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Technical Director
International Auditing and Assurance
Standards Board
International Federation of Accountants
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USA
Our ref SS/288
Contact Sylvia Smith
17 June 2011
Dear Sirs
IAASB Exposure Draft, Proposed ISAE 3410 Assurance Engagements on Greenhouse Gas
Statements
We are pleased to have the opportunity to comment on the above Exposure Draft issued by the
International Auditing and Assurance Standards Board (IAASB).
Overall, we are very supportive of the proposed Standard and the efforts of the IAASB in
responding to the comments received from the consultation process on this proposed Standard.
Our overarching comments are included below. Appendix 1 sets out our responses to the
specific questions included in the proposed Standard. Appendix 2 includes additional comments
on specific paragraphs.
Overarching comments
Global urgency
We strongly support the development of an internationally recognized Standard for assurance
engagements on greenhouse gas statements. There is growing global demand for reporting
greenhouse gas information and localized regulations covering the assurance requirements are
being developed in the absence of a global framework. We therefore encourage the IAASB to
finalize this Standard as soon as practicable to facilitate the development of consistent, high
quality frameworks for assurance on greenhouse gas statements across different jurisdictions.
Reasonable and limited assurance
We acknowledge the IAASB’s efforts to respond to practitioners’ requests to incorporate limited
assurance into the proposed Standard, as well as aiming to clearly differentiate which
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ABCD
KPMG IFRG Limited
KPMG submission on Exposure Draft ISAE 3410
17 June 2011
requirements and guidance apply to reasonable assurance and limited assurance engagements
respectively.
We generally agree with the different requirements in the proposed Standard that apply to
reasonable assurance and limited assurance engagements except for:

as stated in our response to question 2 in Appendix 1, we believe that a practitioner
needs to assess risk of material misstatement at the assertion level for both reasonable
and limited assurance engagements and not just for reasonable assurance engagements;
and

Appendix 2 also identifies a number of other areas where the proposed Standard
includes differences between the requirements for a reasonable assurance engagement
and those for a limited assurance engagement that we recommend the IAASB reconsider
as to whether these differences are appropriate.
In finalizing this Standard, we strongly encourage the IAASB to ensure that any conceptual
differences that may arise between this Standard and any revisions to ISRE 2400 Engagements
to Review Historical Financial Statements and ISAE 3000 Assurance Engagements other than
Audits or Reviews of Historical Financial Information can be clearly explained. For example,
any differences in the requirements around the nature of procedures to be performed for a
limited assurance/review engagement.
We do not, however, believe the finalization of this Standard should be delayed due to the
revisions to these other standards.
Proposed application of ISAE 3410 by non-traditional users of IAASB standards
The footnote to Paragraph 10 of this proposed Standard states that the IAASB is considering
whether the extant ISAE 3000 requirement to comply with the IESBA Code should be changed
to require compliance with the IESBA Code “or other professional requirements, or
requirements in laws or regulations, that are at least as demanding.” We acknowledge that this
proposed change is understandable, particularly in areas such as assurance on greenhouse gas
statements, where the appropriate subject matter expertise may not be confined to the
“traditional” users of the IAASB standards.
We strongly believe that the issue of who is able to use the IAASB standards relates to more
than the need to consider professional competence. Compliance with the requirements of
Assurance Standards alone may not result in a high quality assurance engagement unless the
practitioner complies with requirements that are at least equivalent to the IESBA Code of Ethics,
as well as the practitioner’s firm having a system of quality control comparable to that required
by International Standard on Quality Control (ISQC1).
We are also concerned over how compliance with equivalent requirements to the IESBA Code
and ISQC1 can be enforced. We strongly encourage the IAASB to consider this issue and the
necessary measures to be implemented to achieve high quality assurance engagements
undertaken by all practitioners using the IAASB’s Assurance Standards.
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KPMG IFRG Limited
KPMG submission on Exposure Draft ISAE 3410
17 June 2011
If revised ISAE 3000 includes the above proposed change, and this consequently applies to
engagements under ISAE 3410, we recommend that assurance reports for engagements to
provide assurance on greenhouse gas statements include an appropriate statement on compliance
with the ethical requirements.
Please contact Sylvia Smith at +44 (0)20 7694 8871 if you wish to discuss any of the issues
raised in this letter.
Yours faithfully
KPMG IFRG Limited
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ABCD
KPMG IFRG Limited
KPMG submission on Exposure Draft ISAE 3410
17 June 2011
Appendix 1 – Response to specific questions included in the proposed Standard
Our responses to the questions in the proposed Standard are set out below.
1. Do respondents believe proposed ISAE 3410 achieves an appropriate balance between
improving the consistency and quality of GHG assurance engagements and the
potential cost of such engagements as a result of work effort required by the standard?
Yes. We believe the proposed Standard provides an appropriate balance between improving the
consistency and quality of GHG assurance engagements and the potential cost of such
engagements.
2. Do respondents agree with the general approach taken in proposed ISAE 3410 to
limited assurance engagements on GHG statements, as outlined above? In particular:
(a) Do respondents agree that for such engagements a risk assessment is necessary in
order to obtain a meaningful level of assurance; and
(b) In responding to the assessed risks, do respondents agree that the standard should
direct the practitioner to design and perform further procedures whose nature,
timing and extent are responsive to the assessed risks having regard to the level of
assurance?
An alternative may be to specify only certain types of procedures (such as inquiry and
analytical procedures) as the primary means of obtaining evidence.
The IAASB’s extant Framework for Assurance Engagements requires both reasonable and
limited assurance engagements to adopt a risk based approach and follow the principle of
obtaining sufficient, appropriate evidence. For engagements to provide assurance on GHG
statements, we support applying a risk based approach and the need to use professional
judgment in selecting the most appropriate assurance procedures in the circumstances.
We do not believe it would be appropriate to prescribe or limit the evidence gathering to specific
types of procedures. This may fail to take into account the underlying nature of the way such
information is captured, measured and reported. Performing analytical procedures and making
inquiries alone may not result in a meaningful level of assurance because of the nature of the
subject matter. In many situations, it may not be feasible to perform meaningful analytical
procedures and therefore, the only means of gathering sufficient, appropriate evidence may be
by performing substantive tests of details.
Additionally, as stated in our overarching comments, we wish to highlight the importance of
being able to clearly explain any differences in approach taken to limited assurance in this
Standard to that taken in the revisions to ISRE 2400 and ISAE 3000.
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KPMG IFRG Limited
KPMG submission on Exposure Draft ISAE 3410
17 June 2011
Risk assessment for limited assurance
We have concerns regarding the requirements for risk assessments specific to limited assurance
engagements. Paragraph 31L states that for limited assurance engagements, “the practitioner
shall identify and assess risks of material misstatement:
(a) at the GHG statement level; and
(b) for material types of emission and disclosure, as the basis for designing and performing
procedures...”.
We do not believe that practitioners can effectively assess risk of material misstatement only at
the GHG statement level and not also at the assertion level. We recommend that the
requirements for risk assessment for reasonable assurance included in paragraph 31R also apply
to limited assurance engagements.
3. If the general approach to limited assurance engagements on GHG statements is
adopted in the final ISAE, do respondents agree with the specific differences between
limited assurance and reasonable assurance engagements on GHG statements noted in
the proposed ISAE?
In general we agree with the differences in the requirements for reasonable and limited
assurance engagements, except for:

the comment in question 2 above in relation to risk assessment;

the comment in question 6 below on “trigger points”; and

a number of other points included in Appendix 2.
We recommend the IAASB reconsider these areas of difference between the requirements for
reasonable assurance and limited assurance engagements.
4. Do respondents agree with the use of the columnar format with the letter “L” (limited
assurance) or “R” (reasonable assurance) after the paragraph number to differentiate
requirements that apply to only one or the other type of engagement? Do respondents
believe more guidance needs to be included in the ISAE to assist readers in
understanding the differences between limited assurance and reasonable assurance
engagements on GHG statements and, if so, what should be included in that guidance?
Yes, we agree that the use of the columnar format does result in a clear differentiation in
presentation between the requirements for limited and reasonable assurance engagements.
We also recommend that the IAASB consider using this columnar format for paragraph 70,
Forming the Assurance Conclusion and, where appropriate, in the ‘Application and Other
Explanatory Materials’ section.
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KPMG IFRG Limited
KPMG submission on Exposure Draft ISAE 3410
17 June 2011
5. Do respondents agree with the requirements and guidance in the proposed ISAE for a
limited assurance engagement regarding the summary of procedures in the
practitioner’s report? In particular, will the proposed ISAE lead to reporting
procedures with an appropriate amount of detail to effectively convey to users the level
of assurance obtained by the practitioner?
Yes. With the existing concept of limited assurance representing a range rather than a specific
level of assurance, and with the limited assurance conclusion beginning with the phrase “Based
on the work performed…”, we agree that a limited assurance report should include a sufficiently
detailed summary of the procedures performed. This is important so that users can appreciate
the nature and extent of procedures performed and can draw an appropriate level of assurance
from the conclusion provided.
6. Do respondents agree with the requirements and guidance in the proposed ISAE for a
limited assurance engagement describing the trigger point at which additional
procedures are required? Do respondents agree with the related requirements
concerning the practitioner’s response when there are matters that cause the
practitioner to believe the financial statements may be materially misstated?
We are satisfied with the guidance in Paragraph 47 of the proposed Standard, on the trigger
point for determining whether additional procedures are necessary in a limited assurance
engagement.
As stated above, we believe that a risk based approach is appropriate for both reasonable and
limited assurance engagements, and it is not appropriate to have a prescriptive procedures based
Standard for limited assurance engagements on greenhouse gas statements.
7. Do respondents agree with proposed requirements and application material dealing
with the performance of procedures on location at an entity’s facilities?
We believe the concept of describing the performance of procedures on location at an entity’s
facility to be useful. However, we also believe that further guidance is necessary as the concepts
of an “entity’s facilities” and a “significant facility” are not used extensively in the proposed
Standard.
For example, paragraph 29 states ‘The practitioner shall determine whether it is necessary in the
circumstances of the engagement to perform procedures on location at significant entities.’ On
its own, this statement is not very helpful, and the practitioner needs to determine whether it is
necessary to perform procedures at all facilities whether they are significant or not.
8. With respect to uncertainties associated with emissions:
(a) Do respondents believe the proposed ISAE explains clearly the differences between
scientific uncertainty and estimation uncertainty?
(b) Do respondents agree that the assurance report should include a statement
identifying the uncertainties relevant to emissions? If so, do respondents agree
with the example wording of that statement, and its placement in the illustrative
reports included in Appendix 2 to the proposed ISAE?
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KPMG IFRG Limited
KPMG submission on Exposure Draft ISAE 3410
17 June 2011
(a) Yes, we believe that the proposed ISAE explains clearly the difference between
scientific and estimation uncertainty. However, we also believe that the proposed
standard should address how “measurement” uncertainty is incorporated into these
concepts. In Paragraphs A24 to A26, estimation uncertainty is classified into parameter
and model uncertainty, however it is not clear if this also includes measurement
uncertainty.
(b) Yes, given the nature of the subject matter, and the varied users of assurance reports on
greenhouse gas statements, we believe that the assurance report should include a
statement that clearly describes both the scientific and estimation uncertainties relevant
to emissions.
9. Do respondents agree with the form and content of the illustrative assurance reports
included in Appendix 2 to the proposed ISAE?
Yes, we believe that the form and content of the illustrative assurance reports and their
consistency with financial statement audits reports is appropriate.
We also recommend that in the section in the requirements on Forming the Assurance
Conclusion there is a specific reference to ISAE 3000 and the other forms of conclusion that
may be appropriate for the practitioner to issue in the assurance report (eg. qualified, adverse,
disclaimer).
Our comments on the additional matters for comment included in the proposed Standard are set
out below:
Preparers, Users and Assurers of GHG Statements prepared by Small and Medium-Sized
Entities (SMEs), including Regulators - Recognizing that SMEs increasingly will be
preparing GHG statements and seeking to have them assured, the IAASB invites
preparers, users (including regulators) and assurers to comment on the proposed ISAE, in
particular on the scalability of requirements and the form and content of the illustrative
assurance reports.
We do not see any specific issues with scalability of the requirements or with the proposed
assurance report for greenhouse gas statements prepared by SMEs.
Developing Nations - Recognizing the contribution of many developing nations to
international efforts with respect to climate change, the IAASB invites respondents from
these nations to comment on the proposed ISAE, in particular, on any foreseeable
difficulties in applying it in a developing nation environment.
We have no specific comment in relation to this matter.
Translations - Recognizing that many respondents may intend to translate the final ISAE
for adoption in their own environments, the IAASB welcomes comment on potential
translation issues respondents may note in reviewing the proposed ISAE.
We do not foresee any specific translation issues associated with the proposed Standard.
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KPMG IFRG Limited
KPMG submission on Exposure Draft ISAE 3410
17 June 2011
Effective Date - Recognizing that proposed ISAE 3410 is a new standard, and given the
need for national due process and translation, as applicable, and the likely immediate use
of the standard where there is no equivalent national standard, the IAASB believes that an
appropriate effective date for the standard would be 12-15 months after approval of the
final standard but with earlier application permitted. The IAASB welcomes comment on
whether this would provide a sufficient period to support effective implementation of the
ISAE.
We believe the timeframes identified in the proposed Standard are appropriate.
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ABCD
KPMG IFRG Limited
KPMG submission on Exposure Draft ISAE 3410
17 June 2011
Appendix 2 - Additional comments on specific paragraphs
Additional comments on specific paragraphs are set out below.
Paragraph 3. This paragraph states that, “The assurance engagement may cover a GHG
statement and other information, for example, when the practitioner is engaged to report on a
sustainability report of which a GHG statement is only one part.”
This paragraph implies that when GHG emissions data is disclosed within a larger sustainability
report, and the assurance report covers the whole sustainability report, this Standard should be
applied, irrespective of materiality considerations. We do not believe that application of the
Standard as a whole is appropriate in this situation. For example, a number of the reporting
requirement in paragraph 73 of the proposed Standard would not be applicable to an assurance
report covering a whole sustainability report.
Whilst the proposed Standard provides useful and relevant guidance for the conduct of an
engagement to provide assurance on GHG emissions data, we recommend that the applicability
of this proposed Standard to the scenario described above be reconsidered.
Paragraph 4(b). This paragraph mentions baseline data but not future information (e.g. targets
and objectives) which are often part of the data/graphical information on GHG emissions. We
recommend that the proposed Standard clarifies how to deal with future information. For
example, a statement in the assurance report that highlights, where relevant, achievability of
targets is not included.
Paragraphs 22 and 23. Understanding the Entity and its Environment. We believe that the
procedures listed for a limited assurance engagement should be consistent with those listed for a
reasonable assurance engagement. The difference between a limited assurance engagement and
a reasonable assurance engagement is the extent of understanding developed. It is important in a
limited assurance engagement to develop a sufficient understanding of the entity and its
environment in order to assess the risks of material misstatement. The development of this
understanding should not be restricted to only those procedures currently prescribed in the
proposed Standard.
Paragraphs 35 to 39. Overall Responses to Assessed Risks and Further Procedures. We
believe that the procedures listed for a limited assurance engagement should be consistent with
those listed for a reasonable assurance engagement. It is important that in both limited and
reasonable assurance engagements that the risks of material misstatements are appropriately
reduced to an acceptable level in the circumstances.
Paragraphs 40 and 41. Analytical Procedures Performed in Response to Assessed Risks. Our
comment is consistent to the one raised above on paragraphs 35 to 39. In addition Paragraph
40R(c) states “Develop an expectation of recorded quantities or ratios which are sufficiently
precise to identify material misstatements.” The corresponding limited assurance procedure
does not make reference to material misstatements, which we believe is necessary, and as such
the procedures should be consistent.
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KPMG IFRG Limited
KPMG submission on Exposure Draft ISAE 3410
17 June 2011
Paragraphs 42, 43, 46 and 47
In relation to the above paragraphs, it is our view that the approach for limited assurance
engagements should be the same as for reasonable assurance engagements and that the
procedures listed for a limited assurance engagement should be consistent with those listed for a
reasonable assurance engagement. The difference between limited assurance engagements and
reasonable assurance engagements is primarily in relation to the extent of testing performed.
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