The Securities and Exchange Commission of Pakistan (SECP) has directed all non-listed companies to appoint their statutory external auditors from chartered accountants (CA) firms holding satisfactory rating under the Quality Control Review (QCR) Program of the Institute of Chartered Accountants of Pakistan (ICAP) with effect from July 1, 2012. The directives were issued with the objective to strengthen the vigilance on the audit reporting on financial statements by the auditors and to safeguard the investor’s interests in the non listed companies. SECP also aims to implement the international best practices to develop and maintain compliance of professional standards amongst the CA firms engaged in the audit of economically significant companies. SECP has introduced the mandatory requirement for the non-listed companies designated as economically significant companies in terms of clause 2(iii) of the fifth schedule to the 1984 companies ordinance to appoint as its statutory external auditors a CA firm within the meaning of the 1961 chartered accountants ordinance and the 1983 chartered accountants bye-laws, which holds satisfactory rating under the QCR program of ICAP with effect from the financial year beginning on or after July 1, 2012. The said direction is issued in consultation with the ICAP. The clause 2(iii) of the fifth schedule to the ordinance provides that economically significant company means a company that has turnover in excess of Rs 1 billion, excluding other income with number of employees in excess of 750 and total borrowings excluding trade creditors and accrued liabilities in excess of Rs 500 million. Provided that in order to be treated as economically significant any two of the criterion have to be met.
