Limited Assurance vs. Reasonable Assurance
Exploration of the difference between limited and reasonable assurance from a 3rd party verifier.
Imagine you're getting your car checked by a mechanic before a long road trip.
- Limited Assurance is like a basic check-up. The mechanic looks at the most obvious things (tire pressure, fluid levels) and says, "Based on what I've seen, nothing major seems to be wrong that would stop you from going on your trip." They haven't taken everything apart or done super deep testing. They're saying they haven't found any glaring issues.
- Reasonable Assurance is like a more thorough inspection. The mechanic spends more time, checks more components in detail, and might even run some diagnostic tests. They'll say something like, "We've done a pretty comprehensive check, and we're reasonably confident that your car is in good shape for the trip, although we can't guarantee absolutely nothing will happen." They've done more work and have a higher level of confidence, but there's still a small chance something could be missed.
In the context of CSRD and sustainability reports:
- Limited Assurance means an independent auditor will review the sustainability information and state that, based on their procedures, they haven't found any significant errors or misstatements. They perform less in-depth procedures than with reasonable assurance. It's like saying, "We looked at the key data and haven't seen anything obviously wrong."
- Reasonable Assurance means the auditor will perform more extensive and in-depth procedures to gather sufficient evidence to provide a higher level of confidence that the sustainability information is materially correct and fairly presented. It's a more rigorous audit, aiming for a stronger level of certainty, though still not an absolute guarantee of perfect accuracy.
The CSRD's phased approach means companies will initially undergo a less intensive "limited assurance" audit, and over time, the expectation will be for a more thorough and confidence-building "reasonable assurance" audit. This reflects a gradual increase in the credibility and reliability expected from sustainability reporting.