The Future of Corporate Sustainability Reports by Brian Ballou - Article Example

The absence of any audit by an independent body reduces the value of a CSR, just as an unaudited financial statement of a company is of no value. However, there are many aspects of a CSR pertaining to non-financial aspects that are either, "qualitative statements about risk management and performance [or] quantitative measures that are not reliable enough to audit". Hence this aspect of a CSR is more of an opinion expressed by the company as well as the auditors, appealing more to emotion and based on individual perceptions.

It is to remove this anomaly that the new G3 Reporting Framework has been compiled.Challenges of Providing Auditor Assurance The challenge of providing credibility to any CSR rests on firstly, the criteria that the management uses to prepare the CSR and secondly, the standards the auditor uses to assess the CSR. Adding to the difficulty of assessing a CSR is the fact that these reports are based on facts and figures that may be outside the area of expertise of the auditor(s). For any report to have credibility, it must be based on facts and figures and appeal to common sense.

Quantitative aspects such as accident rates or the amount of carbon dioxide emitted can be commented upon objectively and without bias. However, there are many other performance measures that cannot be audited, "with a high enough level of assurance to provide an opinion". In such cases, an element of subjectivity or bias in favor of the company being reported upon is likely. This probably stems from the fact that it is in the auditor's interest to seek the continued patronage of the company.

More and more companies are disclosing their social and environmental performance as part of their annual financial reports. CPAs will increasingly play an important role both in preparing as well as analyzing such reports. Interestingly enough, a survey of investors and analysts revealed that as many as 90 % of the people wanted companies to include aspects such as environmental sustainability and corporate governance as part of their annual reports. This only underscores the importance of having objective criteria for measuring performance in non-financial fields in order to arrive at a true and fair view of a company based on facts.