Financial Crime World

Lowest Level of Assurance: Limited Assurance Engagement

The European Commission has introduced a new directive, Corporate Sustainability Reporting Directive (CSRD), which aims to achieve a similar level of assurance for financial and sustainability reporting. However, experts warn that the lowest level of assurance provided by limited assurance engagement may not be sufficient for auditing financial information.

Option for Companies

According to the CSRD, member states have the option to allow companies to choose a different statutory auditor or audit firm than elected for financial auditing to perform the auditing of sustainability information. Additionally, independent assurance services providers can also complete the auditing, as long as they are accredited and meet certain requirements.

Comparison with Reasonable Assurance Engagement

In contrast, reasonable assurance engagement provides the highest level of assurance, which is required for auditing financial information. The European Commission has announced plans to issue standards for reasonable assurance of sustainability reporting by 2028.

Timeline

  • Entry into force: CSRD (5 January 2023), ESRS (30 November 2023)
  • Implementation due: 6 July 2024
  • Assurance standards for reasonable assurance of sustainability reporting: by 1 October 2028

Resources

  • Directive (EU) 2022/2464 - Corporate Sustainability Reporting Directive
  • Directive 2014/95/EU - Non-Financial Reporting Directive
  • Directive 2013/34/EU - Accounting Directive
  • Directive 2004/109/EC - Transparency Directive
  • Directive 2006/43/EC - Statutory Audit Directive

Experts’ Concerns

Experts stress that companies must review the new regulations and frameworks to determine their applicability and potential relief from regulatory requirements. The future of sustainability reporting remains uncertain, with the need for higher levels of assurance in auditing financial information.

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