{"title":"The Importance of the ESG Factors and Their Potential Impact on an Audit of a Financial Statement","authors":"Magdalena Indyk PhD, FCCA","doi":"10.22158/ibes.v4n3p1","DOIUrl":null,"url":null,"abstract":"This review paper aims to determine the potential impact of Environmental, Social, and Corporate Governance (ESG) factors on an audit of a financial statement. For this reason, a triangle of implications has been proposed, i.e., for: (1) audit clients whose business activity is reflected in a financial statement; (2) a financial statement; and (3) audit firms which perform an audit. The evidence represents a collection of a) scientific articles, b) publications offered by professional accounting bodies and consulting firms, and c) relevant standards and legal regulations. The paper finds that ESG has become a factor which must be considered, and the financial world will face multiple changes. For audit clients, the critical aspect will be ESG integration with a business model. Financial reporting will evolve under Exposure Drafts IFRS S1 and IFRS S2. A financial statement will require in-depth knowledge about existing accounting standards to reflect the financial implications of ESG-related products and transactions. Moreover, there is a distinction between “financial audit” and “ESG assurance” in audit and assurance services. However, some ESG-related risks and matters may be considered in the financial audit cycle. The paper’s findings are significant from the scientific research perspective as only a few studies contribute to ESG and auditing. The article also provides some practical implications that might be important for audit clients, firms, and regulators.","PeriodicalId":343833,"journal":{"name":"International Business & Economics Studies","volume":"218 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2022-06-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Business & Economics Studies","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.22158/ibes.v4n3p1","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 0
Abstract
This review paper aims to determine the potential impact of Environmental, Social, and Corporate Governance (ESG) factors on an audit of a financial statement. For this reason, a triangle of implications has been proposed, i.e., for: (1) audit clients whose business activity is reflected in a financial statement; (2) a financial statement; and (3) audit firms which perform an audit. The evidence represents a collection of a) scientific articles, b) publications offered by professional accounting bodies and consulting firms, and c) relevant standards and legal regulations. The paper finds that ESG has become a factor which must be considered, and the financial world will face multiple changes. For audit clients, the critical aspect will be ESG integration with a business model. Financial reporting will evolve under Exposure Drafts IFRS S1 and IFRS S2. A financial statement will require in-depth knowledge about existing accounting standards to reflect the financial implications of ESG-related products and transactions. Moreover, there is a distinction between “financial audit” and “ESG assurance” in audit and assurance services. However, some ESG-related risks and matters may be considered in the financial audit cycle. The paper’s findings are significant from the scientific research perspective as only a few studies contribute to ESG and auditing. The article also provides some practical implications that might be important for audit clients, firms, and regulators.