As the project page explains ISSA 5000 will be ‘profession agnostic’ – for use by all assurance practitioners including non-accountants – and apply to sustainability information reported about any appropriate sustainability matter and prepared under any suitable framework across the globe including ESRS, LSME ESRS and VSME. It will also apply for both limited and reasonable assurance engagements.
The EC sees assurance as the key to ensuring the reliability of sustainability reports. In the EU sustainability assurance standards will be the subject of an EC Delegated Act, in the same way as Set 1 ESRS is for sustainability reporting. But unlike reporting (for which there is EFRAG) there is no EU entity to develop sustainability assurance standards. Hence, it is vital that European stakeholders input to the ISSA 5000 consultation to help ensure it is ‘fit for purpose’ in the EU as well as scalable and proportionate for the benefit of SMEs. In the meantime, assurance providers can continue to use ISAE 3000 or appropriate national standards.
The accountancy media has been full of news and analysis on the proposed sustainability standard. As the IAASB Chair explains in this article that the ISSA is highly flexible. It is designed to be profession agnostic, framework agnostic and framework neutral. According to an EC senior expert speaking at a conference on 3 October 2023 the EC will use the years leading up to the 2026 Delegated Act to “absorb” the developments with ISSA 5000 and will judge whether to adapt or gold plate the standard to fit Europe’s unique reporting regime. According to this article many attending the conference told Corporate Disclosures they hoped any changes to ISSA 5000 would be kept to a minimum.
The EC wants to ‘open up’ the assurance market so that both auditors and other independent assurance service providers can carry out sustainability assurance and avoid the Big Four accounting firms dominating the market in the same way they do financial auditing. However, there are serious concerns as to whether there will be market capacity to conduct high quality sustainability assurance on the 50,000 or so EU companies that will be required to publish sustainability reports that have been subject to limited assurance in the coming few years. Read more here.
Speaking at a sustainability assurance conference on 3 October 2023, Jose Maria Hinojal, a member of EFAA’s Assurance Expert Group, said SMPs face a challenge building the necessary capacity and capability to provide high quality sustainability assurance.
Preparers are also facing challenges with the onset of assurance. Most of the 50,000 companies in scope of the CSRD will likely be reporting for the first time. Many will struggle to be ready to have these reports ready for assurance as this article explains.