This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice (http://www2.deloitte.com/ca/en/legal/cookies.html) for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

IESBA Code of Ethics: Responding to Non-Compliance with Laws and Regulations (Amendments to Harmonized Rule of Professional Conduct, Rule 204) [Completed]

Effective date:

The amendments to the IESBA Code of Ethics are effective July 15, 2017. Early adop­tion is per­mit­ted.

Last up­dated:

September 2017

Overview

Har­mo­nized provin­cial Rule 204 sets out the Cana­dian pro­fes­sion’s stan­dards that en­sure Char­tered Pro­fes­sional Ac­coun­tants (CPAs) main­tain au­di­tor in­de­pen­dence dur­ing en­gage­ments they un­der­take or par­tic­i­pate in. It sets the stan­dards and re­quire­ments CPAs must main­tain as part of their pro­fes­sional con­duct. Ethics stan­dards adopted by Cana­dian provin­cial bod­ies are cre­ated in align­ment with the Code of Ethics for Pro­fes­sional Ac­coun­tants is­sued by the In­ter­na­tional Ethics Stan­dards Board for Ac­coun­tants (IESBA).  Hence, changes to the IESBA Code of Ethics will need to be re­flected in Rule 204.

On July 14, 2016, the International Ethics Standards Board for Accountants (IESBA) released a new standard, Responding to Non-Compliance with Laws and Regulations. The standard sets out a first-of-its-kind framework to guide professional accountants in what actions to take in the public interest when they become aware of a potential illegal act, known as non-compliance with laws and regulations, or NOCLAR, committed by a client or employer.

The standard applies to all categories of professional accountants, including auditors, other professional accountants in public practice, and professional accountants in organizations, including those in businesses, government, education, and the not-for-profit sector. It addresses breaches of laws and regulations that deal with matters such as fraud, corruption and bribery, money laundering, tax payments, financial products and services, environmental protection, and public health and safety.

Among other matters, the new standard provides a clear pathway for auditors and other professional accountants to disclose potential non-compliance situations to appropriate public authorities in certain situations without being constrained by the ethical duty of confidentiality. It also places renewed emphasis on the role of senior-level accountants in business in promoting a culture of compliance with laws and regulations and prevention of non-compliance within their organizations.

The standard is the result of an extensive six-year consultative process, including two Exposure Drafts, three global roundtables in Hong Kong, Brussels, and Washington, DC, and extensive outreach to the global regulatory community, international policy-making organizations, investors, preparers, the corporate governance community, national standard setters, accounting firms, professional accountancy organizations, and other stakeholders. In developing the standard, the Ethics Board also liaised closely with the International Auditing and Assurance Standards Board (IAASB) so that the new standard and the IAASB’s International Standards on Auditing are aligned.

For an overview of the standard, see the At-a-Glance document. For a summary of the Ethics Board’s decisions in response to significant comments from respondents on the May 2015 Exposure Draft, see the Basis for Conclusions. Additional resources, including a fact sheet and video Q&A series, are available on the NOCLAR web page.

 

Other developments

July 2016

On July 14, 2016, the International Ethics Standards Board for Accountants (IESBA) released a new standard, Responding to Non-Compliance with Laws and Regulations.

May 2015

On May 6, 2015, the IESBA released a Re-exposure Draft of an enhanced standard, Responding to Non-Compliance with Laws and Regulations. The proposed standard sets out a new framework to guide auditors, other professional accountants in public practice, and professional accountants in business (PAIBs) in deciding how best to act in the public interest when they come across an act or suspected act of non-compliance with laws and regulations.

 

Related discussions

NOCLAR – IESBA

September 2017

  • At its meeting on September 19-22, 2017, in light of the comments received from respondents on Structure ED-2, the IESBA considered revisions to the proposed restructured text relating to its NOCLAR pronouncement. The IESBA was generally supportive of the Task Force’s proposals, subject to any further structure- or safeguard-related refinements. At its December 2017 meeting, the IESBA will consider a final draft of the restructured text, with a view to approval for inclusion in the restructured Code.

NOCLAR – IESBA

September 2016

  • At its September 2015 meeting, the IESBA received a preliminary update on significant comments from respondents to the Exposure Draft, Responding to Non-Compliance with Laws and Regulations.

 

NOCLAR – IESBA

April 2016

  • At its April 2016 teleconference, the IESBA approved the final pronouncement, including consequential and conforming amendments to a number of sections of the Code.

 

NOCLAR – IESBA

March 2016

  • At its March 2016 meeting, the IESBA agreed in principle, subject to the deliberations of the International Auditing and Assurance Standards Board (IAASB) on related consequential and conforming amendments to IAASB standards, the final provisions in Sections 225 and 360 of the IESBA Code of Ethics for Professional Accountants (the Code) addressing the responsibilities of professional accountants in public practice and in business, respectively, to respond to NOCLAR or suspected NOCLAR. The IESBA also agreed in principle consequential and conforming changes to other sections of the Code.  Topics discussed included: disclosing NOCLAR to an appropriate authority without following the specified response process; scope of matters covered by the two sections; communication with respect to group audits; documentation by professional accountants other than auditors; communication between predecessor and proposed successor auditors; and the proposed effective date of the final pronouncement.

 

NOCLAR – IESBA

November 2015

  • At its November-December 2015 meeting, the IESBA considered significant comments received on its May 2015 Exposure Draft Responding to Non-Compliance with Laws and Regulations and related Task Force proposals. The IESBA broadly supported the direction of the Task Force’s proposed revisions to the text of the Exposure Draft in the light of the feedback from respondents. Topics on which the IESBA provided input for purposes of refining the NOCLAR provisions included: communication of NOCLAR matters between component and group auditors; where withdrawal by the auditor from the client relationship is related to a NOCLAR matter, whether the auditor’s communication of the facts and circumstances concerning the instance of NOCLAR or suspected NOCLAR to the proposed auditor should be subject to the client’s consent; and where professional accountants have reason to believe an imminent breach of a law or regulation would cause actual or substantial harm to the entity’s stakeholders or the general public, whether the professional accountants would be permitted under the Code to disclose the matter to an appropriate authority without following the response framework set out in the proposed provisions.

 

NOCLAR – IESBA

April 2015

  • At its April 2015 meeting, the IESBA unanimously approved for exposure revised proposals regarding professional accountants’ response to identified or suspected non-compliance with laws and regulations (NOCLAR). The revised proposals set out a new framework to guide auditors, other professional accountants in public practice, and professional accountants in business (PAIBs) in deciding how best to act in the public interest when they come across an act or suspected act of NOCLAR.

 

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.