How best to address noncompliance with laws and regulations (NOCLAR) by clients was addressed in the first meeting of a joint task force of the AICPA/NASBA Uniform Accountancy Committee and the AICPA Professional Ethics Executive Committee on July 30-31 in Washington, DC. The task force was formed as recommended by the AICPA/NASBA summit leadership meeting in order to coordinate the work of the two committees, which have both been studying the International Ethics Standards Board for Accountants (IESBA) standards released in July 2016 that are steadily being adopted internationally.
IESBA’s Chair Stavros Thomadakis addressed the UAA Committee in September 2018 in Nashville (see sbr 10/18), and since that time more international professionals have adopted the proposed standards. A recent update report received from IESBA Senior Technical Director Ken Siong finds: Australia, Demark, Hong Kong, India, Japan, Malaysia, the Netherlands, New Zealand, Nigeria, Pakistan, Russia, Singapore, South Africa, Sri Lanka, Sweden, the United Arab Emirates and the United Kingdom having adopted at least sections of the IESBA standards; Germany is converging its standards with the IESBA; the standards are nearing final adoption in Brazil, China, Indonesia, Saudi Arabia and South Korea; and are under consideration in Canada.
Mr. Siong reported: “The IESBA has committed to an implementation review of NOCLAR in its Strategy and Work Plan 2019-2023, with fact finding to commence in early 2023. The timing of this initiative takes into account the fact that many jurisdictions are progressing at different speeds as they undertake their national due processes related to adoption, including translation, and recognizes the need to allow sufficient time for actual implementation.”
The Japanese Institute of CPAs adopted IESBA’s NOCLAR standards in two steps: It released its guidance for professional accountants practicing public accounting in July 2018 and released its final provisions for professional accountants in industry and business in July 2019.
The rules focus on guidance for professional accountants who come upon NOCLAR in their work with clients. Among the key provisions of the IESBA rules is requiring successor auditors to include in their tender offer the client’s granting permission to receive information from the predecessor auditor and for the predecessor auditor to provide that information upon the request of the successor auditor. The IESBA rules also allow for confidentiality to be breached to report to an appropriate regulatory authority after reporting up the chain has not resulted in any remediation. International adoption has not included all of the provisions in the IESBA standards, as local laws preclude some from being enacted.
The AICPA PEEC released a proposed NOCLAR interpretation in 2017; however, NASBA commented on May 9, 2017: “We seriously question the notion that confidentiality is preeminent to the degree that it must override all other ethical considerations, especially when public protection is threatened. …we recommend tabling this project until such time as UAA language is developed to incorporate NOCLAR requirements.”
NASBA UAA Committee Chair Coalter Baker (TX) told the joint task force meeting on July 30: “We want to increase public protection, enhance the public’s perception of the CPA, and provide clarity to the profession as to the protocol to use when NOCLAR is encountered. However, we want to go about this task in a manner that does not harm the CPA professional. “ The current joint UAA/PEEC task force is working to arrive at a place where regulators and the profession can agree on appropriate next steps.
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