New audit rules proposed for LCEs; CMA scrutinises ‘greenwashing’

This roundup examines the IAASB’s proposed auditing standard for less-complex entities and an update on the CMA’s ongoing work into misleading green claims.

The International Auditing and Assurance Standards Board (IAASB) opened the public consultation for a group audit-specific section of the proposed auditing standard for less-complex entities (LCEs). The proposed section, Part 10, Audits of Group Financial Statements, is intended to form part of the proposed International Standard on Auditing for Audits of Financial Statements of Less Complex Entities (ISA for LCE) when finalised, according to a news release.

Group audits were not included in the scope of the original exposure draft of the ISA for LCE. Given stakeholder feedback, the IAASB reconsidered its decision to exclude group audits and developed proposals that address audits of less complex groups, the news release said.

"With the inclusion of group audits, the IAASB has proposed changes to the authority of the proposed ISA for LCE," the news release said. "For example, the IAASB removed the prohibition on using the standard when the audit is a group audit unless component auditors are involved, other than in limited circumstances in which a physical presence is needed for a specific audit procedure for the group audit (e.g., for attending a physical inventory count or inspecting physical assets)."

The new stand-alone standard for audits of LCEs, according to an IAASB publication:

  • Is designed specifically for audits of LCEs;
  • Is based on the underlying concepts from International Standards on Auditing;
  • Was developed to be understandable, clear, and concise;
  • Reduces the risk of jurisdictional divergence by driving consistency and comparability globally; and
  • Will achieve a quality audit engagement.

The proposals in this exposure draft may be modified in light of comments received before being issued in final form. The IAASB invites all stakeholders to comment on the exposure draft. Comments can be submitted online until 2 May.

CMA looks to assess green claims in marketing

The move is an expansion of ongoing work by the Competition and Markets Authority (CMA) into "greenwashing", which seeks to get to the bottom of whether products and services that claim to be green or eco-friendly are being marketed to shoppers accurately, according to a news release from the UK government.

"The CMA's review will examine a wide range of products known as 'fast-moving consumer goods' (FMCG)," the release said. "These are essential items used by people on a daily basis and repurchased regularly, such as food and drink, cleaning products, toiletries, and personal care items."

Both online and in-store products will be included within the CMA's investigation to look at whether companies are complying with UK consumer protection law.

"Our work to date has shown there could be greenwashing going on in this sector, and we'll be scrutinising companies big and small to see whether their environmental claims stack up," CMA Chief Executive Sarah Cardell said. "Now is a good time for businesses to review their practices and make sure they're operating within the law."

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