Center for Audit Quality Resource Highlights How Climate-Related Risk Considerations Intersect with the Audited Financial Statements
Thursday, September 9, 2021
New publication provides an overview of current accounting and auditing requirements for climate-related risks
Washington, D.C. — Today, the Center for Audit Quality (CAQ) released a new resource, Audited Financial Statements and Climate-Related Risk Considerations, that provides investors and other stakeholders with a foundational understanding of current climate-related reporting and auditing requirements in the U.S. and how they are applied. The CAQ is releasing this report at a pivotal moment for climate-related and other environmental, social and governance (ESG) reporting, as investor and other stakeholder demand for this information continues to increase.
Currently, climate-related risks are considered and assessed by management and auditors during the preparation and auditing of financial statements. Under current US accounting rules, climate-related risks may have a direct impact on the financial statements, an indirect impact, or in some cases no impact at all. Understanding current financial statement requirements can be a useful starting point for investors and others as they consider how and where to obtain their desired climate-related information to make capital allocation decisions and bridge any information gap that may exist today ahead of future rulemaking by the SEC or others.
“Investors are increasingly using climate-related information to inform their investment decisions,” said Dennis McGowan, Vice President, Professional Practice at the CAQ. “The current disclosure system is market-driven rather than based on regulatory action, so it is important for investors to both consider what public companies voluntarily report as well as to understand what they are required to report in the financial statements under US GAAP.”
In June, the CAQ led a roundtable discussion with investors, board members, auditors and public companies to discuss the SEC’s request for public input on climate change disclosures, and found that the majority of the participants were supportive of climate disclosure requirements.
“The public company auditing profession is supportive of the SEC’s exploration of climate-related disclosures,” added McGowan. “We look forward to ongoing dialogue on this topic as regulators and standard setters assess whether rules and regulations need to be adapted to meet the needs of investors.”
The full publication can be read here.
About The Center for Audit Quality
The Center for Audit Quality (CAQ) is an autonomous public policy organization dedicated to enhancing investor confidence and public trust in the global capital markets. The CAQ fosters high-quality performance by public company auditors; convenes and collaborates with other stakeholders to advance the discussion of critical issues that require action and intervention; and advocates policies and standards that promote public company auditors’ objectivity, effectiveness, and responsiveness to dynamic market conditions. Based in Washington, DC, the CAQ is affiliated with the American Institute of CPAs. For more information, visit thecaq.org.
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