Page 420 - JoFA_2022

T ESG information, said Ami Beers, CPA, CGMA, About the
he leaders of CLA (CliftonLarsonAllen
senior director–Assurance & Advisory Innova-
LLP) have known for years that climate
author
change and social issues would be part of
their work in the future. But they didn’t know just tion for the Association. The 2021 State of Play
report found that U.S. companies seek assurance
Andrew Kenney is
how fast that day would come. on ESG information at higher rates than the a freelance writer
“We originally thought we had a very long run- global average but that relatively few have been based in Colorado.
way. We thought we had time to meet the market seeking assurance from CPAs so far.
demand,” said Walker Wilkerson, CPA, managing Beers expects that to change as companies are
principal of national assurance and a leader of the driven toward more standardized reporting.
firm’s environmental, social, and governance (ESG) “If information needs to be filed with SEC or
efforts, who works out of the firm’s Lakeland, Fla., provided to investors, the information needs to
office. be investor-grade. That demands a higher level of
But the expectations of CLA and other firms quality, and with that a lot of companies are starting
changed this spring with the arrival of a long- to migrate this work into the finance function,” she
awaited SEC proposal that would bring new said. “It needs to have established processes and
standardization of climate-related disclosures and controls around it similar to those that are applied
boost the role of accountants in reporting on carbon to financial reporting.”
emissions and climate-related risks.
The draft would require some companies to A NEW CHALLENGE: REPORTING BEYOND
disclose carbon emissions, climate-related risks, FINANCE
climate-related targets and goals, and governance ESG work is in some ways a natural fit for
and oversight of those risks within SEC Form 10-K accountants. But it comes with critical new
and other documents. It would also require separate demands for talent and knowledge. With the field
assurance over carbon emissions disclosures. The still evolving, firms and their clients are creating
changes would apply to public companies and those new processes, compiling information that they
filing a Securities Act or Exchange Act registration may never have reported previously, and racing to
statement. address a shortage of employees with ESG experi-
Wilkerson and others expect that the biggest ence (see the sidebar, “How One Firm Is Breaking
ideas of the draft will indeed be implemented — Ground in ESG”).
and that by requiring independent auditing of “Developing an attestation practice is no small
climate information, the proposal will start a new feat in this space,” said Christopher Tower, CPA,
rush for ESG-related accounting services. ESG strategy and service leader for BDO, who
“What we believed is people were going to go at works out of the firm’s Orange County, Calif.,
their own pace, and now the SEC has changed the office. Often, firms are being asked to find and
game,” Wilkerson said. attest to data that hasn’t previously been formally
Until recently, climate disclosures and other reported. “You need to figure out your attestation
ESG issues were the domain of the biggest com- methodology: What standard are you going to
panies and accounting firms. But the proposed new use? What is acceptable evidence for nonfinancial
climate regulations already are cascading from large data? You’ve got to figure out how you determine
public companies to their suppliers and contractors materiality in a nonfinancial audit.”
throughout the United States and global econo- Wilkerson has experienced firsthand the
mies — creating significant opportunities for new challenges, and opportunities, of this new terrain.
business for accounting firms in the ESG space. Recently, a client was seeking tax credits for using
To meet the demand, though, firms will need to sustainable energy resources to heat its boilers.
develop talent and expertise in an emerging field. “We not only had to understand the equip-
ment, but we also had to understand the underly-
A BROADER SHIFT DRIVES OPPORTUNITY FOR ing calculations,” Wilkerson said. “It was quite the
CPA FIRMS educational process.”
Research from the Association of International The project was emblematic of the challenges
Certified Professional Accountants, representing that accountants face in ESG, in that it required
AICPA & CIMA, and the International Federa- a combination of outside expertise and in-house
tion of Accountants, underlines the opportunity skills and research. The firm’s team became a
for firms to provide assurance engagements for conduit between outside engineers and the

journalofaccountancy.com October 2022 | 17