Pakistan

Member Organizations

Member Organization Associate Other PAOs

  Institute of Chartered Accountants of Pakistan
  Institute of Cost and Management Accountants of Pakistan
  Pakistan Institute of Public Finance Accountants

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    The accounting and financial reporting framework for all companies in Pakistan are stipulated in the Companies Act of 2017 (formerly Companies Ordinance of 1984). The Act outlines the requirements for the presentation of financial statements, establishes standard-setting procedures as well as other financial reporting obligations. All companies are required to prepare financial statements.

    Under the Act, ICAP is also responsible for adopting and issuing auditing standards.

    Accounting Framework

    Under the Companies Act of 2017, accounting standards are approved for use as adopted by the Securities and Exchange Commission of Pakistan (SECP). The SECP, however, has delegated the responsibility of developing and adopting accounting standards to the Institute of Chartered Accountants of Pakistan (ICAP). ICAP has adopted the International Financial Reporting Standards (IFRS). Under the Companies Act, listed companies (including foreign companies listed in Pakistan), public interest companies (including public sector companies, public utility companies, financial institutions, and companies in the process of being listed), and large-sized non-listed companies (companies with paid-up capital exceeding 200 million rupees or with an annual turnover exceeding 1 billion rupees) are required to apply IFRS in the preparation of their financial statements.

    Medium-sized companies, defined in Pakistan as all companies other than listed, public interest, large-sized, and small-sized can either choose to use IFRS for SMEs or full IFRS.

    Small-sized entities, defined as companies with paid-up capital not exceeding 25 million rupees and with turnover not exceeding 100 million rupees, can choose to use Accounting and Financial Reporting Standards for Small-Sized Entities (AFRS for SSEs), IFRS for SMEs, or full IFRS.

    The Insurance Ordinance of 2000 establishes financial reporting requirements for insurance companies. Under the Ordinance, insurance companies are required to follow financial reporting standards issued by ICAP. Under the Banking Companies Ordinance, the State Bank of Pakistan (SBP) is responsible for setting financial reporting requirements for banks and similar financial institutions. The SBP requires banks and financial institutions to submit audited financial statements prepared and audited according to the standards issued by ICAP.

    Auditing Framework

    Under the Companies Act of 2017, ICAP is responsible for adopting and issuing auditing standards to be applied in Pakistan, and the institute has adopted the revised 2016 ISA. Under the Companies Act, all companies, except for private limited companies with paid up capital below one million rupees, are to be audited following auditing standards adopted and issued by ICAP. The Act indicates that financial statements of companies with paid up capital below one million rupees does not require an audit but still requires submission to the SECP.

  • Regulation of Accountancy Profession

    In 2016, the Securities and Exchange Commission of Pakistan (SECP) made amendments to the Securities and Exchange Commission of Pakistan Act of 1997 that established an independent Audit Oversight Board (AOB) with the responsibility to regulate the auditing profession.

    The Securities and Exchange Commission of Pakistan Act of 1997 (amended in 2016) establishes the functions of the AOB, which include: (i) overseeing and monitoring the work of the Institute of Chartered Accountants of Pakistan (ICAP) Quality Assurance Board (QAB) and Quality Control Review (QCR) program; (ii) registering all firms that have achieved a satisfactory QCR rating and deregistration of firms based on the outcome of the QCR by the QAB; and (iii) ensuring that auditing standards adopted by ICAP are aligned with the International Standards on Auditing as issued by the International Auditing and Assurance Standards Board (IAASB). Other professional accountants are regulated by the three professional accountancy organizations (PAO), which oversee the activities of the main streams of accountants in Pakistan: Chartered Accountants (CAs), Cost and Management Accountants (CMAs), and Public Finance Accountants (PFAs).

    Chartered Accountants (CAs)

    Under the Chartered Accountants Ordinance of 1961 and the ICAP Bye-Laws of 1983, ICAP is authorized to regulate CAs. ICAP’s responsibilities include establishing initial professional development (IPD) and continuing professional development (CPD) requirements for CAs, the operation of a quality assurance (QA) and investigative and disciplinary (I&D) systems, setting ethical requirements for its members, setting accounting standards as delegated and notified by the SECP, and adopting and issuing auditing standards. The institute also awards the Associate Chartered Accountant and Fellow Chartered Accountant designations to members. CAs are issued a Certificate of Practice by ICAP to conduct work as CAs, and only members of ICAP are permitted to audit the financial statements of all companies, except for private limited companies with paid up capital below 10 million rupees.

    Cost and Management Accountants (CMAs)

    Under the Cost and Management Accountants Act of 1966, the Institute of Cost and Management Accountants of Pakistan (ICMAP) is authorized to regulate CMAs. The responsibilities of ICMAP include administering the Cost and Management (CMA) program and establishing IPD and CPD requirements, setting ethical requirements for its members, and establishing a QA and I&D systems. Under the Companies Ordinance, manufacturing industries in Pakistan are required to be audited by individuals who are members of both ICMAP and ICAP. Audit standards followed by CMAs are incorporated in a Cost Audit Handbook developed by ICMAP and Audit of Cost Accounts (Rules) of 1998 as issued by the SECP. CMAs are issued a Certificate of Practice by ICMAP to conduct work as cost and management accountants.

    Public Finance Accountants (PFA)

    Under Section 42 of the Companies Ordinance of 1984, the Pakistan Institute of Public Finance Accountants (PIPFA) is established and authorized to regulate PFAs, and is licensed by the SECP of Pakistan. PIPFA is responsible for establishing IPD and CPD requirements, ethical requirements, and an I&D system for its members.

    Pathways to Membership with a PAO

    The process to become a CA, CMA or PFA is similar whereby individuals can enter the respective programs having completed either a higher secondary school certificate, A levels, or university degree. Each PAO sets out respective minimum marks for each qualification prior to admission as a student. Exemptions are granted to those who have completed university degrees and the total time to complete each respective pathway differs based on initial qualifications. As all three PAOs have adopted the IES requirements and practical training is required prior to completion of the different programs. Foreign PAOs, such as the Association of Chartered Certified Accountants (ACCA) and Institute of Chartered Accountants in England and Wales (ICAEW), also operate and have a substantial presence in Pakistan. Although a large number of ACCA and ICAEW members also hold membership with the other national PAOs, there are non-audit professional accountants working in both the private and public sector with only the membership of ACCA or ICAEW. As indicated above, only members of ICAP are allowed to conduct audits of financial statements.

  • Audit Oversight Arrangements

    In 2016, the Securities and Exchange Commission of Pakistan (SECP) amended the Security and Exchange Commission of Pakistan Act of 1997 to establish an independent audit oversight entity—the Audit Oversight Board (AOB). The functions of the AOB include: (i) overseeing and monitoring the work of Institute of Chartered Accountants of Pakistan (ICAP) ‘s Quality Assurance Board (QAB) and Quality Control Review (QCR) program; (ii) registering all firms that have achieved a satisfactory QCR rating and deregistration of firms based on the outcome of the QCR by the QAB; and (iii) ensuring that auditing standards adopted by ICAP are aligned with the International Standards on Auditing as issued by the International Auditing and Assurance Standards Board.

    ICAP continues to be responsible for other regulatory aspects related to the auditing profession such as, establishing initial professional development and continuing professional development requirements for Chartered Accountants, the operation of a quality assurance and investigative and disciplinary systems, setting ethical requirements for its members, setting accounting standards as delegated and to be notified by the SECP, and adopting and issuing auditing standards under the supervision of the AOB.

    The AOB is not a member of the International Forum of Independent Audit Regulators.

  • Professional Accountancy Organizations

    There are three professional accountancy organizations in Pakistan.

    Institute of Chartered Accountants of Pakistan (ICAP)

    ICAP was established in 1961 to regulate Chartered Accountants (CAs) in Pakistan and its functions are established under the Chartered Accountants Ordinance of 1961 and ICAP Bye-Laws of 1983. ICAP’s responsibilities include establishing initial professional development (IPD) and continuing professional development (CPD) requirements for CAs, the operation of a quality assurance (QA) and investigative and disciplinary (I&D) systems, setting ethical requirements for its members, setting accounting standards as delegated and notified by the Securities and Exchange Commission of Pakistan (SECP), and adopting and issuing auditing standards. The institute also awards the Associate Chartered Accountant and Fellow Chartered Accountant designations to members. CAs are issued a Certificate of Practice by ICAP to conduct work as CAs, and only members of ICAP are permitted to audit the financial statements of all companies, except for private limited companies with paid up capital below 3 million rupees. In addition to being a member of IFAC, ICAP is also a member of the Confederation of Asian and Pacific Accountants (CAPA) and South Asian Federation of Accountants (SAFA).

    Institute of Cost and Management Accountants of Pakistan (ICMAP)

    ICMAP was established in 1951 and was granted statutory status under the Cost and Management Accountants Act of 1966 to regulate cost and management accountants in Pakistan. ICMAP’s responsibilities include administering the Cost and Management program and establishing IPD and CPD requirements for its members, setting ethical requirements, and establishing a QA and I&D system to monitor its members. ICMAP awards the Associate Cost and Management Accountant and Fellow Cost and Management Accountant designations. Under the Companies Act of 2017 (formerly Companies Ordinance of 1984), certain manufacturing industries in Pakistan are to be audited by individuals who are both members of ICMAP and ICAP. In addition to being a member of IFAC, ICMAP is a member of CAPA and SAFA.

    Pakistan Institute of Public Finance Accountants (PIPFA)

    PIPFA was established in 1993, under Section 42 of the Companies Ordinance 1984 and is licensed by the SECP. PIPFA’s responsibilities include setting IPD and CPD requirements, ethical requirements, and establishing an I&D system for all public finance accountants. Members of PIPFA are awarded the Associate Public Finance Accountants or Fellow Public Finance Accountants designation. PIPFA is an Associate of IFAC.

  • Projects or Other Information

Adoption of International Standards

  • Quality Assurance

    Under the Chartered Accountants Ordinance of 1961, the Institute of Chartered Accountants of Pakistan (ICAP) is responsible for establishing a mandatory quality assurance (QA) review system of all firms carrying out audits of financial statements. Following amendments to the Securities and Exchange Commission of Pakistan Act of 1997, an independent Audit Oversight Board was established to oversee the ICAP’s QA program and ensure auditing standards align with ISA.

    ICAP’s system has been operating since 1987. To establish transparency and independence of the system, ICAP established the Quality Assurance Board (QAB) in 2005 to oversee the QA system. The QAB is comprised of members from ICAP, the Securities and Exchange Commission of Pakistan (SECP), the State Bank of Pakistan, and the Karachi Stock Exchange.

    The QAB is responsible for overseeing ICAP’s Quality Control Review (QCR) program and issuing a QCR rating to firms conducting audits in Pakistan. ICAP reports that the QCR program was originally developed in line with SMO 1 requirements. Following the revision of SMO 1 in 2012, ICAP undertook a review of the QCR program in 2014 to ensure it continued to maintain compliant with the requirements of SMO 1.

    Firms conducting audits of all companies in Pakistan, except for private limited companies with paid up capital below one million rupees, require a satisfactory QCR rating as mandated by the SECP’s Code of Corporate Governance of 2002. ISQC 1 is adopted in Pakistan and is mandatory for all firms.

    Current Status: Adopted

  • International Education Standards

    All three professional accountancy organizations have established initial professional development (IPD) and continuing professional development (CPD) requirements for its respective students and members.

    Under the Chartered Accountants Ordinance of 1961, the Institute of Chartered Accountants of Pakistan (ICAP) is responsible for establishing IPD and CPD requirements for its students and members. ICAP is responsible for administering the Chartered Accountants program.

    Under Section 42 of the Companies Ordinance, the Pakistan Institute of Public Finance (PIPFA) is responsible for establishing IPD and CPD requirements for its members. PIPFA is responsible for administering the Public Finance Accountant program and introduced a new education scheme in June 2015.

    Both ICAP and PIPFA report that they have incorporated the 2015 revised IES into their systems.

    Under the Cost and Management Accountants Act of 1966, the Institute of Cost and Management Accountants of Pakistan (ICMAP) is responsible for administering the Cost and Management program and establishing IPD and CPD requirements for its students and members. It is unclear if ICMAP’s IPD and CPD requirements are in line with IES requirements. The institute reports it plans to review its system against the revised IES, as it is introducing a new syllabus for its candidates.

    Current Status: Partially Adopted

  • International Standards on Auditing

    Under the Companies Act of 2017 (formerly Companies Ordinance of 1984), all companies in Pakistan are required to be undergo statutory audits using standards adopted by the Institute of Chartered Accountants of Pakistan (ICAP) under the supervision of the independent Audit Oversight Board. ICAP has adopted the revised 2016 ISA as issued by IAASB.

    Current Status: Adopted

  • Code of Ethics for Professional Accountants

    All three professional accountancy organizations in Pakistan have established ethical requirements for their respective members.

    Under the Chartered Accountants Ordinance of 1961, the Institute of Chartered Accountants of Pakistan (ICAP) is responsible for establishing ethical requirements for its members. ICAP has adopted the ICAP Code of Ethics, which is based on the 2014 IESBA Code of Ethics. ICAP indicates that some areas of its Code are more stringent than the IESBA Code. ICAP reports that the restructured 2018 IESBA Code is being considered for adoption in Pakistan.

    Under the Cost and Management Accountants Act of 1966, the Institute of Cost and Management Accountants of Pakistan is responsible for setting ethical requirements for its members. The institute reports that it has adopted the revised 2016 IESBA Code of Ethics.

    The Pakistan Institute of Public Finance Accountants (PIPFA) Bye-Laws establish PIPFA’s responsibility to adopt a Code of Ethics for its members. The institute reports that it has adopted the 2016 IESBA Code of Ethics for application by its members.

    Current Status: Partially Adopted

  • International Public Sector Accounting Standards

    The 1973 Constitution of Pakistan authorizes the Auditor General of Pakistan to set public sector accounting standards in the jurisdiction.

    As reported by the Pakistan Institute of Public Finance Accountants (PIPFA) in its 2018 SMO Action Plan, Pakistan’s national public sector accounting standards are cash-basis and are developed based on the 2003 version of the IPSAS.

    As per PIPFA, the Auditor General of Pakistan mandates that all provincial government offices apply IPSAS, and this authority is established under the Controller General of Accounts Ordinance of 2001.

    Current Status: Partially Adopted

  • Investigation and Discipline

    All three PAOs are responsible for establishing an investigative and disciplinary (I&D) system for professional accountants in Pakistan. The Audit Oversight Board (AOB) is also empowered to take disciplinary action on auditors in Pakistan.

    Under the Chartered Accountants Ordinance of 1961, the Institute of Chartered Accountants of Pakistan (ICAP) has established an I&D system for its members and students. ICAP conducted a review of its I&D system in 2016 and reports that its system fulfills a majority of the requirements of SMO 6 and that it is working to enhance the administrative processes of the system. Established under the Security and Exchange Commission of Pakistan Act of 1997, the AOB is responsible for deregistering members of ICAP who do not achieve a satisfactory outcome of ICAPs Quality Control Review.

    In 2015, ICAP reports that it began a process to review a set of amendments in the Chartered Accountants Ordinance that would have an impact on, amongst other ICAP responsibilities, its I&D process. ICAP reports that the timeline to complete the revision has not been established due to the lengthy review and approval process.

    Under the Cost and Management Accountants Act of 1966, the Institute of Cost and Management Accountants of Pakistan (ICMAP) is responsible for establishing an I&D system for its members. ICMAP reports that it completed a review of its system in 2013; however, the extent of its compliance with the requirements of SMO 6 is not clear.

    The Pakistan Institute of Public Finance Accountants (PIPFA) Articles of Association, approved by the Security and Exchange Commission of Pakistan, establishes the legal foundation for PIPFA to implement an I&D system for its members. PIPFA reports that following a review of its I&D system in 2018, its system is now aligned with the requirements of SMO 6.

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    The Companies Act of 2017 (formerly Companies Ordinance of 1984) sets out accounting and financial reporting requirements for all companies in Pakistan.

    The Securities and Exchange Commission of Pakistan (SECP) is responsible for adopting and promulgating accounting standards in Pakistan. The SECP has delegated this responsibility to the Institute of Chartered Accountants of Pakistan (ICAP). ICAP has adopted IFRS except for IFRS 1 and 14. ICAP reports that both remaining IFRS are being considered for adoption and that the SECP is developing a roadmap and strategy to address the gaps. The standards are not translated as English is the official business language.

    Listed companies, public interest companies, and large-sized non-listed companies are required to use IFRS in the preparation of their financial statements. Medium-sized companies can either choose to use IFRS for SMEs or full IFRS. Small-sized entities can choose to use Accounting and Financial Reporting Standards for Small-Sized Entities (AFRS for SSE), IFRS for SMEs, or full IFRS.

    Current Status: Partially Adopted

Disclaimer

IFAC bears no responsibility for the information provided in the SMO Action Plans prepared by IFAC member organizations. Please see our full Disclaimer for additional information.

Methodology

Methodology
Last updated: 01/2019
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