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

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

FAQs: Review or audit of sustainability reports

ASIC

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.

Where this sits commercially

Carbonhalo prepares; it never assures.