On 16 August 2016 the International Auditing and Assurance Standards Board (IAASB issued the discussion paper (DP) Supporting Credibility and Trust in Emerging Forms of External Reporting:1 Ten Key Challenges for Assurance Engagements,2 which has been prepared by the IAASB’s Integrated Reporting Working Group (IRWG) for comment by 15 December 2016.

‘The IAASB needs to be at the forefront of the debates on external reporting and how professional accountants and other practitioners can contribute to enhancing credibility and trust,’ said IAASB chairman Professor Arnold Schilder.

‘We hope this paper furthers the debate and helps us gain a deeper understanding of how the IAASB, as the global assurance standard setter, can contribute to the quality of different engagements, in the public interest, and where others can or need to play a role.’


‘What expectations do stakeholders have of professional services in supporting the credibility of emerging forms of external reporting by entities; and how can the IAASB support such services so that stakeholders’ expectations are met?’3

These questions are at the core of the IAASB’s consideration of how and when it should respond to emerging forms of external reporting (EER). The 44-page DP seeks to provide a holistic understanding of the issues and explores:

  • Principal findings from the IRWG’s research and outreach to date (section II)
  • The factors that enhance credibility and trust in EER for stakeholders (section III)
  • Types of professional services most relevant in relation to EER reports and how the characteristics can support credibility and trust (sections III and IV)
  • Ten key challenges in relation to EER assurance engagements and how they could be addressed (section V)

This article deals with sections I, II and III, while part 2 will deal with sections IV and V.

Responses to the questions in the DP are sought from the wide range of stakeholders in the EER reporting supply chain who will be of most value to the IAASB. They are identified  as investors and other users; preparers; those in governance roles; standard setters; practitioners; internal auditors; academics; and other stakeholders.


But why is the IRWG discussion paper of particular relevance to potential respondents in South Africa?

The number of EER issued by corporates and other organisations, non-profit organisations, and public sector organisations is growing apace. While some EER are required by corporate legislation and governance codes in different jurisdictions, others are provided voluntarily, in accordance with relevant global frameworks issued by recognised bodies. Not surprisingly, a recent survey  reflects South Africa as having the highest incidence of published integrated annual reports compared with other jurisdictions.

The Integrated Reporting Council (IRC) in South Africa, led by Professor Mervyn King, has contributed significantly to global developments in integrated reporting. The King III Code of Conduct (2009) endorsed the preparation of an integrated annual report. The JSE Limited Listings Requirements mandate issuers to ‘apply or explain’ their compliance with King III and view an integrated annual report as their primary report. The Draft King IV (2016)  strongly supports the publication of an integrated annual report by all organisations in South Africa and proposes a combined assurance model with five levels of assurance be established by the governing body.

Public sector and state-owned entities in South Africa are required by legislation to report annually on their performance. The Auditor-General South Africa conducts assurance engagements on performance information reported. Many South African organisations have long published sustainability information in their annual reports, some of which contain assurance reports on selected aspects (generally expressing limited assurance) by auditors and other assurance practitioners. Many apply the IAASB International Standards.


The International Integrated Reporting Council (IIRC), on which IRC members are represented, published the International <IR> Framework in December 2013. Challenges arose regarding the credibility of information in applying the ‘principle-based’ International <IR> Framework. The IIRC established a global Technical Consultative Group (TCG) with the Independent Regulatory Board for Auditors (IRBA’s) Committee for Auditing Standards – Sustainability Standing Committee which explored the issues and developed a discussion papers Assurance on <IR> An Introduction to the Discussion and Assurance on <IR> An Exploration of Issues (July 2014). The IIRC’s analysis of the responses Assurance on <IR>: Overview of feedback and call to action (July 2015)  indicated strong support for the IAASB to take the lead in developing guidance for assurance engagements on <IR> and to liaise with other bodies. In response, the IAASB established the IRWG in 2014.


The key messages from the IRWG’s research and outreach to date relate to developments in EER frameworks and demand for professional services. These are:

  • EER is still evolving to meet the needs of a variety of stakeholders for wider information about the entity.
  • Various types of professional services are performed in relation to EER reports.
  • There is demand for actions to support credibility and trust, but this is not limited to calls for professional services.
  • There is a need for flexibility in the nature of professional services as reporting frameworks evolve.


The trends in external reporting reflect more holistic reporting and communications to meet society’s evolving expectations and broader information needs of stakeholders. Some of the trends are:

  • The trend in reporting broader non-financial information has developed alongside the sustainability/environmental, social and governance reporting movement over the last three decades and is now led and supported by a number of global organisations and affiliations of interested parties.
  • The digital revolution is transforming stakeholder access to information about entities.
  • These trends are seen not only at a global level but also at national and regional levels in a wide variety of initiatives to enhance management commentary and annual reports.
  • There is an emerging awareness that the future prospects of an entity are impacted by a wider range of factors than those that are presented in the financial statements.

A variable demand for ‘external assurance’ comes from both external users and internal users. Stakeholders do not generally use the terms ‘assurance’ or ‘external assurance’ to mean an ‘assurance engagement’ as defined by the IAASB but rather as overarching terms for a wide range of approaches to assessment of external reporting processes.

Professionals have begun to respond to the demand seeking to enhance the credibility of EER reports by professional services such as:

  • A range of assurance and other professional services of varied scope under the IAASB’s International Standards or other standards, and
  • Other, less standardised forms of evaluation reports to management such as: consultancy (advisory) engagements; assurance readiness engagements; maturity assessments; and expert insights reports.


Who needs credibility and trust and for what purpose? It is recognised that enhancing credibility can be important for both internal and external users. Four key factors are identified that are perceived to enhance credibility and trust:

  • A sound reporting framework
  • Strong governance
  • Consistent wider information
  • External professional services and other reports

The attributes and transparency of these factors, which enhance and engender external user credibility and trust, are explored further in the DP.

In addition, the DP summarises the characteristics of an EER framework that are likely to engender credible reporting and may be aligned to the IAASB’s characteristics of suitable criteria.  The competencies required of practitioners providing external professional services over EER reports and the manner in which the outcome of the professional service is reported are also considered.


1 Referred to as EER in the discussion paper (DP).

2 The DP may be downloaded from http://www.ifac.org/publications-resources/discussion-paper-supporting-credibility-and-trust-emerging-forms-external Comments are due to be submitted on-line there by 15 December 2016. Frequently Asked Questions (FAQs) and At a Glance have been created as additional resources.

3 DP, section 1, Introduction, page 5.

4 IRWG, At a Glance, page 3.

5 Currents of change: KPMG Survey of Corporate Responsibility Reporting (2015), page 38.

6  The final King IV Report is due for release by the Institute of Directors in Southern Africa on 1 November 2016.

7 The responses to the IIRC’s consultation are included in section II, pages 15–16.

8 IRWG, At a Glance, page 4.

9 DP, section II, pages 10–16.

10 DP, section III, pages 17–22.

11 DP, section III, page 19, Figure 1 Overview of credibility and trust, and Appendix A in the Supplemental Information to the Discussion Paper, pages 4–6.

12 DP, section III, para 48 and table 1.

AUTHOR | Sandy van Esch CA(SA) is Former IRBA Director: Standards and its representative on the IAASB’s IRWG