Responding To Non Compliance With Laws And Regulations (NOCLAR) Flashcards
What is the definition of NOCLAR
NOCLAR is defined as acts of commission or omission intentional or unintentional committed by clients or those charged governance…contrary to laws or regulations the definition excludes personal misconduct (i.e. unrelated to business activities)
What is the ISA regarding NOCLAR
ISA 250 Consideration of laws and regulations
What is the managements responsibility regarding NOCLAR
ISA 250 states that it’s the responsibility of management with the oversight of those charged with covenants to ensure that the entity operates are conducted in accordance with the provisions of laws and regulations. Management responsibilities will be easier to meet if there is affective system of internal controls and an audit committee
What is the responsibility for auditors regarding NOCLAR
The auditor is not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations
However overall the auditor is responsible for identifying material misstatement whether caused by fraud or error
What are the two categories of laws and regulations that ISA 250 believe to be the auditors responsibility
Direct effect on financial statements - E.g. tax or pension laws. Here are the order to must obtain sufficient appropriate order evidence regarding the compliance with these laws
Do not have a direct effect on the financial statements - This still may be fundamental to business operations or going concern. Here the auditors responsibility is limited to undertaking procedures to help identify the non-compliance where this could have a material affect on the financial statements
How should the auditor report non-compliance
Firstly with those charged with governance (unless trivial)
If those charged with governance do not take it seriously than the auditor should seek legal advice
