IESBA Releases Q&As on Responding to Non-Compliance with Laws and Regulations

March 2017

The staff of the International Ethics Standards Board for Accountants (IESBA) have published two Question and Answer (Q&A) publications to support the adoption and implementation of the IESBA standard, Responding to Non-Compliance with Laws and Regulations. This standard, adopted in July 2016, provides a framework to guide professional accountants in responding to potential illegal acts, including non-compliance with laws and regulations (NOCLAR), committed by a client or employer. The new standard will be effective 15 July 2017, with early adoption permitted.

Under the NOCLAR standard, auditors and other professional accountants will be permitted to disclose potential non-compliance situations to appropriate public authorities without constraint by the ethical duty of confidentiality. The standard also emphasises the role of senior-level accountants in business in promoting an organisational culture of compliance with laws and regulations and prevention of non-compliance.

Covered laws and regulations include those that have a connection with an accountant’s professional training and expertise. The rule excludes violations that are ‘clearly inconsequential’; personal misconduct not related to business activities; ‘non-compliance other than by the client or employer, or those charged with governance, management or other individuals working for or under the direction of the client or employer’.

The IESBA staff has provided two separate Q&A documents for professional accountants in public practice and for those in business (PAIBs). The public practice Q&As cover issues related to standard applicability, audits of financial statements, and professional services other than financial statement audits, among others.

The Q&As for accountants in business cover issues related to scope, PAIB responsibilities (for senior versus other PAIBs), organisational culture, and NOCLAR disclosure, among others.

The Q&As are available on this link. 

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