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Auditing

08 July 2016
​​ ERF

Under the Emissions Reduction Fund, the Clean Energy Regulator will adopt a risk-based approach to audit.

This approach balances the need to streamline audit requirements with the need to uphold the integrity of ACCUs. For most projects, this approach to audit will mean a minimum of three scheduled audits across the seven plus year crediting period.

All audits will need to establish reasonable assurance that the abatement achieved and reported on is accurate.

Audit requirements

All audits must be undertaken by a category 2 ​auditor registered under the National Greenhouse and Energy Reporting Regulations 2008. For further information, please see About the National Greenhouse and Energy Reporting scheme.

The costs of audits are your responsibility. We recommend that you engage your auditor early when developing your project. This is to ensure you can establish costs, if bidding into an auction, and to ensure sound reporting and record keeping processes are established from the outset.

You must make all necessary documents and information, including data records, receipts and other supporting documentation available to the auditor.

In addition to engaging an auditor, you may also consider the services of a consultant to assist you in developing your project including establishing costs if bidding into an auction. It is important to note that the auditor and consultant should not be the same person/entity – this is to avoid​ conflicts of interest, which undermine the integrity of audits under the Emissions Reduction Fund.​​

Conflict of interest

An auditor must be independent from the entity they audit.  To maintain independence, auditors must not participate in schemes the Clean Energy Regulator administers. 

Auditors are deemed to have a conflict of interest if they: 

  • participate as a proponent, agent or investor in an Emissions Reduction Fund project, 
  • bid in Emissions Reduction Fund auctions, or 
  • trade in Australian Carbon Credit Units.

If an auditor becomes aware of a conflict of interest situation when conducting an audit, they must take all reasonable steps to ensure the situation is resolved. Where conflicts are not remedied, or exemptions are not provided, the auditor must cease involvement with the audit. 

The documentasset:Guidance for Audits under the ERF​ is available to help you understand the risk-based audit framework that will be applied to registered projects in the Emissions Reduction Fund​​.

Audit types

There are three types of audits under the Emissions Reduction Fund.

Initial audits

An initial audit report must be submitted with the first report for your project, submitted between six months and two years into the crediting period, or five years into the crediting period for sequestration projects. Project reports can be submitted up to six months after the end of the reporting period.

In some cases, a project may report more frequently than every six months. In these cases, the initial audit must cover a period of at least six months and must be submitted with the final report covering the six month period. For more information read the documentasset:Guidance for Audits under the ERF on audits under the ERF.

An initial audit report will provide confidence that the implementation of your project is in accordance with the legislative requirements. It is recommended that you complete and submit this audit report as soon as possible after the initial six month period.

The initial audit will cover the:

  • project registration and assessment of the forward abatement schedule
  • report for the first reporting period, including accuracy of the measurement of abatement to date
  • operation of the project, and
  • all other matters relating to the establishment and operation of the project in accordance with the Carbon Credits (Carbon Farming Initiative)​ Act 2011 and method relevant to the project.

Subsequent audits

Subsequent audit reports must be submitted in line with the project audit schedule, received at the time of project registration.

The subsequent audit schedule is intended to ensure your project is audited across periods of peak abatement, providing assurance over the maximum number of ACCUs issued across the crediting period. Scheduled audits are used to establish reasonable assurance that the abatement achieved and reported by a project is accurate. Subsequent audits will cover a minimum reporting period of 12 months.

Unscheduled additional audits

There are three triggers where additional unscheduled audits may be required. These are:

  • a single report claiming over 100 000 t CO2-e of abatement
  • a previous audit report with a qualified audit opinion. For example, an auditor may qualify their report when some audit evidence was not able to be obtained, and
  • variance from:
    • the project's expected abatement estimate
    • other similar projects, or
    • the general abatement profile of the method used by the project.

Audit frequency

The Clean Energy Regulator will set an audit schedule for your project. The audit schedule is provided at the time of project registration. The audit schedule sets out the level of assurance, frequency, and scope of audits required for your project.

For most projects, a minimum of three scheduled audits across the seven plus year crediting period is required. The number of scheduled audits will depend on your project size in terms of average annual abatement expected to be generated.

The number of subsequent audits required for a project depends on the abatement forecast in the project's forward abatement estimate. The Carbon Credits (Carbon Farming Initiative) (Audit Thresholds) Instrument 2015 (Audit Threshold Instrument) which sets out the audit threshold, will be used as a basis to determine the number of audits to be scheduled.

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