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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Developments in sustainability assurance

Halden Group's auditor, Prowse LLP, is engaged to provide limited assurance on climate disclosures. The audit team also audits the group's financial statements. Management proposes that Prowse's own consulting division design the emissions measurement system that Prowse will then assure. Which response is most appropriate under the IESBA Code?

Prowse should evaluate the self-review threat from assuring a system it designed and decline the design role, or the engagement, if safeguards cannot reduce the threat to an acceptable level. Using separate staff or lowering fees does not automatically resolve it, and the Code applies to sustainability assurance.

  1. AAccept, because consulting and assurance are always permitted to the same firm if separate staff are used
  2. BAccept, provided the fee for the assurance work is reduced
  3. CEvaluate the self-review threat, and decline the design role if safeguards cannot reduce it to an acceptable levelCorrect
  4. DAccept, because sustainability engagements are outside the scope of the Code

Explanation

The Code requires firms to identify and evaluate threats, including self-review when the firm assures a system it designed. If safeguards cannot reduce the threat to an acceptable level, the firm must decline the non-assurance service or the engagement. Separate staff does not automatically resolve it, and the Code applies to assurance engagements generally.

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