1. Twenty-Sixth World Continuous Auditing& Reporting Symposium
Thursday, January 17, 2013
10:40 AM – 11:00 AM
SESSION XVII – Software Solutions II
“Integrated Reporting Requires Integrated Assurance”
Presented by:
Liv Apneseth Watson, Director of International Business Development
Integrated Reporting Requires Integrated Assurance
Track, Report & Trend Your Metrics.
The IAASB and the PCAOB use the terms “assurance” and “attestation” in reference to engagements other than
audits or reviews of historical financial information.
Integrated reporting involves reporting both financial and nonfinancial (environmental,
social, and governance (ESG)) information in a single document, ideally showing
the relationship between the two in terms of how strong performance on ESG issues
contributes to strong financial performance and vice versa.

2. About WebFilings

3. World-Class, Customer-Driven Team
In addition to Ames & Los Altos
7 other US offices, international sales
Rapid growth, 500+ employees worldwide…and counting…

4. WebFilings International Football Team

5. Copyright 2012 WebFilings COMPANY CONFIDENTIAL
Who we are helping
1,000+ companies (in 24 months) use our reporting solution
Copyright 2012 WebFilings COMPANY CONFIDENTIAL

6. Customer first culture
Raving fans… 97% customer satisfaction rating
Critical to our success to date
- high touch relationships
- “Customer Success” team “extension of the reporting team”
CS Culture
- customers send their reps flowers, shower gifts, gift cards, etc.
- they are IM’ing them, txt’ing them
- real relationships
We are problem solvers – goal is to make a difference in people’s lives in the work they do (empowerment, concentrate on what matters, high value)

7. Reporting Pain Points #1
Excel works poorly with Word #2
No supply/value chain collaboration or version control #3
Managing change is difficult #4
End-game crunch
The 10K icon should be replaced with an icon for “Financial Statements”
The icons for EDGAR & XBRL should be replaced with icons for the following:
Bankers (i.e. Commercial Lenders & Creditors)
Investors (i.e. Equity Investors and Investment Bankers)
Auditors
****Management (consider leaving off list)
XBRL Compliance
Copyright 2012 WebFilings LLC Company Confidential

8. Publisher: Bloomsbury Information Ltd (March 29, 2012)
Effective Auditing For Corporates:
Key Developments in Practice and Procedures
by Joe Oringel
Publisher: Bloomsbury Information Ltd (March 29, 2012)

9. by Robert G. Eccles, Michael P. Krzus, and Liv A. Watson
Chapter 4: “Integrated Reporting Requires Integrated Assurance”
by Robert G. Eccles, Michael P. Krzus, and Liv A. Watson
“We believe that the full value of integrated reporting will only be realized when integrated assurance is provided on the report.”
To make integrated reports as reliable and comparable as financial reports, an integrated assurance opinion will have to be provided. Ideally, it will be in the form of
“positive assurance” (“the company did it right”) rather than the “negative assurance” (“nothing leaped out at us as terribly wrong”) that is typically provided today

10. Outline Five key recommendations
A brief background on integrated reporting and the important role the accounting profession has played in developing it.
The meaning of “materiality” for both financial and nonfinancial information.
Five key challenges
Five key recommendations

11. Definition “integrated audits”
Positive assurance” (“the company did it right”)
Negative assurance” (“nothing leaped out at us as terribly wrong”)

12. Background

13. Background on Integrated Reporting
On August 2, 2010, the Prince of Wales’ Accounting for Sustainability (A4S)
Project and the GRI announced the formation of the International Integrated
Reporting Committee (IIRC)
On August 2, 2010, the Prince of Wales’ Accounting for Sustainability (A4S)
project and the GRI announced the formation of the International Integrated
Reporting Committee (IIRC).12 The mission of the IIRC is “To create a globally
accepted integrated reporting framework which brings together financial, environmental,
social and governance information in a clear, concise, consistent and comparable format”13
in order to “help business to take more sustainable decisions and enable investors and
other stakeholders to understand how an organization is really performing.”14
New York Society of Security Analysts, Hoogervorst noted that the IASB is about to sign an MoU with the IIRC.

14. The mission
“To create a globally accepted integrated reporting framework which brings together financial, environmental, social and governance information in a clear, concise, consistent and comparable format in order to “help business to take more sustainable decisions and enable investors and other stakeholders to understand how an organization is really performing”.
integrated reporting combines a company’s key financial and nonfinancial information into a single document. However, the integration
of financial and nonfinancial reporting is about much more than publishing a single paper document. An integrated report serves as a means of reporting
financial and nonfinancial information in a way that explains their impact on each other, answering a fundamental question: Just how does nonfinancial
performance contribute to financial performance, and vice versa?
Integrated reporting involves more than a static document.
It also entails providing performance information in a more integrated way on the company’s website, along
with providing more detailed information of particular interest to shareholders and
other stakeholders.
Analytical tools for exploring the relationship between financial
and nonfinancial performance using data from the company and other sources, as well
as comparing the company’s performance to its competitors, can also be provided.

15. 3,287 companies publishing a sustainability report in
2010
2010 Spain had the largest percentage of companies obtaining
an assurance opinion on their report
In nearly all cases, the companies that produced an integrated report first started out by producing a corporate social responsibility or sustainability report.4
The number of such reports has grown dramatically over the last 10 years. For example, data from CorporateRegister.com showed 3,287 companies publishing a sustainability report in
2010, compared to 830 companies in Similarly, the number of GRI reporters had grown from 125 in 2001 to 1,864 in 2010.
Source: Corporate Registry

16. Materiality
Sustainable Strategies and Value Creation
...“the material issues” that affect the organization’s “ability to create and sustain value in the short, medium, and longer term.”
The concept of materiality is critical to both financial statement disclosure and the
reporting of nonfinancial information. In addition, judgments about materiality
influence accounting firms’ audit and assurance processes. Ultimately, each user of
business information—management, shareholders, analysts, regulators, civil society,
and a variety of others—determines what is material.
Companies operate in a multi-faceted world. The global economy is complex
and intertwined, the demand for finite natural resources is accelerating, and
the lingering effects of the 2008 financial crisis have left society skeptical and
untrusting of corporations. Accordingly, a company’s strategy and business must
reflect an inherent understanding of the relationships between the economic,
governance, environmental, and social dimensions of performance.
A sustainable strategy sets a company on a course towards value creation over
the long term.
Materiality guidance for auditors of financial statements is similar to guidance provided
to companies in preparing their financial statements. For example, the IAASB does not
prescribe any specific methodology for determining materiality, but states that “The
auditor’s determination of materiality is a matter of professional judgment, and is affected
by the auditor’s perception of the financial information needs of users of the financial
statements.”32 Similarly, the PCAOB does not prescribe any methodology for determining
materiality. Instead, the PCAOB standard refers to a US Supreme Court decision.33
Sustainable strategies include, but are not limited to (Eccles and Krzus, 2010):
1. Long-term view. Sustainable strategies require a long-term view by
the company and, by implication, its shareholders, who are one class of
stakeholder.
2. Multiple-stakeholder perspective. Sustainable strategies require the
recognition of the legitimacy of the interests of other stakeholders, who must
also take a long-term view.
3. Engagement processes. Sustainable strategies depend upon processes of
engagement for understanding the expectations of all stakeholders.
4. Value creation for all stakeholders. Doing so contributes to value creation
for shareholders as well as to meeting the needs of other stakeholders.
Failure to adopt a sustainable strategy will put a company’s reputation and
its ability to create shareholder value at risk. Success in the 21st century will
belong to organizations that have learned to balance the imperative for longterm
viability of the company and the world it relies on to create economic
value, with the demands for short-term competitiveness and profitability.
Long-term sustainable value creation requires the company to take a holistic view of
the consequences of its decisions regarding financial, natural, and human resources in
terms of how decisions about each type of resource affects the others. It also requires
good governance and risk management in order to ensure that decisions producing
short-term performance do not threaten the company’s long-term performance or,
in more extreme cases, even existence. As expressed by the IIRC, through integrated
reporting a company is able “to demonstrate the linkages between an organization’s
strategy, governance and financial performance and the social, environmental and
economic context within which it operates. The IIRC’s Framework will support an
organization in addressing, in a clear and concise manner, the material issues affecting
its ability to create and sustain value in the short, medium, and longer term.”25
Integrated reporting is both the most effective way for a company with a sustainable
strategy to report on its performance and a form of discipline to ensure that it has a
sustainable strategy in the first place. Integrated assurance will enhance the credibility
of the integrated report to both management and investors, thereby increasing its utility
to both.
There are no standards for the preparation of nonfinancial information equivalent to either IFRS or US GAAP, and there is therefore no materiality guidance for companies.

17. Five Key Challenges to Providing an Integrated Assurance Opinion
Developing a global set of credible standards for measuring and reporting nonfinancial information which have the appropriate governmental support, just as is true for accounting standards.
Developing methodologies for providing positive or negative assurance on nonfinancial information.
Integrating standards and assurance methodologies for financial and nonfinancial information in a way that provides a “true and fair view of an organization’s sustainability.”
Building the necessary capabilities.
Liability reform.
According to the October 2008 final report of the Advisory Committee on the
Auditing Profession to the US Department of the Treasury,55 the six international
auditing firms paid approximately US$5.7 billion to bring 362 cases to closure
during the period 1997–2009. Of that amount, about US$3.7 billion, or 65%,
was related to the audits of public (listed) companies. Litigation and practice
protection costs include all litigation-related costs—costs of outside counsel and
other experts, settlements and judgments, internal litigation-related costs, and
insurance premiums, less insurance recoveries. The amount is equal to 6.6% of
these firms’ revenues and 15.1% of these firms’ audit- related revenues.
Credible Standards for Measuring and Reporting Nonfinancial Information
Standards for nonfinancial information provide the foundation for being able to
provide an integrated assurance opinion that is backed by the same degree of rigor
as a financial audit. This is also the most difficult challenge and one fraught with
contention, as is always the case when establishing standards. Two issues must be
addressed. The first is “Who should be responsible for doing this?” Today there are a
number of organizations that are doing good work in this domain, such as:
The Center for Audit Quality explains52 processes and practices for the
performance of a financial statement audit. Audit procedures for financial
statement audits that could be replicated to provide assurance on nonfinancial
information include:
1. Inspection. The examination of records or documents, whether internal or
external, in paper form, electronic or other media, or physically examining
an asset. For example, inspecting a sample of invoices.
2. Observation. Observing a process or procedure being performed by
company personnel or others. For example, observing a company’s physical
inventory count, and re-performing counts on a test basis.
3. Inquiry. Seeking information from knowledgeable persons in financial or
nonfinancial roles within the company or outside the company.
4. Confirmation. Obtaining information or representation of an existing
condition directly from a knowledgeable third party. .

18. Integrated Reporting Reporting Process

19. Recommendations

20. Five Key Recommendations
Advocacy: Working with the agencies of the government(s) that give authority to their efforts, accounting standard-setters, such as the FASB , IFAC, and the IASB to drive mandates.
Initiate projects for developing auditing standards for nonfinancial information
Define individual metrics for internal control and measurement systems
Define the meaning of “a true and fair view of an organization’s sustainability.”
Accounting profession should build the necessary capabilities to conduct an integrated audit including liability reform.

21. Questions!! Liv A. Watson Director, International Business Development
WebFilings
2625 North Loop Drive, Suite 2105
Ames, IA
USA
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Skype: livwatson