KARACHI – After conducting an inspection of records of a large audit firm, the Audit Oversight Board (AOB) reprimanded the Firm with a penalty of Rs. 3.5 million, and directed the Firm not to allow the concerned engagement partner to conduct audit of Public Interest Companies (PICs) for one year with a requirement of completion of 100 training hours.
In exercise of its regulatory powers and with a reference received from the Securities and Exchange Commission of Pakistan, AOB conducted direct inspection of the records of M/s KPMG Taseer Hadi & Co. Chartered Accountants (the Firm) in November and December 2020. A report on the findings was shared with the Firm in February 2021 and the Firm provided its first written response in March 2021. Thereafter, a meeting was held between the officers of AOB and the Firm to discuss the findings and the responses. After a detailed analysis of the inspection report and the responses, the AOB issued a show cause notice upon the Firm in April 2021 and a written response was received (second response) in reply to the SCN in May 2021. AOB provided the Firm an opportunity of being heard, after which, a decision was taken by the AOB and the Order was issued on 4 June 2021. A copy of the Order can be viewed on the AOB’s website: www.aob.gov.pk.
The responsibility of an auditor is to conduct an audit in accordance with the International Auditing Standards. The findings of the inspection report point out that the auditor failed to discharge its responsibilities under the applicable auditing standards. The issues highlighted in the Order are in violation of the applicable standards which limit investors’ confidence in the audited Financial Statements of a PIC. AOB is the independent audit regulator in Pakistan established by the parliament in 2016 to protect public interest by overseeing the quality of the audit of Financial Statements of PICs. There are more than 1000 PICs in Pakistan which include all listed companies and non-listed public sector companies. Out of over 550 audit firms in Pakistan, 124 have a satisfactory quality rating and 92 are currently registered with AOB. Only the audit firms registered with AOB can audit the Financial Statements of a PIC.
