1. Does the draft guidance adequately address the challenges for practitioners that have been
identified as within the scope of the draft guidance developed in phase 1? If not, where and
how should it be improved?
Subject to our comments below, we believe the draft guidance appropriately describes the key areas
of challenge faced by practitioners that have been identified as within the scope of the draft guidance
developed in phase 1.
Preconditions for Assurance
ISAE 3000 (Revised) sets out the preconditions for an assurance engagement, one of which is that the
engagement has a rational purpose. We believe that further guidance in applying this criterion to
prospective engagements would benefit practitioners. For example, the considerations described in
the box under paragraph 49 states (emphasis added) that “Assuming the subject matter information is
expected to address the significant information needs of intended users, whether any aspects of the
subject matter information are to be excluded….”. While it is not the responsibility of the practitioner to
independently identify the intended users and establish their needs, we believe it would be useful to
emphasise that it is important to consider how the entity has identified the intended users and their
information needs, applying a sceptical mindset, and not to simply assume that the information is
expected to meet all such needs. As we note in response to question 3, there is a clear linkage here
between the proposed chapter on the entity’s materiality process (chapter 8), which addresses the
identification of intended users and what would aid their decision-making, and consideration of the
rational purpose precondition. Better linkage of this guidance would be useful.
With respect to the final bullet of the same considerations box (based on paragraph A56 of ISAE 3000
(Revised)) that addresses inappropriate association by the entity of the practitioner’s name with the
subject matter or the EER report, we believe expanding this guidance would be helpful. It is important
that a practitioner considers the rationale for their requested involvement - is the nature of the
engagement and the underlying subject matter relevant to the practitioner's field and knowledge?
Considering why the practitioner is being asked to perform the engagement and to issue a report is
relevant in determining whether the engagement has a rational purpose.
Looking ahead to phase 2, as the guidance on the scope of the engagement is developed, it will
equally be important to link this content to the guidance in (current) chapter 8, which further addresses
the selection of topics and elements to be included in the EER report and how this relates back to the
needs of the intended users and the overall purpose of the engagement. As phase 2 progresses,
further consideration as to how the relevant content in chapters 2 and 8 is best presented may be
Consideration of materiality by the practitioner is important and introducing this only in chapter 9 may
be unhelpful. We believe signposting this guidance earlier in the document would be useful.
Consideration of materiality in planning an engagement provides essential context to being able to
identify and assess the risks of material misstatement and planning the appropriate responses. This is
likely to be an area where practitioners will find practical guidance useful. For example, how to
consider materiality in the context of a whole EER report versus in relation to individual subject matter elements within the report, depending on the nature of the practitioner’s conclusion(s) in the assurance
report, and the related implications for the practitioner’s work effort and evidence needed to express
that conclusion. Further, addressing relevant considerations when dealing with multiple unrelated
subject matter elements and multi-location engagements would also be useful. Again, the linkages
with chapter 8 will be important.
Maturity in governance and internal control
Chapter 6 includes guidance on the practitioner’s consideration of the preparer’s system of internal
control as part of the overall preconditions when making an acceptance decision. We agree that the
level of understanding needed will be affected by the size and complexity of the entity, but that this will
also be affected, often more so, by the complexity of the subject matter and related measurement/
We believe it is also important to be clear that a mature system of internal control is not an absolute
prerequisite for assurance, so long as the practitioner is satisfied that the pre-conditions for assurance
contemplated by ISAE 3000 (Revised) can be met.
We believe these matters could be better reflected in this section, including in relation to paragraphs
Narrative and future-orientated information
Overall, we consider the guidance in Chapters 10 and 11 to be a fair summary of the challenges
associated with narrative and future-orientated information, respectively. However, with respect to
future-orientated information, we believe the guidance could better draw out that there is likely to be a
stronger evidential basis for a forecast that is supported by a stable history of accurate forecasting, as
compared to future-orientated information that is entirely based on subjective judgement with no
history. See also our response to question 2 on the inclusion of further examples.
2. Is the draft guidance clear and easy to understand, including through the use of examples and
diagrams, and the way terminology is used? If not, where and how should it be improved?
Subject to our overarching comment on length, our comments below, and in response to question 6,
we believe the guidance is clear and easy to follow.
Subject matter element qualities
The introduction of the term “qualities” is causing confusion. In outreach with practitioners that conduct
engagements of this nature, the term was not widely understood and the consensus from our
practitioners was that it should be removed. We believe that a simpler concept of “characteristics” of
the subject matter elements that are to be measured will be more easily understood and applied. See
also our response to question 6 on the accompanying background and contextual information where
the concept of “qualities” is further addressed.
While ISAE 3000 (Revised) does not refer to the use of assertions, we support the guidance on
considering assertions during an EER assurance engagement and believe that this is reflective of
current practice. However, we find the description of “categories” of assertions to lack clarity. ISA 315
and ISAE 3410 already contemplate “categories” of assertions as noted in the guidance. However, in
our view the categories in those standards are described in a different (and clearer) way to the content
in paragraphs 171-183, being:
- ISA 315 - (i) assertions about classes of transactions and events, and related disclosures, for
the period under audit and (ii) assertions about account balances, and related disclosures, at
the period end.
- ISAE 3410 - (i) assertions about the quantification of emissions for the period subject to
assurance and (ii) assertions about presentation and disclosure.
We believe the extensive discussion of “categories” of assertions and how they may map back to the
characteristics of suitable criteria may be over-complicating the concept of assertions such that the
intended guidance hinders rather than helps the practitioner's thought process. This section of
guidance gave rise to most questions in outreach with current practitioners. At its simplest, assertions
are most easily thought of in terms of “what can go wrong” - what is it about that subject matter that
could give rise to a material misstatement?
We suggest focusing on (i) describing the concept of assertions and (ii) how they can be used by the
practitioner in considering the types of misstatements of the subject matter information. In doing so,
recognising that some practitioners performing these engagements may not have recent audit
experience to draw upon or be familiar with ISAE 3410, we believe there would be value in including
(potentially in an appendix) a more general description of each assertion, how the information may be
misstated and how assertions otherwise may impact a practitioner’s testing approach, by providing a
few examples i.e., extending the concept explored in paragraphs 182 and 184.
With respect to “neutrality”, we suggest that “freedom of bias” is the better term to use and is best
addressed as part of considering other assertions, rather than a discrete assertion, or category of
assertions, in its own right. This avoids the risk of confusion with the concept of neutrality as a
characteristic of suitable criteria.
Narrative and future-orientated information
Chapter 10 provides useful guidance on how a practitioner may approach narrative information, in
particular the example in paragraph 195 on how to potentially address sentences or sections of
significant narrative information. We believe this is an area where a more detailed worked example
that includes the specific criteria, as well as additional shorter examples covering different types of
narrative information, would be worthwhile. This is a challenging area and illustrations are likely to add
most value here. It is unclear to us, however, whether the example in paragraph 195 was intended to
illustrate an approach to presentation of the entity’s final EER report, or merely an approach to the
practitioner’s documentation of their work performed. We believe the latter, but clarity would be
We also suggest that examples that illustrate how to consider forward-looking scenarios would also be
Chapter 12 of the guidance includes reference to “evaluation uncertainty”. Guidance is needed on how
this term differs from “measurement uncertainty”.
3. Do you support the proposed structure of the draft guidance? If not, how could it be better
We believe the proposed structure of the draft guidance generally follows a logical approach to
performing an assurance engagement. Given the close relationship between the consideration of the
purpose of the engagement and the intended users and the preconditions for the engagement, we feel
there is an argument for locating Chapter 8, Considering the Entity's ‘Materiality Process’, earlier in the
document, for example, to follow chapter 3 - see also our response to question 1.
We believe this would also be useful in setting relevant context for current proposed chapter 6 on
consideration of the system of internal control. Guidance on the entity’s materiality process around
determining what is to be reported, and how, and what is ‘material’, will to a large extent drive the
consideration of the internal controls that are needed to identify, record, process and report the subject
matter information. We comment separately on the content of the materiality process section in our
response to question 4 below.
With respect to narrative information, we suggest that Chapter 3, Agreeing the Scope of an EER
Assurance Engagement, should include some introductory material that highlights the importance of
narrative information in the context of EER, in particular in helping build the practitioner's
understanding, in assessing the risks, and in designing procedures. While Chapter 10 sits logically
within the structure of the proposed guidance, it is important to emphasise that such information be
considered early in the engagement.
4. Do you agree that the draft guidance does not contradict or conflict with the requirements or
application material of ISAE 3000 (Revised), and that the draft guidance does not introduce any
Chapter 8 of the guidance describes the entity’s “materiality process” as the process the entity goes
through in order to decide what is of sufficient relevance for users of the EER that it warrants inclusion
within the EER report (where the criteria themselves do not stipulate this). It also suggests a method
that can be adopted by practitioners in order to obtain an understanding of this (the diagram following
We agree with the need to understand how the preparer has approached the preparation of the EER
report, including what to include. In doing so, the practitioner actively considers, applying professional
scepticism, the rigour and robustness of management’s process to be satisfied that what is expected
to be included appears reasonable based on their understanding of that process and in light of the
need for the engagement to have a rational purpose.
We are, however, concerned that the guidance implies an obligation on the practitioner to evaluate or
form an independent conclusion on the preparer’s assessment. For example, the proposed guidance
refers to “reviewing” the process and also the “appropriateness and outcomes” of the materiality
Management remains responsible for determining what information is to be included in their reporting
and, while we understand that many EER frameworks are worded in such a way that leaves room for
interpretation, it is important not to convey an impression that the assurance practitioner is capable of
independently determining what should be reported. The practitioner may express views to the
preparer that what is being reported may not appear appropriate or relevant, but guidance should not imply the practitioner is the arbiter on this point.
We suggest that this section make the above principles clearer, as well as clarifying what is meant by
the term reviewing, to avoid the potential for misinterpretation. Similarly, we find reference to how
“effective” the entity’s materiality process was (also in the diagram) to be unhelpful - effectiveness is a
subjective concept and we suggest removing this term. The key test should be whether the preconditions
for assurance have been met.
We do agree, however, with the principle in paragraph 129 that “the extent to which” the practitioner
needs to understand the entity’s materiality process may depend on the scope of the assurance
engagement. We believe the guidance that follows needs to avoid implying the contrary - for example,
avoiding phrases such as “the suggested process for a practitioner” (paragraph 130).
Lastly, given materiality is already a commonly understood concept for practitioners in the context of
an assurance engagement, it may be more helpful to avoid using this term in describing the entity’s
process. Referring to considering the entity’s “scoping” or “basis of preparation” process may limit the
potential for confusion with the existing concept.
Do you agree with the way that the draft guidance covers matters that are not addressed in
ISAE 3000 (Revised)?
Our comments on matters not addressed by ISAE 3000 (Revised) are set out in our responses to the
- Subject matter element “qualities” - question 2.
- Assertions - question 2.
- Materiality process - question 4.
6. Do you agree that the additional papers contain further helpful information and that they
should be published alongside the non-authoritative guidance document?
While the main body of the guidance is drafted in a manner that is clear and uses ‘plain English’, we
feel the background and contextual information is less easy to read. In particular, for example, we find
the “understanding the nature of evaluation and measurement of subject matter elements” section to
be quite theoretical and challenging to comprehend. The illustrative example is particularly complex to
understand. Simpler language, or simpler examples, may be beneficial.
As noted in our response to question 2, we believe the introduction of new concepts such as “qualities”
is adding complexity and, in part, resulting in the need for further explanation within the proposed
appendix. Further, we believe the examples in the “understanding the nature and role of criteria” may
confuse, rather than aid, understanding, by referring to both “expressions” of various things, as well as
“characteristics”. We believe the multitude of terms is unhelpful - it is unclear how “qualities” are to be
distinguished from these other attributes. As stated above, we recommend simply referring to
“characteristics” (or potentially “attributes”) of the subject matter element.
In addition, we also note that the IAASB’s International Framework for Assurance Engagements
already includes sections on underlying subject matter and criteria, together with other useful
“educational” material, and refers to “characteristics” of different subject matters. We find this material
to be written in a more readily understandable style.
Taken as a whole, for the reasons described above, we question whether the proposed background
and contextual information will add to users’ understanding of the guidance. We suggest that the body
of the guidance should address all appropriate contextual content that will aid practitioners in
understanding how to approach such engagements. If deemed necessary to refer to additional
“educational” content, we would instead suggest referencing the International Framework for
We do, however, support the proposed “four key factor model for credibility and trust in relation to
EER” paper. We believe this has educational value as a stand-alone paper.
7. In addition to the requests for specific comments above, the IAASB is also seeking comments
on the matters set out below:
- Stakeholder Perspectives—Respondents representing stakeholders such as preparers
(including smaller entities) of EER reports, users of EER reports, and public sector
entities are asked to comment on the questions above from their perspective.
- Developing Nations—Recognizing that many developing nations have adopted or are in
the process of adopting the International Standards, the IAASB invites respondents
from these nations to comment, in particular, on any foreseeable difficulties in using the
draft guidance in a developing nation environment.
- Translation—Recognizing that many respondents may intend to translate the final
guidance for adoption in their own environments, the IAASB welcomes comments on
potential translation issues.
No specific comments.