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ACCA Strategic Professional · Advanced Audit and Assurance (International) · The assurance of sustainability

Norvik Co has engaged Calder & Co for reasonable assurance on its sustainability report. Management states it measured water usage using criteria it developed internally, which are not disclosed in the report and change each year without explanation. Which is the most significant issue for the practitioner at the acceptance stage?

The main issue is that the criteria may be unsuitable. Suitable criteria must be relevant, complete, reliable, neutral and understandable, and must be available to users. Undisclosed, annually changing internal criteria fail this test, and a management representation cannot remedy that, nor does the requirement apply only to limited assurance.

  1. AThe criteria may not be suitable, because they must be relevant, complete, reliable, neutral and understandable and be available to usersCorrect
  2. BThe criteria are unsuitable only if they differ from IFRS Accounting Standards
  3. CThe criteria are acceptable provided management signs a representation letter
  4. DThe criteria only matter in limited assurance engagements

Explanation

ISAE 3000 (Revised) requires suitable criteria, which must be available to intended users so they can understand how the subject matter was evaluated. Undisclosed and unexplained changing criteria undermine comparability and understandability. A representation letter cannot cure unsuitable criteria, and the requirement applies to all assurance engagements, not only limited ones.

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