BDO warns against engaging multiple auditors for financial, sustainability reports

Recent guidance published by ASIC has clarified that under the Corporations Act 2001, registrable superannuation entities (RSEs) can only have one auditor, meaning their sustainability reports must be audited by the same individual as their financial reports.

No such restriction exists for other entity types, meaning companies and registered schemes can engage multiple auditors across different reports.

However, BDO Australia partner and national leader in sustainability reporting, Aletta Boshoff, said firms should think twice about employing separate auditors, as it could lead to duplication of work and other inefficiencies.

“Companies, registered schemes and retail corporate collective investment vehicles (CCIVs) can choose to appoint different auditors for the financial and sustainability reports,” Boshoff wrote in a recent insight.

“Nevertheless, there are consequences for entities adopting this approach, and we do not recommend it as a practical and viable alternative. Mainly, it will result in entities incurring significant additional costs because of the additional time investment and duplication of work effort.”

Boshoff urged firms to consider a few factors and risks before choosing to appoint two separate auditors.

First, she noted that engaging two separate auditors would lead to greater communication burdens, as company directors and management would have to co-ordinate two separate audit engagements.

Auditors could also use different methodologies, which could result in reduced connectivity.

There were often connections between information presented in sustainability and financial reports, but having a separate auditor for each would limit the utility of these connections and could lead to duplicative work.

“There may be connections between information presented in the sustainability report and the annual financial report. Having two separate auditors means both parties will have to be across connected disclosures rather than one,” Boshoff said.

“Both the auditor of the financial report and the auditor of the sustainability report are required to consider whether there are any material inconsistencies between the information they have assured, and other information contained elsewhere in the annual report. This results in information being looked at twice rather than once.”

She added that the sustainability report auditor must be a registered company auditor, precluding climate consultants from auditing such reports.

Overall, companies that relied on one auditor would likely see greater efficiency gains, less duplication, and would enable that auditor to have a more holistic view of their business operations, Boshoff said.

“We recommend that entities appoint only one audit firm or company to audit both the financial report and the sustainability report. If needed, the auditor can use internal or external experts to assist in conducting the audit of the sustainability report.”