Accountants and NOCLAR – more than a systems update

Professional accountants in Australia will soon be bound by a new standard that could require them to report offences to the police, or, in accountants’ language, “non-compliance with laws and regulations”, or NOCLAR. This new obligation raises a number of issues which, while no doubt in hand, may involve more than an “update of systems” as the standard setter – the APESB – suggests.

This standard is an aspect of an increased “whistleblower” focus of accounting professionals, post GFC, who appear to have seen their existing professional and ethical as preventing this in the past.  The obligation will be included in the international Code of Ethics for Professional Accountants (APES 110), as from 1 January 2018.

The obligation appears to be confined to a breach of the law by one’s employer or client, and not, for example, by a breach committed by a party to a client’s dealings. One might report a client’s bribery, but not if the client is offered a bribe. 

Serious offences involving tax evasion, health and safety breaches and money-laundering are given as examples that “may” cause the accountant to “determine that disclosure of the matter to an appropriate authority is an appropriate course of action”.   

The law of course has and continues to prevail over such obligations, and limitations, for example in relation to certain legal requirements to report offences to the police, whether of a client, employer or anyone.

And while the law might have some regard to an accountant’s conduct in compliance with such obligations, legal protection for the consequences of a misguided referral is not guaranteed.  It is for that reason, it seems, that APESB has, perhaps belatedly, asked the government for legal protection in the current review into whistleblower laws.

Whistleblowing also raises questions of protection of those who report, particularly by employees reporting breaches of the law by an employer. The accounting professional bodies may need to develop processes of support for those accountants. Whistleblowing still has, for some, a negative connotation. 

Finally, in areas where lawyers and accountants compete and where their clients may well be in breach of the law – for example in tax, corporate and financial matters, and in advising on the restructuring of failing companies – a client might be hesitant to engage an accountant whose professional responsibility may result in the client’s prosecution. As the American Society of CPA’s has said, NOCLAR may have a “chilling effect” on clients, in particular those that require advice on remediating regulatory compliance defaults. 

These issues will no doubt have been contemplated and will be addressed. Although there is perhaps more involved than accountants merely “updating their systems” as APESB suggests.

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