Research On The Procedures Of Risk-Oriented Carbon Emission Auditing

In order to cope with the negative impact of climate change to human society,some international organizations began to develop a number of effective policies tocontrol the concentration of greenhouse gases in the atmosphere. As the economicgrows, China has faced with increasing pressure from international communities toreduce carbon emissions. On this background, China began to explore effective waysof reducing carbon emissions: the “12th Five-Year Plan” explicit requires establishinga carbon emissions trading market; some enterprises are forced or take voluntaryapproach to disclosure carbon emission information. The implement of thesemeasures need an assurance opinions to the carbon emission activities given by anindependent third-party. So there comes a strong demand for carbon emission auditing.In carbon emission auditing, the auditor uses some audit procedures and methods togive an opinion on the enterprise’s carbon emission activities in accordance with somecriterions, including the fairness of the scale of carbon emissions, the legality ofcarbon emission activities and the effectiveness of carbon reduction activities.According to the Business Guidance Catalogue (2012) published by the ChineseInstitute of Certified Public Accountants, the Certified Public Accountant should carryout carbon emission auditing based on market and policy demand. As a logicalprocess, carbon emission auditing must be carried out in a certain order. The wholeprocess of the work performed is called audit procedure which is the key to carry outcarbon emission auditing. So this paper focuses on the research of the carbonemission auditing procedures in order to provide support for the auditing practice.Based on the risk management theory, this paper builds a systematic carbonemission auditing procedures which contain the core idea of risk identification, riskassessment and risk response. Scientific and feasibility of the procedures are alsodemonstrated in this paper. The auditor should understand the carbon emissionsactivities in the enterprises and identify the risks generated by activities, then assessthe material misstatement of the greenhouse gas emission statement, on this basis,implement response measures to control the auditing risk to an acceptable range. Inthe part of risk identification, this paper discusses the definition, causes and the typesof carbon emission risks, it also describes how to use risk survey method, businessmodel analysis method and carbon footprint analysis to identify the carbon emission risk. In the risk assessment section, this paper first analyzes the impact of the carbonemissions risk to t misstatement of greenhouse gas emissions statement, and thendiscusses how to assess material misstatement by using qualitative analysis method,risk factor analysis method and risk matrix evaluation method. In the part of riskresponse, overall response measures should be adopted for the overall level ofmaterial misstatement risk, further auditing procedures including carbon managementcontrol test and substantive procedures should be applied for the assertion level ofmaterial misstatement risk. This paper also forms a carbon management and controlsystem by dividing into strategy, production and operation levels, and discusses howto test the system and integrates it into the auditing procedures. This paper alsoconnects the assertion, audit objectives and substantive procedures together, andanalysis specific content of the substantive procedures.The first innovation of this paper is applying the risk management theory to thedesign of carbon emission auditing procedures in accordance with the core idea ofrisk identification, risk assessment and risk response; it also integrates some generalrisk management approaches and some environmental research approaches such asthe carbon footprint analysis method into the carbon auditing procedures.