By Jim McFie, a Fellow of ICPAK
There Has to Be Improvement in The Transparency and Effectiveness of The Due Process for Standard Setting
On 19 December 2024, Lee White, the Chief Executive Officer of the International Federation of Accountants (IFAC), of which body the Institute of Certified Public Accountants of Kenya is a member, called for engagement on the International Ethics Standards on Sustainability Assurance (IESSA) to help address “practicability challenges and their successful adoption”. Shortly before White’s call to action, the International Ethics Standards Board for Accountants (IESBA) finalized the IESSA. It is interesting that the vote by IESBA Board Members to approve the new standard was not unanimous. The IESSA then had to be certified in January 2025 by the Public Interest Oversight Board. White pointed out that: “There is still a lot of complexity in the IESSA, leading to practicability challenges, in particular — but not restricted to — significant practical difficulties with the value chain considerations. These issues remain after several months of consultation, including with IFAC and many of its members, during which we consistently communicated to IESBA concerns and challenges regarding the future implementation of the standard, in particular for small-and medium-sized practices. IFAC fully respects the independence of the standard-setting process. At the same time, we remain committed to collaborating with IESBA to address the practical challenges identified during the development of IESSA. To this end, I am proposing a summit to bring together IESBA, IFAC and representatives of its members, as well as key stakeholders, including users of the standards and practitioners, within the first quarter of 2025. This will be an opportunity to continuously improve consultation and engagement, and to facilitate further dialogue. The aim would be to ensure the newly approved IESSA is both fit for purpose and firmly grounded in a principles-based approach, setting the stage for its successful global adoption and implementation. The stakes are high, and collaboration is essential. Together, we can align on a path forward that meets the needs of the profession, users, and is in the public interest.”
You may well ask: “of what concern is that to us accountants in Kenya”? On 6 September 2023, ICPAK announced its intention to adopt the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards S1 (General requirements for Disclosure of Sustainability-related Financial Information) and S2 (Climate-related disclosures). To facilitate this, ICPAK established a Multi-Stakeholder Sustainability and Climate Change Reporting Committee to develop a Roadmap for Adoption of IFRS Sustainability Disclosure Standards in Kenya. Phase two of ICPAK’s plan stipulates mandatory adoption of IFRS S1 and S2: all public entities will be required to report using these standards for financial years commencing on or after 1 January 2027; large enterprises will be required to do so on or after 1 January 2028; small and medium sized enterprises (SMEs) on or after 1 January 2029. External assurance of sustainability-related disclosures will be required one year after mandatory adoption.
The International Auditing and Assurance Standards Board (IAASB) had approved and issued International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements (ISSA 5000) on 12 November 2024. The standard is effective for assurance engagements on sustainability information reported for periods beginning on or after 15 December 2026. When issuing ISSA 5000, IAASB pointed out that external assurance plays a key role in enhancing trust and confidence in financial and non-financial reporting. IAASB stated that, with the goal of enhancing the trust and confidence investors, regulators and other stakeholders have in sustainability information, ISSA 5000 will serve as a comprehensive, stand-alone standard suitable for any sustainability assurance engagements. It will apply to sustainability information reported across any sustainability topic and prepared under multiple frameworks. The standard is also profession agnostic, supporting its use by both professional accountant and non-accountant assurance practitioners.
PricewaterhouseCoopers issues audit reports on the Sustainable Business Reports of Safaricom plc.
The Public Interest Oversight Board was established in February 2005 to oversee the auditing and assurance, ethics, and education standard-setting activities of the International Federation of Accountants (IFAC). It also oversees IFAC’s Member Body Compliance Program which is designed to encourage member bodies, such as ICPAK, to adopt international standards and to implement quality assurance and investigation and discipline programs. The aim of the PIOB is to increase the confidence of investors and others that the public interest activities of IFAC and the setting of standards by the independent boards operating under the auspices of IFAC, are properly responsive to the public interest. It met in December 2024 and again in January 2025 to consider a number of issues, one of which was to certify the IESBA’s and the IAASB’s sustainability standards. The PIOB states that market participants and policymakers around the world now have a robust global baseline to instill confidence in sustainability reporting. Sustainability reporting has wide relevance for users both within and outside of capital markets and it requires additional information sources and the exercise of key judgments beyond financial reporting. There are also heightened risks, such as greenwashing, where organizations might seek to misrepresent their performance. Avoiding such risks, which could undermine public trust and capital flows into sustainable development, is clearly in the public interest.
The International Ethics Standards on Sustainability Assurance (IESSA) was published on January 2025. It has been developed with the intention of being equivalent to the standards of ethical behaviour and independence that apply to audits of financial statements. As a result, the IESBA developed the IESSA to mirror the same high standards of ethics and independence that apply to financial statement audits in the IESBA Code, and to address the same interests, relationships and circumstances that might create threats to the ethical behaviour and independence of the sustainability assurance practitioner and their firm.
The summit proposed by White in December 2024 took place in Paris on 14 April 2025, and focused on the practical implementation of the new IESSA. The summit was hosted by the “Compagnie Nationale des Commissaires aux Comptes”, the French Institute of Accountants, and was observed by the Public Interest Oversight Board. The meeting brought together over 50 global leaders from Africa, Asia-Pacific, the Americas, and Europe, including IFAC member organizations and other professional accounting organizations, practitioners, regulators, investors, business preparers, supervisors and standard setters, offering a remarkable blend of perspectives, skills, and knowledge. The conference reaffirmed the important role that global assurance and ethics standards need to play in building trust in reported sustainability information, and hence the importance of ensuring successful global adoption and implementation.
Two priority areas were highlighted by the participants: firstly, it was clear that enhanced coordination among the IESBA, the IAASB and IFAC leadership is required to maximize the use of limited resources to progress the adoption of the IESBA’s and the IAASB’s international standards globally and support their consistent implementation; and secondly, there has to be improvement in the transparency and effectiveness of the due process for standard setting, including, appropriate effects analysis of new or revised standards; the need for post-implementation reviews of significant new or revised standards, generally within five years post-effective date; the use of narrow scope amendments to resolve relevant issues identified through implementation or emerging issues monitoring mechanisms; and enhanced engagement and feedback on how stakeholder input is considered and feeds into decisions.
It was decided that IFAC, IESBA, and IAASB will continue to focus on furthering the public interest and commit to convening another multi-stakeholder summit in Q4 2026 or Q1 2027.
White thanked all of those who participated in the summit. What encouraged him most was the spirit of serving the public interest, shared responsibility and collaboration amongst all stakeholders. He was delighted to see there is a consensus that standards should be of high quality, but also practical, inclusive, and fit for purpose: that was how the standard setters build trust and resilience across the entire ecosystem. Gabriela Figueiredo Dias, Chair of the IESBA, said “The IESBA commends IFAC for convening this important summit and is encouraged by constructive suggestions shared by a wide range of participants. We are fully committed to improving the practices that connect us all, as well as to the adoption and effective implementation of global standards on assurance, ethics, and independence. Both I, personally, and the IESBA call for and stand ready to support impactful initiatives from all involved parties that promote the public interest and embed ethics as the DNA that guides the global accountancy profession in all its activities and services.” Tom Seidenstein, Chair of the IAASB, said “I welcome the invitation to participate in this timely event. I am heartened by the continued support for international standards set by independent standard-setters committed to robust due process. Ever deepening engagement with IAASB stakeholders and coordination with IESBA are leading strategic objectives of the IAASB, and the summit provided valuable recommendations in both of those areas.” One thing is clear from these developments in the reporting world is that the process of reporting on the health of an entity is becoming more complex by the day; we all need to attend continuing professional development activities
