Institute of Chartered Accountants of Pakistan

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. The QCR framework primarily encompasses firms involved in statutory external audits of public interest companies, large-sized companies, as well as public interest companies and large-sized companies which are either associations not for profit or limited by guarantee. The QCR procedures align with the SMO 1 benchmark.

Because the SMO 1 benchmark outlines that all audits of financial statements ideally undergo a review, ICAP has designed an Audit Practice Review and Support (APRS) Program for all Non-QCR rated firms engaged in Audit, Assurance, and Related Services within Pakistan, effective from October 2020. The APRS targets firms engaged in Audit, Assurance, or Related Services and runs concurrently alongside the QCR Program.Additionally, as IFAC’s SMO 1 ‘Quality Assurance guideline, mandating a quality assurance review system for all firms conducting financial statement audits, the Institute’s Council has established the ‘Audit Practice Review and Support (APRS) Program’. This program became effective on October 1, 2020, and applies to all non-QCR rated firms engaged in Audit, Assurance, and Related Services within Pakistan. The oversight and execution of the APRS program initiative have been delegated to the Members’ Affairs Committee, formed by the ICAP Council. Notably, the APRS Program is being conducted at an accelerated pace. Consequently, audit firms are now subject to quality monitoring either the Quality Control Review conducted through the QCR Program or the Audit Practice Review via the APRS Program.

The responsibility for implementing the APRS program lies with the Members’ Affairs Committee formed by the Council, ensuring its accelerated pace and effective execution.

ICAP has also adopted relevant standards for quality assurance reviews— ISQM 1, 2, and ISA 220 (revised)—effective for all firms carrying out audits by December 2024. The evaluation of the SOQM is required to be performed within one year following the effective date.  With the adoption of Quality Management Standards, the extant ISQC 1 and ISA 220 will be superseded. With the aim to facilitate members’ implementation, ICAP has developed and published a ‘ISQM Guide and Toolkit’ in performing risk assessment process, as required in ISQM 1. ICAP has also organized awareness sessions on Quality Management Standards for members.

Current Status: Sustain

Under CA Ordinance 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 requirements. The institute has procedures in place to update its program as appropriate:

• reviewing updates on IESs,
• 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 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.

Current Status: Sustain

Under the Companies Act, 2017, all companies, except those under a certain capital threshold, in Pakistan are required to be audited using standards adopted by 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 all the ISAs as issued by the IAASB and reports that its Auditing Standards & Ethics Committee maintains a process to monitor new and revised pronouncements issued by the IAASB to ensure national auditing standards are current.

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. In addition, workshops have been organized for Small and Medium Practice professionals. ICAP also organizes continuing professional development activities for members. Lastly, ICAP participates in the international standard-setting process by responding to exposure drafts issued by the IAASB.

Current Status: Sustain

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 issued by IESBA. ICAP reports it is currently reviewing the IESBA’s 2023 International Code of Ethics for Professional Accountants (including International Independence Standards’ (IESBA Code 2023) for adoption, except for few requirements. The institute must make amendments as required under local law (i.e. CA Ordinance 1961) but the result is more stringent requirements.

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 arranged awareness sessions on NOCLAR and on the ICAP Code 2019 from 2018 to 2021 to keep members updated on the changes. ICAP has also developed FAQs and relevant guidance material 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’s Exposure Drafts.

ICAP is to keep IFAC updated about its progress to adopt the latest Code issued by IESBA.

Current Status: Review & Improve

With no authority to adopt public sector accounting standards in Pakistan, ICAP’s Accounting Standards Board (ASB) 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. As a result, with funding from the World Bank, a project is ongoing to implement accrual accounting practices in the public sector in Pakistan.

Over several years, ICAP’s advocacy has included ongoing discussions with the SECP and the Auditor General. ICAP has also organized seminars on public sector governance and reporting rules, issued review report formats for public sector companies, and has provided comments on FAQs developed to guide public sector companies. ICAP has also hosted three Public Finance Management Conferences to promote the importance of Public Finance Management. First was organized in 2014, with the World Bank and U.S. Agency for International Development (USAID), followed by second and third with the Chartered Institute of Public Finance and Accountancy (CIPFA) in 2016 and 2018 respectively.

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.

Current Status: Sustain

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 and aligned with the SMO 6 requirements. 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. Out of this review process, the only area for improvement identified was the process for an independent review of complaints where there is no follow up. This will be rectified once the CA ordinance, which is pending approval by the Ministry of Finance, is revised.

ICAP reports that it provides new members with the ICAP Members’ Handbook to raise awareness of its I&D system. ICAP publishes 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.

ICAP is to keep IFAC updated on amendments to the CA Ordinance.

Current Status: Review & Improve

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 (ASB) of ICAP, a deliberation on the local environment, timeframe for adoption, and consideration for the different sectors and if a standard requires amendments, a discussion with the SECP and other stakeholders, and finally a recommendation to the ICAP Council. ICAP Council after due consideration approves and recommends adoption of accounting standard to SECP. 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, to eliminate the exemptions given to various sectors relating to some IFRS which would then permit adoption of IFRS 1. IAS 40 and IFRS 7 have 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 and DFIs from 01 January 2024. For Non-Banking Finance Companies (NBFCs) and Modarabas, IFRS 9 will be effective for the accounting period/year ending on or after June 2024. The companies holding financial assets due from the Government of Pakistan in respect of circular debt, the requirements contained in IFRS 9 with respect to application of Expected Credit Losses method are not applicable until December 2024, provided that such companies follow relevant requirements of IAS 39. 

The ASB has been working for some time on phased implementation of IFRS 17 in Pakistan in close coordination with SECP. To date, Phase 1 and 2 have been completed and phase 3 (out of 4 phases) is in progress. Various session has been arranged so far among ICAP members, regulators, and industry participants for knowledge-sharing on IFRS 17.

ASB is also actively working to review and adopt the ISSB’s sustainability reporting and disclosure standards— IFRS S1 and IFRS S2— in Pakistan. For the awareness and education of all stakeholders, various seminars, webinars, and consultative sessions on IFRS Sustainability Disclosure Standards have been planned for auditors, companies, and regulators. Most of the sessions have been arranged jointly with SECP.

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 committed 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 IFRS standards.

Current Status: Sustain