Document ID: chunk:federal_register_of_legislation:F2025L00107:front:0:p142
Version: federal_register_of_legislation:F2025L00107
Segment Type: other
Provision Reference: 
Character Range: 446224–449451

identify incentives and pressures that increase the susceptibility of the sustainability information to management bias or fraud.

Understanding the Legal and Regulatory Framework (Ref: Para. 111)

 1.       The effect on the sustainability information of laws and regulations will vary. Those laws and regulations to which an entity is subject constitute the legal and regulatory framework. The provisions of some laws or regulations may have a direct effect on the sustainability information, in that they may determine the criteria to be applied or specify disclosures required to be included in an entity's sustainability information.

 2.       Other laws and regulations may not have a direct effect on the determination of the disclosures in the sustainability information, but compliance with them may be fundamental to the operating aspects of the business. Non–compliance with laws and regulations that have a fundamental effect on the operations of the entity may have consequences for the entity's disclosures.

 3.       To obtain an understanding of the legal and regulatory framework, and how the entity complies with that framework, the practitioner may, for example:

           * Use the practitioner's existing understanding of the entity's industry, regulatory and other external factors.

           * Update the understanding of those laws and regulations that establish criteria, frameworks, standards or guidance.

           * Enquire of management as to other laws or regulations that may be expected to have a fundamental effect on the operations of the entity.

           * Enquire of management concerning the entity's policies or procedures regarding compliance with laws and regulations.

Enquiries and Discussion with Appropriate Parties (Ref: Para. 112)

 1.       Enquiries of appropriate parties and, when appropriate, others within the entity may offer the practitioner varying perspectives in performing risk assessment procedures.
Examples:

     * Enquiries directed towards those charged with governance may help the practitioner understand the extent of oversight by those charged with governance over the preparation of the sustainability information.

     * Enquiries of management may help the practitioner to evaluate the appropriateness of the selection and application of the applicable criteria.

     * Enquiries directed towards in-house legal counsel may provide information about matters such as litigation, compliance with laws and regulations, knowledge of fraud or suspected fraud affecting the sustainability information.

     * Enquiries directed towards the risk management function (or enquiries of those performing such roles) may provide information about operational and regulatory risks that may affect the sustainability information.

     * Enquiries directed towards IT personnel may provide information about system changes, system or control failures, or other IT-related risks.

 1.       If an entity has an internal audit function, enquiries of the appropriate individuals within the function may assist the practitioner in understanding the entity and its environment and the entity's system of internal control, in identifying and assessing risks of