The IESBA approved revisions to the IESBA Code to address the professional accountant’s responsibility in relation to NOCLAR at its April 2016 teleconference. The changes to the IESBA Code become effective on July 15, 2017 and would be adopted by the Accounting and Auditiing professional bodies across the world.

The International Ethics Standards Board for Accountants (IESBA) has recently released an amending standard to the Code of Ethics for Professional Accountants (the Code) to redefine the accountants’ role when laws or regulations are broken i.e to address the professional accountant’s responsibility in relation to Non-compliance with Laws and Regulations (NOCLAR). This standard sets out a basis to guide auditors and other professional accountants in what actions to take in the public interest when they become aware of a potential illegal act, committed by a Client or their Employer.

NOCLAR is any acts of omission or commission, intentional or unintentional, committed by a client, or by those charged with governance, by management or by other individuals working for or under the direction of a client who are contrary to the prevailing laws and regulations.

The non-compliance which the standard addresses is concerned with laws and regulations which are generally recognised to have a direct effect on the determination of material amounts and disclosures in the client’s financial statements. It also addresses other laws and regulations which may be fundamental to the operating aspects of the client’s business, to its ability to continue its business or to avoid material penalties. It is worth noting that the standard does not include within its scope any matters that are clearly inconsequential or any personal misconduct which is unrelated to the business activities of the client or employer.

APPLICATION OF THE STANDARD

The standard applies to all professional accountants, including auditors, other professional accountants in public practice, and professional accountants in organizations, including those in businesses, government, education, and the not-for-profit sector. It addresses breaches of laws and regulations that deal with matters such as fraud, corruption and bribery, money laundering, tax payments, financial products and services, environmental protection, and public health and safety.

NOCLAR provides a clear pathway for auditors and other professional accountants to disclose potential non-compliance situations to appropriate public authorities in certain situations without being constrained by the ethical duty of confidentiality. It also places renewed emphasis on the role of senior-level accountants in business in promoting a culture of compliance with laws and regulations and prevention of non-compliance within their organizations.

IMPLICATIONS;

Any business with a history of Non-compliance with Laws and Regulations (NOCLAR) is likely to suffer someday for the contravention of any Laws and Regulations of their host Countries for as long as their every day dealings involve Accountants and Auditors whether as employees or not.

THE WAY FORWARD;

Every business should engage only experienced professionals to work with either as employees or consultants so that any issue of NOCLAR can be corrected before its too late.