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Non-compliance laws to tighten

Non-compliance laws to tighten

[vc_row type=”in_container” full_screen_row_position=”middle” scene_position=”center” text_color=”dark” text_align=”left” overlay_strength=”0.3″][vc_column column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ width=”1/1″ tablet_text_alignment=”default” phone_text_alignment=”default”][vc_column_text]Ethical responsibilities of accountants and auditors over non-compliance with laws and regulations are about to increase significantly.

Substantial revisions of APES 110 Code of Ethics for Professional Accountants are on their way. Proposals were released as a Christmas present by the Accounting Professional and Ethical Standards Board (APESB), and revisedethical and auditing standards have been released internationally and are the basis for our local requirements.

The proposals address breaches of laws and regulations dealing with matters such as fraud, corruption and bribery, money-laundering, tax payments, financial products and services, environmental protection, and public health and safety.

Non-compliance with laws and regulations comprises acts of omission and commission, intentional or unintentional, committed by a client or by those charged with governance, by management or by individuals working for or under the direction of a client that are contrary to prevailing laws and regulations. In shorthand, it’s known as NOCLAR.

Proposed new ethical requirements apply to all categories of professional accountants, including auditors, professional accountants in public practice and in entities, including those in businesses, government, education, and the NFP sector.

The proposals set out a framework to guide accountants in what actions to take in the public interest when they become aware of a possibly illegal act committed by a client or employer.

Confidentiality requirements in the code have been revised to require an accountant to determine whether non-compliance needs to be disclosed to an appropriate
regulatory authority.

It will no longer be appropriate to ignore non-compliance or just to resign.

Responsibilities under the code differ depending on whether you are:

  • A professional accountant in public practice providing services other than audits of financial statements
  • An auditor undertaking an audit of financial statements
  • A professional accountant employed by an entity, and
  • A ‘senior professional accountant’.

A senior professional accountant is described as a director, officer, or senior employee able to exert significant influence over, and make decisions regarding, the acquisition, deployment and control of an entity’s human, financial, technological, physical and intangible resources.

Because of their roles, positions and spheres of influence, there is a greater expectation for them to take whatever action is appropriate in the public interest to respond to non-compliance or suspected non-compliance.

Their responsibilities require them to:

  • Obtain an understanding of the matter
  • Address the matter
  • Determine whether further action is required, and
  • Determine whether to disclose the matter to an appropriate authority.

Documentation of the steps is encouraged. The responsibilities of other professional accountants are not so extensive but still quite onerous.
The revisions flow from a revision of the Code of Ethics for Professional Accountants that has been released by the International Ethics Standards Board with two new sections and consequential amendments. The new sections are 225 Responding to Non-compliance with Laws and Regulations, which applies to members in public practices, and 360 of the same title, which applies to members in business.

It is proposed that the changes become operative from 15 July (the same date as the international standard).
As the new requirements have been finalised internationally, don’t expect any changes to result from the local exposure process. It is policy to comply with international rules.

Every accountant needs to know about their new NOCLAR responsibilities. Entities will need to consider their internal policies and procedures on compliance and the implications of reporting non-compliance. The time to start thinking about it is now.
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