Institute of Chartered Accountants of Pakistan
Member | Established: 1961 | Member since 1977
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 i) establishing initial professional development (IPD) and continuing professional development (CPD) requirements for CAs; (ii) the operation of a quality assurance (QA) and investigative and disciplinary (I&D) systems; (iii) setting ethical requirements for its members; (iv) setting accounting standards as delegated and notified by the SECP; and (v) adopting and issuing auditing standards. The institute also awards the Associate Chartered Accountant and Fellow Chartered Accountant designations to members. CA’s are issued a Certificate of Practice by ICAP to conduct work as CAs. 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).
Statements of Membership Obligation (SMO)
The Statements of Membership Obligations form the basis of the IFAC Member Compliance Program. They serve as a framework for credible and high-quality professional accountancy organizations focused on serving the public interest by adopting, or otherwise incorporating, and supporting implementation of international standards and maintaining adequate enforcement mechanisms to ensure the professional behavior of their individual members.
SMO 1: Quality Assurance
Under the Chartered Accountants Ordinance of 1961, ICAP is responsible for the quality assurance reviews of audit firms in Pakistan. ICAP established a Quality Assurance Board (QAB) in 2005 to oversee the Quality Control Review (QCR) Framework for all firms conducting audits of financial statements of listed companies; public interest companies (Non-listed); and large-sized companies.
ICAP reports that the QCR Framework was originally developed in line with SMO 1 requirements. Following the revision of SMO 1, ICAP undertook a review of the Framework in 2014 to ensure it maintained its compliance with the requirements of SMO 1. As a result of the review, significant changes were made to the existing framework, including the establishment of an appellate board that would act as an independent resolution body for appeals by members, and the establishment of a Review Committee that reviews QCR ratings issued to audit firms.
To support the implementation of the QCR Framework, ICAP developed a guide on the implementation of ISQC 1 and a checklist for ISQC 1 compliance for QCR reviewers. In addition, ICAP has held roundtable meetings to provide a discussion forum for practicing members to discuss issues with the implementation of ISQC 1 and it has developed a mentorship program to assist firms with the implementation of ISQC 1. ICAP also has plans to organize awareness sessions on updates to the newly revised International Standards on Quality Management.
SMO 2: International Education Standards
Under the Chartered Accountants Ordinance of 1961, ICAP is responsible for establishing initial professional development (IPD) and continuing professional development (CPD) requirements for Chartered Accountants. ICAP has developed a comprehensive program that is aligned with the latest IES, following a review in 2017. The institute has procedures in place to update its program as appropriate. This includes reviewing updates issued by the former-IAESB, identifying areas in the ICAP program that require updates, preparing a proposal to address the areas that require updates, consulting stakeholders (academia, members, firms, and the public), and re-drafting current rules and regulations before presenting the changes to the ICAP Council for approval. This process can take 2-3 years to complete. ICAP reports that it has recently completed the incorporation of revisions in IES 2019 into its education scheme.
ICAP regularly holds seminars and workshops for its members and keeps its members and students up to date through journals, newsletters, emails, and circulars. ICAP also runs online programs for its members and collaborates with both ICMAP and PIPFA on various activities to support mutual members. In addition, ICAP utilizes feedback from reviewers of the Quality Control Review program to ensure the syllabus includes examples of issues that arise during the review of the work of auditors. ICAP entered into a memorandum of understanding with CPA Canada where ICAP members can attain membership with CPA Canada contingent on passing on the passing of a final examination.
SMO 3: International Standards on Auditing
Under the Companies Act of 2017, all companies in Pakistan are required to be audited using standards adopted by the Institute of Chartered Accountants of Pakistan (ICAP). The Audit Oversight Board, which was established in 2016 under the amended Securities and Exchange Commission of Pakistan Act of 1997, oversees work of ICAP to ensure that auditing standard adopted and issued by ICAP conform to the ISA as issued by the IAASB. ICAP states it has adopted the ISA as issued by the IAASB and reports that through its Auditing Standards & Ethics Committee it maintains a process to monitor new and revised pronouncements issued by the IAASB to ensure national auditing standards are current.
ICAP has most recently coordinated with the Securities and Exchange Commission of Pakistan and State Bank of Pakistan and after due process has aligned the format of Auditor Reports with ISA 700 (Revised) and the same has been issued by SECP through Auditor (Reporting Obligations) Regulations 2018. ICAP has also adopted the revised ISA 250 and ISA 540. ICAP also has plans to organize awareness sessions on updates to the newly revised International Standards on Quality Management.
ICAP keeps members informed on developments by the IAASB and disseminates pronouncements and exposure drafts to members via a quarterly audit bulletin and a technical update section in the monthly newsletter. An example of guidance on the new auditors’ reporting standard is available here. In addition, workshops have been organized for Small and Medium Practice professionals. ICAP also organizes continuing professional development activities, including seminars, round tables, and other conferences for members. Lastly, ICAP participates in the international standard-setting process by responding to exposure drafts by the IAASB.
SMO 4: Code of Ethics for Professional Accountants
Under the Chartered Accountants Ordinance of 1961, ICAP has direct responsibility for establishing ethical requirements for its members and has adopted the 2018 International Code of Ethics.
ICAP monitors updates and pronouncements by IESBA to disseminate the information via its technical bulletins, and to include it in its initial professional development and continuing professional development program. ICAP held awareness sessions on NOCLAR and the 2018 Code throughout 2018 and 2019 to keep members updates on the changes. ICAP has also developed FAQs and guidance on ethics for members and regularly hosts various round table sessions on ethics around the country for its members. ICAP also participates in the international standard-setting process by responding to IESBA exposure drafts.
SMO 5: International Public Sector Accounting Standards
With no authority to adopt public sector accounting standards in Pakistan, ICAP’s Accounting Standards Board is actively promoting the full adoption of IPSAS to the Accountant General and Auditor General’s Office by having discussions on strategies to move from cash-based IPSAS to accrual-based IPSAS. ICAP is represented on the Auditor General’s Policy Board, where based on ICAP’s advocacy, significant decisions have been made to adopt the IPSAS such as the alignment of the Auditor General’s office Accounting Manuals with the IPSAS.
In 2014, ICAP engaged in discussions with the Securities and Exchange Commission of Pakistan on the enforcement of “Public Sector Companies (Corporate Governance) Rules 2013”. The Rules are intended to improve governance and transparency of public sector companies in the country. ICAP reports that with the implementation of the rules in 2015, the institute has been organizing seminars on the Rules, and in addition, the institute has issued review report formats for public sector companies and has provided comments on FAQs developed to guide public sector companies. In 2018, ICAP’s Accounting Standards Board hosted a meeting with the Auditor General where the scope for implementation of accrual accounting in the public sector was discussed. The ASB Chairman also attended a Policy Board meeting where a presentation was given on gaps between existing accounting practices in the public sector in Pakistan and the benefits of accrual accounting. As a result, with funding from the World Bank, a project is ongoing to implement accrual accounting practices in the public sector in Pakistan.
To keep students and members up to date on IPSAS, ICAP monitors new and amended IPSASB pronouncements to include in its initial professional development. Cash based IPSAS is included in the Chartered Accountant examination syllabus to provide candidates with an understanding of IPSAS management in government entities. It also disseminates the pronouncements to members via technical bulletins.
In addition, ICAP hosted the Public Finance Management Conference in 2014, with the World Bank and U.S. Agency for International Development (USAID) to promote the importance of Public Finance Management. A second Public Finance Management Conference was held in 2016 with the Chartered Institute of Public Finance and Accountancy followed by a third Conference in 2018.
SMO 6: Investigation and Discipline
Under the Chartered Accountants Ordinance of 1961, ICAP has direct responsibility for establishing an investigative and disciplinary (I&D) system for Chartered Accountants. The institute has established an I&D system for its members, and it reports that it periodically reviews its system to ensure the system is functioning effectively. ICAP conducted a review of its I&D system and reports that its system fulfills most of the requirements of SMO 6, and that the institute is working to enhance the administrative processes of the system.
In 2015, ICAP 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 is pending due to the lengthy regulatory approval process. The approval of the ordinance is currently with the Ministry of Finance for further action.
ICAP reports that it provides new members with the ICAP Members’ Handbook to raise awareness of its I&D system. ICAP has also published the results of investigative findings through its newsletter and the Official Gazette of Pakistan. The institute has also developed a manual that includes past decisions of the Council on I&D cases. This manual is used for guidance during Council and Investigation Committee meetings.
I&D procedures that meet the SMO 6 benchmark are foundational to maintaining public trust and confidence in the profession. ICAP is encouraged to continue its efforts to strengthen its I&D procedures where possible and provide an update on the status of the legal approval process of its Ordinance when available.
SMO 7: International Financial Reporting Standards
Under the Companies Act, 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 ICAP.
The process of adoption of IFRS in Pakistan includes a review of new and updated standards by the Accounting Standards Board of ICAP, a deliberation on the local environment, timeframe for adoption, and consideration for the different sectors and if a standards requires amendments, a discussion with the SECP and other stakeholders, and finally a recommendation to the ICAP council. All new and updated standards are approved by the SECP for notification in the Official Gazette.
ICAP is working with local regulators, such as the SECP and the State Bank of Pakistan to ensure that all regulated entities become fully compliant with IFRS. ICAP is working with SECP, via a dedicated working group, to eliminate the exemptions given to various sectors relating to some IFRS which would then permit adoption of IFRS 1. IAS 39, IAS 40, and IFRS 7, has been deferred by the State Bank of Pakistan for financial entities falling under its authority as it has prescribed recognition and measurement criteria of financial instruments for these financial entities. All Independent Power Producers and power companies are exempted from IFRIC 4 and IFRIC 12. IFRS 9 will be effective for all banks beginning January 2021.
ICAP participates in the international standard-setting process by responding to exposure drafts and discussion papers issued by the IASB. ICAP is raising awareness through its continuing professional development program and round tables, and seminars for Small and Medium Practice entities. To promote the implementation of IFRS, ICAP updates members on developments by the IASB via technical bulletins and the ICAP website. ICAP has also tasked its Quality Assurance Board to monitor compliance of the application of the standards by companies in Pakistan.
ICAP is encouraged to continue its collaboration with the SECP to eventually eliminate the identified gaps. This would be significant in progressing the jurisdiction to ‘Adopted’ status for this standard.
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