What is the influence of ESG under the focus on sustainability reporting on internal auditing, and how can this be integrated into the auditing of projects? The research question is based on the underlying: hypothesis ESG risks are currently not or inadequately integrated into current project audits. As a result, possible potentials are not leveraged. To prove this hypothesis, the following questions need to be addressed: Are ESG risks related to sustainability reporting reflected in current audit programs? How can ESG criteria being integrated into internal project audits? What conclusion can be drawn for the auditors to support sustainability reporting?
Projects are often exposed to a wide variety of risks. One reason is, that projects are subject to a dynamic environment due to their complexity and project durations. Particularly in the initial project phase, it is often difficult to comprehensively specify projects in terms of their outcome, scope, time, and resources. A high level of complexity often leads to change requests and thus to a modified scope as the project progresses. This is also shown by the "Pulse of the Profession" study, conducted for the tenth time by the Project Management Institute, according to which 52 per cent of projects completed in the last 12 months were affected by changes in the design and scope. Such adaptions usually impact the other factors of the Magic Triangle (longer project duration, higher project costs, or higher resource requirements). They subsequently often impact stakeholder satisfaction with the project and its result or even result in a project failure. Not least because of this context, the Agile Manifest was developed in 2002 to tackle such uncertainties. Today, many companies use agile project management methods or hybrid forms of agile and classic project management when the project can’t be sufficiently determined. Whether projects are handled classically, agilely or in a hybrid form, they represent an uncertainty and associated risk factor for companies. This is already reflected in the term "project" definition, which, according to, is characterised by keywords such as novel, complex, dynamic and significant, especially concerning economic success. Therefore, it is the question of how project success and the effectiveness and efficiency of managing projects can be monitored and ensured.
Table of Contents
1 Introduction
1.1 Background and Problem Description
1.2 State of Research
1.3 Research Gap and Research Question
1.4 Objective and Limitation
1.5 Research Method
2 Project Management Standards
3 Internal Audit
3.1 Terminology and Delimitation
3.2 Internal Audit Characteristics
4 Project Audit
4.1 Definition and Characteristics of project auditing
4.2 Project Audit of conventional projects
4.3 Project Revision of Agile Projects
5 Sustainability Aspects in Internal Project Audit
5.1 Background - ESG Development
5.2 Sustainability Reporting
5.2.1 EU Taxonomy
5.2.2 CSRD Reporting
5.2.3 ESRS – European Sustainability Reporting Standards
5.3 ESG in Internal Audit
5.4 ESG Implications for Project Audits
6 Empirical investigations
6.1 Case Study
6.1.1 Case Study – Object (Single Case)
6.1.2 The Company – test object
6.1.3 Corporate Audit
6.2 Data collection and Analysis
6.3 Summary
7 New approaches in internal auditing
7.1 General implications for internal auditing
7.2 Implications for project audits
Objectives and Topics
The primary objective of this research is to analyze the influence of new sustainability reporting standards and related ESG risks on internal auditing and to determine how these can be integrated into the auditing of projects, ultimately deriving revised audit methods.
- Analysis of ESG integration within internal audit processes.
- Evaluation of deficiencies in current project audit approaches regarding ESG.
- Development of concepts for integrating sustainability metrics into internal project auditing.
- Examination of the relationship between corporate, project, and environmental reporting levels.
- Assessment of the role of internal audit as a change agent in sustainability transitions.
Excerpt from the Book
5.4 ESG IMPLICATIONS FOR PROJECT AUDITS
Since companies in the future will have to be evaluated according to financial key figures and ESG criteria, this topic will be reflected in most business areas. Especially for the strategically important projects. Traditionally, projects create change and drive innovation in a company. As a result, the project manager is increasingly able to implement sustainability strategies and move the entire organisation toward greater sustainability. This means for the entire project implementation to avoid, reduce or compensate negative effects and bring them into the environmental and social balance. Which aspects and dimensions of sustainability are taken into account in this process has so far varied greatly in practice. For many companies, the focus is on CO2 emissions, while other environmental aspects, such as biodiversity, still receive little attention. This will be standardised in the future by the vast amount of sustainability reporting requirements. The EU taxonomy and the ESRS name more than 1100 different data points/KPIs which will be relevant for reporting and, thus, for possible investors in the future. These criteria are based on data resulting not only from the production areas but also from projects. In addition, it is precisely through projects that the production processes in the company are renewed. Sustainability aspects are, therefore, not only directly relevant in project reporting but also in its implementation and realisation. For companies, this will be a decisive factor in the planning of strategic changes in the future. In addition to the direct changes realised through projects, ESG reporting criteria can impact other subjects. For example, public institutions' financial founding of projects is often dependent on compliance with various standards. In addition, initiatives and approvals are also measured against ESG criteria. For Internal Audit, these topics are not entirely new. For example, occupational health and safety topics, emission protection, minimum social requirements, etc., have already been integrated into project audits. However, due to the lack of standardisation to date, these topics have only been audited in projects on an as-needed basis under the specific individual requirements of the project objective.
Summary of Chapters
1 Introduction: Provides the research background, defines the problem, presents the state of research, and outlines the research method regarding the internal auditing of projects.
2 Project Management Standards: Offers basic definitions of project management using the waterfall model as a foundational support for subsequent audit discussions.
3 Internal Audit: Establishes a theoretical foundation by covering fundamental audit standards, terminology, and characteristics essential for experienced auditors.
4 Project Audit: Explores the auditing of projects by linking project management standards with the DIIR Auditing Standard No. 4 and examines specific approaches for conventional and agile projects.
5 Sustainability Aspects in Internal Project Audit: Details the integration of ESG criteria, sustainability reporting requirements such as the EU Taxonomy and CSRD, and their specific implications for the internal audit function.
6 Empirical investigations: Documents the qualitative single case study conducted to verify the research hypothesis based on real-world IT audit system data and practices.
7 New approaches in internal auditing: Proposes strategic adjustments, educational needs, and recommendations for internal audit departments to adapt to the new sustainability-driven landscape.
Keywords
Internal Audit, ESG, Sustainability Reporting, Project Audit, CSRD, ESRS, EU Taxonomy, ESG Risks, Corporate Governance, Internal Control System, Project Management, Sustainability Audit, Reporting Standards, Audit Universe, Risk Management.
Frequently Asked Questions
What is the core focus of this research?
The research focuses on the intersection of project auditing and the emerging requirements of sustainability reporting (ESG), aiming to clarify how internal audit functions can adapt to these new regulatory demands.
What are the primary thematic areas covered?
The key themes include the evolution of project management standards, the framework of internal auditing, the specific requirements of the EU Taxonomy and CSRD reporting, and the practical application of these in project-level data collection.
What is the ultimate goal or research question?
The core research question addresses how ESG influences internal auditing under the focus of sustainability reporting and how these elements can be effectively integrated into the auditing of projects.
Which scientific methodology is utilized?
The work employs a qualitative research paradigm, conducting a comprehensive literature review followed by a deductive single case study involving the analysis of archival audit data and expert insights.
What topics are addressed in the main body of the work?
The main body covers definitions of project auditing, detailed explanations of ESRS standards, an empirical case study of an organization's audit practices, and proposed new approaches for internal audit departments.
Which keywords best characterize the work?
The study is characterized by terms such as Internal Audit, ESG, Sustainability Reporting, CSRD, and Project Audit, reflecting its focus on regulatory and professional developments in auditing.
How does the introduction of CSRD change the audit object for companies?
The CSRD mandates a substantive audit of sustainability reports, which effectively forces companies to expand their internal governance and audit systems to include ESG risks and ensure data traceability previously not required on this scale.
Why is the "Audit IT System" significant for this research?
The audit IT system serves as the data basis for the empirical study, allowing the researcher to evaluate actual, pre-formulated audit checklists and determine the extent to which they currently map to ESG-relevant data points.
- Arbeit zitieren
- Martin Henschelchen (Autor:in), 2024, Internal Audit in Projects under the Influence of ESG Aspects with a Focus on Sustainability Reporting, München, GRIN Verlag, https://www.grin.com/document/1464295
