness for the purpose intended.

Consideration of New Information or Changes in Facts and Circumstances

5300.7 A7 New information or changes in facts and circumstances might:

(b)

Affect the sustainability assurance provider’s conclusions about whether safeguards applied continue to address identified threats as intended.

In these situations, actions that were already

implemented as safeguards might no longer be effective in addressing threats. Accordingly, the application of the conceptual framework requires that the sustainability assurance provider re-evaluate and address the threats accordingly. (Ref: Paras. R5120.9 and R5120.10). 5300.7 A8 Examples of new information or changes in facts and circumstances that might impact the level of a threat include: • When the scope of a professional service is expanded. • When the sustainability assurance client becomes a listed entity or acquires another business unit. • When the firm merges with another firm. • When the sustainability assurance provider is jointly engaged by a sustainability assurance client and another client and a dispute emerges between the two clients. • When there is a change in the sustainability assurance provider’s personal or immediate family relationships.

Addressing Threats

5300.8 A1 Paragraphs R5120.10 to 5120.10 A2 set out requirements and application material for addressing threats that are not at an acceptable level.

Examples of Safeguards

5300.8 A2 Safeguards vary depending on the facts and circumstances.

Examples of actions that in certain circumstances might be

safeguards to address threats include: • Assigning additional time and qualified personnel to required tasks when an engagement has been accepted might address a self-interest threat. • Having an appropriate reviewer who was not a member of the team review the work performed or advise as necessary might address a self-review threat. • Using different leaders and teams with separate reporting lines for the provision of non- assurance services to a sustainability assurance client might address self-review, advocacy or familiarity threats. • Involving another firm to perform or re-perform part of the engagement might address self- interest, self- review, advocacy, familiarity or intimidation threats. • Disclosing to sustainability assurance clients any referral fees or commission arrangements received for recommending services or products might address a self-interest threat. • Separating teams when dealing with matters of a confidential nature might address a self-interest threat. 5300.8 A3 The remaining sections of this Part describe certain threats that might arise during the course of performing professional services for sustainability assurance clients and include examples of actions that might address threats.

Appropriate Reviewer

5300.8 A4 An appropriate reviewer is a professional with the necessary knowledge, skills, experience and authority to review, in an objective manner, the relevant work performed or service provided to a sustainability assurance client. Such an individual might be a sustainability assurance provider.

Communicating with Those Charged with Governance

R5300.9

When communicating with those charged with governance in

accordance with this Part, a sustainability assurance provider shall determine the appropriate individual(s) within the sustainability assurance client’s governance structure with whom to communicate. If the practitioner communicates with a subgroup of those charged with governance, the practitioner shall determine whether communication with all of those charged with governance is also necessary so that they are adequately informed.

R5300.10

If a sustainability assurance provider communicates with

individuals who have management responsibilities as well as governance responsibilities, the practitioner shall be satisfied that communication with those individuals adequately informs all of those in a governance role with whom the practitioner would otherwise communicate. 5300.9 A1 In determining with whom to communicate, a sustainability assurance provider might consider:

(b)

The matter to be communicated. 5300.9 A2 Examples of a subgroup of those charged with governance include an audit committee or another committee tasked with oversight of sustainability information, or an individual member of those charged with governance. 5300.10 A1 In some circumstances, all of those charged with governance are involved in managing the sustainability assurance client, for example, a small business where a single owner manages the entity and no one else has a governance role. In these cases, if matters are communicated to individual(s) with management responsibilities, and those individual(s) also have governance responsibilities, the sustainability assurance provider has satisfied the requirement to communicate with those charged with governance.

Using Non-Assurance Work of Another Practitioner

R5300.11

A sustainability assurance provider who intends to use non-

assurance work performed by another practitioner for purposes of a sustainability assurance engagement shall exercise professional judgment to determine the appropriate steps to take, if any, in order to fulfil the sustainability assurance provider’s responsibilities to comply with the fundamental principles of integrity, objectivity and professional competence and due care. 5300.11 A1 For the purposes of this section, the non-assurance work performed by another practitioner excludes the work of an external expert. When a sustainability assurance practitioner intends to use the work of an external expert, the requirements and application material set out in Section 5390 apply. When a sustainability assurance practitioner intends to use assurance work performed by another practitioner for purposes of a sustainability assurance engagement, the requirements and application material set out in Section 5406 apply. 5300.11 A2 Factors to consider in determining the appropriate steps to take, if any, when a sustainability assurance practitioner intends to use the non-assurance work of another practitioner include: • The reputation and competence of, and resources available to, that other practitioner. • Whether that other practitioner is subject to applicable professional and ethics standards. Such information might be gained from prior association with, or from consulting others about, that other practitioner.