Properly Done Financial Audits Are A Powerful Tool For Addressing Climate Change
The Trustees of the IFRS Foundation had a meeting and discussed their proposed “Sustainability Standards Board (SSB).” The current plan is a formal announcement at COP 26 in November of this year-
The “Effects of climate-related matters on financial statements” begins by noting that “IFRS Standards do not refer explicitly to climate-related matters. However, companies must consider climate-related matters in applying IFRS Standards when the effect of those matters is material in the context of the financial statements taken as a whole.” In other words, even before the SSB establishes explicit standards for climate reporting, climate is an important topic that needs to be considered in preparing a company’s financial statements.
This will change the incentives to management, aligning them with a sustainable world. It will improve the quality of financial statements and the quality of audits to the benefit of investors who represent their ultimate beneficiaries. Which is people like you and me.