Sustainability

Climate-related risks can have a material impact on a reporting issuer's financial results. 

CPAB conducted climate-focused thematic reviews in 2022 and 2023 concurrently with our file inspections to understand how auditors evaluate the impact of climate-related risks in their financial statement audits. Our goal was to understand:

1. How audit firms are preparing engagement teams to consider the impact of climate-related risks in financial statement audits of public companies, and
2. the extent to which engagement teams are currently doing so.

Climate thematic review observations

1. Canada’s four largest audit firms each had specific guidance and training materials to support auditors in considering and addressing climate-related risks in their financial statement audits.
2. The quality of resources provided to the audit practice varied across all firms. There is a range of guidance and training seen at the other annually inspected firms, with many firms at the early stage of developing their approach.
3. In most files we inspected, there was no change to the audit approach to respond to the climate-related audit risks.

4. In instances where climate-related factors were considered by auditors as part of their risk assessment, the extent and quality of work performed varied significantly.

Click here to learn more about CPAB’s observations stemming from our climate thematic reviews.

Looking forward

CPAB encourages audit firms to continue to prepare their teams to consider and address climate-related risks in their financial statement audits.

Firms should also be monitoring this area to ensure that audit teams, particularly those auditing reporting issuers in industries more likely to be impacted by climate-related risks, are using their existing guidance and resources.

CPAB continues to monitor how auditors are identifying and assessing climate-related risks through our inspections.

CPAB also continues to monitor, and where appropriate, share perspectives on standard-setting activities related to the development of sustainability reporting and assurance standards.