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CS Professional · Internal and Forensic Audit · Emerging Issues and Challenges

Kaveri Foods Ltd publishes a claim that '90% of our packaging is recyclable'. The internal auditor, testing the claim, finds that the figure was based on the weight of packaging designed to be recyclable, but local collection facilities exist for only part of it. The auditor's concern relates mainly to which risk?

The main concern is greenwashing risk. The recyclability claim rests on design intent, while actual collection facilities cover only part of the packaging, so the statement may mislead stakeholders. The auditor should check the basis of the claim and recommend that it be substantiated or qualified.

  1. AGreenwashing risk arising from a misleading sustainability claimCorrect
  2. BLiquidity risk of the company
  3. CForeign exchange translation risk
  4. DInventory obsolescence risk

Explanation

A claim that overstates real environmental performance, without substantiation of the basis or limits, creates greenwashing risk with reputational and regulatory consequences. The other risks are unrelated to the accuracy of an environmental claim. The auditor should test the basis of the claim and recommend clear qualification.

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