SYNOPSIS OF REGULATIONS RELATED TO AUDIT IN PAKISTAN

COMPANIES ORDINANCE, 1984

Companies Ordinance, 1984 is the principal law which deals with the corporate affairs in Pakistan. Under this law it is mandatory for all Companies to appoint Chartered Accountants as their Statutory Auditors in the Annual General Meeting of their members. Through various provisions the Ordinance imposes strict restrictions on auditor to maintain Objectivity, Integrity and Independence during the audit engagement.

CODE OF CORPORATE GOVERNANCE

The Code was introduced in 2002 to establish a framework of good corporate governance in Pakistan. The Code has made it mandatory that external auditors must have a satisfactory Quality Control Rating under the Quality Assurance program of Institute of Chartered Accountants of Pakistan. In addition a listed company cannot seek any additional services other than audit from their auditors except with the guidelines issues by IFAC. Auditor should refrain from engaging in any management function of the entity. Banking Companies are required to change their auditors at max after every five years and companies operating under all other sectors should at least rotate their engagement partner after five years. In addition Listed Companies are also require to get their half yearly accounts reviews by their statutory auditors before it public publication.

INSTITUTE OF CHARTERED ACCOUNTANTS OF PAKISTAN

The Institute of Chartered Accountants of Pakistan (ICAP) was established under The Chartered Accountants Ordinance, 1961 as a self-regulatory body to govern and regulate the profession of accountancy and auditing in Pakistan. It operates under the CA Bye Laws 1983. The Institute through its bye laws maintains a strict control and monitoring on its members involved in the profession and issues guidelines to remove difficulties. ICAP also collaborate with the Securities and Exchange Commission of Pakistan on the preparation of laws and regulations to regulate the corporate affairs in Pakistan. Moreover the adoption of International Standards on Auditing (ISAs) is also the responsibility of ICAP. In addition to that ICAP also issues guidelines conduct seminars for educating its members on new developments made by IFAC.

SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

The Securities and Exchange Commission of Pakistan (SECP) was set up in pursuance of the Securities and Exchange Commission of Pakistan Act, 1997 To develop a fair, efficient and transparent regulatory framework, based on international legal standards and best practices, for the protection of investors and mitigation of systemic risk aimed at fostering growth of a robust corporate sector and broad based capital market in Pakistan.

Companies are required to submit their audited annual accounts to SECP for its critical review on compliances with local laws and International Accounting Standards as applicable in Pakistan. The Commission also look matters raised by the auditors in their reports and related matters.

STATE BANK OF PAKISTAN

The State Bank of Pakistan (SBP) is the central bank of Pakistan with the powers to govern and regulate the banking and other financial sectors of the country also entrusted with the responsibility to carry out monetary and credit policy. The central bank requires all Banking and Non-Banking Financial Institution to submit their annual audited accounts following the close of their financial years. For the purpose the central bank also maintains a list of approved auditors under section 35(1) of the Banking Companies Ordinance, 1962. The panel is divided under three Categories viz. A, B and C. The law has also set out the limits under each categories for the chartered accountants firms to act as auditors of banking and non banking finance companies based on the size of the bank in terms of its capital, asset and no. of branches.