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AICPA-GRI Guide Discusses Assurance of Sustainability Reports

Thomson Reuters Tax & Accounting  

· 5 minute read

Thomson Reuters Tax & Accounting  

· 5 minute read

By Soyoung Ho

The AICPA and the Global Reporting Initiative (GRI) issued a guide that answers frequently asked questions (FAQs) about external assurance of sustainability reports.

This comes as more companies are providing information about environmental, social, and governance (ESG) matters to investors. Reporting of ESG information is voluntary in the United States.

Ninety percent of public companies in the Standard & Poor’s 500 Index published sustainability reports last year, Desire Carroll, CPA, a senior manager for assurance and advisory innovation with the Association of International Certified Professional Accountants, said, citing findings from a recent Governance & Accountability Institute research report. Almost one third, or 29 percent, of those companies got some sort of assurance on the reports.

But in surveys, an increasing number of investors want some level of verification on such matters. Thus, the percentage of companies getting assurance on sustainability reports is likely to increase in the coming years.

For example, in a 2015 survey in which 1,325 portfolio managers participated, the CFA Institute found that 73 percent take ESG issues into account in their investment analysis and decisions. And 69 percent thought it is important that ESG disclosures be subject to independent verification. Consulting firm McKinsey & Co. last year found that 97 percent of investors said that sustainability disclosures should be audited in some way, and 67 percent said that the audits should be as rigorous as financial audits.

The FAQs, issued on August 20, 2020, are specifically for organizations in the U.S. that follow GRI standards and certified public accountants (CPAs) performing assurance engagements under the AICPA’s professional standards. GRI is the first organization that produced global standards for sustainability reporting. The standards represent best practice for reporting on a range of economic, environmental, and social impacts.

The AICPA and the GRI came up with the FAQs in part because there has been an uptick in questions about ESG assurance, said Carroll.

“I think people were just trying to get an understanding of … what is assurance, and the available options to them in terms of the levels of service,” Carroll said.

The guide explains that there are two levels of assurance services under AICPA attestation standards.

One is examination engagement. This is when the CPA obtains reasonable assurance and expresses an opinion about whether the subject matter as measured or evaluated against the criteria is free from material misstatement.

The other is review engagement. This is when the CPA obtains limited assurance and expresses a conclusion about whether any material modifications should be made to the subject matter in order for it to be in accordance with the criteria. The procedures are more limited under review engagements that result in a meaningful but lower level of assurance than examination engagements, the FAQs explained.

The AICPA has also been recently revising or writing new standards so that CPAs can offer more flexible and new services as demand for verification on non-financial information has been increasing. (See AICPA Standards Evolving With Changing Times in the August 26, 2020, edition of Accounting & Compliance Alert.)

In the meantime, companies do not have to hire a CPA firm to get its ESG reports verified. For example, engineering or environmental consulting firms can also provide assurance on certain sustainability reports. But Carroll emphasized that CPAs performing procedures must strictly follow various professional standards promulgated by the AICPA and also follow professional code of conduct.

For example, “assurance provided need to be independent, have quality controls in place whereas others may or may not have formal standards, may or may not be performing in accordance of standards,” she said.

In addition, CPA firms undergo peer reviews. This means that a CPA firm reviews the work of another CPA firm to make sure its work is up to snuff.

While an engineering firm may have industry-specific expertise, Carroll explained that CPAs, when they are engaged to provide assurance, they themselves must have industry expertise or have in-house or engage outside specialists who have expertise in the industry.


This article originally appeared in the September 1, 2020 edition of Accounting & Compliance Alert, available on Checkpoint.

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