1. EER Assurance September 2018
Agenda Item 7
September 20, 2018

2. Recap of June meeting
Challenge 3
Challenge 2
Challenge 4
Generalized construct of an EER report and its relationship to assurance concepts
Addressing Materiality for Diverse Information with Little Guidance in EER Frameworks
Evaluating the Suitability of Criteria in a Consistent Manner
Building Assertions for Subject Matter Information of a Diverse Nature

3. The EER Assurance House (under construction)
Agenda
CAG feedback
Presentation of the remaining phase 1 ‘issues’ which were not discussed in June 2018.
Present a first draft of the phase 1 guidance.
Receive feedback on the draft guidance.
The EER Assurance House (under construction)
Exercising Professional Skepticism and Professional Judgment 
 Applying Materiality
 Evaluating Suitability of Criteria
 Building Assertions
 Maturity in Governance & Internal Control
Obtaining the Competence Necessary to Perform the Engagement 
Communicating Effectively in the Assurance Report 
 &  Addressing Narrative and Future-Oriented Information
Determining the Scope of an EER Assurance Engagement 
Phase 1
Challenges allocated to phase 1
Challenges split between phase 1 and phase 2

4. Maturity in Governance & Internal Control (Challenge 5)
What is the challenge?
Many entities may have a reporting system, controls and oversight in place for EER which are not yet very robust.
A lack of maturity and formality may mean it is challenging for the practitioner to conclude whether the preconditions for an assurance engagement are present or not.

5. Maturity in Governance & Internal Control (Challenge 5)
Assessment of the entity’s system of internal control broadly consistent with structure in ISA 315 (Revised) ED.
The entity’s reporting system, controls and oversight need to have developed sufficiently to support an assurance engagement.
The level of formality and complexity should reflect the entity’s size and nature.
System of Internal Control
Issues Paper
Paragraphs 6-12

6. Questions to the IAASB The IAASB is asked for its views on:
Whether the Task Force has addressed the issues related to Challenge 5 appropriately and sufficiently.
Issues Paper
Paragraphs 6-12

7. Obtaining Assurance of Narrative & Future-Oriented Information (Challenges 6 & 7)
What are the challenges?
Narrative information that is not factual is subject to management judgment and may be more susceptible to management bias.
The key challenge is how to address the inherent subjectivity and increased risk of management bias and to manage potentially unrealistic expectations that the practitioner can reduce the degree to which the subject matter information is affected by inherent subjectivity.
Future-oriented information is found in some EER reports in a few different forms and there is generally greater measurement or evaluation inherent uncertainty.
This may make the process of assessing whether the criteria are suitable more complex.

8. The general concept of an EER report – subject matter information (qualitative)
subject matter elements
Criteria
Quality: color
Evaluation…
green
subject matter element
(composite object)
Quality (Aspect) of color: shade
subject matter element
(composite object)
light green
Evaluation…

9. The general concept of an EER report – subject matter information (quantitative)
Criteria
subject matter elements
Evaluation (measurement)…
Quality: weight
100 grams 99 98 97
103
102
101
subject matter element
(composite object)
Quality (Aspect) of weight: quantity (grams)
subject matter element
(composite object)

10. Obtaining Assurance of Narrative Information (Challenge 6)
Narrative information may be:
factual; or
inherently subjective.
Narrative information is at higher risk of being ambiguous than numerical information where language used is not subject to precise or specific enough definitions.
Very important for criteria to be reliable and understandable.
Increased risk of management bias in preparing subjective narrative information – considering whether it is neutral and free from bias therefore becomes a greater area of focus for the practitioner.
Issues Paper
Paragraphs 13-20

11. Obtaining Assurance of Future-Oriented Information (Challenge 7)
Inclusion of future-oriented information in most reports today tends to be relatively limited and restricted to specific areas such as an entity’s strategy, performance outlook and future risks/opportunities.
Two possible categories of future-oriented information:
information which ‘predicts’ the future; and
information about the entity’s intentions or strategy.
Future-oriented information contains significant levels of measurement or evaluation uncertainty, although this is similar to uncertainty in historically-oriented information, and in making accounting estimates in financial reporting.
Issues Paper
Paragraphs & 21-24

12. Questions to the IAASB The IAASB is asked for its views on:
Whether the Task Force has addressed the issues related to Challenges 6 & 7 appropriately and sufficiently.
Issues Paper
Paragraphs 13-24

13. Draft guidance – Agenda Item 7-A
Introduction
Objectives
Explain scope of EER and the IAEPN.
Show how IAEPN aligns to ISAE 3000 (Revised).
Emphasize key ISAE 3000 (Revised) requirements regarding competence, capabilities and acceptance/continuance procedures (reference to later guidance).
Preconditions for assurance
Maturity in Governance & Internal Control
Determining the Scope of an EER Assurance Engagement
Evaluating the Suitability of Criteria
Using Materiality to Evaluate what is included in the Report
Building Assertions
Obtaining Assurance of Narrative Information
Obtaining Assurance of Future-Oriented Information
Performance Materiality
Evaluating whether subject matter information is free from material misstatement
Section II
The IAASB is asked for its views on:
Whether the Task Force has addressed the issues related to the challenges allocated to phase 1 appropriately and sufficiently; and
Whether the draft guidance is effective in assisting practitioners to address the issues related to each of the challenges.
Draft Guidance
Paragraphs 1-11

14. Maturity in Governance & Internal Control (Challenge 5)
Introduction
What is the challenge?
Many entities may have a reporting system, controls and oversight in place for EER which are not yet very robust.
A lack of maturity and formality may mean it is challenging for the practitioner to conclude whether the preconditions for an assurance engagement are present or not.
Preconditions for assurance
Maturity in Governance & Internal Control
Determining the Scope of an EER Assurance Engagement
Evaluating the Suitability of Criteria
Using Materiality to Evaluate what is included in the Report
Building Assertions
Obtaining Assurance of Narrative Information
Obtaining Assurance of Future-Oriented Information
Performance Materiality
Evaluating whether subject matter information is free from material misstatement
Section II
The IAASB is asked for its views on:
Whether the Task Force has addressed the issues related to the challenges allocated to phase 1 appropriately and sufficiently; and
Whether the draft guidance is effective in assisting practitioners to address the issues related to each of the challenges.
Draft Guidance
Paragraphs 12-55

15. Evaluating the Suitability of Criteria in a Consistent Manner (Challenge 2)
Introduction
What is the challenge?
EER frameworks are often less prescriptive about the content of a report than more established financial reporting frameworks, meaning there is considerable opportunity for management bias.
Much professional judgment and skepticism is required to determine the suitability of criteria.
Preconditions for assurance
Maturity in Governance & Internal Control
Determining the Scope of an EER Assurance Engagement
Evaluating the Suitability of Criteria
Using Materiality to Evaluate what is included in the Report
Building Assertions
Obtaining Assurance of Narrative Information
Obtaining Assurance of Future-Oriented Information
Performance Materiality
Evaluating whether subject matter information is free from material misstatement
Section II
The IAASB is asked for its views on:
Whether the Task Force has addressed the issues related to the challenges allocated to phase 1 appropriately and sufficiently; and
Whether the draft guidance is effective in assisting practitioners to address the issues related to each of the challenges.
Draft Guidance
Paragraphs

16. Applying Materiality (Challenge 3)
Introduction
What is the challenge?
How to assess what topics and related elements would be material for an EER report is often challenging when both the users and their information needs can be diverse or unknown.
Preconditions for assurance
Maturity in Governance & Internal Control
Determining the Scope of an EER Assurance Engagement
Evaluating the Suitability of Criteria
Using Materiality to Evaluate what is included in the Report
Building Assertions
Obtaining Assurance of Narrative Information
Obtaining Assurance of Future-Oriented Information
Performance Materiality
Evaluating whether subject matter information is free from material misstatement
Section II
The IAASB is asked for its views on:
Whether the Task Force has addressed the issues related to the challenges allocated to phase 1 appropriately and sufficiently; and
Whether the draft guidance is effective in assisting practitioners to address the issues related to each of the challenges.
Draft Guidance
Paragraphs

17. Building Assertions (Challenge 4)
Introduction
What is the challenge?
The diverse nature of EER subject matter information compared with that contained in financial statements makes it more challenging to develop appropriate assertions.
Preconditions for assurance
Maturity in Governance & Internal Control
Determining the Scope of an EER Assurance Engagement
Evaluating the Suitability of Criteria
Using Materiality to Evaluate what is included in the Report
Building Assertions
Obtaining Assurance of Narrative Information
Obtaining Assurance of Future-Oriented Information
Performance Materiality
Evaluating whether subject matter information is free from material misstatement
Section II
The IAASB is asked for its views on:
Whether the Task Force has addressed the issues related to the challenges allocated to phase 1 appropriately and sufficiently; and
Whether the draft guidance is effective in assisting practitioners to address the issues related to each of the challenges.
Draft Guidance
Paragraphs

18. Obtaining Assurance of Narrative & Future-Oriented Information (Challenges 6 & 7)
Introduction
What are the challenges?
Narrative information that is not factual is subject to management judgment and may be more susceptible to management bias.
The key challenge is how to address the inherent subjectivity and increased risk of management bias and to manage potentially unrealistic expectations that the practitioner can reduce the degree to which the subject matter information is affected by inherent subjectivity.
Future-oriented information is found in some EER reports in a few different forms and there is generally greater measurement or evaluation inherent uncertainty.
This may make the process of assessing whether the criteria are suitable more complex.
Preconditions for assurance
Maturity in Governance & Internal Control
Determining the Scope of an EER Assurance Engagement
Evaluating the Suitability of Criteria
Using Materiality to Evaluate what is included in the Report
Building Assertions
Obtaining Assurance of Narrative Information
Obtaining Assurance of Future-Oriented Information
Performance Materiality
Evaluating whether subject matter information is free from material misstatement
Section II
The IAASB is asked for its views on:
Whether the Task Force has addressed the issues related to the challenges allocated to phase 1 appropriately and sufficiently; and
Whether the draft guidance is effective in assisting practitioners to address the issues related to each of the challenges.
Draft Guidance
Paragraphs

19. Applying Materiality (Challenge 3)
Introduction
What is the challenge?
Evaluating misstatements in a diverse range of types of subject matter information is more complex than in audits of financial reporting.
Preconditions for assurance
Maturity in Governance & Internal Control
Determining the Scope of an EER Assurance Engagement
Evaluating the Suitability of Criteria
Using Materiality to Evaluate what is included in the Report
Building Assertions
Obtaining Assurance of Narrative Information
Obtaining Assurance of Future-Oriented Information
Performance Materiality
Evaluating whether subject matter information is free from material misstatement
Section II
The IAASB is asked for its views on:
Whether the Task Force has addressed the issues related to the challenges allocated to phase 1 appropriately and sufficiently; and
Whether the draft guidance is effective in assisting practitioners to address the issues related to each of the challenges.
Draft Guidance
Paragraphs

20. Section II & other questions
Introduction
The IAASB is asked for its views on:
Any other sections of the draft guidance, including Section II;
The structure of the draft guidance, including the use of two sections, diagrams and examples, and whether further examples may be needed and if so where in the guidance they would be most helpful; and
What a suitable alternative term for ‘Emerging forms of External Reporting’ (EER) might be, considering that in future these forms of reporting will no longer be emerging.
Some suggestions already received are listed on page 3 of the issues paper.
Preconditions for assurance
Maturity in Governance & Internal Control
Determining the Scope of an EER Assurance Engagement
Evaluating the Suitability of Criteria
Using Materiality to Evaluate what is included in the Report
Building Assertions
Obtaining Assurance of Narrative Information
Obtaining Assurance of Future-Oriented Information
Performance Materiality
Evaluating whether subject matter information is free from material misstatement
Section II
Draft Guidance
Paragraphs

21. Section II & other questions
Introduction
The IAASB is asked for its views on:
Any other sections of the draft guidance, including Section II;
The structure of the draft guidance, including the use of two sections, diagrams and examples, and whether further examples may be needed and if so where in the guidance they would be most helpful; and
What a suitable alternative term for ‘Emerging forms of External Reporting’ (EER) might be, considering that in future these forms of reporting will no longer be emerging.
Some suggestions already received are listed to the right.
Suggestions for an alternative term to EER:
external reporting
extended external reporting
broader [external] reporting
comprehensive reporting
non-financial statement reporting
environmental, social, governance and financial reporting
[external] accountability reporting
comprehensive accountability information
beyond financial reporting
overall picture reporting
enhanced reporting
Preconditions for assurance
Maturity in Governance & Internal Control
Determining the Scope of an EER Assurance Engagement
Evaluating the Suitability of Criteria
Using Materiality to Evaluate what is included in the Report
Building Assertions
Obtaining Assurance of Narrative Information
Obtaining Assurance of Future-Oriented Information
Performance Materiality
Evaluating whether subject matter information is free from material misstatement
Section II
Draft Guidance
Paragraphs

22. Global Discussion Events
Brussels
November 8
Host: Marek Grabowski
New York
October 15
Host: Ron Salole
Singapore
October 26
Host: Marek Grabowski
Sydney
November 2
Host: Lyn Provost
São Paulo
October 18
Host: Fernando Ruiz Monroy
Johannesburg
October 23
Host: Marek Grabowski
Auckland
October 30
Host: Lyn Provost

23. Next steps
Feedback from global discussion events and an updated draft to be presented to the Board in December.
Plan to issue phase 1 guidance as an exposure draft in January 2019 for public comment.