Non-Compliance with Laws and Regulations (NOCLAR)

Professional accountants in business may encounter or be made aware of non-compliance or suspected non-compliance with laws and regulations in the course of carrying out professional activities. Under section 260 of Chapter A of the COE, they need to assess the implications of the matter and take the possible courses of action when responding to the non-compliance:

• Understanding the matter - understand the nature of the act and the circumstances in which non-compliance has occurred or may occur, the relevant laws and regulations, and the potential consequences to the employing organisation, investors, creditors, employees or the public.
• Addressing the matter - take appropriate steps to have the matter communicated to those charged with governance, comply with applicable laws and regulations, have the consequences of the non-compliance rectified, reduce the risk of re-occurrence, and seek to deter the commission of the non-compliance if it has not yet occurred.
• Determining whether further action is needed - assess the appropriateness of the response of those charged with governance. In case a professional accountant no longer has confidence in the integrity of those charged with governance, the professional accountant may take further action such as:
  • informing the management of the parent entity if the employing organisation is a member of a group;
  • disclosing the matter to an appropriate authority to cause the matter to be investigated and action to be taken in the public interest; and
  • resigning from the employing organisation.
  
  Disclosure of the matter to an appropriate authority would be precluded if doing so would be contrary to law or regulation. Otherwise, if the professional accountant determines that disclosure of the matter e.g. bribery, potential harm to public health or safety to an appropriate authority is an appropriate course of action in the circumstances, this will not be considered a breach of the duty of confidentiality. When making such disclosure, the professional accountant shall act in good faith and exercise caution when making statements and assertions.
• Documenting the matter - document the matter, results of discussions with those charged with governance and their responses to the matter, the courses of action considered, the judgments made and the decisions taken.

A distinguishing mark of the accountancy profession is its responsibility to act in the public interest. When responding to non-compliance or suspected non-compliance, professional accountants should always comply with the fundamental principles.

For more details of the above, please refer to section 260 of Chapter A of the COE.