What others are saying about environmental accounting AIEA Conference November 2013
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The document summarizes five reports on environmental accounting and auditing: (1) The NWC Rural NPR Audit Requirements may lack robustness compared to auditing standards; (2) A VAGO audit found that most natural resource agencies report outputs, not outcomes; (3) The updated CER Audit Handbook provides guidance for new carbon programs; (4) An ANAO audit found agencies were slow to implement recommendations; and (5) CSEAR's "silent and shadow reporting" techniques remain useful tools for auditors. The author believes environmental accounting can learn from financial reporting methods.
What others are saying about environmental accounting AIEA Conference November 2013
- 1. What others are saying about environmental accounting… Tim Kirby, Sydney
- 2. What others are saying about environmental accounting… Environmental accounting continues to develop at a faster pace than financial accounting. Lots of decision-makers are reviewing the quality of environmental information all the time. We can all learn some things from what they say. e: [email protected]
- 3. Agenda I will review 5 reports, using my normal in5slides format: •NWC Rural NPR Audit Requirements •VAGO Audit Report on performance reporting •CER Audit Handbook •ANAO Audit Report on implementation of recommendations •CSEAR silent and shadow reporting e: [email protected]
- 4. NWC Rural NPR Auditing Requirements… This is the first year that pricing and service quality performance indicators for rural water service providers will be universally audited. Part of the NPR handbook explains how this aspect of water accounting will be audited. AUGUST 2013
- 5. Rural water service providers must all report the same pricing and service quality data. NPR audits look at the accounting processes, the reported data and the presentation of data. NPR auditors must follow ASAE 3000. NPR audits must provide reasonable assurance. Audit report templates are provided. They consist of two parts; a short form opinion, and a more expansive table of findings. . WHAT DOES IT SAY. AUGUST 2013
- 6. The requirements may not be consistent with ASAE 3000 in a couple of ways: •They do not require auditors to have qualifications in audit or assurance (they do require them to have qualifications in water engineering). •They allow an auditor to undertake assurance while they have an existing conflict of interest. Both may mean that the quality of audits in this area are less robust than expected by the AUASB Framework for Assurance Engagements. WHAT ELSE DOES IT SAY. AUGUST 2013
- 7. Auditors are required to assess reliability and accuracy of data, and to determine whether data should be reported. Data may have A, B, C or D level reliability, where A is the best. For auditors, this is ‘sufficient and appropriate’ evidence. Data may also have 1, 2, 3, or 4 level of accuracy, where level 1 data has +/- 5% possibility of error. For auditors, this is materiality. WHAT ELSE DOES IT SAY. AUGUST 2013
- 8. • The grading system for reliability, accuracy and reporting should be the focus for improving professionalism in water accounting. • The ‘paint by numbers’ approach taken in these requirements are indicative of a lack of confidence in water accounting and auditing .The comments on these slides are the views of Tim Kirby, Sydney. You should always read the report itself before putting any money on the line. WHAT DOES IT MEAN. Tim Kirby, Sydney CA, CIA, LA-EMS au.linkedin.com/in/timkirbysydney AUGUST 2013
- 9. Victorian Auditor General’s audit of the natural resource agency performance reporting … VAGO looked at whether performance reporting by three Victorian NRM agencies was being done well. OCTOBER 2013
- 10. • The Victorian EPA is doing performance reporting quite well. • DEPI is not reporting on performance very well. • Parks Vic are somewhere in between. WHAT DOES IT SAY. OCTOBER 2013
- 11. There is still too much reporting of outputs and activities, and not enough reporting of achievement of outcomes. This applies right through from Budget Paper 3 indicators down to indicators that operational management use. WHAT ELSE DOES IT SAY. OCTOBER 2013
- 12. The accounting and information management systems for performance data at DEPI and Parks Vic have serious weaknesses. They lack controls over quality of data, and documentation of data recognition decisions. WHAT ELSE DOES IT SAY. OCTOBER 2013
- 13. • Like lots of other public service programs, these agencies find it hard to report on achievement of outcomes, so they report on ‘busy-ness’. • Performance reporting is not done as professionally as financial reporting, and could learn a lot from accounting methods. • Public confidence in DEPI reporting is probably pretty low. The comments on these slides are the views of Tim Kirby, Sydney. You should always read the report itself before putting any money on the line. WHAT DOES IT MEAN. Tim Kirby, Sydney CA, CIA, LA-EMS au.linkedin.com/in/timkirbysydney OCTOBER 2013
- 14. CER Audit Handbook 2013… The CER requires audited data for a number of its regulatory programs, including National Greenhouse and Energy Reporting and the Carbon Farming Initiative. This 2013 update to their auditor handbook for greenhouse gas and energy audits incorporates several new developments. NOVEMBER 2013
- 15. The Handbook was originally developed as guidance for auditors doing NGER audit engagements. This update to the Handbook incorporates a number of new programs that registered GHG auditors are involved in, including Carbon Farming Initiative (CFI) applications and pre- submission audits required by the Carbon Pricing Mechanism. . WHAT DOES IT SAY. NOVEMBER 2013
- 16. This update also incorporates guidance from the AUASB, issued in later 2012 as Guidance Statement 021 - Engagements under the National Greenhouse and Energy Reporting Scheme, Carbon Pricing Mechanism and Related Schemes, and the (new) requirements of the ASAE 3410 - Assurance Engagements on Greenhouse Gas Statements For accountants, GS021 and ASAE 3410, will probably still be the first point of guidance. WHAT ELSE DOES IT SAY. NOVERMBER 2013
- 17. Templates for audit reports have been updated and extended to the newer schemes. The expectations regarding audit evidence should be read by carbon accountants. Two whole chapters are devoted to project management for audit and verification engagements, and these will seem very familiar to assurance providers. WHAT ELSE DOES IT SAY. NOVERMBER 2013
- 18. • Expectations are changing and audit practice is rapidly developing in this field, which makes it hard to keep up. • The report templates in the updated Handbook will probably become standard practice. • Another update may be needed soon, to inform GHG auditors about Direct Action audit requirements. The comments on these slides are the views of Tim Kirby, Sydney. You should always read the report itself before putting any money on the line. WHAT DOES IT MEAN. Tim Kirby, Sydney CA, CIA, LA-EMS au.linkedin.com/in/timkirbysydney NOVEMBER 2013
- 19. ANAO Audit Report on agency implementation of audit recommendations… The ANAO reviewed how well four Australian Government agencies had implemented recommendations from seven performance audits of their programs. The agencies audited were DEEWR, FaHCSIA, DoFD and DIT. OCTOBER 2013
- 20. Agencies had identified and monitored those recommendations that related to their work directly, but were not very good at picking up where the ANAO had made cross-agency recommendations that applied to their work. Audit committees were generally used to keep track of implementation of recommendations. WHAT DOES IT SAY. OCTOBER 2013
- 21. Implementation was not always quick – the audit found one implementation still ongoing after six years, while nearly 20% were still ongoing after two years. The ANAO considered that all the agencies had instances of implementation that didn’t really meet the ANAO’s expectations. Either agencies weren’t listening to, or they didn’t agree, with the auditors. WHAT ELSE DOES IT SAY. OCTOBER 2013
- 22. The ANAO is optimistic though, and has made two further recommendations to these agencies: a)review how relevant past recommendations are to current business and act accordingly, and b)improve approaches to implementing recommendations. WHAT ELSE DOES IT SAY. OCTOBER 2013
- 23. • The ANAO’s audit recommendations are usually implemented. • Some agencies inappropriately accepted ANAO recommendations, and then pursued implementation anyway. • All the agencies were perceiving business improvement flowing from implementing ANAO recommendations. The comments on these slides are the views of Tim Kirby, Sydney. You should always read the report itself before putting any money on the line. WHAT DOES IT MEAN. Tim Kirby, Sydney CA, CIA, LA-EMS au.linkedin.com/in/timkirbysydney OCTOBER 2013
- 24. The CSEAR Silent and Shadow Reporting Experiment… Around 10 years ago, CSEAR began work producing silent and shadow reports for public companies not yet adopting public social or environmental reporting. Even as reporting has improved, these approaches remain useful for auditors to test their conclusions on difficult jobs . OCTOBER 2013
- 25. ‘Silent’ reporting is a method of building a picture of social and environmental performance on the basis of statements made by the reporting entity, either within its performance report, website or media release. Auditors can use this approach as a form of analytical review to test the consistency with reported performance data. WHAT DOES IT SAY. OCTOBER 2013
- 26. ‘Shadow’ reporting is a method of building a picture of performance in the basis of statements made by ‘others’, beyond the reporting entity. It is noted that media releases (included within silent reports) may also have an impact on this report. This approach offers auditors another reference point, and also a view of how stakeholders might accept their audit opinion. WHAT ELSE DOES IT SAY. OCTOBER 2013
- 27. CSEAR developed the methods as an experiment, and tested them on several public companies in the early 2000s. The approaches are on their website, and remain useful where other forms of analytical review are unavailable, or less suitable. The HSBC silent report even includes a bit on anti-money laundering. WHAT ELSE DOES IT SAY. OCTOBER 2013
- 28. • The CSEAR reporting experiment was not continued beyond the first round, but the results are still interesting. • The experiment was not ‘embraced’ by the subject companies, but then, auditors should not be afraid of techniques that are challenging for auditees. The comments on these slides are the views of Tim Kirby, Sydney. You should always read the report itself before putting any money on the line. WHAT DOES IT MEAN. Tim Kirby, Sydney CA, CIA, LA-EMS au.linkedin.com/in/timkirbysydney OCTOBER 2013
- 29. What others are saying about environmental accounting… NWC – The grading system for reliability, accuracy and reporting should be the focus for improving professionalism in water accounting. VAGO - Performance reporting (including environmental reporting) is not done as professionally as financial reporting, and could learn a lot from accounting methods. CER – Carbon accountants should think about how to provide audit evidence. ANAO - Audit recommendations are usually implemented and agencies were perceiving business improvement flowing from them. CSEAR – Environmental information should correlate with other information. e: [email protected]
- 30. Contact details e: [email protected] Tim Kirby, Sydney Chartered Accountant (NZ), Certified Internal Auditor (IIA), Lead Environmental Auditor (RABQSA), Masters of Environmental and Business Management (University of Newcastle), Bachelor of Commerce (University of Canterbury) m: 0433 488 569 e: [email protected]
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