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31 Jan 2018

“Whistle-blowing” on your client


4 min

A balancing act of client confidentiality and ethical responsibility!

Accountants should be acutely interested in a new standard that “encourages professional accountants to speak up where they discover laws and regulations are not being adhered to” as stated in a media release by the Accounting Professional & Ethical Standards Board (APESB).  This new standard is known as “Responding to Non-Compliance with Laws and Regulations” or “NOCLAR” and is now incorporated into the code of ethics adopted by major accounting bodies including CA ANZ and CPA Australia.

What does NOCLAR mean for accountants?

Previously, accountants were protected by client confidentiality from having to disclose client non-compliance to the relevant authorities including the police, Australian Taxation Office (ATO) or regulatory bodies such as the Australian Securities and Investments Commission (ASIC). Whistle blowing

The introduction of NOCLAR now means that accountants must carefully consider disclosing client non-compliance that may cause substantial harm to public interest regardless of whether there is no other legal requirement to report such a breach.

APESB’s examples of NOCLAR breaches include:

  • Fraud/corruption/bribery

  • Proceeds of crime

  • Public health and safety

  • Tax liabilities.

A Balancing Act

In reality, there must be a fine balancing act between maintaining client confidentiality and disclosing client activities that may negatively impact the public interest.

Accountants may now be forced ask themselves the following.

Should I report my client’s suspected money laundering to the police or Australian Transaction Reports and Analysis Centre (AUSTRAC)?

For example, an accountant may come across numerous large overseas transactions into and out of a client’s bank account that cannot be fully accounted for by the accountant’s client.

Should I report my client’s failure to withhold PAYG or superannuation to the ATO if he or she becomes aware of this? Or should I report possible tax fraud to the ATO?

An example would be the gold bar scam whereby companies worked in collusion to illegally claim GST tax credits by mislabelling gold bullion as scrap gold.

Should I report my client to ASIC for possible insolvent trading based on my knowledge of my client’s financial position and cash flow?

While there is no legal obligation for an accountant to report suspected insolvent trading to ASIC (unless such contravention was found as part of a statutory audit conducted), NOCLAR does raise the issue of whether an accountant should report a client to ASIC if this is in the public’s interest.  In this instance, an accountant should consider referring a client suspected of insolvent trading to a firm of qualified insolvency practitioners such as Worrells to determine the appropriate next steps. 

Recent Case – Fair Work Ombudsman (FWO) v Blue Impression Pty Ltd (Blue Impression) / Ezy Accounting 123 Pty Ltd (Ezy Accounting)

Given that NOCLAR has only just commenced, there is no case law or authority dealing with this matter in Australia. However, some parallels to NOCLAR could be drawn from the recent case in the Federal Circuit Court of Australia by the Fair Work Ombudsman (FWO) against Blue Impression (which ran a Japanese fast food chain).

Blue Impression outsourced its payroll function to Ezy Accounting to calculate and perform payroll payment tasks on behalf of Blue Impression. FWO alleged that Ezy Accounting was aware that Blue Impression was underpaying foreign workers on working holiday visas and continued to process wage payments despite previous FWO warnings regarding its obligations relating to minimum award rates.

The Court eventually found Ezy Accounting of being an accessory in contravention of workplace laws and was penalised $53,880. This was for an underpayment of only $750 that “occurred over 2 fortnights between September and December 2014” according to the Court transcript.


With the new NOCLAR standard in place and this recent case law, accountants should consider and balance their duty as a trusted financial advisor against reporting requirements pursuant to NOCLAR.

For more information, you can download NOCLAR amendments to APES 110 Code of Ethics for Professional Accountants here.

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