Section 5320Part 5

Professional Appointments

Introduction

5320.1 Sustainability assurance providers are required to comply with the fundamental principles and apply the conceptual framework set out in Section 5120Section 5120 to identify, evaluate and address threats. 5320.2 Acceptance of a new sustainability assurance client relationship or changes in an existing engagement might create a threat to compliance with one or more of the fundamental principles. This section sets out specific requirements and application material relevant to applying the conceptual framework in such circumstances.

Requirements and Application Material

Client and Engagement Acceptance

General

5320.3 A1 Threats to compliance with the principles of integrity or professional behavior might be created, for example, from questionable issues associated with the sustainability assurance client (its owners, management or activities). Issues that, if known, might create such a threat include client involvement in illegal activities, dishonesty, questionable financial or non-financial, including sustainability, reporting practices or other unethical behavior. 5320.3 A2 Factors that are relevant in evaluating the level of such a threat include: • Knowledge and understanding of the sustainability assurance client, its owners, management and those charged with governance and business activities. • The sustainability assurance client’s commitment to address questionable issues, for example, through improving corporate governance practices or internal controls. 5320.3 A3 A self-interest threat to compliance with the principle of professional competence and due care is created if the team does not possess, or cannot acquire, the competencies to perform the professional services. 5320.3 A4 Factors that are relevant in evaluating the level of such a threat include: • An appropriate understanding of: o The nature of the sustainability assurance client’s business; o The complexity of its operations; o The quantitative and qualitative characteristics of the sustainability assurance client’s value chain; o The requirements of the engagement; and o The purpose, nature and scope of the work to be performed. • Knowledge of relevant industries or subject matter. • Experience with relevant regulatory or reporting requirements. • The existence of quality control policies and procedures designed to provide reasonable assurance that engagements are accepted only when they can be performed competently. • The level of fees and the extent to which they have regard to the resources required, taking into account the sustainability assurance provider’s commercial and market priorities. 5320.3 A5 Examples of actions that might be safeguards to address a self-interest threat include: • Assigning sufficient engagement personnel with the necessary competencies. • Agreeing on a realistic time frame for the performance of the engagement. • Using experts where necessary.

Changes in a Professional Appointment

R5320.4

A sustainability assurance provider shall determine whether there are any reasons for not accepting an engagement when the practitioner:

(a)

Is asked by a potential sustainability assurance client to replace another sustainability assurance provider;

(b)

Considers tendering for an engagement held by a different practitioner for a sustainability assurance client; or

(c)

Considers undertaking work for a sustainability assurance client that is complementary or additional to that of a different practitioner. 5320.4 A1 There might be reasons for not accepting an engagement. One such reason might be if a threat created by the facts and circumstances cannot be addressed by applying safeguards.

For example, there might be a self-interest threat to compliance with the principle of professional competence and due care if a sustainability assurance provider accepts the engagement before knowing all the relevant facts. 5320.4 A2 If a sustainability assurance provider is asked by a sustainability assurance client to undertake work that is complementary or additional to the work of an existing or predecessor practitioner, a self-interest threat to compliance with the principle of professional competence and due care might be created, for example, as a result of incomplete information. 5320.4 A3 A factor that is relevant in evaluating the level of such a threat is whether tenders state that, before accepting the engagement, contact with the existing or predecessor practitioner will be requested. This contact gives the proposed practitioner the opportunity to inquire whether there are any reasons why the engagement should not be accepted. 5320.4 A4 Examples of actions that might be safeguards to address such a self-interest threat include: • Asking the existing or predecessor practitioner to provide any known information of which, in the existing or predecessor practitioner’s opinion, the proposed practitioner needs to be aware before deciding whether to accept the engagement. For example, inquiry might reveal previously undisclosed pertinent facts and might indicate disagreements with the existing or predecessor practitioner that might influence the decision to accept the appointment. • Obtaining information from other sources such as through inquiries of third parties or background investigations regarding senior management or those charged with governance of the sustainability assurance client.

Communicating with the Existing or Predecessor Practitioner

5320.5 A1 A proposed practitioner will usually need the sustainability assurance client’s permission, preferably in writing, to initiate discussions with the existing or predecessor practitioner.

R5320.6

If unable to communicate with the existing or predecessor practitioner, the proposed practitioner shall take other reasonable steps to obtain information about any possible threats.

Communicating with the Proposed Practitioner

R5320.7

When an existing or predecessor practitioner is asked to respond to a communication from a proposed practitioner, the existing or predecessor practitioner shall:

(a)

Comply with relevant laws and regulations governing the request; and

(b)

Provide any information honestly and unambiguously. 5320.7 A1 An existing or predecessor practitioner is bound by confidentiality.

Whether the existing or predecessor practitioner is permitted or required to discuss the affairs of a sustainability assurance client with a proposed practitioner will depend on the nature of the engagement and:

(a)

Whether the existing or predecessor practitioner has permission from the sustainability assurance client for the discussion; and

(b)

The legal and ethics requirements relating to such communications and disclosure. 5320.7 A2 Circumstances where a sustainability assurance provider is or might be required to disclose confidential information, or when disclosure might be appropriate, are set out in paragraph 5114.3 A1.

Changes in Sustainability Assurance Appointments

R5320.8

In the case of a sustainability assurance engagement within the scope of the Independence Standards in this Part, a sustainability assurance provider shall request the existing or predecessor practitioner to provide known information regarding any facts or other information of which, in the existing or predecessor practitioner’s opinion, the proposed practitioner needs to be aware before deciding whether to accept the engagement.

(a)

If the sustainability assurance client consents to the existing or predecessor practitioner disclosing any such facts or other information, the existing or predecessor practitioner shall provide the information honestly and unambiguously; and

(b)

If the sustainability assurance client fails or refuses to grant the existing or predecessor practitioner permission to discuss the client’s affairs with the proposed practitioner, the existing or predecessor practitioner shall disclose this fact to the proposed practitioner, who shall carefully consider such failure or refusal when determining whether to accept the appointment.

Client and Engagement Continuance

R5320.9

For a recurring engagement for a sustainability assurance client, a sustainability assurance provider shall periodically review whether to continue with the engagement. 5320.9 A1 Potential threats to compliance with the fundamental principles might be created after acceptance which, had they been known earlier, would have caused the sustainability assurance provider to decline the engagement. For example, a self-interest threat to compliance with the principle of integrity might be created by improper sustainability reporting, such as changes in measurement methodology to create the appearance of a positive trend in a key performance indicator.

Using the Work of an Expert

R5320.10

When a sustainability assurance provider intends to use the work of an expert in the course of undertaking a professional activity, the practitioner shall determine whether the use is appropriate for the intended purpose. 5320.10 A2 Factors to consider when a sustainability assurance provider intends to use the work of an expert include: • The reputation and expertise of, and the resources available to, the expert. • Whether the expert is subject to applicable professional and ethics standards. Such information might be gained from prior association with, or from consulting others about, the expert.

Using the Output of Technology

R5320.11

When a sustainability assurance provider intends to use the output of technology in the course of undertaking a professional activity for a sustainability assurance client, the practitioner shall determine whether the use is appropriate for the intended purpose. 5320.11 A1 Factors to consider when a sustainability assurance provider intends to use the output of technology include: • The nature of the activity to be performed by the technology. • The expected use of, or extent of reliance on, the output of the technology. • Whether the practitioner has the ability, or access to an expert with the ability, to understand, use and explain the technology and its appropriateness for the purpose intended. • Whether the technology used has been appropriately tested and evaluated for the purpose intended. • Prior experience with the technology and whether its use for specific purposes is generally accepted. • The firm’s oversight of the design, development, implementation, operation, maintenance, monitoring, updating or upgrading of the technology. • The controls relating to the use of the technology, including procedures for authorizing user access to the technology and overseeing such use. • The appropriateness of the inputs to the technology, including data and any related decisions, and decisions made by individuals in the course of using the technology.

Other Considerations

5320.12 A1 When a sustainability assurance provider is considering using the work of experts or the output of technology, a consideration is whether the practitioner is in a position within the firm to obtain information in relation to the factors necessary to determine whether such use is appropriate.