Glossary›Assurance, audit evidence and working papers›Basis of preparation
Glossary term
Cluster A · A18
Tier 1 · differentiator
Basis of preparation
Definition
A basis of preparation is the written statement of the rules you applied to build the disclosure: the reporting boundary, the consolidation approach, the standards and emission factor sources used, the estimation methods, and any exclusions with reasons. It is the first document an assurance provider reads and the reference point for every later test.
AASB S2 requires disclosure of judgements and methods
· the document itself is practice ·
Practice
On this page
In practice
The basis of preparation is where an entity states, in advance, the rules it will be tested against. That is a significant advantage, and most first-time reporters give it away by writing a thin one.
A useful basis of preparation names: the reporting entity and the period; the organisational boundary and the consolidation approach chosen; which Scope 3 categories are included and which excluded, with a reason for each exclusion; the emission factor sources and their edition or year; the measurement method for each significant emissions source; the treatment of estimates and proxies; the treatment of leased assets, joint arrangements and entities acquired or disposed of during the year; and the restatement policy.
Where the entity has chosen among permitted options, saying so removes the argument. An assurer cannot object to a permitted method that was disclosed. They can and will object to an undisclosed method that has to be reverse-engineered from the spreadsheet.
What the assurer does with it
The assurer reads it first and uses it to design the engagement. Every subsequent test asks whether the entity did what its basis of preparation says it did. Two findings follow from a weak document. First, the file does not match the stated basis. Second, the basis is silent on something material and the assurer has no benchmark. The second is worse, because it turns a testing exercise into a negotiation.
Commonly confused with
The methodology section of the sustainability report, which is a summary written for readers. The basis of preparation is longer, internal and more specific, though parts of it are usually disclosed.
Sources
1
2
ASSA 5000 General Requirements for Sustainability Assurance Engagements
AUASB
Review status
Review required
Last reviewed
15 September 2026
Editorial pass, unsigned
Reviewer required
Registered company auditor
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 file the basis of preparation sits at the front of
One of the core decisions the document has to state
The consolidation approach most Australian reporters choose
Related questions
What will our auditor actually ask for?
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In year one they ask for evidence behind the disclosures that are actually assured: Scope 1 and Scope 2 emissions, your governance disclosures, and the specified strategy paragraphs on climate risks and opportunities. In practice that means source documents, a calculation they can rebuild from those documents, and minutes showing the governance you described actually happened.
What are working papers for a climate report?
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Working papers are the file showing how each reported number was produced: the source document, the activity data taken from it, the emission factor and its published source, the calculation, the judgements made, and who prepared and reviewed it. If someone else cannot rebuild your number from the file, it is not finished.
What is our organisational boundary and who decides it?
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Your organisational boundary is the set of entities and facilities whose emissions you report, and the basis on which you include them. Management decides it, the board or audit committee approves it, and it should reconcile to the consolidated entity in your financial report. Operational control is the common Australian starting point, and the friction sits in joint ventures, leased sites, franchises and recent acquisitions.
Where this sits commercially
Carbonhalo writes the basis of preparation as the preparer; the assurer tests it.
Other terms in this cluster
Basis of preparation