11 September 2015

FEE comments on the IESBA ED: “Responding to Non-Compliance with Laws and Regulations”

The ED is a significant improvement from the former ED on Responding to a Suspected Illegal Act. It has gone some way to finding a good balance between responding to stakeholders’ expectations and complying with the applicable legal framework. The proposals find a sensible approach about each party’s responsibilities and recognise the important differences between the role of auditors and the one of other professional accountants in public practice in relation to issues such as client privilege.

FEE welcomes the fact that the Board takes this matter seriously and that a reference to this is now clearly included in the proposed Section 225.27 as “disclosure would be precluded if it would be contrary to law or national regulation”. In FEE’s view, this is an essential clarification that ought to be more prominent in the finalised Code.

FEE has consistently supported the concept of transparency in its public policy work while recognising limits and practical difficulties that could arise when applying this concept. FEE had previously expressed the opinion that IESBA should not seek to require disclosure in the absence of an appropriate legal framework and retains this stance. FEE is therefore pleased that mandatory reporting is no longer being considered, as this would have resulted in unintended and adverse consequences, potentially reducing the ability of PAs to influence potential non-compliance. FEE would also welcome that the Code clarify that disclosure is precluded where there is a conflict with local laws and regulations, an example being tipping-off concerns under anti-money laundering legislation where a discussion with management may not always be lawfully allowed.

Full press release

Full comment letter

© FEE