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Auditors Warn Clients Lack Climate Reporting Tools, Expertise

July 6, 2022, 12:00 PM

Public companies lack the expertise and data-wrangling tools they will need to comply with possible climate and other sustainability-related reporting mandates, audit partners say in a survey released Wednesday.

The survey, from the Center for Audit Quality, reflects what 700 audit partners across eight of the largest US firms say about their clients’ priorities and the challenges they face—from inflation to fraud to cryptocurrency. The findings highlight hurdles that companies will have to overcome to comply with expanded reporting mandates as the Securities and Exchange Commission weighs new rules on climate, cybersecurity, and workforce management.

Nearly half of partners said the challenges of collecting and analyzing climate- and other sustainability-related data would present the greatest roadblock to expanded environmental, social, and governance reporting.

Other reporting challenges include competing standards and frameworks, and a shortage of skills and experience for establishing reliable reporting processes. The largest companies—those with a market cap of at least $10 billion—were more likely to struggle with data collection, the survey found. Smaller companies with market caps of less than $1 billion were more likely to consider the lack of expertise as a challenge, it said.

Partners said that inflation, labor shortages, and supply chain disruptions topped other risks for their clients such as cybersecurity, geopolitical instability, tax uncertainty, and climate risks.

A majority of partners said their clients had no plans to begin accepting cryptocurrency as a form of payment. Financial services plus telecom and media companies were more likely to be interested in accepting digital asset payments, according to the survey, which was conducted in May following the cryptocurrency market crash.

To contact the reporter on this story: Amanda Iacone in Washington at aiacone@bloombergtax.com