ESG assurance an elusive but promising opportunity for auditors

August 19, 2021

Published: Journal of Accountancy

Google, Netflix, Salesforce, and Coca-Cola all use public company auditors to perform assurance on their environmental, social, and governance (ESG) information.

So do Verizon, UPS, and Johnson & Johnson. But those companies are the exception rather than the rule among the S&P 500, according to an analysis performed by the Center for Audit Quality (CAQ), which is affiliated with the AICPA.

Just 31 of the S&P 500 companies use public company auditors to perform assurance on their ESG reporting, according to the CAQ study. Meanwhile, 235 members of the S&P 500 used a non-audit firm assurance provider, and 236 did not get assurance on ESG information. (Note: The numbers don’t add to 500 because two companies used both an audit firm and a non-audit firm to provide assurance).

Nonetheless, substantial opportunities exist for CPA firms to perform ESG assurance in the future because of increased investor interest and regulatory focus, according to Dennis McGowan, CPA, vice president, Professional Practice for the CAQ.

“I think with the SEC’s focus on this and the likelihood that this information gets closer and closer to an SEC submission or filing, you could see an uptick in demand for assurance from public company audit firms,” McGowan said.

A recent global survey by AICPA & CIMA and the International Federation of Accountants showed that the United States is an outlier in this area. In many other countries in the Americas and Europe, an overwhelming majority of sustainability assurance is provided by audit firms.

That’s probably at least partly because these countries have more stringent regulations around ESG issues, whereas regulations in the United States are less mature. But that may be changing.

https://www.journalofaccountancy.com/news/2021/aug/esg-assurance-promising-opportunity-for-auditors.html

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