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As companies continue to report climate-related information, investors, regulators, and other stakeholders are placing greater emphasis on the reliability of this information. 
 Download PDF As companies continue to report climate-related information, investors, regulators, and other stakeholders are placing greater...

The Role of the Auditor in Climate-Related Information

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The CAQ is pleased to share our views related to the California Air Resources Board (CARB) Information Solicitation to Inform Implementation of California Climate-Disclosure Legislation: Senate Bills 253 and 261, as amended by SB 219.

Given our role, our comments are focused...

The CAQ is pleased to share our views related to the California Air Resources Board (CARB) Information Solicitation to Inform Implementation of California Climate-Disclosure Legislation: Senate Bills 253 and 261, as amended by SB 219.

Given our role, our comments are focused on the assurance-related aspects of the solicitation. Our response highlights the benefits of assurance, the benefits of assurance engagements performed by professional accountants, and provides insights into key considerations for CARB in drafting the assurance-related aspects of the upcoming regulation. Our letter provides insight into the following key elements that the CARB should incorporate into the regulation as the assurance requirements are drafted:
<ol>
 	<li>Recognized reporting standards should be specified to enable assurance</li>
 	<li>Acceptable assurance standards should be specified</li>
 	<li>Levels of assurance should be specified</li>
 	<li>Minimum requirements for assurance providers should be specified</li>
 	<li>The importance of oversight of assurance providers</li>
</ol>
We are pleased that certain key elements are already included in SB 253 (i.e., specifying use of a recognized reporting standard and specifying the levels of assurance required). To promote consistent, comparable, and reliable assurance, we encourage the CARB to incorporate the remaining elements, leveraging the existing assurance ecosystem, to help maximize the benefits that can be derived from assurance engagements.

Read the full comment letter <a href="https://www.thecaq.org/wp-content/uploads/2025/03/caq_carb_comment-letter_final_3_21_2025.pdf">here</a>.

Comment Letter | CARB: Information Solicitation to Inform Implementation of California Climate-Disclosure Legislation: Senate Bills 253 and 261, as amended by SB 219

Comment Letter

Desiré Carroll, CPA, CA(SA) is a Senior Director, Professional Practice at the Center for Audit Quality. Her role involves advancing technical and policy-oriented projects to identify, develop, and seek consensus on issues affecting the public company auditing profession. This includes engaging with senior leaders across the financial reporting ecosystem, drafting comment letter responses to regulators, and developing thought leadership publications.

Before joining the CAQ, Desiré served as Associate Director – Sustainability Assurance at the American Institute of Certified Public Accountants (AICPA). Prior to that, she spent over 11 years at Deloitte primarily in their New York M&amp;A Transaction Services group and initially in their Audit practice. Desiré is a CPA and a South African Chartered Accountant.

Desiré Carroll, CPA, CA(SA)

Advances in technology and investor demand for climate-related information continue to transform the corporate reporting landscape.

As Senior Director of Professional Practice at the Center for Audit Quality (CAQ), I lead advanced technical and policy-oriented projects to identify, develop, and seek...

Advances in technology and investor demand for climate-related information continue to transform the corporate reporting landscape.

As Senior Director of Professional Practice at the Center for Audit Quality (CAQ), I lead advanced technical and policy-oriented projects to identify, develop, and seek consensus on issues affecting the public company auditing profession. We frequently analyze S&amp;P 500 companies’ disclosures to understand corporate reporting trends and emerging areas of investor interest, and provide recommendations to support all members of the profession in an ever-changing reporting environment.

In our latest analysis of S&amp;P 500 SEC Form 10-Ks, we dive into disclosure trends on <a href="https://www.thecaq.org/sp-500-10k-climate">climate-related information</a>. Given the proliferation of <a href="https://www.thecaq.org/sp-500-and-ai-reporting">artificial intelligence (AI)</a> across organizations, for the first time this year, we also reviewed AI disclosures in 10-K filings. Read on for my key takeaways.

[custom_quote text="We frequently analyze S&amp;P 500 companies’ disclosures to understand corporate reporting trends and emerging areas of investor interest."]
<h3>Climate Reporting Continues to Increase</h3>
The latest SEC Form 10-Ks (available as of June 30, 2024) demonstrate that organizations are regularly reporting various climate-related information. Our analysis found that most S&amp;P 500 companies mentioned climate-related information in their 10-K, an almost 4% increase from 477 companies in 2022 to 494 companies in 2023.

<img class="alignnone wp-image-15950 size-full" src="https://www.thecaq.org/wp-content/uploads/2025/02/2025_02_AiA_10k_Climate-Related-Information-Mentioned-in-10-K.jpg" alt="" width="1200" height="627" />

We found that the types of information included in the climate-related disclosures varied from company to company. Several companies associated dollar amounts with their climate-related information, which included capital expenses, research and development (R&amp;D) costs, losses associated with severe weather events, and more. Some companies disclosed the use or sale of carbon offsets or renewable energy certificates (RECs), often in relation to their discussion around GHG emissions reductions or other related goals.

In light of investor demand and the global focus on net zero commitments at the time this data was released, more companies disclosed a net zero or carbon neutral commitment than in years past, with a 7% increase from 2022. While the target dates varied, we observed that the most common target date was 2050 for both net zero and carbon neutral commitments.

<img class="alignnone wp-image-15951 size-full" src="https://www.thecaq.org/wp-content/uploads/2025/02/2025_02_AiA_10k_Net-Zero-or-Carbon-Neutral-Commitment-Mentioned-in-10-K.jpg" alt="" width="1200" height="627" />

Furthermore, climate-related mentions in financial statements nearly doubled from the prior year. While companies increased disclosures across various footnotes, we observed the greatest increase in disclosures related to sustainability-linked debt or borrowing arrangements.

This year, we also reviewed whether companies mentioned any ESG reporting standards and frameworks or any upcoming ESG reporting requirements beyond the <a href="https://www.thecaq.org/summary-of-the-enhancement-and-standardization-of-climate-related-disclosures-for-investors">2024 SEC Climate Rule</a> in their 10-Ks. We discovered that roughly 17% of companies mentioned using specific ESG reporting standards or frameworks for their sustainability reporting. Many companies mentioned using more than one standard or framework for their sustainability reporting, with the most common being the TCFD recommendations followed by the SASB standards.

[custom_quote text="Furthermore, climate-related mentions in the financial statements nearly doubled from the prior year."]
<h3>The Rise of AI-Related Disclosures</h3>
For the first time, we reviewed AI-related disclosures to understand where companies were disclosing this information within their 10-Ks and what they were typically disclosing about AI.

We found that 359 companies, or 72% of S&amp;P 500 companies, mentioned AI-related information in their 10-Ks. Most companies that mentioned AI-related information did so in Item 1A. Risk Factors (312) and Item 1. Business (176). Some companies also mentioned AI within Item 7. MD&amp;A (69) and Item 8. Financial Statements (36).

<img class="alignnone wp-image-15955 size-full" src="https://www.thecaq.org/wp-content/uploads/2025/02/2025_02_AiA_10k_Section-of-10-K-AI-is-Mentioned.jpg" alt="" width="1200" height="627" />

When discussing AI-related topics in Item 1A. Risk Factors, companies largely focused on legal, regulatory, reputational, and cybersecurity risks. Legal and regulatory risks were noted around companies' or third parties' rapid adoption of AI technologies and the privacy or protection of data within these technologies that could be subject to laws, policies, legal obligations, and codes of conduct.

Additionally, companies were concerned that the aggressive use of AI technologies by new entrants to the market may decrease their competitiveness and harm their performance and reputation. Companies noted that the use of data by AI tools increased their exposure to cybersecurity events and flagged that malicious actors could use these technologies to access, use, disclose, or destroy information.

We also observed disclosures that described investments in AI, as companies discussed their use of and investment in AI-related technologies within Item 1. Business.

At the CAQ, we will continue monitoring how companies report this information and how our profession can support high-quality disclosures. Be sure to follow us on <a href="https://www.linkedin.com/company/2859773/">LinkedIn</a> for the latest updates.

[custom_quote text="When discussing AI-related topics in Item 1A. Risk Factors, companies largely focused on legal, regulatory, reputational, and cybersecurity risks."]

Analyzing S&P 500 Companies’ 10-K Disclosures: Climate and AI

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Emerging Reporting Areas

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AI governance rose on the list of issues committees are considering
NEW YORK, Feb. 12, 2025 — As digital threats continue to mount across industries, cybersecurity remains the top priority for audit committees at public companies, outside of financial reporting and...

AI governance rose on the list of issues committees are considering
NEW YORK, Feb. 12, 2025 — As digital threats continue to mount across industries, cybersecurity remains the top priority for audit committees at public companies, outside of financial reporting and internal controls, according to survey findings released in the “<a href="http://www.thecaq.org/audit-committee-practices-report">Audit Committee Practices Report: Common Threads Across Audit Committees</a>,” a joint effort between Deloitte’s Center for Board Effectiveness and the Center for Audit Quality (CAQ).

On a broader scale, enterprise risk management (ERM), critical to achieving organizational objectives and safeguarding the company’s reputation and stakeholder relationships, is ranked as the second highest priority for audit committees. Finance and internal talent remain the third-highest priority for audit committees.

The report also shows how artificial intelligence (AI) governance is growing in importance as an audit committee consideration, reflective of the rapid adoption of transformative digital technologies that have ushered in a new era of business risk.

A total of 237 respondents participated in this year’s survey, primarily on boards of U.S. (89%) public (86%) companies with $2 billion or more in market cap (72%). Directors on boards of financial services companies made up 27% of the respondents.

Cybersecurity is the chief priority for audit committees
The survey found that 93% of respondents ranked cybersecurity as one of their top three priorities, with 50% ranking it as the leading priority for the audit committee. Further, 71% report cybersecurity is on their agenda on a quarterly basis. Cybersecurity has consistently been ranked as the top priority of audit committees in each of the four years the survey has been conducted, a clear indication that complex and evolving risk will continue to be a focus for audit committees in years to come.

"Cybersecurity remains atop audit committees’ agendas because the stakes have never been higher," said Vanessa Teitelbaum, senior director, Professional Practice, Center for Audit Quality. "With the increasing sophistication of cyber threats and the potential for significant financial, operational, and reputational harm, it’s critical for audit committees to stay ahead. Their continued focus and evolving expertise are essential to protecting organizations in this heightened risk environment."

Audit committee effectiveness remains a priority
In the current economic and geopolitical environment, the corporate reporting landscape is constantly evolving. When presented with various strategies to enhance audit committee effectiveness, more than two-thirds of respondents (69%) felt meetings might be improved by implementing one or more of the following strategies:
<ul>
 	<li>Forty percent of respondents want to improve the quality of presentations during meetings. This jumped from third last year to the top area of improvement this year.</li>
 	<li>Thirty-four percent of respondents want more engagement and discussion from committee members during meetings.</li>
 	<li>While most respondents feel that they have enough time to cover agenda items, some (12%) suggested they could use more time.</li>
</ul>
“As I work with audit committees, enhancing meeting effectiveness remains a top priority. In the face of new and evolving risks, the ability to better prioritize agendas, access comprehensive and timely information, and engage in open and candid discussions are critical factors that will drive efficiency and overall effectiveness,” said Krista Parsons, Audit &amp; Assurance managing director and Governance and Audit Committee Program leader, Center for Board Effectiveness.

Enhanced focus on AI governance
The survey also found an increased emphasis on understanding the impact and usage of AI technologies throughout the organization by the C-suite and board. The number of respondents who identified AI governance as a priority grew year over year, jumping to 35% from 20% last year. A growing portion of audit committees are taking on primary oversight of AI governance (up to 20% from 14% last year). Still, oversight mostly falls with the full board (58%).

Additionally, survey results suggest that work has been done to develop governance structures for AI oversight, with fewer respondents (6%) acknowledging they “don’t know” where AI oversight falls within their organization this year versus last year (17%). Amid ongoing conversations around how organizations govern AI, the question of who should be responsible for primary oversight continues to evolve.

<a href="http://www.thecaq.org/audit-committee-practices-report">Read the report</a>.

About the Survey
The fourth edition of the “Audit Committee Practices Report,” like prior editions, is based on a survey of audit committee members. A total of 237 respondents participated in this year’s survey, primarily on boards of U.S. (89%) public (86%) companies with $2 billion or more in market cap (72%). Those on boards of financial services companies made up 27% of respondents.

About the Center for Audit Quality
The CAQ champions the public interest in the capital markets by:
<ul>
 	<li>Elevating the quality, credibility and transparency of public company audits.</li>
 	<li>Advancing critical issues affecting public company audits.</li>
 	<li>Driving innovation in assurance.</li>
 	<li>Providing a collaborative forum for capital market stakeholders to address evolving needs and challenges.</li>
</ul>
As the voice of the public company audit profession, we work to instill trust in corporate reporting and the integrity of the auditing process, ultimately empowering investors, companies, and society as a whole.

About Deloitte’s Center for Board Effectiveness
Deloitte’s Center for Board Effectiveness helps directors deliver value to the organizations they serve through a portfolio of high-quality, innovative experiences throughout their tenure as board members. Whether an individual is aspiring to board participation or has extensive board experience, the Center’s programs enable them to contribute effectively and provide focus in the areas of governance and audit, strategy, risk, innovation, compensation and succession.

About Deloitte
Deloitte provides industry-leading audit, consulting, tax and advisory services to many of the world’s most admired brands, including nearly 90% of the Fortune 500® and more than 8,500 U.S.-based private companies. At Deloitte, we strive to live our purpose of making an <a href="https://www2.deloitte.com/us/en/pages/about-deloitte/articles/purpose-at-deloitte-us.html">impact that matters</a> by creating trust and confidence in a more equitable society. We leverage our unique blend of business acumen, command of technology, and strategic technology alliances to advise our clients across industries as they <a href="https://www2.deloitte.com/us/en/pages/about-deloitte/articles/technology-consulting-engineering-advantage.html">build their future</a>. Deloitte is proud to be part of the largest global professional services network serving our clients in the markets that are most important to them. Bringing more than 175 years of service, our network of member firms spans more than 150 countries and territories. Learn how Deloitte’s approximately 460,000 people worldwide connect for impact at <a href="http://www.deloitte.com/">www.deloitte.com</a>.

###

Contact

Kerry Lee
Public Relations
Deloitte Services LP
+1 916 298 8031
kerlee@deloitte.com

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the “Deloitte” name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see <a href="http://www.deloitte.com">www.deloitte.com/</a>about to learn more about our global network of member firms.

Cybersecurity, Enterprise Risk Management, and Meeting Effectiveness Are Top Priorities for Audit Committees, According to Deloitte, Center for Audit Quality Survey

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The CAQ analyzed S&amp;P 500 companies’ 10-Ks to understand their SEC filing disclosures regarding climate-related information, greenhouse gas emissions, and net-zero and carbon neutral commitments. 
 The CAQ analyzed S&amp;P 500 companies’ Form 10-Ks to understand the extent of climate-related...

Analysis of Climate-Related Information in S&P 500 Companies’ 10-Ks

Having transparency and accountability in reporting helps companies build stakeholder trust, attract investment, more effectively manage risks, and drive long-term growth. In addition, stakeholders continue to demand high-quality, accurate, and comprehensive data about sustainability-related information, including Greenhouse Gas (GHG) emissions,...

Having transparency and accountability in reporting helps companies build stakeholder trust, attract investment, more effectively manage risks, and drive long-term growth. In addition, stakeholders continue to demand high-quality, accurate, and comprehensive data about sustainability-related information, including Greenhouse Gas (GHG) emissions, which affect climate risks.

As legislators and regulators respond to the evolving needs of the market by contemplating laws and regulations requiring companies to report sustainability information, they should consider incorporating the following into legislation or regulations to achieve the objective of providing high quality, consistent and comparable information to users of the information:
<ul>
 	<li>Recognized sustainability reporting standards</li>
 	<li>Assurance practitioner qualifications like ethics, independence, and oversight; competency; and systems of quality management</li>
 	<li>Recognized assurance standards and</li>
 	<li>Specified levels of assurance (limited or reasonable assurance)</li>
</ul>
<a href="https://thecaq.wpenginepowered.com/wp-content/uploads/2025/01/caq_sustainability-reporting-and-assurance_2025-01.pdf">Download this publication</a> to further explore these important considerations.

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S&P 500 ESG Reporting and Assurance Analysis

Auditors are known to adapt quickly to the changing world around them and are used to applying skills like objectivity, skepticism, and standards-based analysis across countless different industries.

98%

63%

39%

12%

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