Question

6. We stressed existing key differences between a firm's (1) independent auditor and (2) other entities [e.g., AccountAbility] providing assurance standards regarding sustainability accounting. Most Big 4 firms provide assurance and consulting on sustainability reporting, but often focus more on consulting than assurance sustainability reports. Compare and contrast how both types of entities measure materiality and other sustainability reporting matters.

Answer 1

Answer :

Independent Auditor

The independent auditor serves a vital role in our capital markets by providing an objective third party opinion on the integrity of financial statements that investors rely upon for investment decisions. Accurate and reliable financial statements are critical for companies to raise capital and are the bedrock upon which investors depend to make informed decisions.

In the United States, the auditor has been given a unique franchise under our federal securities laws in that all companies wishing to access the U.S. capital markets must obtain an audit. That franchise, however, carries certain responsibilities.

The regulatory landscape changed to prevent that from happening again by prohibiting the firms from providing certain consulting and advisory services to audit clients. Firms implemented safeguards to comply with those requirements. Yet, nearly 16 years after the adoption of those rules, we continue to see auditor independence violations.

For example, over the past two years all of the global network firms or their affiliates have either settled enforcement actions related to independence violations or resigned from an engagement because they provided prohibited services to a client or its affiliates. The Board also continues to identify independence issues.

While the final transparency rule was a compromise from the original proposal of having the engagement partner sign the audit report, I nonetheless believe that investors will benefit from what was ultimately adopted. For example, you will soon be able to:

• Evaluate and compare the performance of individual engagement partners over time.
• Determine whether an engagement partner has been associated with adverse audit outcomes or sanctioned by the PCAOB or SEC.
• Discover how much of the audit was performed by the firm issuing the report and by other firms.

This information is also aimed to help in your decision whether or not to ratify a company's independent auditor.

Sustainability Reporting

Finally, I would like to briefly address the issue of sustainability reporting. I applaud the ICGN for focusing on this topic during this conference.

Environmental, social, and governance ("ESG") matters are increasingly playing a significant role in investors' voting and investment decisions. According to a recent report, 89 percent of global investors state that non-financial performance factors, such as ESG matters, are integral to their investment decision making. A 2015 CFA Institute survey found that 73 percent of respondents take ESG issues into account in their investment analysis and decisions.

This is the heart of what makes ESG information material from a disclosure perspective.

We are seeing sustainability reporting gain prominence globally and public policy is adapting accordingly. As of 2014, approximately 31 countries and 18 stock exchanges require or encourage some form of ESG reporting.Notably, in September 2014, the EU adopted an amendment requiring large, publicly listed companies to disclose in their management report relevant and material information on environmental and other matters.

In the U.S., sustainability reports are prepared on a voluntary basis, though public companies must disclose material impacts of climate related changes. But in both the reports and filings, the information is often presented in boilerplate manner, with limited comparability, and inconsistently.

Other entities

An entity is something that exists as itself, as a subject or as an object, actually or potentially, concretely or abstractly, physically or not. It need not be of material existence. In particular, abstractions and legal fictions are usually regarded as entities. In general, there is also no presumption that an entity is animate, or present.

The word is abstract in intention. It may refer, for example, to Bucephalus, the horse of Alexander; to a stone; to a cardinal number; to a language; or to ghosts or other spirits.

The word entitative is the adjective form of the noun entity. Something that is entitative is considered in its own right.

If Subtenant is a partnership, limited liability company, corporation, or Other entity, any transfer of this Sublease by merger, consolidation, redemption or liquidation, or any change in the ownership of.

Other entity forms did not seem to have similarly visible, organized, and influential champions.

If the violation is committed by a corporation, trust or firm, partnership, association, or any Other entity, the penalty of imprisonment shall be imposed upon the entity's responsible officers, including, but not limited to, the president, vice-president, chief executive officer, general manger, managing director or partner.

The death or incompetency (in the case of a Trustee that is a natural person), dissolution (in the case of a Trustee that is a corporation or Other entity), resignation, or removal of the Trustee shall not operate to terminate the Trust created by this Amended Trust Agreement or to revoke any existing agency created pursuant to the terms of this Amended Trust Agreement or invalidate any action theretofore taken by the Trustee.

Other entity means a limited liability company, limited liability partnership, limited partnership, general partnership, business trust, real estate investment trust, or any other entity that is formed under the requirements of applicable law and that is not a corporation.