ClientEarth response to the independent review into the quality and effectiveness of audit

ClientEarth argues that the UK's statutory audit framework is inadequate, particularly regarding the disclosure of climate change-related financial risks. The organization advocates for a shift toward a 'fully integrated audit' of the entire annual report—not just financial statements—to a standard of 'reasonable assurance'. ClientEarth highlights a 'significant audit quality gap' where auditors fail to exercise professional scepticism regarding business risks like the low carbon transition. The response further contends that audit reforms will fail unless accompanied by stronger public and private enforcement of directors' duties, suggesting the UK adopt more rigorous oversight models similar to those used by the US SEC and Australia's ASIC.

• ClientEarth identifies a 'significant audit quality gap' where auditors systematically fail to meet legal requirements, specifically failing to exercise professional scepticism and failing to understand business risks such as 'climate change and the low carbon transition' that could lead to material misstatements.
• The organization argues that the statutory audit should be expanded to a 'fully integrated audit of the entire annual report', including the strategic report and directors' report, provided to a standard of 'reasonable assurance' to benefit a broad range of users including creditors, employees, and regulators.
• ClientEarth observes that companies, particularly in the fossil fuel sector, often use 'boilerplate' language in viability statements and adopt financial assumptions for future demand and prices that are 'inconsistent and imprudent' compared to the risks disclosed in other parts of their annual reports.
• The document asserts that UK public oversight of corporate reporting is 'grossly inadequate' and 'unusually permissive' compared to the US SEC, noting that the Financial Reporting Council (FRC) required zero corrections in 203 reviews during 2016/17, whereas the SEC required 553 reissuance restatements in 2017.
• ClientEarth recommends that the UK strengthen its private enforcement mechanisms by reforming the derivative action scheme under the Companies Act to allow a broader range of applicants to bring proceedings and to remove shareholder ratification as a bar to granting leave.

APA

ClientEarth (2019). ClientEarth response to the independent review into the quality and effectiveness of audit. https://www.clientearth.org/media/lv5jg0pa/clientearth-response-to-the-independent-review-into-the-quality-and-effectiveness-of-audit-ce-en.pdf

Chicago

ClientEarth. ClientEarth response to the independent review into the quality and effectiveness of audit. 2019. https://www.clientearth.org/media/lv5jg0pa/clientearth-response-to-the-independent-review-into-the-quality-and-effectiveness-of-audit-ce-en.pdf.

Wikipedia

{{cite press release |author=ClientEarth |title=ClientEarth response to the independent review into the quality and effectiveness of audit |date=June 2019 |url=https://www.clientearth.org/media/lv5jg0pa/clientearth-response-to-the-independent-review-into-the-quality-and-effectiveness-of-audit-ce-en.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{clientearth2019clientearth, author = {{ClientEarth}}, title = {{ClientEarth response to the independent review into the quality and effectiveness of audit}}, publisher = {ClientEarth}, year = {2019}, month = jun, url = {https://www.clientearth.org/media/lv5jg0pa/clientearth-response-to-the-independent-review-into-the-quality-and-effectiveness-of-audit-ce-en.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }