backOn November 15, 2024, Bloomberg reported that a source familiar with the PCAOB’s process said the PCAOB has paused a project related to the 2023 proposal known as noncompliance with laws and regulation or NOCLAR. The Board’s proposed NOCLAR standards have been hotly contested by auditors and corporate leaders and would significantly overhaul the rules governing how auditors consider the financial risks of legal and regulatory violations, including fraud. The proposed revised standards would require auditors to proactively identify laws and regulations that, if violated, could have a material effect on the client’s financial statements (whether direct or indirect), would strengthen the requirements for auditors to evaluate whether noncompliance has occurred, and would impose specific obligations on auditors to communicate noncompliance to management, as covered in our June 9, 2023 bulletin. The Bloomberg source expects the PCAOB will not take further action with respect to NOCLAR until the regulator consults with the SEC under the incoming presidential administration.
A copy of the Bloomberg article is available here.