Auditing and Assurance Report: CSR, SR, and Auditor's Role

This report delves into the crucial aspects of auditing and assurance in Australia, focusing on Corporate Social Responsibility (CSR) and Sustainability Reporting (SR). It begins by defining CSR and SR, highlighting their similarities and differences, and then traces the historical evolution of SR and assurance practices. The report identifies companies that undertake SR, along with the assurance providers and the levels of assurance offered. Furthermore, it explores potential future developments in SR and assurance, including improvements in sector-based reporting and the integration of SR with financial reporting frameworks. The report also addresses auditor independence, presenting case studies involving potential conflicts of interest and offering recommendations to mitigate these threats. The frameworks, guidelines, and standards utilized for preparing these reports, including the role of the Global Reporting Initiative (GRI) and the Association of Chartered Certified Accountants (ACCA) are also discussed, as well as assurance guidelines and procedures for auditors. The report concludes by summarizing the key findings and emphasizing the importance of both CSR and SR in today's business environment, and offers practical guidance for students.

Running head: AUDITING AND ASSURANCE IN AUSTRALIA
Auditing and Assurance in Australia
Name of the Student
Name of the University
Author’s Note

1AUDITING AND ASSURANCE IN AUSTRALIA
Table of Contents
Question 1: The Expanding Role of Auditor.................................................................2
Introduction...............................................................................................................3
Corporate Social Responsibility (CSR) and Sustainability Reporting (SR)..............3
Similarities and Differences between CSR and SR..................................................3
Brief History on SR and Assurance..........................................................................3
Companies undertake SR.........................................................................................4
Further Development in the Areas of SR and Assurance........................................5
Frameworks Guidelines and Standards....................................................................5
Assurance Guidelines and Procedures for Auditors.................................................6
Conclusion................................................................................................................6
Question 2: Auditor Independence...............................................................................6
Internal Memo...........................................................................................................6
References.................................................................................................................10

2AUDITING AND ASSURANCE IN AUSTRALIA
Question 1: The Expanding Role of Auditor
Executive Summary
This report shows that both Corporate Social Responsibility (CSR) and Sustainability
Reporting (SR) are essential for the companies in disclosing information on their
sustainability performance. The main differences and similarities between CSR and
SR are discussed in this report. This study focuses on four companies that have
adopted SR while providing the necessary assurance on them. This report also
shows the regulations and guidelines for SR for the companies.

3AUDITING AND ASSURANCE IN AUSTRALIA
Introduction
In today’s business world, Corporate Social Responsibility (CSR) and
Sustainability Reporting (SR) has become crucial success factors for the companies
due to the increased awareness of the customers about the sustainability and
environmental issues (Cheng, Ioannou & Serafeim, 2014). At the same time, SR has
a connection with audit and assurance and it has expanded the role of the auditors.
The main aim of this report is to discussion about the current state of CSR, SR and
assurance. The report also sheds light on the expanded role of the auditors.
Corporate Social Responsibility (CSR) and Sustainability Reporting (SR)
CSR – CSR is considered as the mechanism of how firms manage their various
business operations for producing an overall positive impact on the society,
community and environment. CSR takes into consideration issues in the areas of
sustainability, social impact and ethics (Tai & Chuang, 2014).
SR – SR is also considered as a mechanism where companies develop a report
about their social, economic and environmental impacts caused by their day-to-day
business operations. SR also assists in presenting a firm’s governance and value
model for demonstrating the link between strategy and commitment (Ioannou &
Serafeim, 2017).
Similarities and Differences between CSR and SR
Similarities are there between CRR and SR as both are beneficial as well as
highly essential for the firms. Both these concepts measure the impact of day-to-day
operations of the businesses on society, community and environment. This is the
major similarity (Junior, Best & Cotter, 2014).
However, differences are also there between these two as CSR is related to
compliance where SR is about the businesses. The main driver of CSR is the need
for protecting the firm’s reputation where the driver behind SR is creation of value
and opportunity for the businesses (Deng, Kang & Low, 2013).
Brief History on SR and Assurance
SR works as a vital tool for the companies for providing transparent
community with the key stakeholders about the social and environmental
performance of the companies. Due to the high relevancy of SR, certain
stakeholders started to demand transparency and raised question about the integrity

4AUDITING AND ASSURANCE IN AUSTRALIA
of information provided by the companies through the sustainability reports. In the
response of these questions and concerned, some firms commenced to willingly
provide external independent assurance in the sustainability reports with the aim to
enhance the reliability and credibility of provided information (Junior, Best, & Cotter,
2014). In this manner, external assurance of the sustainability reports stared in the
year 1997 to 1998. After this period, different companies started to promote their
independence assurance practice for sustainability as a vital tool for improvising the
quality and credibility of provided information through sustainability reports. For
example, Global Reporting Initiative (GRI) provides major encouragement to the
independent assurance of the sustainability reports as a vital tool for enhancing the
quality and credibility of sustainability reports. It has been found that the improved
quality of sustainability reports strengthened credibility among the key stakeholders
while improved the process of reporting became the main drivers to seek assurance
of the sustainability reports (Junior, Best, & Cotter, 2014).
Companies undertake SR
There are certain companies that have undertaken SR and certain audit firms
have provided the necessary assurance to those reports. Some of these companies
are BHP Billiton, Westpac, Telstra and NAB. These companies are discussed below:
BHP Billion – KPMG has provided the necessary assurance to the sustainability
report of BHP Billion. KPMG has mentioned that they are not aware of the material
misstatements in the sustainability report of BHP Billion. However, KPMG has
provided assurance on GHG emission of BHP Billion by mentioning that the
company has reported greenhouse gas emission in accordance with World
Resources Institute/World Business Council for Sustainability Development
(bhp.com, 2019).
Telstra – Ernst & Young (EY) was responsible for providing the necessary
assurance to the sustainability report of Telstra. EY has provides limited assurance
as per ISAE 3000 on the selection of performance disclosure by the company in the
2018 Sustainability Report. In addition, EY has obtained limited assurance on the
application of the materiality principles in Telstra as per the guidelines of GRI
Reporting Standards (wpengine.netdna-ssl.com, 2019).

5AUDITING AND ASSURANCE IN AUSTRALIA
Westpac – PWC has provided the necessary assurance to the sustainability report
of Westpac. As per the assurance of PWC, Westpac has reported all of their
sustainability in accordance with the required reporting framework (westpac.com.au,
2019).
NAB – KPMG had the responsibility for providing the necessary assurance to the
sustainability report of NAB. It can be seen that KPMG has provided assurance on
the emission of greenhouse gas. KPMG has provided the assurance on other
aspects of sustainability reporting of the bank (nab.com.au, 2019).
Further Development in the Areas of SR and Assurance
There are certain areas in SR and assurance that can be enhanced further in
future. In spite of the presence of all the progresses in SR, SR may become less
popular in the presence of certain factors like global economic recession, doubt
about the stakeholders about the real value of SR and others (Ruhnke & Gabriel,
2013). These aspects need to be improved in the future. In addition, SR can bring
improvements in the areas of sector-based reporting and this can be done with the
help of the standardization of reporting requirements, enhancing data comparability
and alignment of financial performance. At the same time, in the future, SR can be
integrated with the framework for financial reporting that can lead to the development
of international reporting standards or frameworks. In case of assurance, increase
SR practice will lead to more research based on cases from the point of view of the
companies and the assurance providers. This increased prevalence in assurance will
also lead to increased interest in the reason for the managers to make their
sustainability reports assured (Sierra, Zorio & García‐Benau, 2013). This will foster
the incorporation of different level of assurance in the sustainability reports.
Frameworks Guidelines and Standards
The main drivers of sustainability reporting quality are the Global Reporting
Initiative (GRI) guidelines and the Association of Chartered Certified Accountants
(ACCA). GRI is an organization responsible for providing the framework for
sustainability reporting. The guidelines of sustainability reporting are divided into two
parts; they are Reporting Principles and Reporting Guidelines and Standard
Disclosure that includes performance indicators (Fernandez-Feijoo, Romero & Ruiz
2014). The first part includes the definition of report content, quality and boundary

6AUDITING AND ASSURANCE IN AUSTRALIA
that includes materiality, completeness, stakeholder inclusiveness, sustainability
context, balance, comparability and others. The second part includes standard
disclosure such as strategy and profile, management approach and performance
indicators. Hence, in this context, the body of GRI can be considered as the main
body responsible for sustainability reporting.
Assurance Guidelines and Procedures for Auditors
The auditors use certain guidelines and procedures for structuring and
completing assurance engagements. It needs to be mentioned that it is needed for
the auditors to comply with the standards of ISAE 3000 for structuring and
completing assurance engagements. There are certain steps that the auditors are
needed to consider for this purpose; they are ethical requirements, quality control,
acceptance of engagement, planning, use of the work of an expert, obtaining the
needed evidence, documentation and preparation of the assurance report. These
are the steps that the auditors are needed to take into consideration at the time of
their assurance engagement on the sustainability reports of the companies. These
requirements are crucial in structuring and planning the assurance engagement
(Mock, Rao & Srivastava, 2013).
Conclusion
It can be seen from the above discussion that both CSR and SR are needed
for the companies to show the effects of their business operations on society,
community and environment. In addition, both of them create values for the
stakeholders of the companies. Some of the companies that have undertaken this
reporting and assurance are BHP Billiton, Telstra, Westpac and NAB. The above
discussion also shows that GRI has provided the required framework and guidelines
to assist the companies in the development of their sustainability reports with the aim
to disclose the needed information.
Question 2: Auditor Independence
Internal Memo
TO: The Senior Audit Partner
FROM: Audit Manager
RE: Assessment of Potential Independent Issues

7AUDITING AND ASSURANCE IN AUSTRALIA
DATE: 26.03.2019
The main reason behind writing this memo is to discuss about the potential auditor’s
independence issues in the provided scenarios. The following discussion shows the
detailed discussion of these issues.
Client: Baxter Aviation Limited (BAL)
Independence Threats
According to APES 110, Section 290.156, there can be creation of threat to the audit
independence when audit firms provide their customers with non-assurance
services. Since, BAL would become the largest client of Chase and Fearnley by
revenue, there can be self-interest threat, self-review threat and advocacy threat.
These threats can occur due to the facts that the opportunity of huge earnings can
influence the audit decision and audit objectivity can be compromised as the auditors
can promote the business of the client (apesb.org.au, 2019).
Eliminating the Threats
The first safeguard for the elimination of this threat is not to provide non-assurance
services to BAL by Chase and Fearnley. After that, the next is to include a member
in the engagement team to review the assurance works who was not a member of
the assurance team (apesb.org.au, 2019).
Recommendation
It is recommended to Chase and Fearnley to accept the audit due to the fact that the
independence threats can be removed.
Max Maxim Global Limited (MMG)
Independence Threats
As per the provided case, Emily Matthews has developed a close familiar
relationship with MMG due to the fact that she was appointed to facilitate their new
e-commerce computer program. This can lead to the independence threat of
familiarity threat due to the close relationship of the auditor with the client and Emily
Matthews will be too sympathetic to the client’s interest (apesb.org.au, 2019).
Eliminating the Threats

8AUDITING AND ASSURANCE IN AUSTRALIA
The first and key safeguard for the elimination of this threat is not to provide the
annual audit of MMG to Emily Matthews due to the presence of her familiarity with
the audit client (apesb.org.au, 2019).
Recommendation
In this situation, it is recommended to Chase and Fearnley to decline the audit due to
severe audit independence threat. In case Chase and Fearnley wants to accept the
audit, the firm needs to assign different audit members for the audit of MMG.
Granger Freight Services Pty Ltd (GFR)
Independence Threats
As per the provided scenario, Chase and Fearnley owes $462,000 as audit fees from
GFR for the audit of 2017 and 2018; and the audit for 2019 is due to start in next two
weeks. This overdue audit fee can lead to the self-interest threat of audit
independence due to the unpaid leave for long-period. Self-interest threat can be
created as this overdue fees can create influence on the audit judgement or
behaviour (apesb.org.au, 2019).
Eliminating the Threats
The key safeguard in the case is to have an additional member in the engagement
team who was not the part of the audit engagement team. This will bring the threat to
acceptable level (Tepalagul & Lin, 2015).
Recommendation
It is recommended to Chase and Fearnley to determine whether the overdue amount
can be considered as loan to GFR. The firm can accept the audit as the threat can
be minimized to an acceptable level.
Wilcox System Solutions (WSS)
Independence Threats
As per the provided scenario, John and David has been friends for many years and
thus, John made David to attend the mediation process as a negotiator. In addition,
John is the audit manager of Chase and Fearnley. This particular aspect creates the
advocacy and familiarity threat of audit independence as David is promoting the

9AUDITING AND ASSURANCE IN AUSTRALIA
business of James and both the audit client and auditor has close relationship
(apesb.org.au, 2019).
Eliminating the Threats
The first safeguard is that David should not attend the mediation process of James
as a legal advisor. The second safeguard is that David needs to be removed from
the audit program of WSS due to the long-standing friendship with the CEO of WSS
(Tepalagul & Lin, 2015).
Recommendation
It is recommended to Chase and Fearnley to accept the audit program of WSS as
the independence threat can be eliminate and reduced to acceptable level.

10AUDITING AND ASSURANCE IN AUSTRALIA
References
Apesb.org.au. (2019). APES 110 Code of Ethics for Professional Accountants.
Retrieved 26 March 2019, from
https://www.apesb.org.au/uploads/standards/apesb_standards/standard1.pdf
Bhp.com. (2019). Sustainability Report 2018. Retrieved 26 March 2019, from
https://www.bhp.com/investor-centre/-/media/documents/investors/annual-
reports/2018/bhpsustainabilityreport2018
Cheng, B., Ioannou, I., & Serafeim, G. (2014). Corporate social responsibility and
access to finance. Strategic management journal, 35(1), 1-23.
Deng, X., Kang, J. K., & Low, B. S. (2013). Corporate social responsibility and
stakeholder value maximization: Evidence from mergers. Journal of financial
Economics, 110(1), 87-109.
Fernandez-Feijoo, B., Romero, S., & Ruiz, S. (2014). Effect of stakeholders’
pressure on transparency of sustainability reports within the GRI
framework. Journal of business ethics, 122(1), 53-63.
Ioannou, I., & Serafeim, G. (2017). The consequences of mandatory corporate
sustainability reporting. Harvard Business School research working paper,
(11-100).
Junior, R. M., Best, P. J., & Cotter, J. (2014). Sustainability reporting and assurance:
a historical analysis on a world-wide phenomenon. Journal of Business
Ethics, 120(1), 1-11.
Junior, R. M., Best, P. J., & Cotter, J. (2014). Sustainability reporting and assurance:
a historical analysis on a world-wide phenomenon. Journal of Business
Ethics, 120(1), 1-11.
Mock, T. J., Rao, S. S., & Srivastava, R. P. (2013). The development of worldwide
sustainability reporting assurance. Australian Accounting Review, 23(4), 280-
294.
Nab.com.au. (2019). SUSTAINABILITY REPORT 2018. Retrieved 26 March 2019,
from

11AUDITING AND ASSURANCE IN AUSTRALIA
https://www.nab.com.au/content/dam/nabrwd/documents/reports/corporate/
2018-sustainability-report.pdf
Ruhnke, K., & Gabriel, A. (2013). Determinants of voluntary assurance on
sustainability reports: an empirical analysis. Journal of Business
Economics, 83(9), 1063-1091.
Sierra, L., Zorio, A., & García‐Benau, M. A. (2013). Sustainable development and
assurance of corporate social responsibility reports published by Ibex‐35
companies. Corporate Social Responsibility and Environmental
Management, 20(6), 359-370.
Tai, F. M., & Chuang, S. H. (2014). Corporate social responsibility. Ibusiness, 6(03),
117.
Telstra. (2019). 2018 Sustainability Report. 1u0b5867gsn1ez16a1p2vcj1-
wpengine.netdna-ssl.com. Retrieved 26 March 2019, from
https://1u0b5867gsn1ez16a1p2vcj1-wpengine.netdna-ssl.com/wp-content/
uploads/2018/08/Bigger-Picture-Report.pdf
Tepalagul, N., & Lin, L. (2015). Auditor independence and audit quality: A literature
review. Journal of Accounting, Auditing & Finance, 30(1), 101-121.
Westpac.com.au. (2019). 2018 Westpac Group Sustainability Performance Report.
Retrieved 26 March 2019, from
https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/ic/
2018_Sustainability_Performance_Report.pdf