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    Internal Audit's Role in GHG Emissions and Energy...
    research summary posted July 23, 2015 by Jennifer M Mueller-Phillips, tagged 15.0 International Matters, 15.05 Sustainability Services 
    Internal Audit's Role in GHG Emissions and Energy Reporting: Evidence from Audit Committees, Senior Accountants, and Internal Auditors.
    Practical Implications:

    The focus on the insights of audit committee members and senior accountants concerning the role of internal auditors in their work in areas of sustainability reporting, allows the authors to inform the broader internal audit literature on the role of internal auditors as a corporate governance resource. The interviewees indicated that the internal audit teams were already multidisciplinary and that this would increase in the future. Insights from these senior practitioners also inform potential research questions in audit judgment and decision-making (JDM) research.


    Trotman, A. J., & Trotman, K. T. 2015. Internal Audit's Role in GHG Emissions and Energy Reporting: Evidence from Audit Committees, Senior Accountants, and Internal Auditors. Auditing: A Journal Of Practice & Theory 34 (1): 199-230.

    energy usage, GHG emissions, internal auditing, judgment and decision making, nonfinancial assurance, qualitative research
    Purpose of the Study:

    Internationally, disclosures related to greenhouse gas (GHG) emissions and energy usage have increased dramatically due to trends toward increased sustainability reporting, growing concerns about climate change, and the introduction of new legislation and taxes. Audit committees, management, internal auditors, external auditors, and other stakeholders all have a potential role in relation to GHG disclosures.

    This study addresses the role of internal auditors. Understanding the role of internal audit in GHG and energy reporting is important, given recent trends toward reliance by both internal and external stakeholders in the monitoring, measuring, and reporting of GHG emissions and energy usage. European nations have the highest reporting rates and although the U.S. has relatively lower reporting rates, the trend in the U.S. is toward increased reporting. Sustainability reports cover a wide range of disclosures, but the primary focus is on the environment, particularly resource and energy usage.

    Design/Method/ Approach:

    The data was collected via semi-structured interviews. The sample contained 29 participants, including: nine heads of in-house internal audit departments; six partners from the Big 4 accounting firms and one partner and one director from one of the largest second-tier firms; seven audit committee members and five senior accountants. Twenty-one participants were male and eight were female with all having at least 20 years of work experience. The evidence was collected prior to November 2012.

    • All groups of participants consider that internal audit has a role to play in the assurance of GHG and energy reporting.
    • The type of work performed by internal auditors on GHG and energy reporting includes developing and checking processes, ensuring the accuracy and completeness of data, and performance auditing, including cost reductions.
    • The following key factors are identified as providing a need for internal audit involvement in GHG and energy reporting: regulation and compliance; potential penalties and sanctions against the CEO and the directors; managing risk; the nature of the industry; and the interests of shareholders, as this is market sensitive information that can impact reporting reputation. Lack of expertise is given as a reason for internal audit not playing a major role for some organizations.
    • While participants see an important role related to improving the reliability of the data reported, they do recognize other alternatives to in-house internal audit including outsourced internal audit, internal quality assurance, financial accountants, sustainability managers, external audit, and external consultants.
    • All groups of participants see a larger role for internal auditors in this area in the future, particularly audit committee members and partners who expect directors will require more information from internal auditors on GHG and energy disclosures.
    International Matters
    Sustainability ServicesTraining & General Experience