1 July 2008 
 
 
Australia’s plans to reduce carbon emissions, as part of international efforts to reduce greenhouse gas emissions, requires the inclusion of a global assurance framework for carbon emissions disclosures, the Institute of Chartered Accountants in Australia (the Institute) stated in a leadership report launched in Canberra today. 
 
The Institute's leadership report was produced in association with Professor Roger Simnett, Head of Accounting at the Australian School of Business.  
 
The Institute’s Head of Audit, Andrew Stringer said that if the legislative framework, established by the National Greenhouse and Energy Reporting Act 2007 (Act), is expected to underpin the introduction of a future Australian Emissions Trading Scheme (AETS) then it is vital that trust and credibility be built into the system from the very beginning.  
 
“The absence of a robust and rugged assurance requirement to accompany the obligation to report has the potential to impair such a trading scheme,” Mr Stringer said. 
 
Professor Simnett said that independent assurance promotes trust and confidence in disclosures which are a forerunner of, and integral part, of emissions trading schemes. Such schemes have become the preferred response of governments, regulators and business with regards to managing risk and ensuring long term sustainability. 
 
“Emissions reporting will require some specialised skills and equally the auditing of emissions data is likely to require some additional skills. But Australia’s auditing framework is scalable and readily adaptable to all types of data and enterprises. Auditors are well equipped to apply that framework in dealing with these assignments and to add credibility to emissions data reported,” Mr Stringer said. 
 
The report argues that by having a requirement for all data which is lodged to be audited credibility will be built in from the very beginning.  
 
The Institute also argues that there is a need for development of generally accepted international reporting criteria, to ensure that the information reported in one jurisdiction is consistent with that reported in other jurisdictions. This will help facilitate understanding of the depth of the issues, and contribute to the development of emissions trading between jurisdictions. 
 
The International Audit and Assurance Standards Board is currently undertaking a project regarding assurance engagements on information related to emissions trading. Any assurance guidance will need to give attention to:

• The application of concepts of relevance, completeness, reliability, neutrality to emissions data that is reported
• Consideration of whether both ‘reasonable assurance’ and ’limited assurance’ engagements are appropriate
• The methods available to quantify, monitor and report on carbon emissions and the uncertainties around these methods
• The need for an engagement team to include or have access to specific expertise in the evolving legal/regulatory/trading market environment and in assessing appropriate carbon emission boundaries