Evaluating CSR Policy & Sustainability Reporting: Auditor Independence

This report analyzes the role of Corporate Social Responsibility (CSR) policies and sustainability reports, focusing on their impact on businesses in Australia and Europe. It defines and differentiates between CSR and sustainability reporting, highlighting their respective visions, targets, management, and business implications. The report also delves into the history of sustainability reporting and assurance, emphasizing its importance in stakeholder accountability and internal control improvements. Furthermore, it explores future developments in sustainability reporting, including climate change considerations, human rights protection, wealth inequality, and the impact of data technology. The analysis extends to the regulations and frameworks for formulating sustainability reports, such as the Global Reporting Initiative, and the assurance guidelines used by auditors, including adherence to international standards and ethical requirements. Finally, the report examines auditor independence, identifying potential threats and strategies to mitigate them, concluding with the critical role of independent audits in ensuring the credibility of CSR and sustainability reports. Desklib offers a range of study tools and resources for students.

Running head: ROLE OF CSR POLICY AND THE SUSTAINABILITY REPORT
Role of CSR Policy and the Sustainability Report
Name of the Student
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Author’s note

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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.

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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

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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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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.

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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.

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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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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).

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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

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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 (Xiao et al 2016).
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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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 (Abbott et al 2016).
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.

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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.

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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-Almeida et al 2015).
The report of the auditor framed in the following manner.

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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

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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.

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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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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).

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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.

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