Institute of Chartered Accountants of Pakistan
Member | Established: 1961 | Member since 1977
The Institute of Chartered Accountants of Pakistan (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 and continuing professional development requirements for CAs, 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 Securities and Exchange Commission of Pakistan, and 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, 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 and South Asian Federation of Accountants.
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. All firms require a satisfactory QCR rating to conduct audits.
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.
In 2016, the Securities and Exchange Commission of Pakistan amended the Securities and Exchange Commission of Pakistan Act of 1997 to establish an independent Audit Oversight Board (AOB). Some of the key functions of the AOB include: (i) to oversee and review policies, procedures, programs of QAB for ensuring an effective oversight of quality of audit of public interest companies and to specify any improvement required in QAB’s policies, procedures and systems; (ii) registering all firms that have achieved a satisfactory QCR rating; deregistration of firms based on the outcome of the QCR by the QAB; and (iii) to ensure that the auditing standards adopted by the Institute conform to the international standards as issued by International Auditing and Assurance Board.
- SMO 2: International Education Standards
Under the Chartered Accountants Ordinance of 1961, ICAP is directly responsible for establishing initial professional development and continuing professional development requirements for its members. ICAP has developed a comprehensive Chartered Accountants program that it reports incorporates the full requirements of the IES. Through the review of pronouncements by the IAESB, ICAP has a process in place by its education and training teams to update ICAP’s program as appropriate.
ICAP reports that it has completed a review, and is preparing a proposal to revise its current rules, regulation and guidelines to align with the revised IES 8, as issued by the IAESB. ICAP indicates that once a proposal has been drafted, a consultation will be initiated with its members and firms to consider revisions to recommend to its Council. The institute envisions that the Council will approve changes by July 2017.
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 also participates in the international standard-setting process by reviewing and responding to exposure drafts issued by the IAESB.
- SMO 3: International Standards on Auditing
ICAP is responsible for the adoption of auditing standards in Pakistan. The Institute has adopted the 2009 Clarified ISA and reports that through its Auditing Standards Committee it maintains a process to monitor new and revised pronouncements by the IAASB to ensure national auditing standards are current.
ICAP has coordinated with the Securities and Exchange Commission of Pakistan and State Bank of Pakistan to bring the format of Auditor Reports in line with ISA 700 as the standard was revised in 2015; ICAP reports that this process will be completed by December 2016, and that round tables and seminars have been held to create awareness among stakeholders on the revised ISA 700 and related standards.
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, including seminars, round tables, and other conferences for members. 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 aligned the ICAP Code of Ethics with the 2014 IESBA Code of Ethics. ICAP reports that in some areas, its Code is more stringent.
ICAP monitors updates and pronouncements by IESBA to disseminate to members via its technical bulletins, and to include in its initial professional development and continuing professional development program. ICAP has also developed FAQs on ethics for members and in 2015, hosted 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 responsibility to adopt public sector accounting standards in Pakistan, ICAP’s Public Sector Committee is actively promoting the adoption of public sector standards to the Accountant General and Auditor General’s Office by having discussions on strategies to move from cash-based IPSAS to accrual-based 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 aim of this enforcement is to improve governance and the 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.
To keep students and members up to date on IPSAS, ICAP monitors new and amended IPSASB pronouncements to include in its initial professional development and continuing professional development program, and 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 (US AID) 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.
- 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 its members and students. 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 in 2016 and reports that its system fulfills a majority of the requirements of SMO 6, and that the institute is working to enhance the administrative processes of the system.
ICAP reports that it provides new members with the ICAP Members’ Handbook to raise awareness of it’s 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.
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.
- SMO 7: International Financial Reporting Standards
With shared responsibility for the adoption of IFRS in Pakistan, ICAP has adopted IFRS and IFRS for SMEs, and along with the Securities and Exchange Commission of Pakistan (SECP), introduced a differentiated financial reporting requirement.
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. In the process, ICAP is working with the SECP to ensure that the regulated entities do not deviate from the adoption of IFRS and plans to ensure these changes are made by December 2016. To fully comply with the full suite of IFRS, ICAP is aiming to adopt IFRS 1, 9, 14, 15, and 16, subject to notification by the SECP by January 2018.
ICAP participates in the international standard-setting process by responding to exposure drafts and discussion papers by the IASB. ICAP has plans in place to create awareness activities 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 delegated its Quality Assurance Board to monitor compliance of the application of the standards by companies in Pakistan.
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