Primary navigation:

QFINANCE Quick Links
QFINANCE Reference
Add the QFINANCE search widget to your website

Home > Auditing Best Practice > Integrated Reporting Requires Integrated Assurance

Auditing Best Practice

Integrated Reporting Requires Integrated Assurance

by Robert G. Eccles, Michael P. Krzus, and Liv A. Watson

Executive Summary

  • 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.

  • The key challenges faced in providing an integrated assurance opinion.

  • Recommendations for overcoming these challenges in order to make integrated assurance opinions a reality.


Interest in integrated reporting is growing around the world. It is now required in South Africa by the approximately 450 companies listed on the Johannesburg Stock Exchange on a “comply or explain why not” basis.1 Although other countries may follow South Africa’s lead and mandate integrated reporting over the next several years, today it is an otherwise entirely voluntary activity by companies. Nevertheless, a growing number of companies are adopting it because of the substantial benefits they receive, including a better understanding of the relationship between financial and nonfinancial performance, improved internal measurement and control systems for producing reliable and timely nonfinancial information, lower reputational risk, greater employee engagement, more committed customers who care about sustainability, more long-term investors who value sustainable strategies, and improved relationships with other stakeholders.2 There are approximately 240 companies using the Global Reporting Initiative’s (GRI) G3 Guidelines that identified themselves as producing an integrated report during 2010.3 Although many of these are European companies, notable companies producing an integrated report in the United States include American Electric Power, Pfizer, PepsiCo, Southwest Airlines, and United Technologies Corporation.

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 showed 3,287 companies publishing a sustainability report in 2010, compared to 830 companies in 2001.5 Similarly, the number of GRI reporters had grown from 125 in 2001 to 1,864 in 2010.6

Though the growth in sustainability reporting is impressive, the growth in the extent to which these reports have any form of assurance on them, whether by a Big Four accounting firm or a specialist boutique, is less impressive.

As shown in Table 1, in 2010 Spain had the largest percentage of companies obtaining an assurance opinion on their report, at 44%, and the United States had the lowest, at 6%. Providing an assurance opinion on nonfinancial information is a necessary, albeit incomplete, step toward providing an integrated assurance opinion.

Table 1. Sustainability reports with an external assurance statement 2001–107

2001 2010
Sustainability reports issued Sustainability reports with assurance Proportion of reports with assurance (%) Sustainability reports issued Sustainability reports with assurance Proportion of reports with assurance (%)
Australia 117 31 26 248 52 21
Canada 61 4 7 213 26 12
Denmark 26 16 62 74 20 25
Finland 27 6 22 71 19 27
France 29 3 10 223 32 14
Italy 58 30 52 566 66 12
Japan 164 25 15 558 56 10
Netherlands 46 14 30 159 39 25
Norway 35 8 23 52 12 23
South Africa 9 4 44 119 29 24
Spain 12 3 25 256 113 44
Sweden 37 6 16 163 49 30
United Kingdom 169 62 37 566 107 19
United States 156 10 6 629 37 6

We believe that the full value of integrated reporting will only be realized when integrated assurance is provided on the report. After all, how much would investors rely on financial reports if they weren’t accompanied by an audit? It is the audit that, despite the occasional shortcoming, makes financial reports reliable and comparable. Reliability comes from the fact that the user knows that an objective third party has carefully reviewed the reported figures to ensure that the report has been prepared according to the relevant accounting standards—typically, International Financial Reporting Standards (IFRS) or US Generally Accepted Accounting Principles (US GAAP). Comparability of information across companies, at least within a country and a sector, comes from the fact that they have used the same accounting standards and that the auditor has used audit procedures that are subject to oversight and review to ensure their efficacy in ensuring the reliability of the reported information.

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. What we are calling for are “integrated audits” that have the same degree of rigor, including the review of internal systems and controls, as today’s financial audits. And while we prefer the term “integrated audit” to “integrated assurance” to reinforce this connotation, we will use the latter because the Public Company Accounting Oversight Board (PCAOB) in the United States has already established its own, and much more limited, definition of an “integrated audit.”8 The US Sarbanes–Oxley Act of 2002 established the PCAOB as the US standard-setter for audits of public companies and reserved the term “audit” for an examination of financial statements.9 Similarly, the International Auditing and Assurance Standards Board (IAASB) limits use of the term “audit” to an examination of the financial statements.10 The IAASB is the audit and assurance standard-setting organization of the International Federation of Accountants (IFAC).11

In this chapter we will provide some brief background on integrated reporting and the important role which the accounting profession has already played in developing it, discuss the meaning of “materiality” for both financial and nonfinancial information, identify the key challenges in providing an integrated assurance opinion, and make recommendations for overcoming these challenges in order to make integrated assurance opinions a reality.

Back to Table of contents

Further reading


  • Eccles, Robert G., and Michael P. Krzus. One Report: Integrated Reporting for a Sustainable Strategy. Hoboken, NJ: Wiley, 2010.


  • Eccles, Robert G., and Kyle Armbrester. “ Integrated reporting in the cloud: Two disruptive ideas combined.” IESE Insight 8 (First Quarter 2011): 13–20. Online at:


  • Eccles, Robert G., Ioannis Ioannou, and George Serafeim. “The impact of a corporate culture of sustainability on corporate behavior and performance.” Working paper 12-035. Harvard Business School, November 4, 2011. Online at:
  • Ioannou, Ioannis, and George Serafeim. “The consequences of mandatory corporate sustainability reporting.” Working paper 11-100. Harvard Business School, 2011. Online at:


Back to top

Share this page

  • Facebook
  • Twitter
  • LinkedIn
  • Bookmark and Share