An international ethics standard was enacted in New Zealand on 15thJuly 2107 which has important considerations for me as an accountant and you as a client.
It’s a first-of-its-kind framework to guide auditors and other professional accountants in what action 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. It’s a set of ethical standards with global reach. It’s designed to stimulate greater accountability among organisations, help protect stakeholders and the general public from substantial harm resulting from violation of laws and regulations, strengthen the reputation of the accounting profession and positions the accountancy profession to play a greater role in the global fight against NOCLAR, such as financial fraud, money laundering, and corruption.
It permits the accountant to set aside the duty of confidentiality to their client in order to disclose NOCLAR to appropriate public authorities in certain situations. The duty of confidentiality acted as a barrier to the disclosure with Auditors and Accountants simply resigning from client relationships without issues being addressed. It was deemed to be too difficult or stressful.
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 organisation’s financial statements or its business in a material or fundamental way. Personal misconduct unrelated to the business activities of a client or employer are not in scope.
Examples of the range of laws and regulations covered include those that address:
- Money Laundering
- Public health and safety
- Securities markets and trading
- Data protection
- Financial products
- Financial services
- Proceeds of crime
- Environmental protection
- Tax and pension liabilities
- Terrorist financing
The requirements do not demand accountants to have an in-depth knowledge of every law – thankfully! However, it makes it clear that there is now a responsibility to alert relevant authorities where illegal acts such as fraud, corruption, bribery or money laundering are suspected or uncovered during the course of our professional work.
It comes down to whether there is credible evidence of serious adverse consequences to investors, creditors, employees or the general public in financial or non-financial terms.
So does this make auditors and accountants the new cops on the block? It certainly adds another level of responsibility to their role. A first response will always be to address the issue with the client – an unintentional omission or lack of knowledge can be quickly and easily remedied. Deliberate non-compliance is a different matter entirely.