At its February meeting, the Professional Ethics Executive Committee (PEEC) approved for exposure two new interpretations, each entitled “Responding to Non-Compliance with Laws and Regulations,” that are applicable to CPAs in public practice and in business, respectively.
The proposed interpretations provide guidance for CPAs when they encounter an actual or suspected act of non-compliance with laws or regulations (NOCLAR) from a client or within the employing organization.
In developing the proposed interpretations, the PEEC considered the International Ethics Standards Board for Accountants’ (IESBA) new ethics standards, “Responding to Non-Compliance with Laws and Regulations” for professional accountants in public practice and business, which the IESBA approved in April 2016.
The PEEC believes that while many of the proposed requirements are consistent with that of the IESBA standards, certain differences are necessary to enhance the clarity of the proposed interpretations and make them relevant to CPAs in the United States. Most notably, the IESBA provisions permitting disclosure to an outside authority under certain conditions were not included in the AICPA proposals, as they would be incompatible with most state laws and regulations on client and employer confidentiality.
The PEEC is seeking feedback on these proposals from state boards of accountancy. The Exposure Draft will be available on the AICPA website on or about March 10, 2017, with a comment deadline of May 12, 2017.