Standards used during the assurance process

Providing information about the standards or guidelines used in the assurance practice may help readers to understand the nature of the assurance provided. FEE (2002, p. 29) note that “if reference is made to the assurance provider carrying out the work in accordance with a particular named set of standards, the user may examine those standards to gain an understanding of what had been done”. Over the last five years new assurance standards have been introduced. In addition to a number of national standards in different countries, two global standards in the field of assuring stand- alone reports have also been released, namely ISAE3000 and AA1000AS.119 Table 5.12 presents data on disclosures of types of the standards used to govern the assurance engagements in this data set.

Table 5.12 Standards/guidelines used in assurance engagements/Years 2000-2004

Number of assurance statements issued in

Type of Guidelines/Standards used

2000 2001 2002 2003 2004

Total %

More than one standard ª - 1 5 11 13 30 15.3

AA1000AS - - 2 7 12 21 10.7

ISAEs, ISAE3000 - 6 2 5 5 18 9.2

Emerging Best Practice 2 2 4 4 3 15 7.7

ISO 14000s Series 5 2 2 - - 9 4.6

Financial Auditing Criteria 2 1 1 1 1 6 3.1

GRI Guidelines 0 1 1 1 1 4 2.0

EMAS (EC 761/2001) - - 1 1 - 2 1.0

ISA920 b _{- - 1 1 - 2 1.0}

Principles of Auditing Procedures - 1 1 - - 2 1.0

Firm specific standard/ protocol - 1 - - 1 2 1.0

FORGE Guidelines 1 - - - - 1 0.5

Inter. Environmental Auditing Practices 1 - - - - 1 0.5

No standards referred to 13 17 22 16 15 83 42.4

Total 24 32 42 47 51 196 100

ª Details of this category are outlined in Table 5.13. b _{This standard is related to the International} Standard for Agreed-Upon Procedures 920.

118 _{IFAE: International Framework for Assurance Engagements (IFAC, 2004).}

119 _{There are also national level initiatives. For example Standards Australia has released the Standard} DR03422: General Guidelines on the Verification, Validation and Assurance of Environmental and Sustainability Reports, the Japanese Institute of Certified Public Accountants (JICPA) published in 2001 the “Environmental Report Assurance Services Guidelines”, and other standards have been released in some countries such as Germany, Netherlands and Sweden (see KPMG, 2005).

The results of the current study indicate that 58% (113) of the assurance statements have made a clear reference to (at least one) standard or guidelines used to govern the assurance engagement. This is broadly consistent with Deegan et al., (2006) who found that 40% of the UK sample, and 63% of the European sample provided information on standards used. In contrast, O’Dwyer and Owen (2005, p. 218) found that 29% of the UK and European ACCA’s short-listed assurance statements indicated that a particular standard had provided a criteria used in the assurance engagement. It would appear, therefore, that the use of standards is increasing over time.

In total, 26% of the 113 assurance statements (where assurance standards used) have indicated that the assurance providers had employed more than one standard to govern the assurance engagement (almost similar to the 21% of the UK sample found to do this in Deegan et al., 2006). In these cases AA1000AS and the principles of assurance identified within the GRI Guidelines (2002) were the most common standards refereed to. In three cases in the current study, AA1000AS and ISAEs/3000 were used together in the assurance engagement (Table 5.13 shows frequencies of the standards included in those statements where two or more standards are used in the assurance engagement).

Table 5.13 Frequencies of combined standards used in assurance/Years 2000-2004

Number of assurance statements issued in

Type of Guidelines/Standards used

2000 2001 2002 2003 2004

Total

AA1000AS - - 5 9 13 27

GRI Guidelines (2002) - - 3 7 10 20

ISO 19011 - - 2 3 4 9

International Accreditation Forum (IAF) – G. 66 - 1 2 3 1 7

Association of British Insurers (ABI) - - 1 2 1 4

ISAEs - - 1 2 - 3

ISAE3000 - - - 1 1 2

ISRS 4400ª - - - 1 - 1

ISO 14010, 14011 - 1 - - - 1

ª This standard is related to the International Standard for Agreed-Upon Procedures 4400

There are a number of trends that are evident in Table 5.14. There is a disappearance of use of the technical standards (such as ISO 14010 and 14011, and EMAS) over time. Such decline could be inferred to be influenced by the release of new standards in the context of assurance of corporate stand-alone reporting (especially AA1000AS and ISAE3000). This result suggests that while Ball et al., (2000), found that

“environmental audit standards, particularly EMAS, are having considerable influence on EPR verification practice”, it seems that this is no longer the case. Further, while it was thought that “environmental audit standards are becoming the guide promoted by both verifiers and reporters for public accountability processes” (Ball et al., 2000, p. 10),120 this has not come to pass.

Table 5.14 Total No. of the standards/guidelines used in assurance/Years 2000-2004

Number of assurance statements issued in

Type of guidelines/standards used

2000 2001 2002 2003 2004

Total

AA1000AS - - 7 16 25 48

GRI Guidelines (2002) 0 1 4 8 11 24

Emerging Best Practice 2 2 4 4 3 15

ISAEsª - 6 3 4 1 14

ISO 14000s Series (14010, 14011) 5 3 2 - - 10

ISAE3000 - - - 3 6 9

ISO 19011 - - 2 3 4 9

International Accreditation Forum (IAF) G.66 - 1 2 3 1 7

Financial Auditing Criteria 2 1 1 1 1 6

Association of British Insurers (ABI) - - 1 2 1 4

Principles of Auditing Procedures - 1 1 - - 2

ISA920 - - 1 1 - 2

Firm specific standard/ protocol - 1 - - 1 2

EMAS (EC 761/2001) - - 1 1 - 2

ISRS 4400 - - - 1 - 1

FORGE Guidelines 1 - - - - 1

International environmental auditing practices 1 - - - - 1

ª International Standards on Assurance Engagements.

The results of the combined data regarding use of the assurance standards indicate clearly that the AA1000AS and GRI Guidelines are the standards most often employed by the assurance providers to govern their engagements. The ISAE3000 is also employed as an assurance standard to complete nine assurance engagements. In contrast with the findings of O’Dwyer and Owen (2005),121 the results of the current study (see Table 5.15) indicate that accountants (84% of the statements provided) are the most likely to make reference in the assurance statements to standards that govern the assurance process. Conversely, 69% and only 46% of the assurance statements provided by the certification bodies and the consultancy firms, respectively, disclosed information related to the use of standards.

120 _{In Ball et al., (2000, p. 10) results show that 15 out of the 56 assurance statement (27%) included in} the study made a reference to EMAS or another environmental standards.

121 _{Of the 41 assurance statements in the ACCA (UK and Europe) short listed reports, only 12} statements (29%) made a reference to specific assurance standards, nine of these statements were

Table 5.15 Frequency of disclosure of assurance standards by AP/Years 2000-2004 Number of assurance statements issued by Type of Guidelines/Standards

Accountants Consultants Cert. Bodies N-P Org.

Total

Mixed Standards 2 21 7 - 30

AA1000AS 5 14 2 - 21

ISAEs, ISAE3000 18 - - - 18

Emerging Best Practice 7 8 - - 15

ISO 14000s Series - 3 6 - 9

Financial Audit Criteria 3 3 - - 6

GRI Guidelines - 4 - - 4

EMAS (EC 761/2001) - - 2 - 2

ISA920 2 - - - 2

General Principles of Auditing Procedures - 2 - - 2

Firm specific standard/ protocol - 1 1 - 2

FORGE Guidelines 1 - - - 1

International Env. Auditing Practices - 1 - - 1

No standards referred to 7 67 8 1 83

Total 45 124 26 1 196

The standards disclosed by the accountants (40% of all statements provided) relate to the International Standards on Assurance Engagements (ISAEs namely ISAE3000 in the last two years). Surprisingly, in three assurance statements (6%) accountants stated that financial auditing criteria have been used to govern the assurance process. For example, PwC in their external verification report that appeared with Barclays’ Social and Environmental Report 2000 indicate that “[i]n completing this review, we have adopted the principles that underpin international standards on financial auditing and reporting. This approach brings rigour throughout the review process including detailed consideration of the design and operation of the environmental process”. It context of standardisation of the assurance practice, it should be noted that the non- professional standards (such as AA1000AS) might not be optionally employed by a specific group of assurance providers (e.g. the accountants). Instead, the reporting company may request the assurance provider to use such standards when carrying out the engagement. In this respect, Deloitte & Touche in their independent assurance to Vodafone Group’s plc Corporate Responsibility 2004/05, state that “[w]e conducted our work in accordance with: the International Standard on Assurance Engagement 3000 (ISAE3000)…and the AccountAbility 1000 Assurance Standard (AA1000AS) issued by AccountAbility as requested by the Company”.

provided by consultants (representing 41% of the whole statements provided by the consultants) and three statements provided by accountants (16% of the statements provided by the accountants).

In few cases it was found that assurance providers have developed their own standards (or protocols) to be used in the assurance exercise. The certification body Bureau Veritas indicated that they used VeriSEAAR©122 as standard to make their

assessment of the Social Report of the British American Tobacco’s plc. In the same context, the consultancy firm csrnetwork™ indicated that they had developed their

own standard which they used in the assurance of Standard Chartered’s plc Corporate Responsibility Report 2004, stating “Standard’s Chartered accountability has been assessed using the Accountability Rating® developed by csrnetwork and

AccountAbility”.