Are accountants, and lawyers, prepared for NOCLAR?

The APESB has released a draft of new section 225 of the Code of Ethics for Professional Accountants, APES 110, for comment by 15 March 2017.

This section deals with NOCLAR, “non-compliance with laws and regulations”, and the obligation on an accountant to report or respond to that non-compliance detected in a client or third party.

This obligation has been the subject of extensive consultation internationally, and in Australia, over the past years, in which I took part.

The Code obligation is expected to commence in July 2017.

The long history of this obligation in legal history, and my comments on its present day form, are on this site.

In brief, my comments are that while the change is well intentioned, one would like to think that the accountants have taken advice on the legal implications of assuming this obligation. There are existing ‘misprision’ laws, in NSW and elsewhere, that apply generally but not to the extent of section 225. Whistleblower laws offer some limited protection. Certainly lawyers do not assume this obligation as a matter of their professional standards.

In the case of insolvency practitioners (who are accountants) there are existing obligations to report offences, and restrictions on the use of information they may receive in conducting an insolvency, or litigation.  Auditors will have similar obligations.

While the section 225 obligation is qualified in several respects, it is sufficiently serious for the draft Code to suggest professional body or legal advice in particular cases. Examples of non-compliance include WHS, environmental, tax and fraud. Liabilities of an accountant reporting a NOCLAR could involve privacy, defamation, and confidentiality, and abuse of process.

No doubt the regulators and the professional bodies will issue more particular guidance, based on legal advice, once the new section, in its final form, becomes operational.

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