Auditing and climate change – the role of the FRC

ClientEarth argues that UK auditors are systemically failing to apply existing accounting and audit standards to climate-related financial risks. Citing the FRC's own 2020 Climate Thematic Review and a report by Carbon Tracker and the Carbon Accounting Project, the letter claims that auditors frequently ignore climate-sensitive assumptions and fail to ensure financial statements are Paris-aligned. ClientEarth calls on the FRC to move beyond monitoring and take meaningful enforcement action, including public investigations into the 'big four' firms (EY, Deloitte, KPMG, and PwC) and stricter oversight of Recognised Supervisory Bodies (RSBs).

• The FRC's own 2020 Climate Thematic Review found that auditors are failing to consider climate change when assessing risks of material misstatement and may be breaching IFRS standards regarding climate change disclosure in financial statements.
• A report by the Carbon Tracker Initiative and the Carbon Accounting Project (the CT Report) indicates that the 'big four' auditors (EY, Deloitte, KPMG, and PwC) habitually fail to account for climate-related risk, even for highly carbon-exposed companies.
• The CT Report found that 80% of auditors provided no indication of how they considered material climate-related matters, such as emissions reduction targets or declining product demand, and 75% of companies failed to disclose climate-sensitive quantitative assumptions used in financial statements.
• There is a significant lack of 'Paris-aligned' accounting; the CT Report found that none of the companies assessed appeared to use assumptions and estimates aligned with the goals of the Paris Agreement or provide corresponding sensitivity analysis.
• ClientEarth's review of UK listed companies' climate reporting for 2019-20 revealed that only 40% of companies clearly referred to climate change in their discussion of principal risks and uncertainties, and only 4% of audit reports disclosed if climate-related factors were considered.
• ClientEarth asserts that the FRC has failed to take substantive enforcement action despite its purpose to serve the public interest and its own findings of audit failings.

APA

ClientEarth (2021). Auditing and climate change – the role of the FRC. https://www.clientearth.org/media/viaafrcy/clientearth-letter-to-frc-on-audit-15-december-2021-_redacted.pdf

Chicago

ClientEarth. Auditing and climate change – the role of the FRC. 2021. https://www.clientearth.org/media/viaafrcy/clientearth-letter-to-frc-on-audit-15-december-2021-_redacted.pdf.

Wikipedia

{{cite press release |author=ClientEarth |title=Auditing and climate change – the role of the FRC |date=15 December 2021 |url=https://www.clientearth.org/media/viaafrcy/clientearth-letter-to-frc-on-audit-15-december-2021-_redacted.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{clientearth2021auditing, author = {{ClientEarth}}, title = {{Auditing and climate change – the role of the FRC}}, publisher = {ClientEarth}, year = {2021}, month = dec, url = {https://www.clientearth.org/media/viaafrcy/clientearth-letter-to-frc-on-audit-15-december-2021-_redacted.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }