Climate Disclosure: Canada Mandates TCFD for Banks

Apr 11, 2022

The Canadian government unveiled its federal budget last week, with an entire chapter devoted to climate. As US companies assess the SEC’s climate disclosure proposal and shareholder demands, this requirement is another sign that regulators and investors are losing patience with voluntary disclosures about emissions and climate risks to companies, and moving towards mandates for comparable info.

Among other things, Section 3.4 of the budget calls on the investment industry and federally regulated financial institutions to support the “transition economy” on the path to net-zero emissions. Here’s an excerpt:

Climate Disclosures for Federally Regulated Institutions

  • The federal government is committed to moving towards mandatory reporting of climate-related financial risks across a broad spectrum of the Canadian economy, based on the international Task Force on Climate-related Financial Disclosures (TCFD) framework.
  • The Office of the Superintendent of Financial Institutions (OSFI) will consult federally regulated financial institutions on climate disclosure guidelines in 2022 and will require financial institutions to publish climate disclosures—aligned with the TCFD framework — using a phased approach, starting in 2024.
  • OSFI will also expect financial institutions to collect and assess information on climate risks and emissions from their clients.
  • As federally regulated banks and insurers play a prominent role in shaping Canada’s economy, OSFI guidance will have a significant impact on how Canadian businesses manage and report on climate-related risks and exposures.
  • Separately, the government will move forward with requirements for disclosure of environmental, social, and governance (ESG) considerations, including climate-related risks, for federally regulated pension plans.

This move follows a proposal last fall by the Canadian Securities Administrators to require TCFD-aligned reporting by issuers. That particular proposal is still under consideration.

Review the federal budget and climate chapter on the Government of Canada's website and summary on the Corporate Counsel's website.

Corporate sustainability push a $35 trillion dollar conundrum for auditors

Feb 22, 2022

Reliable checks on companies' sustainability credentials will take years to develop, auditors say, meaning investors pouring trillions of dollars into green funds remain at greater risk of being hoodwinked.

Given the demand for investments that support environmental, social and governance (ESG) goals, the pressure is on to ensure companies aren't exaggerating or misrepresenting the benefits of their activities, a phenomenon known as "greenwashing".

Review the full article on the Reuters website.

Global ethics board expands universe of entities that are public interest entities

Apr 11, 2022

On April 11, 2022, the International Ethics Standards Board for Accountants (IESBA) released a revised definition of a PIE together with other revised provisions in the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code). The revised provisions specify a broader list of categories of entities as PIEs whose audits should be subject to additional independence requirements to meet stakeholders’ heightened expectations concerning auditor independence when an entity is a PIE.

To recognize diversity in jurisdictional contexts, the IESBA has taken a novel approach of expanding the PIE definition globally at a high level while providing guidance to regulators, national standard setters and other relevant local bodies on tailoring the broad definition for jurisdictional specificities. Among other matters, the revisions also:

  • Articulate an overarching objective for additional independence requirements for audits of financial statements of PIEs.
  • Provide guidance on factors to consider when determining the level of public interest in an entity.
  • Replace the term “listed entity” with a new term “publicly traded entity,” providing a definition of the latter term.
  • Recognize the essential role local bodies responsible for the adoption of the Code play in delineating the specific entities that should be scoped in as PIEs in their jurisdictions, encouraging them to properly refine the PIE categories and adding any other categories relevant to their environments.
  • Introduce a transparency requirement for firms to publicly disclose the application of independence requirements for PIEs where they have done so.

The IESBA coordinated the development of these revisions closely with the International Auditing and Assurance Standards Board (IAASB) given that some of the terms and concepts that were considered are common to both Boards’ standards. The IAASB is pursuing a project to consider a number of matters relevant to its standards arising from the finalization of the IESBA’s PIE provisions, including whether and how to address the transparency requirement noted above in the IAASB’s standards.

The revised PIE definition and related provisions become effective for audits of financial statements for periods beginning on or December 15, 2024. Early adoption is permitted and encouraged.

Review the press release and revised provisions on the IESBA's website.

Grant Vingoe gives keynote address at the Economic Club of Canada

Oct 06, 2022

On October 6, 2022, the Ontario Securities Commission (OSC) published Grant Vingoe's first keynote address as dedicated Chief Executive Officer of the OSC, where he outlined why regulatory oversight of the crypto industry is critical for our capital markets.

Review Vingoe’s remarks, Buyer Aware: Applying essential protections to the crypto world, on the OSC’s website.

IESBA Addresses Independence Expectations in Group Audits

Feb 28, 2022

On February 28, 2022, the International Ethics Standards Board for Accountants (IESBA) released for public comment the Exposure Draft "Proposed Revisions to the Code Relating to the Definition of Engagement Team and Group Audits".

The proposed revisions establish provisions that comprehensively address independence considerations for firms and individuals involved in an engagement to perform an audit of group financial statements. The proposals also address the independence implications of the change in the definition of an engagement team―a concept central to an audit of financial statements―in the International Auditing and Assurance Standards Board’s (IAASB) International Standard on Auditing (ISA) 220, Quality Management for an Audit of Financial Statements.

Among other matters, the proposals:

  • Establish new defined terms and revise a number of existing terms, including for application with respect to independence in a group audit context.
  • Clarify and enhance the independence principles that apply to:
    • Individuals involved in a group audit.
    • Firms engaged in the group audit, including firms within and outside the group auditor firm’s network.
  • More explicitly set out the process to address a breach of an independence provision at a component auditor firm, including reinforcing the need for appropriate communication between the relevant parties and with those charged with governance of the group.
  • Align a number of provisions in the Code to conform to changes in the IAASB’s Quality Management standards.

Review the press release and proposed revisions on the IESBA's website.

IESBA broadens definition of public interest entity

Apr 19, 2022

Auditors following global standards will want to review new guidance released by the International Ethics Standards Board for Accountants that broadens the definition of a public interest entity and complements other recently revised provisions to the International Code of Ethics for Professional Accountants.

Review the press release and article on the IESBA's website.

IESBA comments on the ISSB’S sustainability and climate-related disclosures exposure drafts

Jun 24, 2022

On June 24, 2022, the International Ethics Standards Board for Accountants (IESBA) submitted a response to the International Sustainability Standards Board (ISSB) on the ISSB’s Exposure Drafts – General Sustainability-Related Disclosures and Climate-Related Disclosures.

The IESBA believes that to meet the sustainability information needs of investors, customers, employees or potential employees, government agencies and other stakeholders, the infrastructure that supports sustainability reporting and assurance must be underpinned by the highest standards of ethical behavior.

Review the press release and response on the IESBA's website.

IESBA commits to readying global ethics and independence standards timely in support of sustainability reporting and assurance

Jun 13, 2022

On June 13, 2022, the International Ethics Standards Board for Accountants (IESBA) unanimously resolved to take timely action to develop fit-for-purpose, globally applicable ethics and independence standards as a critical part of the infrastructure needed to support transparent, relevant and trustworthy sustainability reporting. This recognizes the need to respond at pace to match the speed of transformation in the corporate reporting landscape. Demand for sustainability information has risen substantially and rapidly in recent years, and such information is increasingly used to support capital allocation or other decisions by investors, customers, current or potential employees, and other stakeholders. It also recognizes the essential role ethics and independence play in the production, reporting and assurance of sustainability information.

The IESBA has tasked its recently established Sustainability Working Group to develop a strategic vision to guide the IESBA’s standard-setting actions in relation to sustainability reporting and assurance. The Working Group will prepare a project plan by December 2022 as a launchpad for commencement of standard-setting work soon after.

This work will proceed in tandem with the development of IFRS Sustainability Disclosure Standards by the International Sustainability Standards Board (ISSB), and sustainability-related International Standards on Assurance Engagements (ISAEs) by the International Auditing and Assurance Standards Board (IAASB).

The IESBA recognizes the importance of coordinating this work closely with the ISSB and IAASB so that coherent, mutually reinforcing building blocks of standards can be put in place around the same time to support the necessary regulatory infrastructure for sustainability reporting.

Review the press release on the IESBA's website.

IESBA discussion on sustainability and ethics

May 18, 2022

This IESBA Sustainability and Ethics Discussion examines the critical role that complying with ethics standards, including on independence, plays in ensuring reliable and trustworthy sustainability information.

The one-hour, live-streamed conversation provided key insights about the applicability of the International Code of Ethics for Professional Accountants (including International Independence Standards) to the preparation and presentation of sustainability information and the provision of assurance thereon.

Watch the video on the IESBA's website.

IESBA Meeting Highlights: December 2021 Meetings

Apr 07, 2022

In April 2022, the International Ethics Standards Board for Accountants (IESBA) released the highlights summary of its hybrid meetings held on March 14-16, 2022.

The Agenda items in­cluded:

  • Emerging Issues and Outreach Committee (EIOC)
  • Rollout of Revised Public Interest Entity (PIE) Definition
  • IESBA-IFAC Collaboration in Relation to Adoption and Implementation of the Code
  • Benchmarking International Independence Standards
  • IESBA Strategy and Work Plan Survey
  • Tax Planning & Related Services
  • Technology Fact Finding and Thought Leadership
  • Next Meeting

Re­view the high­lights sum­mary and pod­cast on the IESBA's web­site.

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