According to INTERNATIONAL
AUDITING PRACTICE STATEMENT 1010 “Environmental audits” are
becoming increasingly common in certain industries. The term “environmental
audit” has a wide variety of meanings. They can be performed by external or
internal experts (sometimes including internal auditors), at the discretion of
the entity’s management. In practice, persons from various disciplines can
qualify to perform “environmental audits.” Often the work is performed by a
multi-disciplinary team. Normally, “environmental audits” are performed at the
request of management and are for internal use. They may address various subject
matters, including site contamination, or compliance with environmental laws
and regulations. However, an “environmental audit” is not necessarily an
equivalent to an audit of an environmental performance report.
With respect to the entity’s
compliance with environmental laws and regulations, the auditor’s purpose is
not to plan the audit to detect possible breaches of environmental laws and
regulations; nor are the auditor’s procedures sufficient to draw a conclusion
on the entity’s compliance with environmental laws and regulations or the
adequacy of its controls over environmental matters. To conclude that an entity
operates in compliance with existing environmental laws or regulations
ordinarily requires the technical skills of environmental experts, which the
auditor cannot be expected to possess.
It is management’s
responsibility to ensure that the entity’s operations are conducted in
accordance with laws and regulations. The responsibility for the prevention and
detection of noncompliance rests with management (ISA
250, paragraph 9). In this context, management has to take
into account:
- Laws
and regulations that impose liability for remediation of environmental
pollution arising from past events; this liability may not be limited to
the entity’s own actions but may also be imposed on the current owner of a
property where the damage was incurred by a previous owner (“vicarious
liability”);
- Pollution
control and pollution prevention laws that are directed at identifying or
regulating sources of pollution, or reducing emissions or discharges of
pollutants;
- Environmental
licenses that, in certain jurisdictions, specify the entity’s operating
conditions from an environmental point of view, for example, a
specification of the maximum levels of emissions; and
- The
requirements of regulatory authorities with respect to environmental matters.
Practice
If the auditor suspects there
may be non-compliance, the auditor shall discuss the matter with management
and, where appropriate, those charged with governance. If management or, as
appropriate, those charged with governance do not provide sufficient
information that supports that the entity is in compliance with laws and
regulations and, in the auditor’s judgment, the effect of the suspected non-compliance
may be material to the financial statements, the auditor shall consider the
need to obtain legal advice.
