The respective responsibilities of preparers and assurers

In this article in the series on assurance over emerging forms of external reporting (EER), John Ward explores the respective responsibilities of preparers and assurers in using established and bespoke reporting frameworks.

Assurance over emerging forms of external reporting (EER) is of increasing interest and debate, and the range and variety of both the information organisations are reporting and the ways in which organisations are reporting it present a number of challenges.

Those used to the audit of financial statements will have to adapt to assurance over EER, which will involve a number of new decisions, for example relating to the reporting framework chosen. This will then impact the respective responsibilities of preparers and assurers.

Reporting framework options

There are two broad options for preparers when considering reporting frameworks for EER:

1. Using an established reporting framework
   An established reporting framework is where established bodies, such as the IASB, develop criteria, or where criteria are prescribed by law or regulation, such as gender pay gap in the UK.
2. Using a bespoke reporting framework
   A bespoke reporting framework is where the preparer develops specific criteria for their own purpose.

The IAASB’s International Framework for Assurance Engagements (the Framework) includes characteristics for assessing the suitability of criteria and suggests that less work will be needed to assess the suitability of criteria in an established rather than a bespoke reporting framework.

Based on assurance engagements I have encountered as an assurance practitioner, I have summarised the respective responsibilities of preparers and assurers using established and bespoke reporting frameworks.

1. Using an established framework

Respective responsibilities of preparers and assurers are:

	PREPARERS	ASSURERS
1	Identify the framework to be used.	Consider the context of the framework and its relevance to the preparer and the proposed assurance engagement.
2	Review the users to whom the report is to be addressed.	Understand who the users are and consider the relevance of the framework to their needs.
3	Review the likely content that will be required by the users.	Understand the nature of the content that will be included in the report.
4	Review the criteria in the framework that will be used to determine what is and isn’t included in the report.	Ensure the criteria meets the assurer’s needs and meets the characteristics of suitable criteria in the Framework.
5	Review what would and wouldn’t be regarded as material in the context of each category of information to be included in the report.	Ensure it will be possible to identify suitable materiality factors or thresholds for each element of the report.

2. Using a bespoke framework

Respective responsibilities of preparers and assurers are:

	PREPARERS	ASSURERS
1	Determine the process to be followed to develop the framework and criteria within it.	Review and analyse the process proposed before it starts with a view to commenting on any weaknesses, providing recommendations together with commentary on any critical points where evidence would be required together with its quality and substance. Failure to identify key weaknesses may result in the framework and criteria being poorly evidenced and thereby incapable of supporting assurance.
2	Analyse the intended users and any other users to whom the report is to be addressed.	Review, providing a critique and recommendations.
3	Analyse the likely content that will be required by the users.	Review, providing a critique and recommendations.
4	Analyse the criteria in the framework that will be used to determine what is and isn’t included in the report.	Review, providing a critique and highlighting weaknesses that would prevent or inhibit assurance.
5	Analyse what would and wouldn’t be regarded as material in the context of each category of information to be included in the report.	Review, providing a critique and highlighting weaknesses that would prevent or inhibit assurance, for example this might include comments on lack of clarity as to any definitions of materiality.
6	Validate the content with the intended users in a multi-stage facilitated process involving dialogue and debate.	Review and evaluate the process before it starts with a view to providing a critique of strengths and weaknesses together with recommendations for change. Observe the process in action as a means of validating the operation of the process and also collecting evidence.
7	Consult any other users with a view to identifying topics and issues that may need to be considered by the intended users in addition to their initial view of the content.	Review and evaluate the process before it starts with a view to providing a critique of strengths and weaknesses together with recommendations for change. Observe the process in action as a means of validating the operation of the process and also collecting evidence.
8	Consult with the users to establish their views on: a) The proposed content b) The criteria being used to determine what is and isn’t included c) What the users do and don’t regard as material.	Review and evaluate the process before it starts with a view to providing a critique of strengths and weaknesses together with recommendations for change. Observe the process in action as a means of validating the operation of the process and also collecting evidence.
9	Consult with the users regarding the final proposed content once all of the above discussions have been held and decisions made.	Review and evaluate the process before it starts with a view to providing a critique of strengths and weaknesses together with recommendations for change. Observe the process in action as a means of validating the operation of the process and also collecting evidence.
10	Consult further with the users, as necessary, to explain what will be covered in the report and what will be included elsewhere in the organisation’s reporting structures eg, in the annual report and on the webpages.	Review and evaluate the process before it starts with a view to providing a critique of strengths and weaknesses together with recommendations for change. Observe the process in action as a means of validating the operation of the process and also collecting evidence.

Whether or not all of these steps will be necessary will vary depending on the assurance engagement, but the respective responsibilities of both preparers and assurers are likely to be substantially greater when using a bespoke reporting framework compared with an established reporting framework.