NOCLAR – A Complete Awareness Brief

NOCLAR stands for “Non-Compliance with Laws and Regulations,” a framework guiding professional accountants on how to respond to illegal or unethical acts in the public interest.

Definition and Scope

NOCLAR is a set of ethical standards issued by the International Ethics Standards Board for Accountants (IESBA) to help professional accountants act appropriately when they become aware of non-compliance with laws or regulations by a client or employer.

It covers any act of omission or commission, intentional or unintentional, committed by management, those charged with governance, or others working under their direction, which is contrary to prevailing laws or regulations.

The laws and regulations addressed by NOCLAR include those that:

• Directly affect financial statements or business operations
• Are fundamental to the entity’s operations
• Could result in material penalties or harm to stakeholders

Purpose and Objectives

The main objectives of NOCLAR are to:

• Enable professional accountants to respond ethically to non-compliance in the public interest
• Mitigate the effects of non-compliance or deter future violations
• Encourage reporting of significant non-compliance to appropriate authorities when necessary

Application for Professional Accountants

NOCLAR applies to all professional accountants, including those in public practice, business, government, education, and not-for-profit sectors. Key responsibilities include:

• Assessing the situation and determining whether disclosure is necessary
• Informing management or those charged with governance about the non-compliance
• Reporting to relevant authorities if management fails to act and disclosure is legally permissible
  Importantly, NOCLAR allows accountants to set aside confidentiality obligations when reporting non-compliance in the public interest, provided it does not violate law.

Significance

NOCLAR is considered a game-changing ethical standard because it strengthens accountability, protects stakeholders, and enhances the reputation of the accounting profession by ensuring that serious and harmful non-compliance is addressed appropriately. It effectively provides a structured pathway for professional accountants to act as ethical gatekeepers in situations involving fraud, corruption, tax evasion, environmental violations, and other regulatory breaches.

Reference: www.ethicsboard.org

Responding to Non-Compliance with Laws and Regulations | Ethics Board

IESBA Snapshot: Post-Implementation Reviews of NOCLAR Standard and Restructured Code | Ethics Board