May 28, 2021
Published: Journal of Accountancy
By Joseph Radigan
The first few months of 2021 witnessed some major milestones in investors’ and regulators’ efforts to get public companies to provide shareholders with more information about environmental, social, and governance (ESG) issues.
In March, the SEC published a request for public comments about ESG disclosures. The move followed the launch of an Enforcement Division task force to uncover flawed ESG-related disclosures that violate its regulations. Additionally, shareholders are becoming more assertive in getting companies to lessen their reliance on fossil fuels.
A month before the SEC’s moves, the Center for Audit Quality (CAQ) published ESG Reporting and Attestation: A Roadmap for Audit Practitioners to help auditors guide clients in how they should approach ESG disclosures.
During a virtual session Monday, Kristen Sullivan, CPA, CGMA, a partner with Deloitte & Touche LLP and the firm’s Americas region sustainability services leader, gave an overview of the concerns public companies, directors, and auditors have about the new regulatory focus on ESG disclosures. To date, ESG disclosures have tended to be separate from regulatory filings. But the CAQ’s road map is meant to help guide capital market participants through the frequency and consistency of the disclosures and whether the information is comparable from company to company, Sullivan said.
“All are much more in the spotlight as the growing attention to ESG disclosure continues to intensify,” said Sullivan, who also chairs the AICPA Auditing Standards Board’s Sustainability Task Force. The developments regarding ESG disclosures are also presenting auditors with a new host of responsibilities.
“We’re seeing a conversation around the role and the value of assurance provided by independent auditors,” Sullivan said.
Typically, new rules and regulations impose an unwelcome burden on financial reporting professionals and their auditors. But the trend toward ESG reporting comes with a twist — the demands for the information have been coming from so many different corners of the market that the development of new standards and reporting regulations may simplify life for CFOs, corporate controllers, and audit committee members.