Document ID: chunk:federal_register_of_legislation:F2025L00107:front:0:p140
Version: federal_register_of_legislation:F2025L00107
Segment Type: other
Provision Reference: 
Character Range: 440105–443332

criteria from another framework may need to be identified or entity-developed criteria may need to be developed. Matters that the practitioner may consider when obtaining an understanding of the entity's selection and application of reporting policies, including any changes and the reasons for those changes, may include:

           * Reporting policies used by similar entities, such as those in the same industry or jurisdiction.

           * The methods the entity uses to recognise, measure, present and disclose significant sustainability information, or to address unusual or exceptional circumstances.

           * The effect of significant policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus.

           * Changes in the environment, such as changes in the applicable criteria, law and regulation or accepted interpretation of the criteria that may necessitate a change in the entity's reporting policies.

           * Criteria and laws and regulations that are new to the entity and when and how the entity will adopt, or comply with, such requirements.
 1.       Example of the entity selecting and applying reporting policies in accordance with the framework criteria:

          * A mining company reports sustainability information in accordance with a sustainability framework that requires specific disclosures on risks and opportunities related to human rights and rights of Indigenous Peoples for the metals and mining industry.

          * In complying with the criteria, the entity also selects and applies reporting policies, including the methods used to disclose engagement processes and due diligence practices with respect to human rights and indigenous rights in areas of conflict to mitigate related risks.

Understanding the Entity and Its Environment

Understanding the Entity's Operations, Legal and Organisational Structure, Ownership and Governance, and Business Model (Ref: Para. 110(a))

 1.       The practitioner uses professional judgement to determine the characteristics of the entity and its environment that are relevant to the sustainability information and therefore are necessary to understand. The practitioner's primary consideration is whether the understanding that has been obtained is sufficient to meet the objective of the risk assessment procedures. The practitioner's understanding may involve less effort when the scope of the assurance engagement is limited to certain sustainability information (e.g., discrete metrics). On the other hand, a broader understanding of the entity and its environment may be necessary if the scope of the assurance engagement addresses multiple topics or aspects of the topics. Similarly, the depth of understanding of the entity and its environment necessary for a limited assurance engagement may be less than the depth of understanding necessary in a reasonable assurance engagement.

 2.       The practitioner's understanding of the entity and its environment may include an understanding of the following:

         1.                 The nature of the entity and its sustainability-related business risks, including:

                 1.                  The nature of