The purpose of this report is to examine how practitioners may use Professional judgment when performing Materiality assessment for use in the submission of an ISAE 3000 assurance statement on sustainability reports submitted under Corporate Sustainability Reporting Directive (CSRD). The findings presented in the report are based on a performed case study including both qualitative and quantitative data by means of interviews with current auditors and experts as well as a questionnaire from university students with practical experience from the accountant industry. The analysis of the report is divided into two parts, where the first part focuses on analyzing current practice for performing Materiality assessment, while the second part discusses what is needed to possess “Professional judgement“.
In the first part of the report a new methodology for performing Materiality assessment is presented for use in the submission of ISAE 3000 assurance statements on sustainability reports. The methodology is based on a comparative analysis of experience among auditors from the largest audit firms in Denmark. The methodology template is inspired by guidelines from ISA 315 and 320, however, the methodology suggests that the risk assessment must be carried out before the Materiality is determined as it is argued that the Materiality assessment is to be performed per subject area. Moreover, the methodology sets a benchmark between 1-5 % for the quantitative reporting areas, while a sensitivity analysis may be performed for the qualitative reporting areas.
The second part of the report discusses the expectations of the stakeholders, the preparers and auditors as the practitioners respectively for an assurance engagement on a sustainability report. In this regard, a new concept is introduced: The competence gap. The competence gap is discussed in relation to three main challenges: 1) requirements for auditor's competencies in the future, 2) whether the same audit team can be assurance providers for both the financial Annual report and the sustainability report and 3) how to facilitate education within ESG auditing in the future. Based on this, it is concluded that there are not enough auditors in Denmark with the appropriate and sufficient competences to provide all the assurance engagements expected as a result of the coming implementation of CSRD in the EU Member states. It is therefore recommended that the audit industry as a whole set up a strategy for facilitating an ESG competency boost in order to avoid an expansion of the competence gap.

For future work, it is recommended that a special focus should be paid to the decision making of the Danish Business Authority (‘Erhvervsstyrelsen’) in relation to how CSRD is to be implemented in Danish legislation. In addition, it will also be interesting to follow the work of the IASB toward a new assurance standard – ISSA 5000, which is expected to be targeted statements on sustainability reports and thereby also have a decisive impact on the competence requirements of auditors as practitioners.