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ETHICS

The ‘Unpaid Fees’ individuals working for or under the direction of
the client or the employer.
interpretation is now a suspected NOCLAR, he or she should alert the
When a member encounters a known or
appropriate parties to enable a client’s or employing
principles-based approach, organization’s management and those charged with
governance to rectify, mitigate the effects of, or
deter the commission of the NOCLAR.
which better aligns with the The new interpretation, as it applies to members
in public practice, has separate requirements for
unpaid fee rules under the members providing financial statement audit or
review services and members providing other
services. The requirements are more robust for
International Ethics members providing financial statement audit or
review services, who must:
■ Obtain an understanding of the matter;
Standards Board for ■ Advise the client to take appropriate and timely
actions to rectify or remediate the NOCLAR;
and
Accountants and the SEC. ■ Document certain aspects of the NOCLAR.
Coinciding with the issuance of the interpreta-
tions, the AICPA’s Auditing Standards Board
issued Statement on Auditing Standards No. 147,
Inquiries of the Predecessor Auditor Regarding Fraud
(ET §1.180.010 and ET §2.180.010). The and Noncompliance With Laws and Regulations, to
interpretations set forth members’ responsibilities require an auditor to inquire of the predecessor
when they encounter noncompliance with laws or auditor regarding identified or suspected fraud
regulations when working with a client or within or NOCLAR, once management authorizes the
their employing organization. The interpretations predecessor auditor to respond to inquiries from
define NOCLAR as acts of omission or commis- the auditor.
sion, intentional or unintentional, that are contrary Similarly, there are separate requirements for
to prevailing laws and regulations and are commit- members in business who are senior professional
ted by a client or an employer, by those charged accountants and members other than those who
with governance, by management, or by other are senior professional accountants in business. The
requirements are more robust for members who
are senior professional accountants in business,
who must:
AICPA RESOURCES ■ Obtain an understanding of the matter;
■ Take the appropriate steps to:
Article y Have the matter communicated to those
“NOCLAR: Proposals Aim to Help CPAs Find the Right Balance,” JofA, March charged with governance;
29, 2021 y Comply with applicable laws and regulations;
y Have the consequences of the NOCLAR
Podcast episodes
rectified, remediated, or mitigated;
“Ep. 37: PEEC’s 1Q 2022 Meeting — Approval of Changes to the Code of y Reduce the risk of reoccurrence;
Professional Conduct,” Ethically Speaking, Feb. 18, 2022
y Seek to deter the commission of the NO-
“Ep. 34: EDs on the Go — Loans, Acquisitions, and Other Transactions,” CLAR if it has not yet occurred; and
Ethically Speaking, Oct. 7, 2021 ■ Evaluate the appropriateness of the response of
“Ep. 33: EDs on the Go — Assisting Clients With Implementing Accounting the member’s superiors, if any, and those charged
Standards,” Ethically Speaking, Sept. 30, 2021 with governance and determine if further action
“Ep. 32: EDs on the Go — Unpaid Fees,” Ethically Speaking, Sept. 30, 2021 is necessary in the public interest.
Members in business are permitted to report
a NOCLAR to an appropriate authority unless

32 | Journal of Accountancy June 2022