In contrast with the audit of the financial reports where legal requirements stipulate that the audit report should be addressed to a specific group of stakeholders (exclusively shareholders), no such requirement exists in relation to who should be the addressee for the stand-alone reports’ assurance statements (Deegan et al., 2006). In the context of the stand-alone reporting, it could be assumed that the reports (and hence the assurance statements) are aimed at stakeholders (ACCA and AccountAbility, 2004, p. 61). Thus, it could be expected that the assurance statements would be addressed to general stakeholders.
The IAASB (2006, p. 1057) asserts that the assurance statement should include an addressee. Such an addressee would identify “the party of parties to whom the assurance report is directed. Whenever practical, the assurance report is addressed to all the intended users, but in some cases there may be other intended users” (p. 1057). In contrast to this expectation, Table 5.10 demonstrates that the majority of the assurance statements provided (75%) do not identify an addressee. To some extent, this result is consistent with O’Dwyer and Owen (2005) who found that only 27% of the statements have an addressee, and Deegan et al., (2006) who found that 21% of the UK assurance statements in their sample indicated an addressee. In the current study, the results show that the 49 assurance statements were addressed to either the reporting company/the management (35 statements), or to the board of directors (14 statements).
As shown in Table 5.10, 86% of the addressed assurance statements were provided by the accountants,111 four assurance statements (8%) were provided by certification bodies, two statements (4%) provided by the consultancy firms, and one assurance statement was provided by non-profit organisation.112 It is striking that consultancy firms do not provide addresses as a matter of course.
111 Deegan et al., (2006) note that 90% of those UK addressed statements were provided by accountants.
112 The certification body Bureau Veritas addressed three assurance statements (one of them to the board of directors) to British American Tobacco plc during the years 2002, 2003 and 2004 and one assurance statement to the management of AstraZeneca plc in year 2004. Consultancy firms: Arthur D Little and ICF Consulting addressed two assurance statements to Rio Tinto plc in the years 2000 and 2002 respectively, whereas the non-profit organisation Prince of Wales IBLF in partnership with the
Table 5.10 Addressees of the assurance statements/Years 2000-2004
Number of assurance statements issued by Addressees’ of the assurance
statement’s Accountants Consultants Cert. Bodies N-P Org.
Total
Reporting company/Management 32 - 3 - 35
Board of Directors 10 2 1 1 14
General Stakeholders - - - - -
Specific Group of Stakeholders - - - - -
More than one addressee - - - -
No-party addressed 3 122 22 - 147
Total 45 124 26 1 196
As the Table 5.10 indicates, in total, 93% of the assurance statements provided by the accountancy firms have been given an addressee, 32 of these statements (74%) have been addressed to the reporting company directly or to the management of the company while 22% of the assurance statements provided by the accountancy firms were addressed to the board of directors of the reporting companies.
Various reasons for the variation in addressees of assurance statements compared to audit of financial reports have been identified in the literature. One of them is the possible issues associated with perceived legal implications of nominating different addressees (Deegan et al., 2006, p. 341). In order to overcome this problem, the assurance assignment could specify who is to be the nominated addressee or indicate a restriction in terms of the extent to which stakeholders can rely upon the assurance statement. An example of the latter approach was found in the URS Verification Ltd’s statement which appeared with Unilever’s plc Environmental Report 2004, where they state that “The verification statement provided herein by URSVL is not intended to be used as advice or as the basis for any decisions, including, without limitation, financial or investment decisions”. This cautious approach to provide assurance to the stakeholders, especially in relation to investing decisions is may be related to the fact that this ‘unregulated’ practice still premature to give high level of assurance regarding historical or future performance of organisations.
What is striking from the data in Table 5.10 is that there are no assurance statements addressed to the stakeholders in general or to a specific group of stakeholders. In a few cases, the assurance provider may indicate indirectly that the assurance statement is addressed to the stakeholder. A clear example could be seen in Casella Stanger’s consultancy Synergy addressed their statement to the board of directors of Rio Tinto plc in the year 2001.
‘External Assurance Statement’ which appeared with Liberty International’s plc Corporate Social Responsibility Report 2003, where the assurance provider says “[t]he overall aim of the assurance statement is to provide confidence to Liberty International’s stakeholders that the information and data provided in the Report is accurate, reliable and objective”. Such a statement, however, did not lead to the assurance statement being formally addressed to stakeholders.
In conclusion, where addressees are indicated they are without exception those within the company. This suggests that there is some reluctance to specify who the stand- alone report is for and/or for whom assurance could be given. Where addressees are identified they are internal not external parties. The absence of a stakeholder addressee (for example employees, customers, community) within the assurance statement, despite the clear addressing of their issues within the stand-alone report, provides little assurance to “organisational stakeholders regarding the reliance they may place on the stand-alone report contents”, which in turn, necessitates the reconsideration of fundamental issues of the corporate governance in the context of non-financial reporting practice (O’Dwyer and Owen, 2005, p. 215).