IBRACON - Instituto dos auditores independentes do Brasil

IBRACON - Instituto dos auditores independentes do Brasil IBRACON - Instituto dos auditores independentes do Brasil

Informativos e Afins > Artigos

Quinta-feira, 11 de Maio de 2017

NOCLAR in Brazil: One Step at a Time

by Idésio Coelho, President, Ibracon

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The International Ethics Standards Board for Accountants (IESBA)’s new standard, Responding to Non-compliance with Laws and Regulations (NOCLAR), advances compliance and transparency in the corporate universe and public sector.

However, its adoption in Brazil is under a careful analysis. Such care is necessary because the 530,000 accountants and independent auditors in Brazil—18% of the almost 3 million professional accountants IFAC member organizations encompass—are not able to rely on legislative support and protection for reporting non-compliance situations to the appropriate authorities.

Under the standard, such reporting, if determined by the accountants or auditors to be in the public interest, will depend on the availability of legal protection, among other considerations.

Under Brazilian law, confidentiality is imposed on virtually all client or employer matters in the public and private sectors. The Brazilian penal code makes violating confidentiality a criminal offense, subjecting accountants and auditors to imprisonment of up to one year. It also criminalizes injury, libel and slander, and causing, without concrete motive, a police investigation, lawsuit, administrative investigation, civil inquiry, or administrative improbity—penalties can be up to eight years in prison. The Code of Civil Procedure, likewise, defines these as unlawful acts with significant compensatory fines. In Brazil at this time, reporting an actual or suspected NOCLAR under the standard without factoring in these legal considerations could mean committing an unlawful act or violating civil rights.

Brazilian legal framework provides rare circumstances for when anonymous complaints may be made, although anonymity in part or whole is allowed for whistleblowers and those reporting money laundering and terrorism financing, including accounting professionals and auditors. However, the obligation to report to Financial Activities Control Board refers only to service providers, not employees or company directors.

The IESBA is aware that NOCLAR application is complex in some countries, including Brazil, as there may be no way to assure legal protection, as well as safety, for professional accountants, as well as their families in some cases.

Considering current Brazilian legislation, auditors and accountants face a serious dilemma: if they communicate a potential NOCLAR incident to authorities without taking into account the legal considerations outlined above, they may face civil and criminal lawsuits. If they decide not to report an irregularity, they are exposed to damages arising from their omission.

A second concern arises the moment the Conselho Federal de Contabilidade (Federal Accounting Board, or CFC) issues a Brazilian version of NOCLAR. The capital markets regulator requires all CFC members follow all CFC rules or face fines, suspension, and/or the inability to work in the market. This means that once passed, CFC members must follow NOCLAR—and any concerns about their safety, ability to continue practicing, or potential legal ramifications will be a serious factor in determining whether to report NOCLAR to authorities.

There are, therefore, significant challenges to immediate NOCLAR adoption in Brazil. However, the Instituto dos Auditores Independentes do Brasil (Institute of Independent Auditors of Brazil, or IBRACON), CFC, and other organizations, in a synergic and dynamic partnership, are intensively working toward NOCLAR adoption and application harmonization throughout Brazil. The first, necessary step in this journey is a more in-depth study and the proposal of legislative changes. All involved organizations are dedicated to NOCLAR adoption, and understand it will support society’s growing demand for increased compliance, transparency, and ethics.

Idésio Coelho became a member of the IFAC Board in November 2016 after being nominated by the Instituto dos Auditores Independentes do Brasil and Conselho Federal de Contabilidade (IBRACON). Mr. Coelho is a Brazilian certified accountant and auditing professional. He is a senior partner leading the risk management for EY in Brazil, where he has worked for more than 30 years. He is also the regulatory matters leader for South America EY operations. He has experience in local and cross-border listing activities, in quality matters and inspection activities of audit firms. Mr. Coelho is also the President of IBRACON and an active member of the Federal Accounting Council (CFC). He is also the Chair of Trustees of the Foundation supporting the Brazilian Accounting Pronouncements Committee (CPC). In his multiple years and roles serving the accounting profession through IBRACON, CFC, and CPC he has supported the convergence and adoption of the International Auditing Standards and International Financial Reporting Standards in Brazil. Mr. Coelho is graduated from the Fundação Santo André, Brazil with an accountancy degree.
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