Iesba Noclar Fact Sheet

RESPONDING TO NON-COMPLIANCE Fact Sheet
WITH LAWS AND REGULATIONS July 2016

WHAT IS IT?
Responding to Non-compliance with Laws and Regulations

is an international ethics standard for auditors and other
professional accountants (PAs). It sets out a first-of-its-kind
framework to guide PAs in what actions to take in the public
interest when they become aware of a potential illegal act,
known as non-compliance with laws and regulations, or
NOCLAR, committed by a client or employer.
The standard includes a clear pathway

to disclosure of NOCLAR to appropriate
THE STANDARD WILL BE EFFECTIVE JULY 15, 2017.
public authorities in certain circumstances.
EARLY ADOPTION IS PERMITTED.
WHY IS IT IMPORTANT? The standard will stimulate greater accountability among organizations,
help protect stakeholders and the general public from substantial harm
As a set of ethical standards resulting from violation of laws and regulations, and strengthen the
with global reach, the IESBA reputation of the profession (see Outcomes on next page).
Code of Ethics for Professional
Accountants (the Code) plays
a unique role in supporting This is the first time accountants have been permitted to set aside the
the accountancy profession in duty of confidentiality under the Code in order to disclose NOCLAR to
acting in the public interest. appropriate public authorities in certain circumstances.
The standard positions the accountancy profession to play a greater

role in the global fight against NOCLAR, such as financial fraud,
money laundering, and corruption.
The standard is the result of over six years of extensive

consultation, based on a multi-stakeholder approach
and stringent due process.
WHY WAS THE STANDARD DEVELOPED?
The standard responds to the following key public interest concerns:

• The duty of confidentiality in the Code acting as a barrier to the disclosure by
PAs of potential NOCLAR to public authorities in the appropriate circumstances
• Auditors simply resigning from client relationships without NOCLAR issues
being appropriately addressed
• A lack of guidance to help PAs in working out how best to respond to potential
NOCLAR, a situation that may often be difficult and stressful
WHAT OUTCOMES IS THE STANDARD SEEKING TO ACHIEVE?
PROTECTION FOR STAKEHOLDERS ENHANCED ROLE AND VALUE OF

ENHANCED ETHICAL CONDUCT
AND GENERAL PUBLIC THE ACCOUNTANCY PROFESSION
• Clarifies that turning a blind Stimulates PAs to take a proactive role • Enables the profession to play a
eye to potential NOCLAR is not in responding to NOCLAR, which can greater role in the fight against
an appropriate response from lead to: significant NOCLAR, such as
professional accountants, while • an earlier response by management financial fraud, money laundering,
placing renewed emphasis on or those charged with governance, and corruption
the roles of management and thereby mitigating adverse • Enhances the profession’s
those charged with governance in consequences for stakeholders and reputation as a guardrail for
addressing the matter the general public trustworthy organizations and a
• Increases awareness and • deterring potential NOCLAR, healthy global financial system
understanding among PAs of their thereby helping to lower rates of
legal and regulatory responsibilities NOCLAR for the greater benefit of
when they face NOCLAR, thereby business and society
helping to stimulate increased
reporting of NOCLAR to public • timelier intervention from public
authorities pursuant to reporting authorities on reports of potential
requirements in law or regulation NOCLAR from PAs in appropriate
circumstances, thereby mitigating
any adverse consequences for
stakeholders and the general public
WHEN DOES IT APPLY?
NOCLAR is defined as any act of omission or commission, intentional or unintentional,

committed by a client or employer, including by management or by others working for
or under the direction of the client or employer, which is contrary to prevailing laws
or regulations.
The laws and regulations covered, violations of which are acts of NOCLAR, are those
that directly affect the client’s or the employing organization’s financial statements or
its business in a material or fundamental way.
Examples of the range of laws and regulations covered include those that address:
MONEY LAUNDERING PUBLIC HEALTH AND SAFETY

SECURITIES MARKETS
BRIBERY
DATA PROTECTION
FRAUD CORRUPTION FINANCIAL PRODUCTS
FINANCIAL SERVICES BANKING PROCEEDS OF CRIME
SECURITIES TRADING ENVIRONMENTAL PROTECTION
TAX AND PENSION LIABILITIES TERRORIST FINANCING
WHO WILL BE AFFECTED BY THE STANDARD?
The standard applies to all PAs. However, it stipulates a different but

proportionate approach for the following four categories of PAs:
• Auditors
• Other PAs in public practice
• PAs in business who are in senior-level roles—directors, officers,
or senior employees in their employing organizations
• Other PAs in business
Those with whom PAs may raise NOCLAR matters will also be
directly affected—including those in management positions or on
boards of directors, and regulators or other public authorities.
CALL FOR SUPPORT
• The IESBA alone cannot make a difference. All links in the financial reporting supply chain, especially
management and those charged with governance, have an important role to play in preventing and
bringing to light potential acts of NOCLAR.
• Governments, legislators, and regulators are uniquely placed to introduce or strengthen legislation or
regulation governing the reporting of NOCLAR, appropriately tailored to their national circumstances, including
establishing appropriate protections for whistle-blowers.
• National standard setters and professional accountancy organizations should review their national ethics
standards or codes of ethics and consider actions to adopt or promulgate provisions that are at least as robust as
the IESBA’s NOCLAR standard.
• Legislators, regulators, accounting firms, professional
accountancy organizations, academic institutions, and
other stakeholders should work toward helping PAs become
more aware of and better understand their legal, regulatory,
and ethical responsibilities regarding responding to NOCLAR.
• Regional and international organizations with an interest
or a role in ensuring that NOCLAR is addressed effectively can
stimulate dialogue, coordination, and progress on the topic.
• The IESBA encourages other professions to reflect on
this new standard of ethical conduct for the accountancy
profession and consider working toward a similarly global
standard of ethics for their members in the public interest.
Find contacts, additional resources, and more about

the standard and IESBA at www.ethicsboard.org.

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RESPONDING TO NON-COMPLIANCE Fact Sheet

WITH LAWS AND REGULATIONS July 2016

Responding to Non-compliance with Laws and Regulations

The standard includes a clear pathway

The standard positions the accountancy profession to play a greater

The standard is the result of over six years of extensive

WHY WAS THE STANDARD DEVELOPED?

The standard responds to the following key public interest concerns:

PROTECTION FOR STAKEHOLDERS ENHANCED ROLE AND VALUE OF

WHEN DOES IT APPLY?

NOCLAR is defined as any act of omission or commission, intentional or unintentional,

MONEY LAUNDERING PUBLIC HEALTH AND SAFETY

The standard applies to all PAs. However, it stipulates a different but

CALL FOR SUPPORT

Find contacts, additional resources, and more about

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