Current Development of CSR, Sustainability Reporting and Assurance

The report assesses current development of CSR, sustainability reporting and assurance. It looks at brief definition of the two terms. It also evaluates similarities and differences between sustainability reporting and CRS. Further, it looks at historical perspective of sustainability reporting and assurance, it recent development and future for it.

Running head: AUDITING & ASSURANCE 1
Auditing & Assurance
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AUDITING & ASSURANCE 2
Executive Summary
The report assesses current development of CSR, sustainability reporting and assurance. It
looks at brief definition of the two terms. It also evaluates similarities and differences
between sustainability reporting and CRS. Further, it looks at historical perspective of
sustainability reporting and assurance, it recent development and future for it. Today, there is
an increasing number of organization distributing CSR reports as their yearly financial
statements or as the separate corporate social statements. In spite the growth these reports the
superiority differs. Sustainability reporting is the practice of presenting a company’s values
as well as is governance model, and demonstrating link that exists between its commitment
and its strategy to a sustainable development. It is the modes for executing some lawful
obligation of an organization and proof of accomplishment of the legality to general public.
Given that sustainability reporting and assurance is usually a voluntary process in most
nations, there are no restrictions on which firms could undertake such reporting and who is
providing the assurance services. It was also found out that some of the firms undertaking
sustainability reporting and assurance include the KPMG, E&Y, PWC and Deloitte.

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Table of Contents
Executive Summary...................................................................................................................2
Topic 1: The Expanding Role of the Auditor.............................................................................4
Introduction................................................................................................................................4
Current State of CSR and Sustainability Reporting and Assurance..........................................4
1. Definition and Explanation of CSR and Sustainability Reporting..................................4
2. Similarities and Differences Between CSR and Sustainability Reporting......................5
3. Brief History of the Sustainability Reporting and Assurance.........................................6
4. Current Details on Which Companies Undertake Sustainability Reporting and
Companies Involved in Providing the Assurance Service.....................................................7
5. Future Developments In The Sustainability Reporting as well asAssurance.................8
6. The Frameworks, Guidelines or Standards Used for the Preparation of the
Sustainability Reports, including the Bodies Responsible to These Guidelines....................8
7. Assurance Guidelines and Procedures for Auditor.........................................................9
Conclusion..................................................................................................................................9
Topic 2: Auditor independence................................................................................................10
References................................................................................................................................12

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Auditing & Assurance
Topic 1: The Expanding Role of the Auditor
Introduction
Organizations might communicate their commitment in the sustainability and might
offer their outcomes in their ground through creation or publication of corporate social
responsibility statement. Today, there is an increasing number of organization distributing
CSR reports as their yearly financial statements or as the separate corporate social statements.
In spite the growth these reports the superiority differs (Brown-Liburd & Zamora, 2014, pg
75). This means that CSR do not necessarily give complete information that the learners
want, which as a result intensifies the issues with assessment and comparison of company’s
results accomplished within this scope. The diversion also takes place between reporting
techniques utilized in numerous nations caused by differently employed legislatures on
admission of the non-financial and financial information. The paper thus offers the present
state of the CSR and sustainability reporting as well as assurance with focus on EU, Australia
and the US.
Current State of CSR and Sustainability Reporting and Assurance
1. Definition and Explanation of CSR and Sustainability Reporting
CSR reporting is usually a communication tool envisioned in giving relevant
information, both externally and internally on the organization’s tactic and development in
execution of its CSR theory. Basically, CSR report is usually the concept in which
organizations integrate social as well as environmental components within their operations,
management as well as relation with the stakeholders. Such form of understanding of the
CSR reporting has been advocated by EU and US (Brown-Liburd & Zamora, 2014, pg 76).
European Union defined CSR as one of the responsibility of firms for their effect on the
society. In other words, CSR is the management concept where a company integrates
environmental, social and economic concerns in its interactions and operations with its
stakeholders. Generally, it is considered as sum total of a company’s commitments to a
sustainable development (Cohen & Simnett, 2014, pg 60).
On the other hand, sustainability reporting is usually the means by which an enterprise
communicates all its contribution to a sustainable development process to its stakeholders. In
this procedure, organizations report its entire social, economic and the environmental
practices, performance as well as effects caused by daily operations (Lewis, 2016, pg 350). In
other words, sustainability reporting is the practice of presenting a company’s values as well
as is governance model, and demonstrating link that exists between its commitment and its

AUDITING & ASSURANCE 5
strategy to a sustainable development. It is mainly described with some terms like corporate
responsibility reporting, non-financial reporting, triple-bottom-line reporting, social or
environmental reporting as well as extra-financial reporting (Noronha, Tou, Cynthia & Guan,
2013, pg 30). It is the modes for executing some lawful obligation of an organization and
proof of accomplishment of the legality to general public. Lewis (2016, pg 349) described it
as the mean through which organizations could display their legitimacy to their stakeholders.
2. Similarities and Differences Between CSR and Sustainability Reporting
CSR and sustainability reporting are similar at some point. Some of the similarities
between CSR and sustainability reporting include; first, CSR and sustainability reporting
share in common a nice-sounding concepts which present wish lists of what should be
avoided or done locally or globally by companies and policy-makers (Lewis, 2016, pg 348).
Further, the two aims for a triple-bottom-line though at different levels; where sustainability
reporting is at multi-governmental and governmental levels and CSR at the organizational
level.
Despite the two terms appearing interchangeable, there are some differences between
them. First, sustainability reporting is futuristic whilst corporate social responsibility is
antiquated. It is easy to not that sustainability reporting presents information about future or
forward plans of an organization to sustain its operations and improve its targets such as
innovative brand development and waste reduction. On the other hand, CSR comprises of
deeds or activities which have already been performed before in supporting a specific
community venture or others such as building a library in supporting literacy within the
community or provision of health care site for the community (Brown-Liburd & Zamora,
2014, pg 77). Secondly, sustainability is long-term while CSR is all about now. A good
number of the CSR ventures satisfy the present community wants, but fails to always address
fundamental issues. Sustainability reporting on the contrary is about long-term plans. For
instance, a community might have been somehow better in an oil firm change its techniques
of extraction for better and conduct some replenishment measures upon every extraction.
Thus, CRS is more of present initiative with restricted strategic focus than sustainability
reporting (Freundlieb & Teuteberg, 2013, pg 5). Third, sustainability is both external and
internal while CSR is mainly external. Whenever organizations conduct CSR, they more
often aim at the external stakeholders. On the other hand, sustainability reporting incorporates
both internal and external stakeholders.
3. Brief History of the Sustainability Reporting and Assurance

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Sustainability reporting could be traced all the way back in 1960s as well as 1970s
within Europe and to some extent far along in the US when firms began to distinguish their
roles or responsibilities within the society beyond and above profit generation. Basically,
sustainability reporting as well as assurance in the US can be traced back to major Earth Day
that was help on 22nd April 1970 (Habek & Wolniak, 2015, pg 563). After this period,
sustainability reporting and assurance gained momentum with 1987 UN report. The reports
greatly reinforced sustainability reporting as the mode of matching environmental and
economic issues. The proposition that businesses should supplement their financial reporting
or accounting with non-financial reporting or on their social, environmental and on the other
non-financial concept; that is, sustainability reporting was first proposed in 1990s. By 1992
UN Conference, quite a good number of organizations were engaged in the sustainability
reporting and responding to the growing media attention to the environmental and social
issues, most of their reporting were focused on the environmental performance and policies
(Hąbek, 2017, pg 2322). While calls for the sustainability reporting originally stemmed from
advocacy investors and groups and from some leaders, the government played a significant
role in distinguishing the significance of sustainability reporting.
In a decade between the UN Conference and 2002 World Summit, several initiatives
were commenced in exploring and advancing sustainability reporting. By early 2012,
sustainability reporting concept had definitely turned as one of the most desirable and
progressively conventional reporting practice in major industries across the world (Hąbek &
Wolniak, 2016, pg 400). This proposition was based on the fact that the progress toward a
sustainable development and green economy could not be made at all unless the information
is unveiled on social, environmental as well as economic effect and performance of the
organization. Toward this edge, the government developed CSR that encourages
sustainability reporting. Besides, several nations including Sweden and Denmark have gone
further and have mandated sustainability reporting for specific large firms. With the urge of
understanding the current business practices of an organization and the need to conduct
comparative and trend analysis of the business, there has been increased uptake of the
sustainability reporting and assurance of the sustainability report internationally (Sawani,
Mohamed Zain & Darus, 2010, pg 628).
4. Current Details on Which Companies Undertake Sustainability Reporting and
Companies Involved in Providing the Assurance Service
Sustainability reporting and assurance is usually a voluntary process in most nations.
Thus, there are no restrictions on which firms could undertake such reporting and who is

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providing the assurance services. The providers of assurance services could be segregated
into two main classes including the accounting sustainability assurance provides as well as
the non-accounting sustainability assurance providers (Sawani et al., 2010, pg 630). Some of
the firms undertaking sustainability reporting and assurance include the KPMG, E&Y, PWC
and Deloitte (Sethi, Martell & Demir, 2017, pg 790).
The KPMG offers sustainability reporting and assurance services that deals with
greenhouse gases as well as emissions and signs linked with occupational safety and health,
human rights, corporate governance, human resources, risk management and the social
sphere. The providers evaluate sustainability of reporting prepared by board of the directors
and provide opinion on whether or not the reports are prepared in line with agreed criteria to
sustainability report users. Basically, the four assurance service providers have mainly
focused on provision of financial audit services to their customers (Hąbek & Wolniak, 2016,
pg 117).
5. Future Developments In The Sustainability Reporting as well asAssurance
In the sustainable development, sustainability reporting is considered as the greatest
example of how action undertaken by partnership of the shareholders since 1992 UN
Conference has assisted in creating and putting into operation a wholly fresh sustainability
reporting practice (Sapkauskiene & Leitoniene, 2014, pg 7). All together with the other multi-
stakeholders region inventiveness like Carbon Disclosure project, Global Reporting
inventiveness has closely created fresh levels of awareness, engagement and information
across sustainability performance of companies. Though promising, nonetheless, this in not
deeply and widely enough viewed to accomplish sustainable development (Sawani et al.,
2010, pg 633). As noted, some probable pathways on sustainability reporting lie ahead. For
instance, despite the progress made, sustainability reporting might have peaked and now
becoming less popular. This could be due to prolonged global economic crisis, confusion
arising from emergence of diverse reporting techniques as well as mixed messages from the
government. Secondly, sustainability reporting would make steady though increasing
progress amongst large public firms and improvements in quality and depth of reporting
(Subhan, Hassan & Fletcher, 2018, pg 300). Thirdly, sustainability reporting would become
issue-specific. This means that the reporting would be featured by incremental attention to
issue-based reporting driven by increasing market or regulator demand on particular firms
which have some special effect on sustainability issues.
6. The Frameworks, Guidelines or Standards Used for the Preparation of the
Sustainability Reports, including the Bodies Responsible to These Guidelines

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There are a number of frameworks or guidelines used in preparation of sustainability
reports. Some of these guidelines include, first, in preparation of the sustainability reports,
organizations should disclose information on their sustainability performance in order to
protect their good image from future criticism. The guidelines establish that reporting
standards should be employed by a firm when preparing sustainability reports. It is clear that
the firm should identify relevant issues and their impacts on their activities, services and
products, regardless of whether these effects took place outside or within the firm
(Sustainability Studies, 2016, p 8). The firm is also responsible for disclosing management
technique and indicators linked with material aspects. The main bodies responsible for these
standards and guidelines include ISO 14031, Global Reporting Initiative and the Suitability
Accounting Standard Board (Leitoniene & Sapkauskiene, 2015, pg 335). These bodies
provide detailed reporting and accounting frameworks and guidelines that improve corporate
accountability and transparency amongst companies.
7. Assurance Guidelines and Procedures for Auditor
While structuring and completing assurance engagement, there are a number of
procedures and guidelines the auditor needs to use. First, the company needs to adhere to
ethical standards by observing independence and objectivity. It is crucial for auditor to show
high level of independence from any answerable party (Sawani et al., 2010, pg 635).
Absence of independence would impact the auditor capacity of conducting their engagement
in more objective manner therefore compromising quality of their work and possibly issuing
some misleading opinions to sustainability reports users. According to Braam and Peeters
(2018, pg 167), given that the auditor experiences with carrying out financial audit, s/he have
a clearer understanding of the assurance and therefore require to maintain high level of
objectivity and independence than other stakeholders. Moreover, the auditor needs to adhere
to all requirements of ethical code of conduct. These codes plainly explain requirements for
an auditor in maintaining their independence and in safeguarding against specific threats
which might impact on their objectivity.
Conclusion
In conclusion, as future direction of sustainability reporting remains unknown, more
demand for the sustainability information or data is expected. Besides, it can be concluded
that as sustainability issues become urgent and more apparent, it is unthinkable that there
would be relatively little demand for sustainability reporting in future.

AUDITING & ASSURANCE 9
Topic 2: Auditor independence
Memo
To: Senior Audit Manager
From: Audit Manager Chase and Fearnley
Date:
Re: Independence requirements of up-coming engagements
Independence in auditing is the cornerstone of auditing professions. Thus, there is a
closer link between independence and the auditing risk. In fact, independence and auditing
risks, all have significant impact on the audit credibility and audit quality as well as economy
in general (Allen & Siegel, 2002). Independence in auditing is considered as heart of trust for
auditing work. As such, I have highlighted in this memo some of the probable threats to
independence in the four scenarios, probable solutions in eliminating the threats as well as
recommendations to BAM Pty Ltd.
First, as an auditor, one needs to be aware of some of the situations that might damage
his or her independence. In this scenario, a number of potential independence threats can be
pointed out. The first threat to audit independence is self-review threat. Self-review threat
takes place whenever an auditing company or person in the audit team, is placed in position
of reviewing some subject matters for which an individual or the company was formerly
responsible and that seem important in context of audit engagement. For instance, Craig who
was chair of the audit committee in Baxter Aviation Limited (BAL) wishes to become the
external auditor. This would result in Craig reviewing some of the judgements he had
undertaken previously before the acquisition. This would pose some threat to independence
and objectivity of the audit work.
Secondly, there is self-interest threat. This threat takes place whenever auditing
company or member of audit team benefit from some financial interests in audit customer.
For instance, in case of Max Maxim Global Limited, Emily has some financial interests in the
organization having been selected to audit the company financials due to her familiarity with
the company complex IT system. This might affect her independence and objectivity while
delivering her audit report.
The third threat to audit independence is intimidation. This form of threat takes place
whenever audit firm is deterred from exercising their professional scepticism and acting
objectively by perceived or actual threats from the audit customer. Basically, it is said that
Granger Freight Services Pty Ltd (GFR) owed Chase and Fearnley $462,000 cash for audit as
well as other assurance services offered to GFR in the financial years 2017 and 2018. This

AUDITING & ASSURANCE 10
would compromise the audit independence since Chase and Fearnley could not act
independently since it is scared to loss the outstanding amount unless they audit and give a
report favourable to their customer.
Finally, there is familiarity threat. This form of threat take place whenever there is
close relationship between the auditing firm and audit customer, officers, personnel or
director. In other words, familiarity threat might be created when a member of auditing team
or audit firm have very close relation with audit customer, hence, putting his or her in
position of exerting significant and direct influence over audit engagement. For instance,
given that John and David have been friends for many years, it would be difficult for David
to rule in favour of Wilcox System Solutions (WSS) opponents but instead he would rule in
favour of John. This is based on the fact that the auditor had very close relationship with
WSS as a result of long association with John in conducting the annual audit. Thus,
independence and objectivity of the mediation between WSS and the petitioner would be
compromised.
The financial-review threat would be eliminated by disposing Craig proposal to
becoming an external auditor for the company. None of the assurance or immediate audit
committee should be given an external auditor post. Further, familiarity threat could be
eliminated by excluding David in the mitigation meeting. This way, WSS and the
complainant would reach to an effective decision. Self-interest threats to independence could
be eliminated by excluding Emily in auditing Max Maxim Global Limited financial reports.
Additionally, intimidation threat could be eliminated by employing another firm other than
Chase and Fearnley to audit GFR financial statements. Doing this, the firm auditing GFR
would be independent in conducting its duties since nothing would force it give a report in
favour of its client.
BAM Pty Ltd should decline the audit. This due to fact that it is quite impossible to
remove or reduce the independence threats pointed out to acceptable levels. Basically, it is
very hectic for some firms to exclude their auditors since some have a very senior position in
the organization, making it hard to deny them a position to audit the firm.

AUDITING & ASSURANCE 11
References
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assurance in investors' judgments when managerial pay is explicitly tied to CSR
performance. Auditing: A Journal of Practice & Theory, 34(1), 75-96.
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