Glossary›Assurance, audit evidence and working papers›Auditor independence (climate reporting)
Glossary term
Cluster A · A8
Tier 1 · differentiator
Auditor independence (climate reporting)
Definition
Auditor independence means the firm assuring your climate disclosures must be free of any interest that would compromise its judgement, and must be seen to be. Under APES 110 a firm cannot assure information it prepared itself. That is why many audit firms decline to prepare the sustainability report they will later assure.
· non-assurance services and self-review provisions, plus the sustainability assurance provisions effective 1 January 2026 ·
In force
On this page
In practice
Independence has two components and both bite. Independence of mind is the actual state of impartial judgement. Independence in appearance is whether a reasonable and informed third party would conclude that impartiality was compromised. A firm can be genuinely impartial and still fail the second test, and failing the second test is enough.
The structural position for a captured entity is this. The Corporations Act requires the sustainability report to be assured. Section 324AA permits the entity to appoint a different auditor for the sustainability report than for the financial report, so the two are not legally tied together. In practice most entities appoint the same firm, because the sustainability assurer must consider whether the sustainability report is materially inconsistent with the financial report, and one firm makes that far easier. Once the same firm holds both engagements, APES 110 determines what else that firm may do. Preparing the disclosures it will assure is not one of those things.
That is the origin of the referral pattern. It is not that the law forbids an audit firm from preparing a climate report for anyone. It is that the firm cannot prepare it for a client it also assures.
What the assurer does with it
Before accepting the engagement, the firm runs an independence assessment covering every service it and its network firms provide to the entity, and it will ask who prepared the disclosures and what role any adviser played. It must provide a written independence declaration identifying which report it relates to. Where an adviser did the preparation, the firm wants to know whether that adviser has any assurance role for the entity, and whether the entity rather than the adviser made and owns the judgements. The answer the firm needs is that management took responsibility for the disclosures. An adviser who “made the decisions” creates a problem for the entity, not just for the adviser.
Commonly confused with
Conflict of interest generally, and with auditor rotation. Rotation limits how long an individual may serve as lead auditor; independence governs what services the firm may provide at all.
Sources
1
APES 110 Code of Ethics for Professional Accountants (including Independence Standards)
APESB
2
Review status
Review required
Last reviewed
15 September 2026
Editorial pass, unsigned
Reviewer required
Registered company auditor with APES 110 expertise
Next scheduled review
1 July 2027
Part of
Cluster A, Assurance, audit evidence and working papers
47 terms on what an assurance provider tests, what they accept as evidence, and what a preparer has to be able to produce.
Related terms
The specific threat that creates the preparation prohibition
The ethics code the independence rules sit in
The operating arrangement independence forces
Related questions
Can our auditor prepare our climate report?
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Usually not, and it turns on whether they will also assure it. Preparing a disclosure you later assure is a self-review threat under APES 110, and for a public interest entity that threat cannot be reduced to an acceptable level, so the service is prohibited. Other entities need a case-by-case assessment.
Does APES 110 stop our audit firm from helping us?
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Not entirely. APES 110 prohibits your audit firm from assuming management responsibility, and prohibits non-assurance services that create a self-review threat for a public interest entity audit client. Advice, training and review of work you prepared and own may still be possible, but preparing the disclosure itself generally is not.
Does our preparer need to be independent of our auditor?
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No rule requires your preparer to be independent. The rule runs the other way: your assurance provider must be independent of what they assure. In practice that means the preparer and the assurer cannot be the same firm or network, so the preparer must sit outside your assurance provider.
Where this sits commercially
Carbonhalo prepares; it never assures.
Other terms in this cluster
Auditor independence (climate reporting)