Auditor's Planning Process for Sustainability Reporting and the Associated Statement

Abstract

The purpose of this thesis is to provide the reader with a fundamental understanding of the auditor's planning process for sustainability reporting and the associated statement. To achieve this insight, the thesis is based on the CSRD (Corporate Sustainability Reporting Directive) and the underlying ESRS (European Sustainability Reporting Standards) standards, where the new legislation is reviewed and interpreted. The thesis is grounded in a hermeneutic epistemological perspective. A chapter on the sustainability reporting statement has been prepared to give the reader an overview of the types of statements that can be issued on the reports. This chapter provides a fundamental understanding for designing audit procedures that can be carried out to issue a statement following the ISAE 3000 assurance standard. Within this chapter, the fundamental considerations regarding the determination of materiality levels are described. A case company has been selected to provide a concrete context for the thesis, which is approached from a hermeneutic epistemological perspective. The Business Model Canvas is used to frame the double materiality analysis for a better understanding of the case company. Companies are required to conduct a double materiality analysis, and the auditor is tasked with reviewing this analysis as part of the assurance process to ensure that all material aspects are included. This is done so the auditor can assess whether the sustainability report has omissions that are considered material for the company's sustainability reporting, which could result in the report as a whole not presenting a true and fair view. Following the double materiality analysis, specific audit procedures have been designed to uncover the risk of material misstatement in a selected area of the ESRS standards. Based on the identified risks, audit objectives have been established for these procedures. The planning process for issuing a statement in accordance with ISAE 3000 for the sustainability report should encompass an understanding of the legislation and its implications for the assurance work. Subsequently, the auditor should gain an understanding of the client, focusing on the company's sustainability activities through a general understanding and the company's double materiality analysis, including an understanding of the company's internal control environment and processes for risk assessment. Finally, the auditor, following the understanding of the client and underlying risk assessment, should design audit procedures to address the identified risks to obtain sufficient and appropriate audit evidence for issuing the statement.