Changes are coming on the international front for the Code of Ethics for Professional Accountants and Non-Compliance with Laws and Regulations (NOCLAR) standards. While the international code is being restructured to make it more familiar to U.S. CPAs, the NOCLAR standards present a new challenge. This guidance was developed jointly by the International Ethics Standards Board for Accountants (IESBA) and the AICPA; however, the AICPA Code of Professional Conduct does not currently include any similar standard. Two websites that provide some excellent free resources on the international code and the NOCLAR provisions are the International Federation of Accountants (IFAC) and the IESBA.
International Federation of Accountants Ethics Portal
The IFAC Global Knowledge Gateway (http://www.ifac.org/global-knowledge-gateway) serves as a portal to IFAC’s library of resource materials on topics such as audit and assurance, business reporting, and ethics. Gateway materials include IFAC-created background information, news articles from external sources, short videos produced by IFAC, and links to related outside resources. The ethics gateway (http://bit.ly/2otheJ5) includes connections to a large number of other organizations’ professional ethics materials.
The ethics gateway also provides an overview of ethics in general, business, and practice perspectives, and includes links to a variety of external documents. The ethics overview page (http://bit.ly/2BThpFp) states that “a distinguishing characteristic of the accountancy profession is the responsibility to act in the public interest,” and that business ethics includes professional ethics. IFAC members, which include the AICPA and Institute of Management Accountants (IMA) in the United States, are required to have professional ethics standards at least as stringent as the IFAC Code of Ethics—so U.S. CPAs and CMAs do fall under international ethics standards.
There are several interesting ethics-related articles and documents available on the ethics gateway, such as “The Professional Accountant’s Mindset and Tackling Corruption” (September 2017), by the Chartered Institute of Management Accountants (CIMA), which begins with some surprising statistics about the number of countries that scored unfavorably on an international corruption index (http://bit.ly/2Cnsgbt). The article states that management accountants are trained to analyze both financial and nonfinancial information and have excellent backgrounds to challenge suspicious data and reports in multiple areas. A link is provided to a downloadable CGMA guide, “Keeping Business Clean: A CGMA Guide to Countering Fraud and Corruption,” which provides practical guidance on combatting both traditional and electronic fraud (http://bit.ly/2BPRcHI).
“Navigating Ethics in a Digital Age” (October 2017), by the Association of Chartered Certified Accountants (ACCA), discusses the effect of technology in creating moving targets, including for determining what is right (http://bit.ly/2FyFmRQ). The article states that “sustainable commercial returns are backed by sound ethical behavior” and briefly addresses the potential use and misuse of data analytics and the importance of a good reputation and public trust. It also links to a downloadable 90-page ACCA research initiative, “Ethics and Trust in a Digital Age,” a survey of over 10,000 professional accountants (http://bit.ly/2HPwNTx) addresses six digital themes covering potential ethical compromises and solutions: cyber-security; platform-based business models; big data and analytics; cryptocurrencies and distributed ledgers; automation, artificial intelligence, and machine learning; and procurement of technology.
The ethics gateway also offers some short, high-quality videos. “Preparing for Ethical Challenges in Your Career” discusses the importance of accountants relying on their experience, training, and values (http://bit.ly/2BOw0BT). “Teach Your Children Well: Teaching Young Accountants the Importance of Ethics” addresses the importance of training new accountants to become members of a profession, as well as of communicating by example (http://bit.ly/2CJS7pC). In “Up-Close with Bill Schneider, Director of Accounting, AT&T,” Schneider states that the most critical skill for accountants is the willingness to learn new things; that accountants need to understand not only accounting rules and ethics, but also what the business is trying to accomplish economically; and that accountants must not only follow the letter, but also the spirit of the standards (http://bit.ly/2BRBJGR). One of the shortest videos, “The Accountancy Profession Must Provide Trust and Accountability,” presents excellent points on the role of accountants in business and the community, as well as in being trusted professionals who provide the highest quality service (http://bit.ly/2ESsw3L).
IFAC also links to “The ‘NOCLAR’ Debate” (Fall 2017), a four-page newsletter published by Audit Conduct (http://www.auditconduct.com) that discusses what the NOCLAR standard requires, why the IESBA adopted the standard, who is subject to the standard, and U.S. reaction to the standard (http://bit.ly/2osckMH). This article is a follow-up to a lengthier Audit Conduct Fall 2016 newsletter, “Raising the Ethical Bar” (Fall 2016), which explains NOCLAR in more detail (see the Sidebar, Ethics Resources).
International Ethics Standards Board for Accountants
The IESBA is an independent standards setting body that has developed the Code of Ethics for Professional Accountants and uses its website (http://www.ethicsboard.org) to foster discussion of ethical issues and promote ethical practices. Its Publications and Resources webpage (http://bit.ly/2oscHXB) presents links to various resources on the website, such as guidance and support, standards and pronouncements, surveys, and videos. Many of the resources require free registration to access; the links included below are to the source webpages and readers can decide whether to create accounts to obtain the materials.
The latest version of the Code of Ethics for Professional Accountants took effect in July 2017; its webpage (http://bit.ly/2osaXgR) provides free access to electronic and PDF versions, as well as the option to purchase print copies as well as translated and older editions. The current version is organized with more detail on applications to professional accountants in public practice, including independence issues. Professional accountants in business receive substantially less guidance.
The IESBA approved revisions to the code in December 2017 and expects to release the final version in April 2018, to be effective in 2019; a PDF draft version is available without registration (http://bit.ly/2F8SKyk). The format of the restructured code will look more familiar to AICPA members and will include structural changes, revisions of some provisions, and new material on professional skepticism and judgment.
A special section of the IESBA website is devoted to NOCLAR resources (http://bit.ly/2m98Xax). The final pronouncement, “Responding to Non-Compliance with Laws and Regulations” (July 2016) is downloadable with registration as a 32-page PDF and provides guidance to auditors and other accountants to follow when they become aware of a potential illegal act (http://bit.ly/2sZRoBa). It is organized to specifically address the requirements under the 2016 code.
Several materials are available for shorthand highlights of the NOCLAR pronouncement. “At a Glance: Responding to Non-Compliance with Laws and Regulations” (July 2016) can be downloaded with registration as a seven-page PDF that covers the purpose, key elements, requirements for auditors, requirements for senior employees, and requirements for other accountants (http://bit.ly/2BRoA0z). A 33-slide PowerPoint presentation, “NOCLAR Overview” (December 2017), is also available with registration (http://bit.ly/2CJtgT0) and overlaps with “At a Glance.”
A NOCLAR video series is accessible without registration; the videos are generally 5 to 10 minutes long (http://bit.ly/2GLZRu3). “What is NOCLAR?” provides examples of non-compliance, such as tax frauds, securities frauds, and noncompliance with environmental and health regulations, as well as guides the professional judgment of accountants in the public interest. “What Accountants Need to Know About NOCLAR” addresses to whom the standards apply, how the standards have changed, and how the standards apply in countries that don’t protect whistleblowers. “How Will the Standard Impact SMPs Specifically?” discusses how to identify the appropriate person to whom the noncompliance should be reported in a small firm, along with unique characteristics of SMPs that will affect implementation.
Association of Chartered Certified Accountants (ACCA)Ethics and Trust in a Digital Agehttp://bit.ly/2HPwNTx
Audit Conduct NewsRaising the Ethical Bar: The Accountant’sResponsibility for Addressing Noncompliance with Laws and Regulations (Fall 2016)
Chartered Global Management AccountantBusiness and Human Rights: Evolution and Acceptance Guidehttps://www.cgma.org/resources/reports/business-and-human-rights.html
International Ethics Standards Board for AccountantsCode of Ethics for Professional Accountantshttps://www.ethicsboard.org/iesba-code
Organization for Economic Cooperation and DevelopmentGuidelines for Multinational Enterpriseshttp://www.oecd.org/corporate/mne/
United NationsBusiness & Human Rights Resource Centerhttps://business-humanrights.org/en/unguiding-principles