This report analyzes the impact of CSR policy and sustainability report on the business environment of Australian and European countries. It also discusses the importance of independence in audit work.
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Running head: ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT Role of CSR Policy and the Sustainability Report Name of the Student Name of the University Author’s note
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1ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT NAME OF STUDENT STUDENT NUMBER Executive summary The aim of the report is to analyse the report of the social responsibility of the corporate bodies and the sustainability report on the business environment of the Australian and European countries. The report further explains importance of the independence in the audit work and the process by which the firms can reduce the effect of the independence on the audit work.
2ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT NAME OF STUDENT STUDENT NUMBER Table of Contents Introduction................................................................................................................................3 Discussion..................................................................................................................................3 Question 1..................................................................................................................................3 The expanding role of the auditor..............................................................................................3 Definition and explanation of corporate social responsibility and sustainability reporting.......3 Differences between the CSR and the sustainability.................................................................4 History of sustainability reporting and assurance......................................................................5 Future developments of the sustainability report.......................................................................7 Regulations and framework to formulate Sustainability report.................................................9 The assurance guidelines and procedures used by the auditor of the company.........................9 Question 2................................................................................................................................12 Auditor independence..............................................................................................................12 The potential independence threat...........................................................................................12 Conclusion................................................................................................................................15 References................................................................................................................................16
3ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT NAME OF STUDENT STUDENT NUMBER Introduction The role of the corporate social responsibility(CSR) and sustainability report is immense in bringing transparency in the business activities of any organisation. The effect of the CSR and the sustainability report on the corporate bodies of Australia , the European union and the United States of America. Discussion Question 1 The expanding role of the auditor Definition and explanation of corporate social responsibility and sustainability reporting Corporate social responsibility is a model that is followed by any business that helps the organisation to perform the social duties towards its stakeholders and the public. The practice of corporate social responsibility engage the company in the enhancement of the society and the environment and thereby improving its business activities. The report contains all the details of the social activities of the company and the amount invested in the corporate social responsibility programs.
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4ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT NAME OF STUDENT STUDENT NUMBER Sustainability reporting In the modern days, the business world it is not enough to simply state the level of sustainability of the company. The sustainability report contains the what is the target of the company when it deals with the customers and the what the changes are required to attract more customers. The social aspects of sustainability like the HR programs supply chain management system and the how to exist in the community are also mentioned in the report. Differences between the CSR and the sustainability Vision Corporate social responsibility The vision of the CSR report is to mention the activities done by the company for the improvement of the society in the last financial year. Sustainability The sustainability report contains the policies of the company to secure its future and to sustain in the community for a long period. Targets The CSR policy of the company targets the politicians NGOs and the backward community of the society. Sustainability The total value chain from suppliers to operations, to partners to end consumers are in the target of the sustainability report.
5ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT NAME OF STUDENT STUDENT NUMBER Business CSR is the part of the compliance Sustainability Sustainability is related with the business of the company. Management CSR The board of directors of the company manages the CSR Sustainability The operations and the marketing team manage sustainability programs Need of the programs The need of the CSR programs is to protect the reputation of the company Sustainability The need of the sustainability program is to create business opportunity for the organisation. Similarities between CSR and sustainability The main similarity between the CSR and the sustainability programs is to promote the reputation of the business in the society.
6ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT NAME OF STUDENT STUDENT NUMBER History of sustainability reporting and assurance The main use of the sustainability report and assurance in the sustainability report is to provide accountability to their stakeholders. The concept of the sustainability and the assurance of the report conducted in the late 1980s and at the beginning of the 1990s . In that period all the companies of the world tried to expand their business all over the world and try to capture the world market. To accomplish the changing objective of the organisations they started to build up a sustainability report. The sustainability report act as the fundamental communication tool between the organisation and the stakeholders. The concept of the sustainability reporting and assurance gets immense popularity and become a essential tool for every organisation of the modern days. Assurance of sustainability reports The affirmation of the feasible reports contributes to the organisations activities by improving the internal control system of the company, which makes the organisation to be more transparent and fair it enhances the credibility of the company towards its stakeholders. The organisations always give priority to create good relation with the stakeholders especially with the customers. The sustainability report helps to communicate with the customer and understand the need of the customers and to bring changes in the business activities of the company. The level of assurance in the sustainability statement makes the sustainability report more reliable and the organisation can take accurate decision based on that report(Michelon Patten & Romi, 2018).
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7ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT NAME OF STUDENT STUDENT NUMBER Assurance providers There are two type of affirmation practices provided by the third part reviews and the mixed approach. The independent third party reviews are performed by the different range of entities or individuals like the stakeholders board academic institutions non-government institutions and the president of various foreign institutions that operates in the sustainability reporting area. The affirmation service provided by these third parties are recorded in the sustainability report as the third party comment(Ioannou & Serafeim, 2017). The assurance statements provided by the third parties contain only the opinion of the entities or then individuals who are invited to inspect the sustainability report of the company. They does not follow any specific methodology or accounting standards(Shamir 2017). The second type of assurance providers are the accounting and the non- accounting firms. This type of assurance is also called as the mixed approach of assurance service. In this method, both the accounting and non-accounting factors are considered in the sustainability report. In this method, 56% of the notes are related with the accounting aspects and 44% contains the non-accounting factors of the sustainability programs(Font Garay & Jones2016).
8ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT NAME OF STUDENT STUDENT NUMBER Future developments of the sustainability report The following points are the new developments made in the sustainability report Climate changes It is found that the changes in the climate become a major issue that is neglected by all the corporate bodies present all over the world. The business activities are the major factors that are responsible for the climate change, so the steps that are taken by the companies to protect the environment is required to be mentioned in the sustainability reports. Human rights The key factors of human rights are to be recorded in the sustainability report. Protection of the human rights has become a part of the due diligence that the organisation has to maintain. The actions that are taken by the organisations to protect the human rights are to be specifically noted in the sustainability reports(Rivera Muñoz & Moneva,2017). Wealth inequality In the modern days unequal distribution of wealth has become major threat for the world economy.it has become a major issue for the world that one section of the society is holding the major portion of the wealth and the a small section is suffering from poverty. The organisations are the main source of flow pf wealth in the economic system it is their responsibility to look after the matter and try to resolve the issue in a systematic way. The sustainability report should contain all the details of
9ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT NAME OF STUDENT STUDENT NUMBER the process by which the organisations try to solve the problem of unequal distribution of wealth in the economy(Ackers & Eccles2015). Data and technology In the modern business world, data technology is an integral part of the corporate bodies the information technology has both positive and negative results this results it is the responsibility of the companies to utilise the positive aspects of the information technology and to prevent the negative affect of the information technology. The process how the company utilise the information technology are to be mentioned in the sustainability report of the company(Xiaoet al2016). Regulations and framework to formulate Sustainability report The international reporting initiative is one of the most commonly and reputed guideline and standard to prepare the sustainability report. This guidelines covers the three aspects of feasibility report these are economic environmental and social. The global reporting initiative is stared in the year 1997by the NGO coalition of environmentally responsible economies and currently it collaborates with the United Nations environmental program. The main body to regulate the sustainability reporting is the United Nations environmental program.
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10ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT NAME OF STUDENT STUDENT NUMBER The assurance guidelines and procedures used by the auditor of the company The assurance guidelines that are followed by the auditors are mentioned below The assurance engagements is made, based on the framework set by the global standards on auditing and the international standards on assurance engagements. The governing bodies frame reference for the following persons: Professional accountants on public practice when they perform any assurance engagement. Others engaged with the assurance engagements which includes the conscious users of the assurance report and the responsible parties. The international auditing and assurance standard board in the development of the international standard for auditing and international standards on the assurance engagements(Abbottet al2016). A auditor accepts an assurance engagement only when the practitioner found the following points: The admissible ethical requirements such as the independence and the professional competence is fulfilled.
11ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT NAME OF STUDENT STUDENT NUMBER Appropriate subject matter The intended users should found the criteria suitable and easily available The auditor should have supporting evidences to support the practitioner’s conclusion A written report is to be given by the auditor where it should be specified whether the assurance involvement is reasonable assurance engagement or a limited assurance engagement(Schrempf-Stirling, Palazzo & Phillips2016). The practitioner should be satisfied with the fact that purpose of the engagement is rational or not. The elements of an assurance engagement are given below There should be a three party relationship that involves, the practitioner a reasonable part and intended party. The subject matter should be appropriate. The criteria should be suitable. There should be sufficient appropriate evidence. The subject matters The subject matter of an assurance engagement are stated below : All the financial statements like the balance sheet the cash flows and the income statements are to be properly disclosed in the subject matter details of the assurance engagements. The non-financial performance are also required to be mentioned in the subject matter information of the affirmation engagements.
12ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT NAME OF STUDENT STUDENT NUMBER The physical features of the assurance engagements are to be checked by the auditor. The system and process based on which the assurance has to be given are mentioned in the report of the auditor. Behaviour like the corporate governance compliance human resource practices are to be mentioned. The assurance report Based on the framework of the assurance engagement the auditors gives their report which contains the findings of the auditor during the process of audit. The professional provides a report containing an endnote that states that the assurance is obtained from the information that is given by the company. The ISA and ISRE creates basic elements for assurance reports. In addition to that, if the auditor founds that apart from the specification of the ISA and the ISRE any other information is required to be given then the practitioner can do so(Mar Alonso-Almeidaet al2015). The report of the auditor framed in the following manner.
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13ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT NAME OF STUDENT STUDENT NUMBER In case responsible party’s assertion the report is given in the following manner: “In our opinion the responsible party’s assertion that internal control is effective in all material aspects.” If the report is made on the basis of the subject matter and the criteria “In our opinion the internal control is effective in all material aspects .“ Question 2 Auditor independence To, The senior audit partner From, Audit manager Subject The memo is prepared review the independence requirement of upcoming audit engagement with our clients and assess the following independence issue the detilas of the review is given below. The potential independence threat The independence issue on the various clients of Chase Fearnley are explained below
14ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT NAME OF STUDENT STUDENT NUMBER Client Baxter aviation limited BAL seems to be the most eligible company whose assignment can be taken by the audit firm. BAL is the largest regional airfreight business in the eastern states approach the audit firm to do the external audit of the company. The external auditor has all the power to work independently and give the report to the management of the company, but the only problem of the company is that it also asked the firm to take over the non-assurance services, which may violate the independence concept of the audit firm(Tepalagul, & Lin, 2015). Client max maxim global limited The firm cannot take the audit of the company as the one of the partner of the firm Emily Matthews is engaged with the firm which creates the happening of conflict of interest with the company and the audit firm the independence of the audit firm will be violated in this case(Unit 2015). Client Granger freight services As the firm owes an amount of 462000 dollars from the audit firm it creates hindrance on the independence of the audit firm. The firm should deny the proposal of the company unless it settle off the dues.
15ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT NAME OF STUDENT STUDENT NUMBER Client Wilcox system The company is in long term relation with the company, but the company cannot provide audit services to the company as recently the company breached the patent rule with another company. David is one of the partner of the firm is also the friend of the board member of the company this will again raise question regarding the independence of the audit work. As David can influence the audit work if the firm take the assignment(Lins, Servaes, & Tamayo 2017). The threats can be removed by flowing the steps mentioned below Client max maxim global limited The audit can be taken by removing Emily from the company. The partner by giving a declaration to the company that as the audit firm is going to take the audit process it will not be possible for Emily to be a part of the company any more. The company should also acknowledge the fact should give a sane declaration to the audit firm that they will not keep Emily in any position of the company(Simnett & Huggins2015).
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16ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT NAME OF STUDENT STUDENT NUMBER Client Granger freight services The company can take the audit of the company only after the company settle off the dues of the firm. The amount that owes to the firm should be settled before the appointment letter is given by the company otherwise the company will not be able to appoint the firm to conduct the audit process of the company(Khalil & Ozkan 2016). Client Wilcox systems solution The company has several problems, which are required to be solved by the company only, then the company will be able to appoint the firm and the threat from the independence can only be removed. The legal suits are to be settled first and then the company has to give declaration that it will never take any assistance from David during the audit process and the company. David also has to give a declaration that he will never try to influence the audit firm during the process of auditing. The firm also has to declare that it will not engage David in any of the process of audit. The issue with BAM Pty ltd The threat of independence in case of the bam pty ltd has occurred, as the company approached to the firm to handle the non-assurance part of the company along with the external audit work. It is the general rule of the auditing is that a company cannot appoint the same audit firm in both the external and internal audit work. It is assumed that an audit firms independence will be affected if it do both the external as well as the internal audit of the company. Internal auditor’s report us placed to external auditor and the external auditor will take the help of the report to frame the audit programs(Ittonen Tronnes & Vähämaa,2018).
17ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT NAME OF STUDENT STUDENT NUMBER So in this case the independence threat can be removed if the company gives only one assignment to the audit firm. Either the firm can work as the external auditor or it will look after the non-assurance part. In any case it will not be possible for the firm to perform both the work simultaneously. Conclusion Based on the above report it is concluded that in the modern days the corporate social responsibility and the sustainability report on the companies has become an integral part of the company. The auditors of the company always looks for the CSR policies and the sustainable report before going for an assurance engagement with the company. It can also be ascertained that the independence of auditor is considered an essential factor while taking the audit work of any company.
18ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT NAME OF STUDENT STUDENT NUMBER References Abbott, L. J., Daugherty, B., Parker, S., & Peters, G. F. (2016). Internal audit quality and financial reporting quality: The joint importance of independence and competence.Journal of Accounting Research,54(1), 3-40. Ackers, B., & Eccles, N. S. (2015). Mandatory corporate social responsibility assurance practices: The case of King III in South Africa.Accounting, Auditing & Accountability Journal,28(4), 515-550. del Mar Alonso-Almeida, M., Marimon, F., Casani, F., & Rodriguez-Pomeda, J. (2015). Diffusion of sustainability reporting in universities: current situation and future perspectives.Journal of cleaner production,106, 144-154. Font, X., Garay, L., & Jones, S. (2016). Sustainability motivations and practices in small tourism enterprises in European protected areas.Journal of Cleaner production,137, 1439-1448. Ioannou, I., & Serafeim, G. (2017). The consequences of mandatory corporate sustainability reporting.Harvard Business School research working paper, (11-100). Ittonen, K., Tronnes, P., & Vähämaa, S. (2018). Do former auditors on the audit committee constrain earnings management? Evidence from the banking industry.Evidence from the Banking Industry (December 03, 2018). Khalil, M., & Ozkan, A. (2016). Board independence, audit quality and earnings management: evidence from Egypt.Journal of Emerging Market Finance,15(1), 84-118. Lins, K. V., Servaes, H., & Tamayo, A. (2017). Social capital, trust, and firm performance: The value of corporate social responsibility during the financial crisis.The Journal of Finance,72(4), 1785-1824. Michelon, G., Patten, D. M., & Romi, A. M. (2018). Creating legitimacy for sustainability assurance practices: Evidence from sustainability restatements.European Accounting Review, 1-28.
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19ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT NAME OF STUDENT STUDENT NUMBER Rivera, J. M., Muñoz, M. J., & Moneva, J. M. (2017). Revisiting the relationship between corporate stakeholder commitment and social and financial performance.Sustainable Development,25(6), 482-494. Schrempf-Stirling, J., Palazzo, G., & Phillips, R. A. (2016). Historic corporate social responsibility.Academy of Management Review,41(4), 700-719. Shamir, R. (2017). Between self-regulation and the Alien Tort Claims Act: on the contested concept of corporate social responsibility. InCrime and Regulation(pp. 155-183). Routledge. Siew, R. Y. (2015). A review of corporate sustainability reporting tools (SRTs).Journal of environmental management,164, 180-195. Simnett, R., & Huggins, A. L. (2015). Integrated reporting and assurance: where can research add value?.Sustainability Accounting, Management and Policy Journal,6(1), 29-53. Soh, D. S., & Martinov-Bennie, N. (2015). Internal auditors’ perceptions of their role in environmental, social and governance assurance and consulting.Managerial Auditing Journal,30(1), 80-111. Tepalagul, N., & Lin, L. (2015). Auditor independence and audit quality: A literature review.Journal of Accounting, Auditing & Finance,30(1), 101-121. Unit, B. (2015). Corporate social responsibility. Xiao, J. Z., Yang, S., Zhang, X., & Firth, M. (2016). Institutional arrangements and government audit independence in China.Abacus,52(3), 532-567.