Page 364 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori

No Disclosure: According to the IESBA Code, accountants are not required to disclose matters to an authority
if such disclosure would be contrary to law or regulation.

(CNO-PE.480) Applicability of NOCLAR in India:
NOCLAR-Service (Section 260): This applies to Senior Professional Accountants in service, who are employees
of listed entities. These individuals are directors, officers, or senior employees who can significantly influence
and make decisions about the organization's resources. They are also referred to as key managerial personnel.
NOCLAR-Practice (Section 360): This applies to audit engagements of entities listed on recognized stock
exchanges in India and have a net worth of 250 crores of rupees or more. An "Audit" or "Audit engagement" is
a reasonable assurance engagement where a professional accountant in public practice expresses an opinion on
whether financial statements give a true and fair view in accordance with an applicable financial reporting
framework.

(CNO-PE.500) NOCLAR vs. SA 250
Applicability: SA 250 is applicable only to audits, whereas NOCLAR applies to professional accountants both
in service and in practice.
Laws Covered: SA 250 outlines the auditor's responsibilities for laws directly affecting the determination of
material amounts and disclosures in financial statements (e.g., tax and labour laws). It also covers laws and
regulations that, while not directly affecting financial statement amounts and disclosures, are fundamental to
business operations. NOCLAR extends beyond this by considering non-compliance that could cause substantial
harm with serious financial or non-financial consequences.
Stakeholder Definition: Unlike SA 250, NOCLAR defines the impact of non-compliance on various
stakeholders, including investors, creditors, employees, and the general public.
Exceptional Circumstances and Disclosure: NOCLAR stipulates that in exceptional circumstances, if a
professional accountant becomes aware of an imminent breach of law or regulation that could cause substantial
harm, they should first consider discussing the matter with management or those charged with governance.
They should then exercise professional judgment to determine whether to disclose the matter immediately to an
appropriate authority to prevent or mitigate the consequences. Such disclosure is permitted under NOCLAR, a
provision not present in SA 250.

(CNO-PE.520) Responding to NOCLAR
In case of Employment
• Responsibility of Senior Professional Accountant in Service
• Responsibilities of Professional Accountant other than Senior Professional Accountant
In case of Audit Engagement
• Responsibilities of Professional Accountant
Steps to be taken for responding.
1. Obtaining understanding of the matter (Nature/ Consequences etc)
2. Addressing the matter (Discuss with immediate superior/ communicate to TCWG / Ensure Compliance
etc)
3. Determine whether further action is needed (Informing Management of Parent Entity / Resigning etc)
4. Seeking Advice (Consulting Internally or Law Firms or ICAI)
5. Determining whether to disclose the matter to appropriate Authority (RBI/SEBI etc)
6. Imminent Breach (Causing Substantial harm) immediate communication to Appropriate Authority
7. Documentation (matter/Discussion/Action etc)
Authority: The authority to which an auditor discloses information depends on the nature of the matter.
SEBI: In cases of fraudulent financial reporting, the Securities and Exchange Board of India (SEBI) is the
appropriate authority

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