Understanding the Differences Between Limited Assurance and Reasonable Assurance
If you have decided to seek third party verification for your Greenhouse Gas emissions statement, you will need to make a decision on the ‘level’ you would like your information ‘assured’. This level of assurance needs to be agreed on prior to a verification commencing. It’s important to decide this before starting because it determines the planning and amount of evidence gathering required to complete the verification.
When it comes to carbon accounting, third part verifiers, or auditors, provide different levels of assurance. The two main types of assurance are limited assurance and reasonable assurance. Although these terms may seem similar, they refer to two different ‘levels’ of assurance. In this article, we'll take a closer look at the differences between limited and reasonable assurance and why they matter.
What is Limited Assurance?
Limited assurance is a type of assurance engagement where a verifier provides a lower level of assurance compared to reasonable assurance. In this type of engagement, the verifier performs some evidence gathering procedures to obtain enough information to understanding of the GHG statement the work is not extensive enough to provide a higher level of assurance. This level of assurance is often used when data includes lots of modelling and estimation in the GHG statement.
With limited assurance, the outcome is expressed in a negative form with the verifier saying that there is no reason to believe that the emissions do not comply with the standard, or there is no reason to believe they do not provide a true and fair view of the inventory. They have not found any material misstatements or deficiencies in the GHG statements, and that their work was not extensive enough to provide a high level of assurance.
What is Reasonable Assurance?
Reasonable assurance, on the other hand, is a high, but not absolute, level of assurance. When a verifier provides a reasonable assurance, they are stating that sufficient appropriate evidence has been obtained as part of a systematic verification process. The auditor will perform a higher level of procedures, such as testing internal controls, verifying information with third parties, and performing recalculations, that reduce the risk that material misstatements are present to an acceptably low level. The verifier is saying that they have done enough work to be confident that the GHG statements are free from significant errors. The outcome is expressed in a positive form and is used when good data is available.
Why Limited and Reasonable Assurance Matter
The level of assurance provided by a verifier is important because it affects the degree of confidence that users of the GHG statements can have in the information presented. When a verifier provides reasonable assurance, users can have a high degree of confidence that the GHG statements are free from material misstatements. When an auditor provides limited assurance, users should be aware that there is a greater risk that material misstatements may exist in the GHG statements.
It's also important to note that the level of assurance provided by an auditor may be influenced by a number of factors, including the complexity of the GHG statement, and the materiality of potential misstatements.
In conclusion, limited assurance and reasonable assurance are two different levels of assurance that can be provided by a verifier. While limited assurance provides a lower level of assurance than reasonable assurance, it can still provide some degree of comfort to stakeholders and are often used on an interim basis between reasonable assurance verifications. However, users should be aware that there is a greater risk that material misstatements may exist in the GHG statements when limited assurance is provided. Reasonable assurance, on the other hand, provides a high level of assurance that the GHG statements are free from material misstatements, giving users a high degree of confidence in the information presented.
If you would like to know more, get in touch with Myimprint.