Financial reporting traditionally focuses on quantifying a company’s financial health, emphasizing measurable financial data. Stakeholders eventually recognized that businesses face various risks that cannot be easily quantified and may not be included in traditional financial reports. These non-financial risks can significantly impact a company’s ability to continue operating, making it essential for stakeholders to understand and assess these risks to make informed decisions.

The limitations of traditional financial reporting in capturing these risks have become increasingly apparent with the emergence and growing importance of integrated assurance. This comprehensive approach combines financial, non-financial, and sustainability reporting, leaving no aspect of a company’s performance unaddressed.

The Evolution of Integrated Assurance

The concept of integrated assurance has evolved in response to the proactive role of stakeholders in setting higher expectations and regulatory requirements for transparency and accountability. The 2008 global financial crisis underscored the limitations of traditional financial reporting, highlighting the need for more comprehensive disclosure of risk factors and sustainability metrics. Additionally, the increasing importance of environmental, social, and governance (ESG) factors has prompted companies to adopt a more holistic approach to reporting.

The International Integrated Reporting Council (IIRC) has been a driving force behind the integrated assurance movement. In 2013, it introduced the Integrated Reporting Framework, a significant step towards a more cohesive and efficient approach to corporate reporting.

Essential Standards for Compliance

Several standards and frameworks have been developed to guide companies in achieving integrated assurance.

Key among them are:

IFRS S1 – General Requirements for Disclosure of Sustainability-related Financial Information

Effective January 2024, IFRS S1 mandated companies to disclose material sustainability-related risks and opportunities that could affect their prospects. This standard ensures thorough reporting on governance, strategy, risk management, and performance metrics related to sustainability.

IFRS S2 – Climate-related Disclosures

Also, effective January 2024, IFRS S2 set specific requirements for climate-related disclosures. It incorporated the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and focuses on governance, strategy, risk management, and metrics related to climate risks and opportunities​.

ISAE 3000 (Revised) – Assurance Engagements Other than Audits or Reviews of Historical Financial Information

This standard provides guidelines for assurance practitioners conducting engagements to give assurance on non-financial information, including sustainability reports. It emphasizes the importance of evidence-based and transparent reporting.

ISSA 5000 – International Standard on Sustainability Assurance

Developed to ensure robust and credible sustainability reporting, ISSA 5000 outlines principles for assurance engagements on sustainability information, promoting consistency and reliability in disclosures.

Steps for Companies to Implement Integrated Assurance

To effectively implement integrated assurance, companies should consider the following steps:

KNAV’s Comments

As the world witnesses a shift in climate alongside a technological revolution, business reporting is becoming increasingly complex. While a company’s share price might show a consistent upward trend, its ESG report could reveal issues that lower its overall value. Therefore, the sooner businesses recognize that integrated assurance is the way forward, the quicker they can adapt and thrive in this evolving landscape. By implementing a holistic and integrated method of reporting, companies can offer stakeholders a more comprehensive and clear view of their performance and sustainability. This not only enhances transparency and accountability but also builds trust and supports long-term value creation.