External presentation
The views and opinions expressed by guest speakers
do not necessarily reflect the views or position of the
Clean Energy Regulator.
Kim Farrant, Ernst & Young
Annual Scheme Audit and
Assurance Workshop
EY’s Sustainability Assurance Methodology and
the NGER Audit Determination
Kim Farrant
31 March 2015
Overview
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What is the Sustainability Assurance Methodology?
Audit team selection and make up
Sufficiency and appropriateness of audit evidence
Documentation, retention and archiving processes
Quality control and review processes
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What is EY SAM?
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The Ernst & Young Global Sustainability Assurance Methodology (EY SAM) provides a
global framework for the application of a consistent thought process to all assurance
engagements on sustainability information.
EY SAM is based on the International Standard on Assurance Engagements 3000
Assurance engagements other than audits or reviews of historical financial information
(ISAE 3000) and is supplemented to comply with the local assurance standards and
regulatory or statutory requirements eg. NGER (Audit) Determination
EY SAM reflects the typical flow of the execution of an assurance engagement in three
broad phases:
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Planning and risk assessment
Execution
Conclusion and reporting
These align with the following phases from the NGER
(Audit) Determination
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Planning
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Performing
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Reporting
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Audit team selection and make up
What the NGER (Audit) Determination says….
► Responsibility for selection of team rests with the audit team leader
► Teams combined must have:
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Knowledge to carry out audit
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Skills to carry out audit
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Availability to carry out audit
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Supporting resources including equipment and access to key personnel
► Teams are typically multidisciplinary and may include assurance practitioners,
engineers, environmental scientists and financial, legal or corporate experts
► It may be necessary to bring in an external expert
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Audit team selection and make up
What we do….
► Upfront when we meet with a client we have an idea of who will be the lead auditor and
engagement manager, but at this stage the broader audit team is yet to be determined
► Only after developing an understanding of the auditee through risk assessment
procedures, analytical procedures, assessment of systems, processes and controls,
are we able to design procedures according to the risks identified and select a team
► While EY has a team of 100 climate change and sustainability professionals including
assurance practitioners, engineers and environmental scientists, we also draw on the
wider resources of the firm eg. IT for controls testing
► A specialised resourcing team ensures individuals aren’t over or under-committed
► Where the assurance engagement includes aspects requiring specialized knowledge of
another profession (for example, a geologist), we consider the involvement of
professionals with this knowledge
Page 6
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Sufficient and appropriate evidence
What the NGER (Audit) Determination says….
► Collect sufficient and appropriate evidence to support the conclusion made
► Additional guidance regarding sufficiency and appropriateness of evidence is provided
by ASAE 3000 and Guidance Statement GS 021 Engagements under the National
Greenhouse and Energy Reporting Scheme, Carbon Pricing Mechanism and Related
Schemes, issued by the Auditing and Assurance Standards Board (AUASB).
► The auditor should consider the cost / benefit of the time taken to gather information
against its usefulness to support the assurance conclusion
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however, the issue of difficulty is not in itself a valid basis for omitting or not
performing evidence gathering procedures for which there is no alternative, and
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the audit team leader uses professional judgement and exercises professional
scepticism in evaluating the quantity and quality of evidence, and thus its
sufficiency and appropriateness, to support the assurance engagement report.
► Guidance is provided in the handbook on substantive analytical procedures and tests of
details.
Page 7
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Sufficient and appropriate evidence
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Assurance evidence comprises information that supports and corroborates
managements assertions and any information that contradicts such assertions
The absence of information also constitutes assurance evidence
Sufficiency and appropriateness of assurance evidence are interrelated
The greater the risk of misstatement, the greater the quantity of evidence required
Appropriateness of assurance
evidence is its relevance and
reliability in providing support for
the conclusion. Reliability is
influenced by its source and
nature, and is dependent on the
circumstances under which the
evidence is obtained.
Determining whether we have
obtained sufficient appropriate
assurance evidence is a matter of
professional judgment.
Page 8
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Sufficient and appropriate evidence
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The glass of audit evidence
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Design
detection
risk
Filling the glass with sufficient
appropriate audit evidence
Detection risk
Control risk
Assess
combined risk
Inherent risk
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The extent of assurance procedures is unrelated to the engagement fee
If an issue is identified, it is a requirement that the team see the investigation of that
issue through to its conclusion
Page 9
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Documentation, retention and archiving
What the NGER (Audit) Determination says….
► Assurance documentation is a key component of undertaking an assurance
engagement.
► It enables effective review and evaluation of the assurance evidence obtained
► Provides a sufficient appropriate record of the basis for the audit report
► Provides evidence the assurance engagement was performed in accordance with the
NGER Audit Determination
► Relevant assurance engagement documentation must be kept for five years after the
date the assurance engagement report is signed.
Page 10
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Documentation, retention and archiving
What we do….
► Standardised document templates for key stages in the engagement
► SharePoint based in-house system used to maintain all assurance documentation
► Provide a comprehensive summary of the nature, timing and extent of procedures
► Records results of the assurance procedures and assurance evidence obtained
► Shows a history of timely review and approval by relevant team members
► Archived to ensure retention requirements are met
Page 11
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Governance and review oversight
What the NGER (Audit) Determination says….
► A robust system of quality control should be in place for all auditors.
► Peer review is an important quality control process for assurance and verification
engagements undertaken under the National Greenhouse and Energy Reporting audit
framework. The NGER Audit Determination requires that the judgements made by the
audit team leader in preparing and carrying out the assurance engagement are peer
reviewed by an impartial, objective and sufficiently qualified person
Page 12
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Governance and review oversight
What we do…..
► Maintain a registered of those authorised to sign assurance reports
► Each key document and work paper is reviewed by another member of the audit team
► Warm review – a review is conducted internally to ensure all quality processes have
been adhered to and to ensure consistency between engagements
► Peer Review – a peer review is conducted in accordance with the requirements of the
NGER (Audit) Determination
► Independent Partner Review – an independent partner review is conducted in relation
to key assurance documentation
Page 13
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Contacts
Kim Farrant
EY Climate Change and Sustainability Services, Melbourne
Tel: +61 3 92888362
Kim.Farrant@au.ey.com
Copyright © 2015 Ernst & Young Australia. All Rights Reserved.
This communication provides general information which is current as at the time of production. The information contained in this communication does not constitute
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