The American Institute of CPAs and CalCPA, California’s state society of CPAs, recently filed a joint comment letter to the California Air Resources Board recommending clarifications to California’s climate risk disclosure rules.
In December, CARB issued an Information Solicitation to help shape regulations for the state’s upcoming Climate Corporate Data Accountability Act and Climate-Related Financial Risk Act. In response, AICPA and CalCPA answered CARB’s questions and highlighted areas where more clarity is needed to ensure CPAs can effectively support a practical and efficient climate disclosure framework.
“Transparency and accountability in sustainability reporting and assurance are crucial for building stakeholder trust and meeting market and public expectations,” the comment letter states. “To strengthen confidence in reported information, we encourage legislators and regulators to incorporate recognized sustainability reporting and assurance standards, which already outline different levels of assurance, and establish uniform requirements for assurance practitioners.”
The AICPA and CalCPA recommend that CARB consider:
- Providing clear guidance implementation and compliance in the first year. “CARB should update its rulemaking timeline, clarify how it will address statutory deadlines if rulemaking is delayed, and provide implementation guidance on reporting and clarity on assurance requirements for the first reporting cycle,” the letter reads.
- Broadening acceptable reporting standards. Allow climate-related disclosures introduced by the IFRS Foundation to be accepted as recognized reporting standards under the California rules, both for simplicity and to ensure consistency and comparability among entities.
- Aligning assurance standards with recognized terminology. “The use of non-standard terms can create confusion for practitioners, preparers and report users, making it harder to apply standards correctly.,” the comment letter notes. “AICPA assurance standards guide CPAs in assurance engagements, which are subject to ongoing monitoring and quality control.”
- Setting rigorous minimum qualifications for assurance practitioners. Qualifications regarding independence, competency, ethics, oversight and quality management should be at least as rigorous as those followed by CPAs when assuring financial and nonfinancial information.
The AICPA and CalCPA formed a climate-disclosure working group after California’s legislation was enacted to review implementation and compliance issues. Besides informing the comment letter to CARB, some of the issues and recommendations addressed by that working group are contained in a joint paper by the AICPA and Center for Audit Quality, Sustainability Reporting and Assurance: Key Considerations for Legislators and Regulators.
To learn more, please visit the AICPA’s resource page on climate and sustainability.
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Tags: california, ESG
