AICD submission on the Proposed Australian Standard on Sustainability Assurance, ASSA 5010 (Timeline)

Our submission highlighted that overall, we support the proposed timetable. We consider it strikes an appropriate balance between meeting the demand for sustainability assurance and ensuring preparer and auditor readiness to service these new requirements.

In summary, our key points were:

1. We broadly support the proposed timetable set out in ED 02/24 and consider it strikes an appropriate balance between meeting the demand for sustainability assurance and ensuring preparer and auditor readiness to meet these new requirements.
2. Alignment with expiry of Modified Liability and Qualified Director regimes: We are pleased to see, and support, the alignment between the phase-in of reasonable assurance with the expiry of the Modified Liability and Qualified Director regimes under the mandatory climate reporting regime.
3. Phase-in from limited to reasonable supported: We support a regime which starts with limited assurance and progresses to reasonable assurance after the fourth reporting year. This should give the assurance market the time to develop the relevant capabilities, and for standard-setters to provide guidance on the implementation of reasonable assurance over more challenging and nascent disclosures, such as scenario analysis and transition plan disclosures.
4. Addressing market constraints and competition issues: We note that the requirement that the Sustainability Report audit be conducted by the Financial Report auditor (or by different lead partners of the same Financial Report audit firm) may exacerbate existing audit market concentration issues. Allowing for lead auditor reliance on other (non-financial audit) sustainability assurance providers may, to some extent, alleviate this. AUAUSB guidance on the parameters of permitted reliance on other assurance providers and experts would be useful.
5. Focus on auditor independence and quality: Consideration should be given as to how to ensure that the quality of sustainability report audits aligns with the high standards currently seen in financial report audits.
6. Guidance, education and capacity-building critical: With Australia being one of the first jurisdictions to introduce mandatory reasonable assurance over ISSB-aligned disclosures, there is significant work in ensuring that directors, report preparers, and auditors are able to comply with these new obligations. The AICD is committed to lifting board and director awareness, education, competency and readiness of the new assurance requirements.
7. Cost burden for Group 3 entities: Group 3 entities, some of whom will be Not-for-Profits (NFPs), are likely to struggle with the cost and compliance burden of both mandatory climate reporting and assurance. Whilst it is hoped that creating a competitive mandatory assurance market will drive down fees, consideration should be given as to how to address the compliance and cost burden to these smaller entities.