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22 May 2004

(1) Source: The Shell Report 2003, Royal Dutch/Shell Group ofCompanies,

www.shell.com.

The majority of information on which assurance currently is being provided isnonfinancial, quantitative performance measures. For example,PricewaterhouseCoopers and KPMG provided assurance on these performancemeasures in the Shell report: * Global warming potential.

* Energy efficiency

* Total spills.

* Flaring in exploration and production activities.

* Fatal accident rate.

* Injury frequency

* Carbon dioxide release.

* Methane release.

* Regulatory, health, safety and environmental fines.

While there are many other performance measures in the report, their auditability wasnot at the level the firms could audit with a high enough level of assurance to providean opinion.

Other assurance approaches that accounting firms use include a review levelengagement or limited assurance based on the policies in place and the results ofevidence-gathering procedures, as well as verification reports that refer to existinginternational assurance and attestation standards. For example, exhibit 5, page 73,contains the independent auditors' report for Starbucks' 2005 CSR. Moss Adams LLPissued it as being prepared using international standards approved by the IAASB andissued in 2005 as a guideline. The firm's conclusion says Starbuck's CSR wasprepared consistent with its internal policies and report information was reasonablysupported by documentation, internal processes and activities, and information

provided by external parties. This type of report, while only referring to establishedcriteria (standards approved by the IAASB) still improves the quality of informationfor external users.

Exhibit 5

Auditors' Report of Starbucks CorporationSustainability Report


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To the Stakeholders of Starbucks Coffee Company:

We have been engaged to provide assurance on the Corporate SocialResponsibility ("CSR") Fiscal 2005 Annual Report (the "Report") ofStarbucks Coffee Company ("Starbucks"), for the fiscal year ended

October 2, 2005.

We have performed evidence-gathering procedures on the followingsubject matter:

* Key Performance Indicators Summary and Fiscal 2005 Highlights;

* Information and data provided in each area of focus of the Report(World of Products, Society, Environment, and Workplace); and

The management and reporting for the preparation of this informationand data.

We have considered the subject matter against the followingevaluation

criteria:

* The procedures by which the CSR information and data wereprepared,

collated and compiled internally; and

* The control environment over the quality elf the information anddata.

Our statement should be considered in conjunction with the inherentlimitations of accuracy and completeness for CSR data as well as inconnection with Starbucks internal reporting guidelines.

The Board of Directors of Starbucks is responsible for both thesubject matter and the evaluation criteria.

Our responsibility is to report on the internal reporting processes,information and data for CSR based on our evidence-gatheringprocedures. Currently there are no statutory, requirements orgenerally accepted verification standards in the United Stares ofAmerica that relate to the preparation, presentation, and

verificationof CSR reports. There are International standards for the CSR

reportsthat were approved by the International Auditing and AssurancesStandards Board (IAASB) in January 2005. Using the IAASB approvedstandards as a guideline, we planned and performed evidence-

gatheringprocedures to provide a basis for our conclusion. However, we have

notperformed an audit in accordance with the International Standards onAuditing. Accordingly, we do not express such an opinion.

Our evidence-gathering procedures included, among other activities,the following:


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* Testing the effectiveness of the internal reporting system used tocollect and compile information on each area of focus in the Report;

* Performing specific procedures, on a sample basis, to validate theCSR data;

* Visiting Starbucks coffee buying operations in Switzerland;

* Visiting Starbucks corporate headquarters in Seattle, Washington;

* Interviewing partners responsible for data collection andreporting;

* Interviewing partners at retail location;

* Assessing the information gathering and compiling process of eacharea of focus in the Report;

* Reviewing relevant documentation, including corporate policiesmanagement and reporting structures; and

* Performing tests, on a sample basis, of documentation and systemsused to collect, analyze and compile reported CSR information and

data.

In our opinion, based on our work described in this report, the CSRinformation contained in the Report gives a fair representation ofCSR performance and activities of Starbucks Coffee Company for thefiscal year ended October 2, 2005. Statements, assertions and datadisclosed in the Report are reasonably supported by documentation,internal processes and activities, and information provided byexternal parties.

Moss Adams LLPSeattle, WashingtonJanuary 27, 2006

Source: Starbucks 2005 Corporate Social Responsibility Report,www.starbucks.com.


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Shell's 2005 CSR report was ranked no. 1 by Pleon's 2005 Global Stakeholder Report(www.pleon.com), which asked stakeholders worldwide to give examples of companiesthat do a good job of CSR reporting. Interestingly, Shell changed its approach for its2005 report from using independent accounting firms to an independent panel of expertswho reviewed the CSR and offered praise and criticism (see exhibit 6, page 74, for

excerpts from the panel's report). While this change does not mean the independentaccounting firms were ineffective, it suggests organizations should consider a range ofmethods for providing assurance about the information in the CSR. If accountants fail toact on the opportunity to provide assurance, companies will begin to adopt other, lessrigorous, means. CHALLENGES OF PROVIDING AUDITOR ASSURANCE

There are two major challenges in providing a sustainability report with auditorassurance: the suitability of the criteria management uses to prepare its sustainabilityreport and the performance and reporting standards the auditor uses. International andnational standard setters should not let these challenges deter them from seeking asolution--there is need for these reports, as well as to protect the public through auditor

verification.While the GRI appears to have the most commonly adopted criteria for sustainabilityreporting and is the organization likely to evolve as providing generally accepted CSRguidelines, it has yet to be recognized in this role by a regulatory body. One mason GRIstandards are not generally accepted is the nature of the measures included in its earlier2002 reporting guidelines, which faced issues associated with relevance, reliability,auditability and the like. The GRI says one of its goals in issuing the new G3 guidelineswas to improve the relevance and auditability of measures.

In 2002 the AICPA and the Canadian Institute of Chartered Accountants (CICA) formed

a joint task force on sustainability reporting. While the task force concluded in 2003 thatthe GRI had not yet developed to a point where its criteria were suitable, it alsorecognized the importance of working with the GRI and international standard setters todevelop performance and reporting criteria. The task force took an important step in theUnited States by developing the first attestation engagement on environmental reporting.With the approval of the AICPA Auditing Standards Board, the task force issuedStatement of Position 03-2, Attest Engagements on Greenhouse Gas EmissionsInformation. The AICPA also is participating in the Enhanced Business ReportingConsortium (www.ebr360.com), which is examining how to improve information forpublic company stakeholders.

In January 2005 the professional body of accountants in the Netherlands published twoexposure drafts--ED 3410, Assurance Engagements Relating To Sustainability Report,and ED 3010, Practitioners Working With Subject Matter Experts From OtherDisciplines On Non-Financial Assurance Engagements (presumably referenced in theStarbucks CSR assurance report). These documents were built on International AssuranceStandards, which are similar to the attestation standards the ASB issues. In response theInternational Audit and Assurance Standards Board (IAASB) formed a sustainabilityadvisory expert panel (which includes members from the AICPA/CICA task force) to


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review the EDs and provide comments and suggestions to the Netherlands. The EDs andthe IAASB comment letter can found at www.ifac.org.

The letter focused on several key aspects of the EDs that needed refinement before theywould be acceptable to the IAASB and ASB. Those include

* Judgments around the suitability of criteria decision.

* The use of experts in performing these types of engagements.

* The work effort necessary to distinguish between reasonable or high assurance vs.limited or moderate assurance.

* Materiality factors to consider in planning the scope of the engagement and whendeciding on the type of report to issue.

* The completeness of the sustainability report.

Adding further to the auditor's challenge is the realization that the information in suchreports usually is generated by a diverse set of measurement techniques. Information maybe gathered from various sources, some of which are outside the reporting organizationbecause of the specialized expertise required to accurately measure certain items. Thesecircumstances may require the auditor to become familiar with the measurementprocedures, management practices, systems and integrity of the other organization(s), inaddition to those of the reporting organization. As Shell notes in its 2003 CSR,"environmental and social data and assertions are subject to more inherent limitationsthan financial data, given both their nature and the methods used for determining,

calculating or estimating such data."

An alternate set of assurance standards has been developed by AccountAbility, which hasno relationship with the AICPA, IFAC or other well-established assurance organizations.In 2002 AccountAbility issued its AA1000Assurance Standards, which represented thefirst assurance standard covering sustainability reporting and performance based onprinciples of materiality, completeness and responsiveness (www.accountability.org.uk).Some 120 organizations used the AA1000 standard in 2004.

GROWTH OPPORTUNITY

Corporate sustainability reporting is a rapidly growing way to address stakeholderdemands for risk management and more performance measurement information. Thereare tremendous opportunities for CPAs in industry to be involved with the preparationand disclosure of these reports. The GRI G3 Reporting Framework might emerge as theone most likely to be generally accepted. With organizations issuing corporatesustainability reports at a rapid rate using GRI guidelines, stakeholders for all publiccompanies will come to expect these reports at some point in the future.


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consistency with the financial statements, nonfinancial information in thesecommunications, as well as corporate sustainability reports, provide temptingopportunities for misrepresentations because they are unaudited.

Another intriguing example Golden offers is that of certain prisoners who, even in

solitary confinement, have successfully continued to run their gang's activities on theoutside. Unfortunately, these prisoners don't stop communicating illegal and dangerousinformation to individuals willing to listen. Instead, they adapt to their situation insolitary, which might be difficult at first but becomes easier with practice.

In much the same way, a fraudster might no longer be able to manage earnings ormisapply GAAP as easily as before Sarhanes-Oxley, but he or she can find other ways toaccomplish the same objectives. And these methods will get easier over time withpractice. The use of unaudited communications that contain nonfinancial and otheroperations data in a misrepresentative manner might be challenging at first, but that willbecome easier with practice, too.

Golden says that as long as there is an abundance of investors with too much moneychasing too few investment opportunities offering high returns, the temptation tomisrepresent a company's performance or future prospects based on nonfinancial andother information will be too great to ignore. He says this is a huge hole in the corporatereporting process and if the accounting profession fails to take a leadership role inplugging it, a new market entrant could emerge to capitalize on providing assuranceservices for corporate sustainability reports.

"Individuals and firms in our profession need to realize they are in the 'assurance,' notsimply the 'auditing' business," Golden says, "and investors need assurance on

nonfinancial as well as financial data."

jiptummpp gdl jou 2009 brianballo 17100 the+futu g

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