Resources

Corporate programme

IIGCC members send letters to UK’s largest audit firms on climate risk

01.12.22

A group of investors have written to the heads of audit at the UK’s four largest audit firms – PWC, KPMG, EY, and Deloitte – in anticipation of 2023 Annual Report and Accounts.

The letters – part of a dialogue that began in January 2019 – set out once again investors’ expectations for auditors to provide greater and more quantitative disclosures relating to how material climate considerations have been taken into account in the audit process.

All four letters specifically call for the auditors to provide a commitment for all audits of entities facing materials headwinds linked to climate change to provide:

• Detailed and specific (not boilerplate) commentary on how it has addressed foreseeable climate risks in its determination that the accounts provide a true and fair view of the company’s financial position; that dividends are payable in accordance with capital maintenance rules; and the going concern statement remains valid.
• Quantitative information of accounting adjustments made and the implications for the entity’s financial position, or reasons why assumptions were not changed.
• An assessment of whether the entity has provided a reliable view of its exposure to a 1.5C-aligned pathway through robust sensitivity analysis.

The letters also set out more recent regulatory guidance and supervisory notices, including detailed recommendations from the Financial Reporting Council published in July.

The four letters can be viewed here (PWC), here (KPMG), here (EY), and here (Deloitte).