Audit & Financial Reporting Requirements

The audit and financial reporting requirements of Pakistan are summarized by type of company..

• Listed Public Companies
• Public Unlisted and Private Companies
• Banks
• Non-Banking Financial Institutions
• Listed Insurance Companies

The qualification, independence and

appointment of auditors requirements are as follows:

Qualification of auditors

Auditors must be members of the Institute of Chartered Accountants of Pakistan (ICAP). A firm where all of its partners are members of the ICAP, can be appointed as an auditor and act in firm's name. The private companies may appoint auditors who are not members of the ICAP. The auditors of a listed company must also possess a satisfactory quality control rating from the ICAP.

Independence

Independence is required by the Companies Ordinance, 1984. An auditor cannot be a director or officer of the company, be a partner or employee of a director or officer, or be indebted to the company. The firm of external auditors auditing a listed company or any partner in the firm and their spouse and minor children are prohibited to hold, purchase, sell or take any position in shares of the listed company or any of its associated companies or undertakings.

 Appointment of Auditors

The first auditors of the company are appointed by the directors of the company within 60 days from the date of incorporation of the company. For subsequent years, the auditors are appointed at each annual general meeting of the company and hold office till the conclusion of next annual general meeting. Where appointment of auditors is not made at any annual meeting the Securities and Exchange Commission of Pakistan (SECP) may, upon application of any shareholder of the company, appoint the auditors and fix their remuneration and in case of causal vacancy, the directors may fill any casual vacancy within 30 days. Otherwise the SECP may appoint the auditors and fix their remuneration as well. For public sector companies, two auditors are normally appointed.

The auditors once appointed cannot

be removed or changed except in next annual general meeting. However, a notice proposing the change must be sent by a shareholder to the company at least 14 days before the meeting and the company must communicate this notice to the retiring auditors and give notice to all of its shareholders at least seven days before the meeting.

Auditing Standards

Members of the ICAP are required to observe the pronouncements of the International Federation of Accountants, as long as these do not conflict with Pakistani laws.