ESG assurance: An emerging opportunity for CPAs

By Anita Dennis

Interest in environmental, social, and governance (ESG) disclosures has risen dramatically during the past year, presenting great potential for CPAs to provide assurance on these disclosures as they become more common and as stakeholders are focusing on the quality of such disclosures.

It’s an area of opportunity for CPAs to meet the public interest and provide value. Although reporting of and assurance on ESG information in the United States is on the rise, this is an evolving area in the United States. In Europe and other parts of the world, many organizations are required to report on ESG information, and a significant portion of ESG assurance is being performed by an audit firm or an affiliated provider, according to The State of Play in Sustainability Assurance: Benchmarking Global Practice, a new report from AICPA & CIMA and the International Federation of Accountants (IFAC).

The report looks at the extent to which companies around the world are reporting and obtaining assurance for sustainability disclosures and the assurance standards they are using. And in the United States, in relation to the limited number of organizations that seek assurance on ESG disclosures, the overwhelming majority of them have their ESG disclosures assured by non-CPAs.

The report found that, in the United States, of the companies included in the study that obtained assurance over their disclosures, nearly 90% of sustainability assurance is done by other service providers. But those outside the CPA profession aren’t necessarily governed by the same ethics and quality requirements, said Scott Hanson, director, Public Policy & Regulation at IFAC.

That means there are practice opportunities for CPAs in this area. Practitioners can help educate clients about ESG reporting and disclosures, including the consideration of risks related to climate that can be material to the financial statements, said Jennifer Burns, CPA, the AICPA’s chief auditor.

“CPAs are uniquely qualified, based on their understanding of their clients, to enhance the reliability of ESG-related disclosures. The auditor’s knowledge should be leveraged to deliver assurance over ESG,” she said.

Interest in ESG reporting applies to private companies as well as public companies, since they both will be held accountable by their stakeholders.

Action on several fronts

In the United States, recent actions related to climate change include an executive order from President Joe Biden, legislation passed in the House of Representatives, and a request for input on climate change disclosures from the SEC (see the AICPA comments to the SEC here). State regulators are also becoming active in ESG, and bank regulators are asking lenders to report on climate-related issues, said Ami Beers, CPA, CGMA, AICPA senior director–Assurance & Advisory Innovation–Public Accounting. Governments and companies around the world have made commitments to net-zero emissions goals as well, and new reporting and assurance requirements are being implemented in Europe.  

A variety of other interested parties are also calling for improved climate change information. “Consistent integrated reporting or an integrated mindset are the hallmarks of successful companies,” said David Madon, director, Public Policy & Regulation at IFAC. Whether they are activist investors or shareholders simply seeking better returns, they all want higher-quality information on sustainability, he said.

Benchmarking current practice

The benchmarking report by AICPA & CIMA and IFAC focused on countries that are members of the G20, as well as Spain, Hong Kong, and Singapore. The report examined the top 50 to 100 companies in each jurisdiction.

It found that 90% of the 1,400 companies included had reported some type of ESG disclosure. Much of that reporting was done through stand-alone sustainability reports, with some disclosed in integrated reporting and some within the annual report. There was great diversity in the reporting standards being used, with 68% relying on multiple standards and many using one or more established frameworks.

“This lack of consistency can have an impact on the quality of information and its comparability and consistency,” Beers said.

The same problem exists when it comes to assurance. Although about 51% of companies globally are obtaining assurance on their sustainability reporting, there is not consistency in the type of assurance involved. The United States is a good example, where non-CPAs dominate the field and different assurance standards are being used on engagements.

“It’s possible to find reliable and comparable financial information for large companies in the United States, Indonesia, and Brazil because financial reporting practices are harmonized and they are all audited,” Hanson said. “That’s not the case for ESG disclosures.”

AICPA & CIMA and IFAC strongly support global standards for sustainability-related information because they would provide consistent metrics across the globe. The IFRS Foundation may take a step in that direction in the fall, when it is expected to announce a decision on whether to create an international sustainability reporting standards board.

The standards and the expertise

If the new board comes to fruition, the existence of one set of standards could create consistency and comparability that currently is lacking in sustainability reporting. Independent assurance can increase the reliability of this reporting, and CPAs have an opportunity to play a critical role in this process.

“As companies develop their reporting and assurance approach, CPAs have the standards and expertise to help them,” Burns said. “CPAs are independent, follow a consistent set of assurance standards, and are subject to quality control rules and monitoring due to their professional requirements.”

AICPA & CIMA have resources to help practitioners as well as accountants in companies who will be developing their organizations’ metrics and reporting. Organizations can also turn to the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Framework in considering ESG control and information needs and to the Institute of Internal Auditors’ Three Lines Model to address related governance and risk management concerns, Burns advised. In addition, COSO and the World Business Council for Sustainable Development have provided guidance for applying enterprise risk management to ESG-related risks, which also may be helpful.

“We’re experts on what to disclose and how to provide assurance,” Burns said. “The profession is ready.”

Anita Dennis is a freelance writer based in New Jersey. To comment on this article or to suggest an idea for another article, contact Ken Tysiac, the JofA’s editorial director, at

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