Climate change is an area of increasing concern and priority for investors and affects how investors perceive climate-related risks in the entity’s financial statements. Climate change is a topic which is increasingly in front of mind for investors and other stakeholders as the effects of climate change are increasingly visible because climate change has the potential to impact an increasing number of entities of all nature and sizes. Today climate change affects businesses in various industries as global and local policy actions around climate change continue to evolve and given the growing demand by investors for climaterelated information for their economic decision making. The writer highlights areas of focus related to the consideration of climate-related risks when conducting an audit of financial statements in accordance with the International Standards on Auditing (ISA).

The International Auditing and Assurance Standards Board (IAASB) approved three quality management standards in September 2020, subject to the final approval of the Public Interest Oversight Board. The standards raise the bar for firms by incorporating a proactive and risk-based approach to how firms enable the consistent performance of quality engagements through their systems of quality management. The standards also deepen the engagement partner’s responsibility for audit quality at the engagement level, and include improvements related to engagement quality reviews.