Page 50 - AAA Integrated Workbook STUDENT S18-J19

Chapter 43 4

1.7 Responding to Non-compliance with Laws and Regulations (NOCLAR)

The IESBA Code of Ethics for Professional Accountants sets out new ethical
requirements in relation to an entity’s compliance with laws and regulations.

The ethical standard, Responding to Non-compliance with Laws and Regulations
(NOCLAR), provides guidance to accountants as to the actions that should be taken
if they become aware of an illegal act committed by a client or employer.

The additional requirements have been introduced to address concerns that the duty
of confidentiality was acting as a barrier to the disclosure of potential NOCLAR to
public authorities in the appropriate circumstances. Auditors were resigning from
client relationships without NOCLAR issues being appropriately addressed.

NOCLAR sets out responsibilities in relation to:

 Responding to identified or suspected non-compliance

 Communicating identified or suspected non-compliance with other auditors

 Documenting identified or suspected non-compliance.

The aims of the new regulations are to:

 Encourage an earlier response by management or those charged with
governance

 Mitigate adverse consequences for investors, creditors, employees and the
general public

 Enable timelier intervention from public authorities.

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