The revised ICAI Code of Ethics, effective this year, strengthens independence requirements for firms undertaking both audit and non-audit engagements for the same client. Firms should reassess their engagement portfolios against the expanded list of prohibited non-audit services for audit clients that are public interest entities.
The Non-Compliance with Laws and Regulations (NOCLAR) provisions now place a more explicit responsibility on members to respond to identified or suspected non-compliance encountered in the course of an engagement, including, in defined circumstances, disclosure to an appropriate authority where the matter is not adequately addressed by those charged with governance.
Fee disclosure norms have also been tightened, requiring firms to more clearly document and, where applicable, communicate the basis of fee arrangements to avoid any perception of a self-interest threat to independence — particularly relevant for contingent fee structures on advisory mandates that sit alongside an audit relationship.
We recommend firms update their engagement acceptance and continuance checklists to build in an explicit independence and NOCLAR assessment step, rather than treating these as year-end compliance reviews alone.