When Treasury’s ‘minimal’ equates to $20K to $50K

Australia’s major accounting organisations have sent a reality check to Treasury around the costs associated with imposing the need for climate risk audits on smaller private companies.

Chartered Accountants Australia and New Zealand (CA-ANZ) and CPA Australia have said that while Treasury’s Impact Statement attaching to the legislation assumed costs would be negligible or nil, the reality is different.

“The Impact Statement, and further engagement, reveals that this requirement appears to have been imposed on an assumption that the costs would be negligible or nil, or that it would be possible to ‘lighten’ the requirements of an audit with a locally developed standard,” the two organisations said.

“However, an audit, or ‘reasonable assurance engagement’, is a substantial process normally reserved for circumstances where the information involved is material and of consequence to stakeholders.”

“These engagements would involve costs likely to range between $20,000 to $50,000 on average for the thousands of Group 3 entities involved,” the two accounting bodies said.

The submission to the Senate Economics Legislation Committee said the two accounting bodies were concerned that “small and medium sized entities including many private companies “do not appear to have been commensurately considered on consulted in designing the [legislative] package”.

“Treasury itself anticipates that “only 5 per cent” of Group 3 entities will have material climate risks or opportunities, but the legislation as currently drafted imposes onerous and costly requirements on 100 per cent of these entities,” it said.

The two accounting bodies have recommended the legislation be amended to increase the threshold for the requirement to entities with $100,000 consolidated revenue or removal of the requirement where there are no material climate risks or opportunities.