Within the INTEGRES project, various studies and researches are carried out. The results will be published on INTEGRES.EU. Case studies have been done on companies, governments. Publications and results can be found here. Elena Lombardo from Rimini Campus made an analysis in the italian context.
ELENA LOMBARDO – Rimini Campus
“Challenges, critical issues and potential hints emerging from the audit of non-financial statements: an analysis in the Italian context”
Over recent years, the interest of stakeholders in corporate environmental, social and ethical performance has risen significantly, as non-financial information enables businesses to be transparent in communicating these non-financial aspects of their management and performance. Nowadays, promoting financial stability and sustainable development by enhancing the links between investment decisions, corporate behaviour and reporting has become a global need. In this context, the European scenario has moved from a voluntary to a mandatory disclosure of non-financial information in 2014, with the introduction of Directive 2014/95/EU. The Directive has been adopted in Italy through the Legislative Decree 254/2016 that states the need for control over non-financial information. While the Directive does not focus on the need of assurance providers, it leaves Member States to legislate about that. In Italy, the D.Lgs. 254/2016 requires the auditors’ supervision on the content of the NFS for all public interest entities (PIEs) with certain characteristics.
The purpose of this paper is to enhance our understanding of the conceptual foundations of
assurance and provide an overview of the auditors’ perspective in the Italian context regarding Directive 2014/95/EU and D.Lgs. 254/2016. It aims to facilitate a discussion of the challenges and the role of assurance in the light of this new scenario. The study explores aspects regarding the audit of non-financial information, addresses current challenges and brings potential hints and drivers of change. Two research questions are addressed: What are the main critical issues in the audit of NFS, from the auditors’ perspective? What are the potential hints and drivers of changes, regarding these issues? Thus, answering these questions, this study seeks to extend current knowledge and promote an informed discussion of the challenges that auditors are expected to face and the role of assurance within an increasingly complex and fragmented reporting regulatory landscape.
Firstly, a literature review on voluntary versus mandatory disclosure and sustainability assurance is undertaken to frame the analysis and examine research questions. The study highlights that the broad-based nature of standards, as well as their diversity, in practice, contribute to the persistent challenges of sustainability assurance. As this research is exploratory/interpretative, data are collected from detailed interviews provided by preparers and assurance experts.
The analysis identified gaps in current sustainability assurance research and theoretical frameworks. This relatively new context has not been widely explored so far. Furthermore, the results of this research show many challenges in the assurance of non-financial statements. For instance, it has been found that the ISAE 3000 (Revised) leaves a lot of scope for professional judgement in determining the nature, timing and extent of the procedures to be conducted.
Progress in sustainability assurance research may lead to developments in sustainability assurance practice and reduction in the challenges for assurance providers. This research informs ongoing debate regarding whether a specific reporting format should be prescribed, whether the assurance should be mandatory all over the European countries and how the practice can be developed to reach real improvements in the preparers’ sustainability-related practices.
This paper presents some findings in an area where little evidence exists. It is one of the few to provide evidence on the challenges for assurance providers and it highlights the need for improvements to existing assurance practices. The paper is also one of the first to deal with the assurance of non-financial information in the Italian context. Therefore, it provides an important contribution to the discussions on the regulation of and through assurance on non-financial statements. Future research avenues are suggested.