Greenhouse gas statement and assurance engagements on greenhouse gas statements (part II)

 

Obtaining an understanding of the entity’s internal control

Obtaining an understanding of the entity’s internal control is one of the steps of performing assurance engagement on the greenhouse gas statements.  Greenhouse gas statement and assurance engagements on greenhouse gas statements (part I) 

If an assurance engagement is in the form of a limited assurance, for internal control relevant to emissions quantification and reporting the practitioner shall obtain an understanding through inquiries about:

(a) The control environment.

(b) The information system, including the related business processes, and communication of emissions reporting roles and responsibilities and significant matters relating to emissions reporting; and

(c) The results of the entity’s risk assessment process.

If an assurance engagement is in the form of a reasonable assurance, the practitioner shall obtain an understanding of the following components of the entity’s internal control relevant to emissions quantification:

(a) The control environment.

(b) The information system, including the related business processes, and communication of emissions reporting roles and responsibilities and significant matters relating to emissions reporting.

(c) The entity’s risk assessment process.

(d) Control activities relevant to the engagement, which are necessary for the practitioner to understand in order to assess the risks of material misstatement at the assertion level and design further procedures responsive to assessed risks.

(e) Monitoring of control.

       When obtaining the understanding described above the practitioner shall evaluate the design of controls and determine whether they have been implemented by performing procedures in addition to inquiry.

Procedures to identify and assess risks of material misstatement when performing the assurance engagement on the greenhouse gas statements.

The procedures to identify and assess risks of material misstatement shall include the following:

(a) Inquiries of those within the entity who, in the practitioner’s judgment, have information that is likely to assist in identifying and assessing risks of material misstatement due to fraud or error.

(b) Analytical procedures. Analytical procedures may help identify the existence of unusual events, and amounts, ratios, and trends that might indicate matters that have implications for the engagement. Unusual or unexpected relationships that are identified may assist the practitioner in identifying risks of material misstatement.

(c) Observation and inspection. Observation consists of looking at a process or procedure being performed by others, for example, the practitioner’s observation of monitoring devices being calibrated by the entity’s personnel, or of the performance of control activities.

 Inspection involves:

1. Examining records or documents, whether internal or external, in paper form, electronic form, or other media, for example, calibration records of a monitoring device. Inspection of records and documents provides evidence of varying degrees of reliability, depending on their nature and source.

2. A physical examination of, for example, a calibrating device.

 Procedures (responses) to address the identified risks of material misstatements in the assurance engagement on the greenhouse gas statements.

Auditors can identify the risk of material misstatements at the GHG statement level and the assertions level of the GHG statement.

Auditor`s responses to assessed risk of material misstatement at the GHG statement level.

Auditors design overall responses to address the assessed risks of material misstatement at the GHG statement level.

Overall responses to address the assessed risks of material misstatement at the GHG statement level may include:

● Emphasizing to the assurance personnel the need to maintain professional skepticism.

● Assigning more experienced staff or those with special skills or using experts.

● Providing more supervision.

● Incorporating additional elements of unpredictability in the selection of further procedures to be performed.

● Making general changes to the nature, timing or extent of procedures, for example: performing procedures at the period end instead of at an interim date; or modifying the nature of procedures to obtain more persuasive evidence.

Audit procedures responsive to the assessed risks of material misstatement at the assertion level of the GHG statement.

The auditor’s assessment of the identified risks at the assertion level provides a basis for designing and performing further audit procedures.

Further procedures may include, for example:

·  Testing the operating effectiveness of controls over the collection and recording of activity data, such as kilowatt hours of electricity purchased.

· Agreeing emissions factors to appropriate sources (for example, government publications), and considering their applicability in the circumstances.

· Reviewing joint venture agreements and other contracts relevant to determining the entity’s organizational boundary.

·  Reconciling recorded data to, for example, odometers on vehicles owned by the entity.

· Reperforming calculations (for example, mass balance and energy balance calculations), and reconciling differences noted.

·  Taking readings from continuous monitoring equipment.

·  Observing or reperforming physical measurements, such as dipping oil tanks.

·  Analyzing the soundness and appropriateness of unique measurement or quantification techniques, particularly complex methods that may involve, for example, recycling or feedback loops.

·  Sampling and independently analyzing the characteristics of materials such as coal or observing the entity’s sampling techniques and reviewing records of laboratory test results.

·  Checking the accuracy of calculations and the suitability of calculation methods used (for example, the conversion and aggregation of input measurements).

·  Agreeing recorded data back to source documents, such as production records, fuel usage records, and invoices for purchased energy.

Assurance report on the greenhouse gas statements.

The final step of the assurance engagement on the greenhouse gas statements is the preparation of an assurance report.

The assurance report shall include, at a minimum, the following basic elements:

a.      A title that clearly indicates the report is an independent assurance report.

b.      An addressee.

c.      An identification or description of the level of assurance, either reasonable or limited, obtained by the practitioner.

d.      Identification of the GHG statement, including the period(s) it covers,

e.      A description of the entity’s responsibilities

f.       A statement that GHG quantification is subject to inherent uncertainty

g.      Identification of the applicable criteria.

h.     A statement that the firm of which the practitioner is a member applies ISQC 1, or other professional requirements.

i.     A statement that the practitioner complies with the independence and other ethical requirements.

j.      A description of the practitioner’s responsibility.

k.    The practitioner’s conclusion. In a reasonable assurance engagement, the conclusion shall be expressed in a positive form. In a limited assurance engagement, the conclusion shall be expressed in a form that nothing has come to practitioner`s attention that causes to believe that GHG statement is not prepared, in all material respects, in accordance with the [applicable criteria].

l.      The practitioner’s signature.

m.    The date of the assurance report. 

n.     The location in the jurisdiction where the practitioner practices