Responding to non-compliance with laws and regulation (NOCLAR)

Content Summary

Responding to Non-compliance with Laws and Regulations (NOCLAR) provides a framework for all members on how best to act in the public interest when they become aware of non-compliance or suspected non-compliance with laws and regulations.

It allows members to set aside the principle of confidentiality and report NOCLAR to an appropriate authority, if that is in the public interest.

NOCLAR became effective from 1 January 2018.

See: Amendments to APES 110 Code of Ethics for Professional Accountants due to revisions to IESBA’s Code of Ethics for Professional Accountants

What is NOCLAR?

NOCLAR is any act of omission or commission, intentional or unintentional, committed by a client or employer. This includes acts taken by management or by those charged with governance, or by others working for, or under the direction of, the client or employer, which is contrary to prevailing laws or regulations.

Which laws and regulations?

  • Laws and regulations that have a direct effect on the determination of material amounts and disclosures in the financial statements
  • Other laws and regulations, even if they do not have a direct effect on financial statements, compliance with which may be fundamental to the entity’s operations, business, or where non-compliance may lead to material penalties.

Are the requirements the same for all members?

NOCLAR provides different requirements for:

  • auditors
  • other members in public practice
  • senior members in business such as directors, officers or senior employees
  • other members in business.

Are members required to disclose NOCLAR to an appropriate authority?  

NOCLAR does not impose an obligation to members to disclose a non-compliance, or suspected non-compliance to an authority, when there is no legal obligation to do so.

However, members must comply with the relevant NOCLAR requirements and consider whether disclosure to an appropriate authority is the right  course of action in the circumstances.

These vary depending on the role and specific characteristics of each case, but there are requirements for members to respond to NOCLAR and not turn a blind eye.

If a member decides that disclosure of NOCLAR to an appropriate authority is the right course of action in the circumstances, then such a disclosure will not be considered a breach of confidentiality.

Members are required to act in good faith and exercise caution.

Members cannot disclose NOCLAR to an appropriate authority if doing so would be contrary to law or regulation.

Terms of engagement template with NOCLAR clause