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Chapter 53 4

Laws and regulations

Guidance regarding responsibility to consider laws and regulations in an audit of
financial statements is provided in ISA 250 Consideration of Laws and Regulations in
an Audit of Financial Statements.

3.1 Definition

Non-compliance means acts of omission or commission by the entity,
either intentional or unintentional, which are contrary to the prevailing
laws or regulations. Non-compliance must specifically relate to the
business activities.

3.2 Responsibilities

Directors Auditors

 Responsible for ensuring the entity  Obtain sufficient appropriate
complies with relevant laws and evidence of compliance with laws
regulations and regulations generally
recognised to have a direct effect
 Monitor legal requirements on the financial statements (e.g.
accounting standards)
 Develop internal controls to ensure
compliance  Perform specified procedures to
help identify instances of non-
compliance with other laws and
regulations that may have a
material effect on the financial
statements (e.g. health & safety
regulations)

 Respond appropriately if non-
compliance is identified or
suspected

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