GS 021

This Guidance Statement has been formulated by the Auditing and Assurance Standards Board (AUASB) to provide guidance to assurance practitioners in applying the relevant AUASB Standards when conducting assurance and agreedupon procedures engagements on regulatory reporting of greenhouse gas (GHG) emissions, energy production, energy consumption or offsets; applications for assistance with carbon liabilities or compliance with related legislative requirements in Australia.

This Guidance Statement is issued on 26 November 2012 by the AUASB.

In Australia, the National Greenhouse and Energy Reporting Scheme (NGERS) provides the legislative and regulatory requirements for reporting GHG emissions, energy consumption and energy production. NGERS reporting underpins the Carbon Pricing Mechanism (CPM), which creates a carbon price liability. In addition, there are assistance and carbon offsets schemes available under the Clean Energy legislation.

The schemes which are addressed in this Guidance Statement are:^[1] 

• NGERS – the National Greenhouse and Energy Reporting Act 2007 (NGER Act) creates a reporting framework for emitters, which exceed specified emissions or energy thresholds,^[2] to report emissions, energy consumption and energy production to the Clean Energy Regulator (the Regulator).
• CPM – the Clean Energy Act 2011 (CE Act) creates a carbon price liability for emitters, which exceed specified emissions thresholds,^[3] which is met by submission of carbon units or carbon offsets.
• Jobs and Competitiveness Program (JCP) – the Clean Energy Regulations 2011 (CE Regulations) provide for approval of activities as emissions intensive trade exposed (EITE) as the basis for assistance through the allocation of free carbon units.
• Carbon Farming Initiative (CFI) – the Carbon Credits (Carbon Farming Initiative) Act 2011 (CFI Act) provides for approval of eligible offsets projects and carbon credit units arising from those projects which may be offset against a carbon liability.
• Renewable Energy Target (RET) – the Renewable Energy (Electricity) Act 2000 (RET Act) and Renewable Energy (Electricity) Regulations 2001 (RET Regulations) provide for a renewable energy target for electricity generation, a renewable energy shortfall charge and relief from that charge for EITE activities using electricity, by way of partial exemption certificates (PEC).

Each scheme either:

1. Allows for the Regulator to initiate an assurance or agreed upon procedures engagement on reports lodged, applications submitted or compliance with related legislative requirements (such as record keeping), for compliance or monitoring purposes; and/or
2. Requires assurance reports to be provided with reports lodged or applications submitted.

The assurance and agreed upon procedures engagements covered under the schemes are:

• NGERS – the National Greenhouse and Energy Reporting (Audit) Determination 2009 (NGER Audit Determination) provides for reasonable assurance, limited assurance or agreed-upon procedures^[4] engagements on the report submitted or other compliance matters identified to the Regulator under NGERS, initiated by the Regulator for monitoring or compliance purposes^[5] or conducted voluntarily at the initiation of the responsible party.
• CPM – the National Greenhouse and Energy Reporting Regulations 2008 (NGER Regulations) require a reasonable assurance report on reported emissions to be submitted by liable entities under the CPM, if their emissions number exceeds the specified threshold.^[6]
• JCP
  • the Guidance Paper Establishing the eligibility of emissions intensive, trade exposed activities under the Jobs and Competitiveness Program and Renewable Energy Target (2012) requires reasonable assurance on applications for assessment of activities as emissions intensive trade exposed (EITE), which is required to be eligible for assistance.^[7]
  • The CE Regulations require a reasonable assurance report on applications for free carbon units for EITE activities, and, if applicable, a limited assurance report on expected production in the application.^[8]
  • The CE Regulations require a reasonable assurance report on applications for supplementary allocations of free carbon units for an EITE liquefied natural gas (LNG) project.^[9]
• CFI
  • The CFI Act and Carbon Credits (Carbon Farming Initiative) Regulations 2011 (CFI Regulations) require a reasonable assurance report on: an eligible offset project’s compliance with the section 27 declaration in operation for the project, the applicable CFI Methodology Determination and the requirements of the CFI Act for the reporting period; and the project proponent’s compliance with the applicable CFI methodology determination.^[10]
  • the CFI Act provides for a reasonable assurance, limited assurance or agreed upon procedures report on the project proponent’s compliance with the CFI Act, initiated by the Regulator for monitoring or compliance purposes.^[11]
• RET – the RET Regulations require a reasonable assurance report on PEC applications.^[12]

The relevant legislative and regulatory requirements for and nature of engagements under each scheme are set out in Appendix 2.

The assurance and agreed upon procedures engagements to be conducted under these schemes are required by the relevant Regulations to be conducted in accordance with the NGER Audit Determination, in so far as the subject matter relates to emissions, energy or offsets, and Standard on Assurance Engagements ASAE 3000 Assurance Engagements other than Audits or Reviews of Historical Financial Information, in so far as the subject matter relates to matters other than financial information, including production, activity definitions and compliance. In addition to this Guidance Statement, guidance on the conduct of assurance and agreed-upon procedures engagements in accordance with the NGER Audit Determination, whether instigated by the Regulator or required to be submitted with reports or applications, is provided in the NGER Audit Determination Handbook.

In addition to the legislative and regulatory requirements imposed on assurance practitioners, relevant Auditing and Assurance Standards Board (AUASB) Standards are applicable to engagements under these schemes. This Guidance Statement has been developed to clarify how the assurance practitioner meets their regulatory obligations whilst also applying the requirements of:

1. ASAE 3000, when conducting assurance engagements on subject matters other than historical financial information, which includes all assurance engagements under NGERS, CPM, JCP, CFI or RET schemes;
2. ASAE 3410 Assurance on Greenhouse Gas Statements, when conducting and reporting on an assurance engagement on emissions, including NGERS, CPM and JCP activity assessments;
3. ASRS 4400 Agreed upon Procedures Engagements to Report Factual Findings, when conducting and reporting on verification engagements under NGERS or CFI; and
4. ASAE 3100 Compliance Engagements, when conducting and reporting on assurance engagements regarding compliance with legislative or regulatory requirements under NGERS, CPM, JCP, CFI or RET schemes.

Applications for a Financial Control or Corporate Group Liability Transfer Certificate (LTC) under the CE Act^[13] require submission of auditor’s reports on the financial reports of the entity assuming the carbon liability. These audit engagements are not addressed in this Guidance Statement as they are engagements conducted under the Australian Auditing Standards, or the equivalent in another jurisdiction, for annual financial reports or under the Standards on Review Engagements for half yearly financial reports, for general purposes not specifically for LTC applications and so do not involve additional work effort for the assurance practitioner with respect to the LTC application.

Entities may seek advice with respect to emissions, energy or offsets, such as the appropriate application of measurement methodologies, application of operational control requirements, identification of facility boundaries, application of reporting or liability thresholds or recommendations for improvements to internal control or record keeping systems. Engagements of this nature, which provide recommendations or advice, are consulting engagements, which are not covered by the AUASB’s pronouncements and so are not addressed in this Guidance Statement. Nevertheless, assurance practitioners may conduct consulting engagements, as long as it does not impact their independence with respect to existing assurance or agreed-upon procedures engagements. The form of reporting for an assurance or agreed-upon procedures engagement is not appropriate for a consulting engagement as it may be misleading to users. Nevertheless, the assurance practitioner in conducting an assurance or agreed-upon procedures engagement may provide observations arising from their work which are significant or relevant to the engaging party’s role with respect to the subject matter or report weaknesses in internal control identified in the course of their work. The provision of this information is ancillary to the objective of an assurance engagement or an agreed-upon procedures engagement.

For the purposes of this Guidance Statement, the following items have the meanings attributed below:

Agreed‑upon procedures engagement^[14] – an engagement which involves the performance of procedures of an assurance nature from which no conclusion or opinion is expressed by the assurance practitioner and no assurance is provided to intended users.  Instead only factual findings obtained as a result of the procedures performed are reported.  Agreed‑upon procedures engagements include verification engagements, being a type of greenhouse and energy audit under the NGER Audit Determination.

Assurance engagement^[15] – an engagement in which an assurance practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria.  Assurance engagements may be either reasonable or limited assurance engagements.

Assurance practitioner – a person or organisation, whether in public practice, industry, commerce or the public sector, providing assurance services,^[16] which includes registered greenhouse and energy auditors, category 1 (Technical, Non‑technical or CFI specialist), category 2 and category 3, registered under the NGER Act and registered company auditors. ASAE 3000, ASAE 3100, ASAE 3410 and ASRS 4400 all apply to assurance practitioners.  Whilst this Guidance Statement uses the term “assurance practitioner”, this does not impact the category of greenhouse and energy auditor which the relevant legislation permits to conduct assurance engagements.^[17]

Basis of preparation – the basis on which the subject matter information (whether a report or application) has been prepared, including the reporting boundaries and criteria applied, and other matters relevant to understanding the preparation of the subject matter information.

Criteria – the benchmarks used to measure or evaluate the underlying subject matter including, where relevant, those for presentation and disclosure.  The term criterion is used in the NGER (Measurement) Determination in a narrower context with respect to specific measurement methodologies relating to fuel consumption and other emissions, however these represent just a part of the criteria against which the entity may be reporting.

Emissions – as defined in ASAE 3410,^[18] includes GHGs which are direct (scope 1) emissions or indirect emissions, including emissions associated with energy that is transferred to and consumed by the entity (scope 2) and all other indirect emissions (scope 3).

Emissions Report – a report under section 22A of the NGER Act on a liable entity’s covered scope 1 emissions and potential emissions embodied in an amount of natural gas.

Entity – as defined in ASAE 3410, means a legal entity, economic entity, or identifiable portion of a legal or economic entity, or combination of legal or other entities or portions of those entities to which the emissions in the GHG statement relate, which includes:

1. a registered corporation and facilities under the operational control of a registered corporation under NGERS;^[19]
2. eligible person under JCP;^[20]
3. liable entity under the CPM or for PEC applications; and
4. project proponent for an eligible offsets project under CFI.

GHG statement – as defined in ASAE 3410, includes reports on scope 1, 2 or 3 emissions and offsets, which includes Greenhouse and Energy Reports under section 19 and Emissions Reports section 22A of the NGER Act, to the extent that they include emissions but does not specifically cover energy production and energy consumption included in Greenhouse and Energy Reports.^[21] ASAE 3410 can nevertheless, be used as guidance for reports under NGERS which include energy consumption or production. Energy under NGERS is fuel or any other energy commodity.^[22]

Greenhouse gas – has the same meaning as in ASAE 3410, however for engagements under the NGER Act^[23] chlorofluorocarbons are not included.

Greenhouse and energy report – A report under section 19 of the NGER Act on controlling corporation or facility’s greenhouse gas emissions, energy consumption and energy production.

Regulator – the Clean Energy Regulator, as regulator of NGERS, CPM, RET and CFI.

Responsible party – the person who is responsible for the subject matter (for example record keeping) or subject matter information (for example the greenhouse and energy report).

Those charged with governance – persons entrusted with the supervision, control and direction of the responsible party, including ‘those with oversight responsibilities for the subject matter’ under ASAE 3410.^[24]

The objective of NGERS is to provide “a single national reporting framework for the reporting and dissemination of information related to GHG emissions, GHG projects, energy consumption and energy production”^[25] for a number of government purposes. With respect to assurance, NGERS provides a consistent approach to the conduct and reporting on assurance and agreedupon procedures (verification) engagements on reports issued under NGERS, whether conducted voluntarily or by regulatory requirement.

Mandatory registration and reporting of emissions, energy consumption and energy production under NGERS is required for controlling corporations meeting group or facility emissions or energy thresholds. Controlling corporations which exceed the group threshold are required to report on all facilities.

ASAE 3410 applies to reports prepared under section 19 of the NGER Act, reporting GHG emissions, energy production and energy consumption of a registered corporation’s group, and section 22A of the NGER Act, reporting “covered” scope 1 emissions of a liable entity, to the extent that that standard applies to assurance on a GHG Statement, or a portion of a GHG Statement of an entity. A GHG Statement under ASAE 3410 includes an entity’s emissions and, if applicable, removals or deductions, for the period. GHG emissions under ASAE 3410 include direct (scope 1) emissions and indirect (scope 2 and 3) emissions, but do not include energy consumption or production, required to be reported on in a section 19 NGER Report. Although ASAE 3410 does not provide requirements for assurance over energy consumption or production, it can still be used as guidance for auditing energy. An entity, under ASAE 3410, is sufficiently broadly defined to include facilities under the operational control of a registered corporation or members of its group, which are required to report under NGERS.

NGERS provides for “greenhouse and energy audits”^[26] which include:

1. Assurance engagements, providing a reasonable or limited assurance report; and
2. Verification engagements, providing a report of factual findings with no assurance.

Greenhouse and energy audits are not equivalent to “audit engagements” under the AUASB Standards, which is a term restricted to reasonable assurance engagements.^[27] ASAE 3410 applies to greenhouse and energy audits to the extent that they are assurance engagements on a Greenhouse and Energy Report or portion of a Greenhouse and Energy Report.

Verification engagements are defined under the NGERS Audit Determination as “a greenhouse and energy audit the purpose of which is to verify the matter being audited. It does not contain an opinion as to the reliability, accuracy and completeness of the matter being audited.”^[28] The contents of a verification engagement report^[29] specify that it is not an assurance report and only findings with respect to each procedure are reported. Verification engagements are equivalent to agreed-upon procedures engagements under the AUASB Standards. The requirements for agreed-upon procedures engagements are contained in ASRS 4400 and that is the only AUASB Standard which applies to those engagements.

Regulator Initiated Engagements

The NGER Act provides for engagements initiated by the Regulator for compliance and monitoring purposes on registered corporation’s compliance with the NGER Act or Regulations. For the Regulator initiated engagements the assurance practitioner is engaged after submission of the Greenhouse and Energy or Emissions Report and so after period end, which may create challenges for the assurance practitioner in gathering sufficient appropriate evidence to support their conclusions.

The subject matter of engagements initiated by the Regulator, may be one or more aspects of the registered corporation’s compliance with the NGER Act or NGER Regulations.^[30] Whilst the subject matter of these engagements is at the Regulator’s discretion, the main compliance requirements in that legislation currently relate to:

1. Registration requirements under section 12 of the NGER Act for controlling corporations meeting thresholds under section 13;
2. Reports under sections 19, 22A and 22AA of the NGER Act on GHG emissions, energy production or energy consumption or a portion of that report, which encompasses the application of reporting boundaries based on “operational control” requirements in the NGER Act, measurement of emissions or energy in accordance with the NGER Measurement Determination and presentation and disclosure in accordance with the NGER Act; and
3. Record keeping requirements.

Regulator initiated engagements are compliance engagements, consequently, in addition to applying the NGER Audit Determination the assurance practitioner applies ASAE 3100 and, when assuring emissions, ASAE 3410.

Emitter or Project Proponent Initiated Engagements

The NGER Act also provides for assurance reports to accompany reports lodged for the purposes of other schemes, including CPM, JCP and CFI. In addition, emitters may voluntarily engage an assurance practitioner to provide assurance on their NGER Report. For engagements initiated by the emitter or project proponent either voluntarily or to meet a requirement of a scheme, the assurance practitioner may be engaged before or during the reporting period. Engagement before or early in the reporting period maximises the available methods of evidence gathering and allows greater scope for reliance on controls, as evidence of their operating effectiveness is more likely to be available.

From 1 July 2012, the CPM requires entities over specified thresholds to report their emissions number, comprising covered scope 1 emissions and potential emissions embodied in an amount of natural gas, annually for the period to 30 June under section 22A of the NGER Act (Emissions Report) to the Regulator by 31 October.  The liable entity is required to surrender carbon units at a rate of 1 per tonne CO₂‑e of emissions.  Entities with operational control over the facility are liable for carbon units at a fixed price for an initial period of 3 years of the CPM followed by a flexible price cap‑and‑trade scheme commencing 1 July 2015.  In the fixed price years, emitters are required to surrender 75% of their carbon units obligation by 15 June of the compliance year (ending on 30 June), lodge their Emissions Report by 31 October and “true up” the remainder of the obligation by 1 February based on the Emissions Report submitted and any subsequent adjustments.

For liable entities under the CPM with emissions over specified thresholds, a reasonable assurance report, prepared by a Category 2 or 3 greenhouse and energy auditor in accordance with the NGER Audit Determination, must also be submitted with the Emissions Report. The subject matter of the reasonable assurance report is the Emissions Report and record keeping required under section 22B.^[31] Regulations may also specify any other matters relating to the Emissions Report to be assured.^[32]

In addition to the NGER Audit Determination, the assurance practitioner applies ASAE 3410 when conducting assurance on an Emissions Report and applies ASAE 3100 when conducting assurance on record keeping.

Emissions intensive Trade exposed Activity Assessment

The Jobs and Competitiveness Program (JCP) provides for assistance in the form of free carbon units for activities which are assessed to be emissions‑intensive trade‑exposed (EITE).  If the preliminary assessment indicates the potential for an activity to meet the JCP eligibility criteria, a draft activity definition is issued by the DCCEE. 

Applications can then be made for formal assessments of activities as EITE, which are used to develop the final activity definition and allocative baselines for the assistance to be provided. These applications for formal assessment require reasonable assurance reports to be prepared by a registered company auditor under ASAE 3000, to be submitted along with the application. The subject matter of the reasonable assurance report is:

1. Emissions;
2. Production;
3. Revenue; and
4. The basis of preparation,

reported in the application in accordance with the EITE activity description, the Guidance Paper and Supplementary Guidance.^[33]

When providing assurance on emissions in an application for EITE assessment, the assurance practitioner applies ASAE 3410 and when providing assurance on compliance, the assurance practitioner applies ASAE 3100, in addition to ASAE 3000.

Emissions-intensive Trade-exposed Industry Assistance

The CE Regulations require assurance reports, prepared by a registered company auditor, authorised audit company or a category 2 or 3 registered greenhouse and energy auditor, to be submitted with applications for free carbon units under JCP for entities conducting EITE activities.  The assurance reports are required to provide:^[34]

1. Reasonable assurance on the activity’s compliance with the relevant EITE activity description^[35] and production reported in the application, in accordance with ASAE 3000, and emissions for new facilities reported in the application, in accordance with NGERS; and
2. Limited assurance on expected production, for new or expanding activities, in accordance with ASAE 3000.

In addition to ASAE 3000, the assurance practitioner applies ASAE 3410 when providing assurance on emissions for new facilities in the application for EITE assistance under JCP and ASAE 3100 when providing assurance on compliance.

Liquefied Natural Gas Supplementary Assistance

Applications for supplementary assistance for liquefied natural gas (LNG) producers under JCP also require a reasonable assurance report to be submitted with the application, prepared by a registered company auditor, authorised audit company or a category 2 or 3 registered greenhouse and energy auditor. The subject matter of the reasonable assurance report is:^[36]

1. The provisional LNG emissions number;
2. The process flow diagram; and
3. The average energy consumed for LNG production (GJ/t),

reported in the application.

In addition to NGERS, the assurance practitioner applies ASAE 3410 when providing assurance on the provisional LNG emissions number and ASAE 3000 when providing assurance on the process flow diagram and production.

Eligible Offsets Projects

The CFI provides for Australian carbon credit units (ACCUs), equivalent to 1 t CO₂‑e, to be issued for abatement from eligible offsets projects. CFI activities can earn either non‑Kyoto ACCUs or Kyoto ACCUs (equivalent to compliance ACCUs to be issued after 2012), depending on the nature of the CFI activities.  Only Kyoto or compliance ACCUs can be offset against a carbon liability under Australia’s carbon pricing mechanism or exchanged for international emissions units. Compliance or Kyoto activities include: reducing emissions from livestock, manure or fertiliser use, reforestation, avoided deforestation and reduction in pre July 2012 landfill emissions.  Non‑Kyoto activities include: soil carbon management, feral animal management, improved forest management and non‑forest revegetation. 

Entities wishing to be project proponents can apply to be a recognised offset entity (ROE), which requires them to pass the “fit and proper person” test. Each ROE is required to open a registry account in the Australian National Registry of Emissions Units, into which ACCUs earned are deposited.

A ROE applies for a declaration that the activity is an eligible offsets project if:

1. The ROE has a legal right to undertake the project;
2. For sequestration projects, the ROE has the applicable carbon sequestration right and the consent of any others with eligible interest in the land where the project will be undertaken;
3. Any necessary environmental, planning and water approvals have been obtained;
4. An approved CFI methodology exists which is applicable to the project; and
5. The activity is on the positive list (projects on the positive list have met the additionality test, in that projects must not be required by law or already be common practice) and not on the negative list nor involve clearing native forests.

The CFI Act^[37] allows for the CFI Regulations to require a prescribed audit report to accompany applications for an eligible offsets project, however the Regulations do not currently require an audit report to be submitted.

An approved CFI methodology, provided in a CFI methodology determination, comprises:

1. Requirements that must be met for an offsets project to be an eligible offsets project;
2. Methodology for calculating the CO_2‑e net abatement, including instructions for determining a baseline; and
3. Project‑specific data collection, monitoring, reporting and record keeping requirements.

Offsets Reports and Certificate of Entitlement

For eligible offsets projects, ROEs must submit a certificate of entitlement application to the Regulator, as a basis on which the Regulator issues ACCUs into the ROE’s registry account. The application includes an Offsets Report for their project’s nominated reporting period. The first reporting period is between 12 months to 5 years from the date the project was declared eligible, then every 1 to 5 years. The crediting period^[38] is set out in the CFI legislation for each eligible offsets project and is the length of time that the project can generate carbon credits using the approved CFI methodology.

Offsets Reports and applications for a certificate of entitlement lodged are required to be accompanied by a reasonable assurance report prepared in accordance with the NGER Audit Determination by a category 2 or 3 registered greenhouse and energy auditor, with the exception of exempt projects.^[39] The reasonable assurance report on an Offsets Report concludes, for the reporting period, whether:^[40]

1. The project is in accordance with:
   1. The declaration of an eligible offsets project;^[41]
   2. The applicable methodology determination; and
   3. The requirements of the CFI Act and CFI Regulations, which primarily comprise notification requirements,^[42] record keeping requirements^[43] and provisions to prevent double counting of abatement that has already been recognised under another carbon offsets project.^[44]
2. The project proponent meets the requirements under the applicable methodology determination.^[45]

Assurance engagements on eligible offsets projects and Offsets Reports are compliance engagements, consequently assurance practitioners apply ASAE 3100, in addition to the NGER Audit Determination as required by the CFI Regulations.

Regulator Initiated Engagements

The Regulator may initiate an assurance engagement or agreed‑upon procedures engagement (verification) on one or more aspects of an eligible offsets project proponent’s compliance with the CFI Act or associated provisions^[46] for compliance or monitoring purposes.^[47]  The engagement is required to be conducted by a registered greenhouse and energy auditor.  Whilst the subject matter of these engagements is at the Regulator’s discretion, the main CFI compliance requirements relate to whether the project activity conforms with the applicable CFI methodology determination, including data collection, monitoring, reporting and record keeping.

In addition to the NGER Audit Determination, the assurance practitioner applies ASAE 3100 for Regulator initiated assurance engagements and ASRS 4400 for agreedupon procedures engagements.

The Renewable Energy Target (RET) imposes a liability if a proportion of electricity produced does not come from renewable sources, which may increase the cost of electricity to EITE activities along with other businesses. Partial exemption certificates (PECs) from RET liability for electricity acquired are available to EITE activities defined in the RET Regulations, which are generally the same as those which qualify for assistance under JCP.

Applications under the Renewable Energy (Electricity) Act 2000 (RET Act) for PECs for an EITE activity which will be acquiring electricity for use in the activity from an entity liable under the RET^[48] are required to be accompanied by an assurance report.^[49]  The Renewable Energy (Electricity) Regulations 2001 (RET Regulations) require that report to be a reasonable assurance report on:^[50]

1. The activity’s compliance with the description of an EITE activity;
2. Production for each year reported; and
3. For new entrants or significant expansions, new or expected additional production.^[51]

The RET Regulations require the auditor be a registered company auditor, authorised audit company or a category 2 or 3 registered greenhouse and energy auditor and to conduct reasonable assurance engagements for PEC applications in accordance with the NGER Audit Determination or ASAE 3000 or other relevant AUASB Standards.^[52]  The applicable AUASB Standards for assurance engagements on:

1. Compliance with the EITE activity description in PEC applications, is ASAE 3100; and
2. Prior year, new or expected additional production in PEC applications, is ASAE 3000.

ASAE 3000 provides the overarching requirements for general application to all assurance engagements where the subject matter is not historical financial information. Consequently, the assurance practitioner applies ASAE 3000 when conducting and reporting on all assurance engagements covered by this Guidance Statement. Agreed-upon procedures engagements, which include verification engagements under NGERS, are not assurance engagements and are conducted under ASRS 4400.

Subject matter specific Standards on Assurance Engagements sit below ASAE 3000 in the hierarchy of AUASB Standards and are applied, when appropriate, in addition to ASAE 3000. For engagements covered by this Guidance Statement, ASAE 3100 is applicable to engagements to report on compliance and ASAE 3410 is applicable to engagements to report on GHG emissions, for which NGERS provides a reporting framework. The requirements of these standards are consistent with one another, consequently it is possible to apply multiple standards without creating a conflict in approach. The assurance practitioner applies the relevant AUASB Standards in addition to the requirements of the NGER Audit Determination, if applicable.

Appendix 3 identifies the AUASB Standards applicable to each type of engagement covered by this Guidance Statement.

ASAE 3000 requires the assurance practitioner to comply with fundamental ethical principles when conducting an assurance engagement and ASRS 4400^[53] requires the assurance practitioner to comply with ethical requirements equivalent to those applicable to “Other Assurance Engagements”. The relevant ethical requirements to which those standards refer are identified in ASA 102,^[54] which applies to all assurance engagements, and are consistent with the Independence and Conduct Declaration^[55] which the assurance practitioner is required to sign when conducting engagements under the NGER Audit Determination.

Australian Standard on Quality Control 1 (ASQC 1)^[56] requires the firm or company from which the engagement team derives to maintain a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. ASQC 1 applies to all firms of assurance practitioners conducting assurance engagements in accordance with the AUASB standards. The relevant firm would be the one to which the engagement team leader belongs.

Acceptance of an Agreed‑upon Procedures Engagement

Agreed‑upon procedures engagements under the AUASB Standards encompass verification engagements under the NGERS and CFI, as they involve the conduct of procedures agreed with the engaging party and result in a report of factual findings which draws no conclusions.  Agreed‑upon procedures engagements may be initiated by the Regulator under NGERS or CFI.  There are no requirements in the legislation or regulations for entities to obtain agreed‑upon procedures reports, although they may seek such reports voluntarily.  Agreed‑upon procedures reports have limited use, however, as the intended users need to draw their own conclusions with respect to the subject matter.

The assurance practitioner applies both the NGER Audit Determination and ASRS 4400 when conducting these engagements. In accepting an agreed-upon procedures engagement, ASRS 4400^[57] requires the assurance practitioner to consider whether the report of factual findings is likely to meet the needs of the intended users, as those users will need to draw their own conclusions, based on the factual findings combined with any other information obtained by them. By understanding the purpose for which the report of factual findings is required the assurance practitioner can satisfy themselves that the engagement has a rational purpose and that it is not likely that users will construe the outcome of the engagement as providing an assurance conclusion about the subject matter. If the assurance practitioner is not satisfied that an agreed-upon procedures engagement is appropriate, based on their understanding of the purpose of the engagement, then they may either not accept the engagement, withdraw from the engagement or, if appropriate, agree to the conduct of an assurance engagement.

The written terms of engagement are required to include, in addition to the matters required by the NGER Audit Determination,^[58] the following under ASRS 4400:^[59]

1. Statements that:
   1. The procedures performed will not constitute a reasonable or limited assurance engagement and that accordingly no assurance will be provided;
   2. The intended users are expected to conduct their own assessment of the findings, combined with other information available to them and, if necessary, perform further procedures in order to obtain sufficient appropriate evidence on which to base any conclusion on the subject matter; and
   3. Distribution of the report of factual findings will be restricted to the engaging party and the intended users identified;
2. The responsibilities of the assurance practitioner;
3. Reference to the Independence and Conduct Declaration, which the assurance practitioner is required to provide to the engaging party prior to agreeing the terms of engagement,^[60] which is confirmation that the assurance practitioner will apply ethical requirements as required by ASRS 4400;^[61] and
4. Reference to the expected form of the report of factual findings.

An example engagement letter for an agreed-upon procedures engagement is provided in Appendix 4, Example 1.

Planning and Performing an Agreed-upon Procedures Engagement

As the procedures to be conducted are agreed at the outset, planning is restricted to determining how the procedures can be conducted in an effective manner. It is not necessary for the assurance practitioner to carry out a risk assessment or determine materiality, as the procedures cannot be altered by them to respond to assessed risks. The procedures are decided by the engaging party, to meet their information needs, and findings are assessed by the intended users and not by the assurance practitioner.

Although the NGER Audit Determination requires the assurance practitioner to amend the plan if the procedures deviate from what was originally planned,^[62] this does not mean that the assurance practitioner has the discretion to alter the procedures without the express agreement of the engaging party. The assurance practitioner is not to exercise professional judgement in determining or modifying the procedures to be performed under ASRS 4400,^[63] as it is the responsibility of the engaging party to determine the procedures which they require conducted to meet their objectives.

Reporting on an Agreed-upon Procedures Engagement

When reporting on an agreed‑upon procedures engagement, ASRS 4400 requires the assurance practitioner to report only factual findings and not to include any evaluation or draw any conclusions.^[64]  In addition to the matters required by the NGER Audit Determination to be included in a verification report and those reflected in the NGER Audit Determination Handbook verification report template, ASRS 4400 also requires the report to contain some additional matters.^[65]  In complying with ASRS 4400, these matters can be addressed by including the following information in the agreed‑upon procedures report:

1. A statement that the engagement was performed in accordance with ASRS 4400;^[66]
2. A statement that the assurance practitioner has complied with the independence and conduct declaration provided to the engaging party;^[67]
3. Identification of any procedures agreed in the terms of engagement which could not be performed and why that has arisen;^[68]
4. A restriction on the use and distribution of the report to those parties identified in the report;^[69] and
5. A statement that the report relates only to certain information specified and it does not extend to the entity’s report or application as a whole.^[70]

Appendix 5, Example 1 provides an example report of factual findings which meets the requirements of both ASRS 4400 and the NGER Audit Determination.

Terms of Engagement

ASAE 3000 requires the terms of engagement for all assurance engagements to be agreed with the engaging party in writing, which is consistent with the requirements of the NGER Audit Determination.^[71]  The NGER Audit Determination^[72] and ASAE 3410^[73] also list the matters to be set out in the written terms.  ASAE 3410 requires the following items to be included in the terms, in addition to those set out in the NGER Audit Determination:

1. The responsibilities of the assurance practitioner;
2. Identification of the applicable criteria for the preparation of the Greenhouse and Energy Report or Emissions Report, if additional to the inclusion of provisions of the NGER legislation  that relate to the matter being audited as required by the NGER Audit Determination;
3. Reference to the expected form and content of any reports to be issued by the assurance practitioner and a statement that there may be circumstances in which the report may differ from its expected form and content; and
4. An acknowledgement that the entity agrees to provide written representations at the conclusion of the engagement.

The terms required by ASAE 3410 can be adapted to all assurance engagements.  Example engagement letters for both limited and reasonable assurance engagements are provided in Appendix 4, Example 2.

When agreeing the terms of engagement for an assurance engagement on a Greenhouse and Energy Report, the objective and scope of the engagement needs to address whether NGER Uncertainty, which is required to be reported to the Regulator along with the Greenhouse and Energy Report, is to be assured.

Where the engaging party is not the responsible party, such as for Regulator initiated engagements under the NGERS or CFI, clarification of the nature of any communication between the assurance practitioner and the responsible party needs to be addressed prior to commencement of the engagement and may be covered in the terms of engagement.

The responsible party may request that the assurance practitioner signs a confidentiality agreement. If the assurance practitioner signs such an agreement it needs to allow for the assurance practitioner to share such confidential information with the engaging party so that the scope of the engagement is not restricted.

Professional Competencies

When accepting or continuing an assurance engagement under any of the schemes addressed in this Guidance Statement, NGERS,^[74] ASAE 3000, and ASAE 3410^[75] all require the assurance practitioner to be satisfied that those who are to perform the engagement, including the engagement team and any assurance practitioner’s external experts, collectively possess the necessary professional competencies, encompassing knowledge and skills. For all assurance engagements these professional competencies include technical expertise in each of the subject matters to be assured, assurance skill and experience, which includes a depth of experience in applying the AUASB standards.

The technical expertise needed on the team will depend on the subject matter of the engagement, whether it be activity descriptions, emissions, production or record keeping. Technical expertise may be needed in emissions quantification, assessment of operational control, production processes for the relevant industry or carbon farming methods, in which case the assurance practitioner or team leader will need to be satisfied that the relevant expertise is reflected in the team or will be provided by an external expert. Whilst the market for assurance on emissions schemes is immature, it is beneficial for the assurance practitioner as team leader to engage a peer reviewer for the engagement with complementary expertise to that possessed themselves, regardless of the team’s expertise. For example, a team leader with primary expertise in emissions measurement may engage a registered company auditor as the peer reviewer and vice versa.

Suitable Criteria

The assurance practitioner is required to assess the suitability of the criteria when accepting an assurance engagement, whether the engagement is being conducted under ASAE 3000, ASAE 3410 or ASAE 3100. The criteria, which are the benchmarks against which the subject matter is evaluated or measured, for the engagements covered by this Guidance Statement include:

• NGERS – For Regulator initiated or voluntary assurance engagements under sections 73, 73A, 74 or 74A of the NGER Act, the criteria depends on the subject matter which is selected by the engaging party, which may include:
  • Greenhouse and Energy Report (section 19, NGER Act) - the NGER Measurement Determination provides the criteria for measuring emissions and energy and the NGER Act^[76] provides the criteria for determining operational control of facilities.
  • Compliance requirement - Requirements in the NGER Act or Regulations selected by the Regulator or engaging party for assurance.
• CPM – For mandatory reasonable assurance engagements under section 74AA, NGER Act:^[77]
  • Emissions Report (section 22A, NGER Act) - the CE Act^[78] and NGER Measurement Determination provides the criteria for measuring covered scope 1 and potential emissions embodied in an amount of designated fuel and the NGER Act^[79] provides the criteria for determining the facilities for which the liable entity has operational control.
  • Section 22B record keeping requirements (NGER Act) - the broad criteria for record keeping are whether the records allow the liable entity to report accurately in the Emissions Report, provide adequate evidence to the Regulator of their compliance with section 22A, are in a form that is easily and quickly accessible for inspection and audits and are retained for 5 years.^[80] More detailed criteria for record keeping are not legislated.
• JCP – For mandatory assurance on eligibility applications for an activity as EITE:
  • Measurement criteria for direct scope 1 emissions and electricity use are contained in the activity definitions in the guidance issued by the DCCEE^[81] and the NGER Measurement Determination.
  • The basis of preparation accompanying the application and the DCCEE guidance papers provide the criteria for determining production and revenue reported.
• JCP – For mandatory assurance on assistance applications for EITE activities:
  • The CE Regulations Schedule 1 provide the criteria for the activity definitions.
  • The measurement policies set out in the application provide the criteria for production and expected production, if applicable.
• JCP – For supplementary assistance applications for LNG production:
  • The CE Regulations^[82] provide the criteria for measurement and apportioning of emissions.
  • The measurement policies set out in the application provide the criteria for the process flow diagram and production reported.
• CFI – For mandatory assurance reports on an eligible offsets project required to accompany Applications for Certificate of Entitlement, under section 13 of the CFI Act, and Offsets Reports, under section 76 of the CFI Act, as set out in the CFI Regulations:^[83]
  • CFI Act section 27 declaration for the project, including project areas and attributes, provide criteria for project definition and boundaries.
  • CFI Methodology Determinations provide measurement criteria for relevant offset activity.
  • Requirements of the CFI Act provide the criteria for the project’s compliance with the Act, including notification and record keeping requirements.
  • Requirements of the applicable CFI methodology determination provide the criteria for the project proponent’s compliance with section 106, CFI Act, including content of the Offsets Report, information to be supplied to the Regulator, record keeping and monitoring requirements.
• CFI – For Regulator initiated or voluntary assurance engagements under section 214 or section 215, CFI Act:
  • Requirements in the CFI Act or associated provisions, including the CFI Regulations, selected by the Regulator or engaging party for assurance, which include reporting, notification requirements and record keeping requirements, provide broad criteria.
• RET – For mandatory engagements under regulation 22UB, RET Regulations, on applications for PEC:
  • RET Regulations Schedule 6 provides the criteria for definition of EITE activities.
  • RET Regulations[84] and the measurement policies set out in the application provide the criteria for measuring production and expected production, if applicable.
• The criteria for each engagement are summarised in Appendix 3.

For most of the engagements covered by this Guidance Statement, the criteria is provided by legislation or regulation, which is a prima facie indication that the criteria will be suitable. However, the criteria for measurement of emissions and energy which are provided in the NGER Measurement Determination, allow for multiple methodologies for most sources of emissions, so it is still necessary for the assurance practitioner to assess the suitability of the method selected as the criteria. The entity is required to identify the method type (1 to 4) and, if applicable, the criterion (AAA, AA, A or BBB) applied when submitting Greenhouse and Energy Reports and Emissions Reports. When assessing the suitability of the method applied as criteria, the assurance practitioner considers if the entity has changed methods from the previous period, as a lower order method can only be applied after a four year period of applying a higher method.^[85] If possible, the assurance practitioner obtains a basis of preparation from the responsible party at the outset, even if it is not required by legislation or regulation, to enable the assurance practitioner to readily identify the measurement methodologies applied and the manner in which other criteria, such as operational control in determining activity boundaries, have been applied in preparing the report or application.

For Offsets Projects, CFI provides a methodology determination^[86] for each activity for which ACCUs may be claimed and the Application for Declaration of an Eligible Offsets Project requires identification of the chosen CFI methodology determination. The relevant determination may allow for different methods of measurement and the entity may have applied judgements which impact how the offsets are measured in the Offsets Report.

Criteria for production reported in applications for assistance under JCP or RET are not provided by legislation or regulation, however the suitability of the criteria can be assessed against industry practice. The criteria for compliance matters are the requirements contained in the relevant legislation or regulation.

Applications for formal assessment of activities as EITE under JCP do require the basis of preparation to be reported. As the criteria for applications for free carbon units under JCP allow for some choices in methodologies, it is again important that the assurance practitioner determines whether the criteria used and significant judgements made in preparing the JCP application will be adequately documented and made available to the engagement team.

In accepting the engagement, the assurance practitioner needs to be satisfied that they will be provided with the criteria used in preparation of the subject matter, such as a basis of preparation, detailing which quantification methods were applied, and information regarding significant judgements made in preparing the relevant report or application. Where it appears unlikely that this information will be available to the assurance practitioner when conducting the engagement, the practitioner may choose not to accept the engagement.

Criteria for Assurance over Record keeping

Reasonable assurance is required under the CPM, for liable entities meeting the threshold, on compliance with the record keeping requirements in the NGER Act in relation to the eligible financial year.^[87] Although those records are required to be kept for 5 years, as the reasonable assurance report relates only to the eligible financial year, there is no need for the assurance practitioner to gather evidence regarding retention of records relating to prior reporting periods. If the assurance practitioner becomes aware of a failure of the liable entity to retain records for the required 5 year period, then this is communicated to the Regulator and those charged with governance along with any other compliance breaches.^[88]

The assurance practitioner can expect records to include both the decisionmaking process for selecting measurement methodologies and the details of the calculation and data analysis methods used for GHG emissions and energy production and consumption. Records may include:

1. A list of all emissions sources monitored;
2. The activity data used for calculation of GHG emissions for each source, categorised by process and fuel or material type;
3. Documentary evidence relating to calculations—for example, receipts, invoices, and details of payment methods;
4. Documentation of the methods used for GHG emissions and energy estimations;
5. Documents justifying selection of the monitoring methods chosen;
6. Documentation of the collection process for activity data for a facility and its sources;
7. Records supporting business decisions and accuracy, especially for high risk areas relating to reporting coverage (for example, applying concepts of controlling corporation, corporate group, and facility); and
8. When facility specific emissions factors are used, the monitoring or sampling methods used, evidence of compliance with relevant sampling and analysis standards adhered to in applying those methods and the results from the development of these emissions factors, as well as information such as biomass fractions and oxidisation or conversion factors.

Availability of Evidence

When the assurance practitioner is engaged by the Regulator to report on compliance with requirements of the NGER Act or CFI Act, invariably this occurs after the relevant period end, as the Regulator usually initiates engagements after the reporting entity’s Greenhouse and Energy, Emissions or Offsets Report is lodged. Greenhouse and Energy, Emissions and Emissions Reports are required to be lodged by 31 October, four months after the end of the reporting period, and Offsets Reports are required to be lodged between 12 months and 5 years after the project was declared eligible. So engagements which are initiated after period end will require evidence with respect to activities which occurred at least three months and up to 5 years earlier. This presents some potentially substantial restrictions on the availability of sufficient appropriate evidence to support an assurance conclusion. When accepting the engagement, the assurance practitioner considers the sources of evidence which may be available and considers whether procedures which are able to be conducted after period end are likely to be adequate to obtain sufficient appropriate evidence. Reliance on controls, for example, may be hampered, as evidence of the operating effectiveness of controls may need to be gathered by observation and enquiry contemporaneously with the operation of those controls. If controls cannot be effectively tested, the assurance practitioner may be able to conduct tests of details alone to support the assurance conclusion. However, if there is likely to be a limitation of scope due to lack of available evidence, the assurance practitioner may choose not to accept the engagement or bring the potential for a modified assurance report to the Regulator’s attention prior to commencement of the engagement.

For assurance engagements required by legislation on Emissions Reports^[89] or Offsets Reports^[90], it is preferable if the engaging party initiates the engagement prior to or early in the reporting period, to allow the assurance practitioner the opportunity to plan the engagement and conduct assurance procedures during the period if necessary in gathering sufficient appropriate evidence. Liable entities under CPM and ROEs under CFI may find it beneficial to consult with an assurance practitioner at the start of the reporting period to ensure that suitable evidence will be available for the assurance practitioner when the engagement is conducted, so that the likelihood of modifications to the assurance conclusion is reduced. This is particularly pertinent to Offsets Reports which may cover a period of up to 5 years after the declaration of the Offsets Project.

In order to plan an assurance engagement on a report, whether prepared under section 19 or section 22A, NGER Act, or section 76, CFI Act, or an application for assistance, the assurance practitioner obtains information regarding the basis of preparation for that report or data in that application, which may include:

1. The organisational structure, operations and facilities, including outsourcing;
2. Sources of emissions, energy or offsets for each material facility;
3. Description of reporting and facility boundaries, including distinction between site and facility definitions;
4. Measurement methodologies and measurement criterion selected, including key points of measurement, assumptions, basis of estimates, significant judgements made and any change in methodologies from the previous reporting period, if any;
5. Description of process to ensure completeness of sources per facility;
6. Discussion of complex areas of operation or areas of significant uncertainty; and
7. Description of data collection, record keeping and aggregation process, including key controls.

The form by which a basis of preparation may be documented will vary and may include a formal document to accompany the report, a reporting manual, checklists or responses to an assurance practitioner questionnaire. The availability of a basis of preparation may also assist the assurance practitioner in planning assurance procedures on record keeping which is required to be opined on for mandatory assurance engagements under the CPM^[91] and CFI.^[92]

Materiality in Planning and Performing the Engagement

When planning and performing an assurance engagement, whether the engagement is being conducted under ASAE 3000, ASAE 3100 or ASAE 3410, the assurance practitioner considers materiality.^[93] The materiality levels set (overall and performance materiality) will determine the nature, timing and extent of risk assessment and further assurance procedures to be performed on the subject matter, whether it be emissions, energy, offsets, disclosures, production, activity description or compliance matters. During the engagement the assurance practitioner reassesses materiality if matters come to their attention that indicate that the basis on which materiality was assessed has changed.

In determining materiality, the assurance practitioner applies their professional judgment to understand and assess what factors might influence the decisions of the Regulator and other intended users and the magnitude and nature of omissions, misstatements, non-disclosures or compliance breaches which may adversely affect decisions made by those users. Where particular types of emissions, disclosures or compliance matters may have a greater impact on the decisions of users, materiality may need to be set lower for those amounts or matters.

Materiality is determined in the same way whether the engagement is a reasonable or limited assurance engagement. The difference between limited and reasonable assurance engagements lies in the nature, timing and extent of evidence gathering procedures, which will differ in order to reduce the risk of a material misstatement or compliance breach remaining undetected to an acceptably low level, in the case of a reasonable assurance engagement, or to a limited level, in the case of a limited assurance engagement. So the risk of material misstatements or compliance breaches in a limited assurance engagement is not reduced to the same extent as in a reasonable assurance engagement, because of the more limited nature, timing and extent of procedures conducted. In a limited assurance engagement, the assurance practitioner seeks to obtain a meaningful level of assurance, which is likely to enhance the intended users’ confidence about the subject matter to a degree that is clearly more than inconsequential.

Factors which may influence the decisions of the intended users, include whether the reported amounts, volumes, disclosures or compliance matters:

• Are close to a reporting or liability threshold.
• May impact government targets.
• May influence resources allocation of the intended users.
• Give rise to a carbon unit liability.
• Give rise to eligibility for assistance.
• Give rise to a saleable offset.

The assurance practitioner determines:

1. Materiality for the report or application as a whole and, if appropriate, materiality for particular classes of emissions, energy production, consumption, disclosure or compliance matter, for assessing misstatements or breaches identified; and
2. Performance materiality, for assessing the risks of material misstatement and determining the nature timing and extent of further procedures.

For Greenhouse and Energy Reports, under section 19, NGER Act, overall materiality is determined separately for emissions, energy consumption and energy production, as these amounts are discrete and quantified in different units so they cannot be aggregated.

When considering materiality, both quantitative factors, that is the magnitude of the amounts, and qualitative factors, such as how the information will be used or how close the reported amounts are to applicable thresholds, are taken into account.

As a starting point for determining materiality a percentage may be applied to a chosen benchmark. The benchmark which is appropriate for determining materiality for the report or application as a whole or compliance matter will depend on the circumstances and subject matter of the engagement. In the absence of other circumstances, the benchmark chosen is within the context of the assurance being sought, so if the subject matter of the engagement is at a group level then the materiality will be based on benchmarks for the group and likewise if assurance is on a single facility then the benchmark will be at a facility level. Examples of benchmarks for overall materiality which may be appropriate, depending on the nature of the engagement, include:

1. Scope 1 emissions in an Emissions Report for liable entity under the CPM;
2. Separate benchmarks for total emissions (scope 1 and 2), energy consumption and energy production in a Greenhouse and Energy Report;
3. Specific amount, volume or compliance matter subject to assurance, where the subject matter of the engagement is not the entire report or application;
4. Each main disclosure (emissions, assumptions in the process flow diagram and production) in an application for assistance under JCP, resulting in multiple benchmarks; or
5. Total offsets in an Offsets Report, which may cover a period of 1 to 5 years, for an eligible offsets project.

The percentage applied to the benchmark to determine overall materiality will depend on the circumstances of the engagement and the amounts or volumes which may influence the decisions of users.

Performance materiality is usually set below the overall materiality so that the aggregated uncorrected or undetected misstatements is not likely to exceed overall materiality. If only one source is reported, it may be appropriate for performance materiality to be set at the same amount as overall materiality. It is not simply a mechanical calculation but involves the exercise of professional judgement.

Overall, materiality and performance materiality, including the percentages and benchmarks on which they are based, are documented in the assurance engagement plan.

Identifying and Assessing the Risks of Material Misstatement or Compliance Breach

When identifying and assessing risks of material misstatement or compliance breach as a basis for designing and performing further assurance procedures, the assurance practitioner does so at the level of the report or application as a whole and, for reasonable assurance engagements, also at the assertion level for material classes of emissions, energy production, energy consumption or compliance matters.

Factors impacting the risk assessment for engagements on emissions, energy or offsets, in addition to those identified in ASAE 3410,^[94] include:

1. The immaturity of the reporting systems;
2. The lack of a double entry recording system;
3. The estimation and uncertainty inherent in the methodologies applied;
4. The application of thresholds to determine liabilities which may create a bias towards understatement or fractionalisation of facilities to fall below the threshold; and
5. Any bias inherent in the measurement methodology.

Assurance engagements conducted for the first time will be higher risk usually than subsequent years, as the entity’s systems and controls over the measurement and recording of emissions, energy consumption, energy production or offsets is likely to be immature and so more likely to contain deficiencies. In addition, the documentation maintained by the entity may not entirely meet the assurance practitioner’s needs and measurement methodologies may not yet be well understood or procedures well established.

Assertions

Assertions are used as a means of assessing the risk of material misstatement and designing procedures to address those risks in reasonable assurance engagements and may also be applied in limited assurance engagements. The assurance practitioner identifies and assesses risk at the overall report level, whether it be a Greenhouse and Energy Report, an Emissions Report, application for assistance or Offsets Report, which is subject to assurance, and also at the assertion level for volumes and disclosures. The assertions identified in the NGER Measurement Determination are: reliability, accuracy and completeness of the matter being audited. ASAE 3410^[95] provides more extensive assertions, which can be applied by the assurance practitioner in considering the different types of potential misstatements in emissions and can also be applied when assuring production or offsets volumes reported, which can be categorised as follows:

1. Assertions about activities during the period, including quantification of emissions, production or offsets:
   1. Occurrence – quantities that have been recorded have occurred and pertain to the entity;
   2. Completeness – all quantities that should have been recorded have been recorded;
   3. Accuracy – quantities have been measured and recorded appropriately;
   4. Cut off – quantities have been recorded in the correct period; and
   5. Classification – quantities have been recorded in the proper category.
2. Assertions about presentation and disclosure:
   1. Occurrence and rights and obligations – disclosed quantities and other matters have occurred and pertain to the entity;
   2. Completeness – all disclosures that should have been included in the report or application have been included;
   3. Classification and understandability – information on the subject matter is appropriately presented and described, and disclosures are clearly expressed;
   4. Accuracy and quantification – quantification and other information on the subject matter is appropriately disclosed; and
   5. Consistency – quantification policies are consistent with those applied in the prior period, or changes are justified and have been properly applied and adequately disclosed; and comparative information, if any, is as reported in the prior period or has been appropriately restated.

When assessing the risks for engagements for which compliance with legislative or regulatory requirements is reported upon, some or all of these assertions may be applicable depending on the nature of the compliance matter.

Certain amounts or volumes will be assessed as higher risk due to the nature of those emissions or energy. For example, fugitive emissions, which are inherently difficult to measure, may be assessed as high risk with assurance procedures targeting completeness and accuracy of those fugitive emissions in response to that assessed risk.

Measurement Methodologies

When the criteria for the engagement includes measurement methodologies, the NGER Measurement Determination provides measurement methodologies for estimating scope 1 and scope 2 emissions, energy production and energy consumption and the CFI Methodology Determinations provides measurement methodologies for each offset activity. The methodologies are likely to be amended periodically to reflect new information in relation to methods and factors. The current methodologies are reflected and explained in Technical Guidelines for the estimation of greenhouse gas emissions by facilities in Australia.

Methodologies allowed under the Measurement Determination for scope 1 emissions, being direct emissions that arise onsite from the activities of the controlling corporation or facility, may include methods rated 1, 2, 3 or 4, with 1 representing the lowest order method or the least accurate with the greatest measurement uncertainty and 4 representing the highest order method or most accurate with the lowest measurement uncertainty. These methods are based on:

• Method 1: Applies national average emissions factors determined by the DCCEE to estimate emissions.
• Method 2: A facility specific method using industry sampling and Australian or international documentary standards for analysis of fuels and raw materials.
• Method 3: A facility specific method using Australian or international documentary standards for both sampling and analysis of fuels and raw materials.
• Method 4: Direct monitoring of emissions systems on a continuous or periodic basis.

Once a method has been selected by the controlling corporation or facility, this method is required to be applied for a four year period unless a higher order method is applied. The controlling corporation may only move to a lower order method after the four year period. If multiple reports are produced for the one facility the same methods are required to be used for those reports.^[96]

Within certain methods, different criterion are permitted to be applied, which may include measurement criteria which are rated AAA, AA, A or BBB, ranging from the highest order to the lowest order measurement criteria. Once a higher order measurement criteria, either AAA or AA, is applied the reporting entity is required to continue applying that criteria for a minimum period.^[97]

Scope 2 emissions are indirect emissions which arise primarily as a result of the consumption of electricity, heating, cooling or steam by the controlling corporation or facility. Scope 2 emissions are either calculated from:

1. State or territory based factors, which are updated each year based on the current mix of electricity generation sources, for electricity purchased from the grid; or
2. Vendor estimates of scope 1 emissions, for electricity, heating, cooling or steam purchased off grid.

Whilst a number of different methodologies are permitted under the NGER Measurement Determination for calculating the emissions reported from each source, those methodologies vary in their accuracy. The accuracy of the methodology is reflected in the uncertainty associated with that methodology. The amount of uncertainty associated with the estimate for the total amount of scope 1 emissions in a Greenhouse and Energy Report is required to be reported to the Regulator.^[98] This NGER Uncertainty is equivalent to statistical uncertainty which is just one component of “estimation uncertainty”, as referred to in ASAE 3410^[99] which is defined in the GHG Protocol Guidance.^[100] Estimation uncertainty comprises model uncertainty and parameter uncertainty, which itself comprises statistical (reported under NGERS) and systematic uncertainty. Uncertainty which is inherent in the measurement methodologies, such as an emissions factor, which are provided under the NGER Measurement Determination, will not usually impact the assurance conclusion. However, any material uncertainty or misstatement in the parameters which feed into the methodology applied, such as a site specific factor or activity data, need to be considered in reaching the assurance conclusion.

ASAE 3410^[101] and ASAE 3100^[102] require the assurance practitioner to obtain an understanding of the entity and its environment and identify and assess the risk of material misstatement or compliance breach in order to plan the engagement. In gaining this understanding, ASAE 3410^[103] provides a comprehensive list of matters to be considered, which can be readily adapted to engagements which do not involve emissions. ASAE 3410^[104] requires the assurance practitioner to conduct the following procedures in obtaining that understanding and assessing risk: enquiries, analytical procedures and observation and inspection.

For a limited assurance engagement the assurance practitioner does not normally develop the depth of understanding of internal controls as is required in a reasonable assurance engagement^[105] and so gaining that understanding may be limited to enquiries.

The assessment of risk is directed at identifying those risks that may result in either the subject matter being materially misstated, as reported in a Greenhouse and Energy Report, Emissions Report, Offsets Report or an assistance application, or, for a compliance engagement, the existence of material breaches of the relevant requirements.

The assurance practitioner designs and performs further assurance procedures which are responsive to assessed risks of material misstatement or material compliance breach. The assurance procedures performed on any particular engagement is a matter of professional judgement and the nature, timing and extent of procedures will vary widely due to the different circumstances of each engagement. The assurance practitioner chooses a combination of assurance procedures, which may include: inspection, observation, confirmation, recalculation, reperformance, analytical procedures and enquiry. Irrespective of the assessed risks of material misstatement or material compliance breach, the assurance practitioner designs and performs test of details for each material source of emissions, energy or offset, production process, class of transaction or compliance matter. In designing these tests the assurance practitioner needs to consider the risks of material understatement, particularly with respect to immaterial amounts reported, or risk of material omission.

Work Effort for a Limited versus Reasonable Assurance Engagement

ASAE 3410 clearly differentiates between the work which is required to be conducted for a limited versus a reasonable assurance engagement. However, the nature, timing and extent of evidence gathering procedures which are conducted in any given circumstance is a matter of professional judgement and is determined in response to the assurance practitioner’s determination of materiality, risk assessment and the results of the procedures conducted in response to assessed risks. As the level of assurance obtained in a limited assurance engagement is lower than in a reasonable assurance engagement, the procedures the assurance practitioner will perform will vary in nature from and will be less in extent than for a reasonable assurance engagement.^[106] In a limited assurance engagement procedures primarily involve enquiries and substantive analytical procedures and may not include tests of controls. Although procedures in a limited assurance engagement will be much more limited in nature, timing and extent than for a reasonable assurance engagement, ASAE 3000, ASAE 3100^[107] and ASAE 3410^[108] require additional procedures to be conducted if the assurance practitioner becomes aware of a matter which causes them to believe the subject matter may be materially misstated or there may be a material compliance breach. The assurance practitioner may conduct procedures more akin to a reasonable assurance engagement on this particular matter in order to satisfy themselves that either the subject matter is not likely to be materially misstated or non-compliant or it is materially misstated or non-compliant.

Most engagements addressed in this Guidance Statement are reasonable assurance engagements, however limited assurance engagements may be:

1. Initiated by the Regulator for monitoring or compliance purposes under NGERS or CFI;
2. Initiated voluntarily by the entity; or
3. Required for applications for JCP assistance, which include facilities without continuously operating EITE activities or commencing significant expansions, on expected production. Limited assurance in this case is provided on the reasonableness of assumptions for the preparation of expected production and the preparation of expected production on the basis of the assumptions and the basis of preparation.

In a reasonable assurance engagement, procedures will include tests of controls as well tests of details. When conducting a reasonable assurance engagement, if the assurance practitioner is able to obtain evidence that the controls they wish to rely on are operating effectively, then the nature, timing and extent of tests of details may be reduced or modified. If reliance is to be placed on the operating effectiveness of controls throughout the period, then testing will need to cover that period. Alternatively, if the identified controls are not operating effectively, then the nature, timing or extent of tests of details will need to be increased or modified.

Sampling

When testing controls or conducting tests of details on amounts, volumes or compliance activities, the assurance practitioner may select:^[109]

1. All items, where the number of items are small and the risks are significant;
2. Specific items based on their attributes, although the results cannot be projected to the entire population;
3. A non statistical sample; or
4. A statistical sample, from which conclusions may be drawn about the entire population.

If a sample is to be selected for testing, the assurance practitioner considers the purpose of the procedure and the characteristics of the population,^[110] determines a sample size which may reduce sampling risk to an acceptably low level and selects items so that each unit has a chance of selection. Sampling may be used for a limited assurance engagement, if appropriate, however as the acceptable level of risk will be higher the sample size may be smaller than if a reasonable assurance engagement was being conducted. For any misstatements or compliance breaches identified the assurance practitioner investigates the nature and cause and (unless it is clearly established to be an anomaly) projects the misstatements to the population.

Sampling and analysis may be required to be used by an entity extensively under the NGER Measurement Determination to determine the composition of fuels or materials produced or consumed in order to estimate emissions and also under CFI methodologies. This sampling conducted by the entity is contrasted to that conducted by the assurance practitioner, in that the assurance practitioner may use sampling to test any of the parameters which form part of the emissions or offsets calculated, not solely the composition of a fuel or material.

Estimates

ASAE 3410^[111] explains the procedures which are conducted by the assurance practitioner with respect to estimates for limited and reasonable assurance engagements on reported emissions. This approach can be applied as guidance for other engagements addressed in this Guidance Statement.

Using the Work of Experts

Engagements to provide assurance on emissions, energy, offsets or compliance with NGER Act, CE Act, CFI Act or related regulations requires a broad ranges of skills, which may necessitate the engagement of an industry, environmental, scientific, assurance or other technical expert from outside of the assurance practitioner’s practice in order to ensure that those who are to perform the engagement collectively possess the necessary professional competencies. Experts may be engaged to work on the engagement as part of a multidisciplinary team, to provide advice on a discrete matter, such as certain measurement methodologies, or to be involved at a specific stage in the engagement, such as to provide a quality control review.

When an expert is to be used, the assurance practitioner still needs to understand their work sufficiently to conclude on the subject matter, including obtaining sufficient appropriate evidence that the expert’s work is adequate for the purposes of the engagement.^[112]

For an engagement involving assurance on emissions it is usually preferable if the expertise of the quality control reviewer is that of a different professional discipline to that of the assurance practitioner, as the quality control reviewer will bring complementary skills to the engagement and may be in a better position to challenge the adequacy of the evidence provided by the work of experts, within the quality control reviewer’s field of expertise.

Evidence Held at Service Organisations

Records may be kept by a third party or service organisation, which provides services to the controlling corporation or the facility, with respect to the subject matter of the engagement. These records may include documentation relating to emissions, energy, offsets, production or compliance. If evidence which is required for the purposes of the assurance engagement is held by a service organisation, then arrangements need to be made either for an assurance report to be obtained by the service organisation or for access to the records of the service organisation by the assurance practitioner to obtain that evidence directly.

When obtaining an understanding of the subject matter and other engagement circumstances as required by ASAE 3000 or an understanding of the entity and its environment under ASAE 3410,^[113] including the nature of the operations, the assurance practitioner considers the organisational boundary of the controlling corporation or facility applicable to the engagement. The assurance practitioner determines whether any service organisations maintain records of material amounts or volumes which fall within the organisational boundary of the activity which is being reported on and so hold evidence needed to support the assurance conclusion. If so, the assurance practitioner determines whether they intend to rely on the operating effectiveness of controls at the service organisation or on evidence held at the service organisation regarding assertions relating to amounts, volumes or compliance matters. The assurance practitioner determines whether that evidence may be obtained by:

1. An assurance practitioner’s report on controls over the subject matter provided by the service organisation;
2. Performing tests of controls or tests of details at the service organisation; or
3. Using another assurance practitioner to perform those tests of controls or tests of details.

Fraud

For assurance engagements on emissions, ASAE 3410 requires the assurance practitioner to respond appropriately to fraud or suspected fraud and compliance breach or suspected compliance breach identified during the engagement. The nature of that response is detailed in the application material to ASAE 3410.^[114] The requirements and application material in ASAE 3410 may also be used as guidance for other engagements addressed in this Guidance Statement to which ASAE 3410 does not directly apply. In addition, ASA 240^[115] may be used as additional guidance in these circumstances.

When assuring emissions, ASAE 3410^[116] requires the assurance practitioner to accumulate misstatements identified during the engagement, other than those that are clearly trivial. For engagements relating to other subject matters, including energy, offsets, record keeping or compliance, the assurance practitioner also accumulates any misstatements or compliance breaches. Misstatements or breaches may be factual, where they have been identified and quantified; judgemental, where they arise from differences between the assurance practitioner’s and management’s judgements; or projected, where they are an estimate based on a sample of the population.

Revision of the assurance engagement strategy or plan in order to perform additional procedures may be necessary if:

1. The nature of the misstatements or breaches and the circumstances of their occurrence indicate that other misstatements or breaches exist, which when aggregated with those identified could be material; or
2. The aggregated misstatements or breaches approach materiality.^[117]

Once the additional procedures have been conducted, ASAE 3410 requires the assurance practitioner to request that the identified misstatements are corrected by the responsible party.^[118] This will be possible if the report or application has not yet been lodged or if resubmission of data is permitted under the relevant scheme, but not for engagements conducted subsequent to lodgement where resubmission is not permitted. Compliance breaches identified may also be rectified by the responsible party in certain circumstances.

The assurance practitioner evaluates the effect of the remaining misstatements or breaches, to determine whether they are material individually or in aggregate. Materiality, determined in planning the engagement, may need to be reassessed if the engagement commenced prior to finalisation of the report or application.^[119]

Compliance Breaches

Compliance breaches which the assurance practitioner becomes aware of during the conduct of an assurance engagement are required to be reported to the Regulator under Part B of the assurance report, for reports issued under NGERS.^[120] They are also reported to those charged with governance under ASAE 3000 or ASAE 3410,^[121] along with any identified or suspected fraud and non-compliance with laws and regulations. However, a compliance breach does not impact the assurance report conclusion, unless the breach:

1. Relates to a compliance matter which is part of the subject matter of the engagement on which the assurance practitioner is required to conclude; or
2. Results in a material misstatement of the subject matter or insufficient evidence being available to form a conclusion.

Compliance breaches which may impact the assurance conclusion include:

• For engagements initiated by the Regulator under the NGER and CFI Acts: material breaches of the compliance matters under the NGER or CFI Act identified in the scope of the engagement.
• For assurance reports under the CFI Act, submitted with an Offsets Report: material breaches of any requirement of the CFI Act.
• For assurance reports under section 74AA, NGER Act for the purposes of the carbon pricing mechanism: material breaches of the section 22A reporting requirements or section 22B record keeping requirements.

Control Deficiencies

If the assurance practitioner identifies any deficiencies in internal controls, the assurance practitioner determines whether those deficiencies individually or in combination amount to significant deficiencies. Significant deficiencies are communicated to those charged with governance of the responsible party on a timely basis. Significant deficiencies which the assurance practitioner has communicated or intends to communicate to those charged with governance are also communicated to management with oversight responsibilities for the subject matter, along with other deficiencies of sufficient importance to merit management’s attention.^[122] When reporting under NGERS, the assurance practitioner determines whether significant deficiencies are a matter required to be included in Part B of the assurance report.

In assessing the significance of deficiencies identified the assurance practitioner may use ASA 265^[123] as useful guidance.

Where the Regulator is the engaging party, such as engagements under section 73 and section 74 of the NGER Act or section 214 and section 215 of the CFI Act, control deficiencies are communicated by the assurance practitioner to the responsible party in the manner agreed in the engagement letter.

Deficiencies in controls do not affect the conclusion in the assurance report unless:

1. The subject matter of the engagement includes the description, design or operating effectiveness of those controls; or
2. Reliance on the operating effectiveness of those controls is necessary in order to obtain sufficient appropriate evidence on which to base the assurance conclusion and alternative procedures are not available.

ASAE 3000 and ASAE 3100 require the assurance practitioner to obtain written representations from the responsible party, which may include:

1. Confirmation of oral representations;
2. Confirmation that the responsible party has provided the assurance practitioner with all information which they are aware is relevant to the engagement and all reasonable facilities and assistance during the engagement; and
3. Acknowledgement that the responsible party has prepared the report or application in accordance with the relevant legislation and regulations and that all relevant matters are reflected in that report or application.

These written representations are obtained as close as possible to the date of the assurance report, but not after that date, and cannot replace other evidence which the assurance practitioner can reasonably expect to be available.

ASAE 3410 expands on the matters to be addressed in representations from the responsible party.

ASAE 3000, ASAE 3100^[124] and ASAE 3410^[125] require the assurance practitioner to consider subsequent events up until the date of the assurance report and provide the requirements for the appropriate response to any such matters identified.

ASAE 3000, ASAE 3100^[126] and ASAE 3410^[127] provide requirements for the matters which are documented by the assurance practitioner. The NGER Regulations^[128] require retention of the assurance practitioner’s records for 5 years.

In determining the extent of documentation to be prepared and retained the assurance practitioner may consider what is necessary to provide an understanding of the work performed and the basis of the principal decisions taken to another experienced assurance practitioner who has no previous experience with the engagement. This understanding is not expected to extend to the detailed aspects of the engagement without discussions with the assurance practitioner who prepared the documentation.

Engagements conducted under the NGER Audit Determination, which include assurance engagements conducted under NGERS, CPM and CFI, are required to be evaluated by a peer reviewer.^[129] The outcomes of that evaluation are required to be reported in Part B of the assurance report.^[130] A peer review under NGER Audit Determination is equivalent to an engagement quality control review under ASAE 3410. Consequently, when conducting their evaluation the peer reviewer addresses the matters required by ASAE 3410.^[131]

The required content of the assurance report for each scheme is set out in:

• NGERS and CPM – NGER Audit Determination^[132] and ASAE 3410, whether initiated by the Regulator or required to be submitted with the related Greenhouse and Energy Report or Emissions Report.
• JCP activity assessments – ASAE 3000 for assurance on applications for formal assessment of activities as EITE.
• JCP assistance – CE Regulations^[133] and ASAE 3000 for assurance on applications for EITE assistance and LNG supplementary assistance.
• CFI – NGER Audit Determination and ASAE 3100 for assurance on compliance with the CFI Act.
• RET – RET Regulations, NGER Audit Determination, ASAE 3000 and ASAE 3100 for assurance on applications for a PEC.

ASAE 3000 applies to all engagements covered by this Guidance Statement and, in addition, ASAE 3410 applies to engagements to report on emissions and ASAE 3100 applies to engagements to report on compliance matters. The matters required to be included in assurance reports under the NGER Audit Determination are consistent with the content required in ASAE 3000, ASAE 3100 and ASAE 3410, except that those standards also require the assurance report to include:

1. When the criteria used to evaluate or measure the subject matter is only available to specific intended users, or are relevant only to a specific purpose, a statement restricting the use of the assurance report to those intended users or that purpose;^[134]
2. A statement to identify the responsible party and to describe the responsible party’s and the assurance practitioner’s responsibilities;^[135] and
3. In the case of a limited assurance engagement, a statement that the procedures performed in a limited assurance engagement vary in nature from, and are less in extent than for, a reasonable assurance engagement. As a result, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had a reasonable assurance engagement been performed.^[136]

Assurance practitioners’ reports under the NGER Audit Determination are long form reports which require detailed findings to be reported under Part B. Part B need not repeat the entirety of the engagement plan nor the detail contained in the working papers which document the work conducted. As the NGER Audit Determination requires that Part B contains details of matters that required particular attention during the engagement, particularly impacted carrying out the engagement, the assurance practitioner believes amounts to a contravention of the NGER Act or NGER Regulations or any other matters which should be mentioned, in addition to the outcome of the peer review, it is not necessary to report trivial matters. The assurance practitioner may report how any misstatements or breaches are aggregated, whether they are material and if they have impacted the conclusion reached.

The assurance practitioner is only required to conclude on NGER Uncertainty reported by the entity in OSCAR if the provision of assurance on NGER Uncertainty has been agreed in the terms of engagement. If assurance on NGER Uncertainty is not included in the scope of the engagement, the assurance practitioner may include a statement to that effect in the assurance report on a Greenhouse and Energy Report to avoid any misunderstanding. If the assurance practitioner identifies, in the course of their work, a material misstatement or inconsistency in the NGER Uncertainty reported, if it does not impact the assurance conclusion, they may report it in an “Other Matter paragraph”^[137] and in Part B of the assurance report.

Example reports for limited assurance and reasonable assurance engagements are provided in Appendix 5, Examples 2 and 3 respectively.

Other Information

If the Greenhouse and Energy or Emissions Report and accompanying assurance report is contained within other documents, ASAE 3410^[138] requires the assurance practitioner to read the other information in those documents and take appropriate action, including discussion with the entity, if it could undermine the credibility of the Greenhouse and Energy or Emissions Report and accompanying assurance report. When conducting other assurance engagements, the assurance practitioner uses ASAE 3410 and ASA 720^[139] to provide guidance with respect to other information. The assurance practitioner will usually need to take action if they identify a material inconsistency or a material misstatement of fact in the other information.

Modifications to the Assurance Conclusion

ASAE 3000 allows for the following modifications to the assurance conclusion:

1. A qualified conclusion;
2. An adverse conclusion; and
3. A disclaimer of conclusion, which is equivalent to an “inability to form a conclusion” in the NGER Audit Determination.

ASAE 3000 requires that:

1. If there is a limitation of scope, imposed either by circumstances, the responsible party or the engaging party, which imposes a restriction which prevents the assurance practitioner obtaining the evidence required, then the assurance practitioner is required to express, depending on the pervasiveness and materiality of the matter:
   1. A qualified conclusion; or
   2. A disclaimer of conclusion.
2. If the report or application is materially misstated or there is material non-compliance with the specified requirements, the assurance practitioner is required to express, depending on the pervasiveness and materiality of the matter:
   1. A qualified conclusion; or
   2. An adverse conclusion.

Even though the matters which lead to a qualified conclusion are not so material as those which lead to a disclaimer or adverse conclusion, it is still necessary for them to be material under ASAE 3000 to result in a qualification. Misstatements, compliance breaches or a limitation of scope, which are not material, may still be communicated to the Regulator if they relate to a contravention of the relevant legislation or regulations and to those charged with governance if they relate to significant deficiencies in controls which need to be addressed.

If a material misstatement or compliance breach is identified during the engagement and the report or application is adjusted to correct the misstatement or the breach rectified for the relevant period, the assurance practitioner will be able to issue an unmodified conclusion.

Emphasis of Matter and Other Matter Paragraphs

In complying with ASAE 3000 and ASAE 3410,^[140] when the assurance practitioner considers it necessary to draw users’ attention to:

• A matter or matters presented or disclosed in a Greenhouse and Energy Report, an Emissions Report, an Offsets Report or a JCP or PEC application that, in the assurance practitioner’s judgement, are of such importance that they are fundamental to users’ understanding of that report or application the assurance practitioner includes an Emphasis of Matter paragraph.
• Any matter or matters other than those that are presented or disclosed in the relevant report or application, which in the assurance practitioner’s judgement is relevant to users’ understanding of the engagement, the assurance practitioner’s responsibilities or the assurance report, the assurance practitioner communicates that matter in an Other Matter paragraph. Other Matter paragraphs may cover a pervasive limitation of scope, where the assurance practitioner cannot withdraw from the engagement, or a restriction on distribution.

Whilst Emphasis of Matter paragraphs and Other Matter paragraphs are not considered in the NGER Audit Determination, the assurance practitioner is not prevented by legislation or regulation from including such paragraphs when appropriate. An Emphasis of Matter or Other Matter paragraph does not affect the assurance practitioner’s conclusion.