Pakistan

The accounting and financial reporting framework for all companies in Pakistan are stipulated in the Companies Act of 2017. 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.

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 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, financial institutions and companies engaged in production and sale of sugar), large-sized non-listed companies (companies with paid-up capital exceeding 200 million rupees or with an annual turnover exceeding 800 million rupees or with employees 750 or more), a large-sized foreign company (with turnover exceeding Rs. 1 billion), a large-sized non-listed company licensed or formed under Section 42 / Section 45 of the Act (with annual gross revenue (grants/ income/ subsidies/ donations) including other income / revenue of Rs. 200 million or more) 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 10 million rupees, turnover not exceeding 150 million rupees and employees not more than 250 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. 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 adopted by ICAP.

Auditing Framework

Under the Companies Act of 2017, ICAP is responsible for adopting and issuing auditing standards to be applied in Pakistan. The institute has adopted all the ISAs issued by the International Auditing and Assurance Standards Board (IAASB). Under the Companies Act, all companies, except for private limited companies whose paid up capital is below one million rupees, are to be audited following auditing standards adopted and issued by ICAP.

In Pakistan, professional accountants may be regulated by one or more of the following professional accountancy organizations (PAOs): (i) the Institute of Chartered Accountants of Pakistan (ICAP); (ii) the Institute of Cost and Management Accountants of Pakistan (ICMAP); and (iii) the Pakistan Institute of Public Finance Accountants (PIPFA). In 2016, the SECP made amendments to the Securities and Exchange Commission of Pakistan Act of 1997 (referred to as SECP Act), that established an independent Audit Oversight Board (AOB) with the responsibility to oversee the auditing profession in Pakistan.

The functions of the AOB include: (i) overseeing and monitoring the work of 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 (ISAs) as issued by IAASB.

The professional accountancy organizations (PAO) regulate 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 (referred to as CA Ordinance) and the ICAP Byelaws of 1983, ICAP is authorized to regulate CAs. 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. 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.

Cost and Management Accountants (CMAs)

Under the Cost and Management Accountants Act of 1966 (referred to as CMA Act), ICMAP is authorized to regulate CMAs. The responsibilities of ICMAP include: (i) administering the Cost and Management (CMA) program and establishing IPD and CPD requirements; (ii) setting ethical requirements for its members; (iii) and establishing QA and I&D systems. Under the Companies Act, members of ICMAP can conduct audits of private limited companies with paid up capital up to 3 million rupees. 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.

Public Finance Accountants (PFA)

The Pakistan Institute of Public Finance Accountants (PIPFA) was established in 1993, under Section 42 of the Companies Act, 2017. 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

Individuals who have either a secondary school certificate, ‘A’ levels, or university degree can pursue the CA, CMA or PFA; however, exemptions are granted based on the level of education completed and the time taken to attain a designation depends on the level of education attained at entry. For example, those with a university degree are exempted from taking certain courses that those with a secondary school education will have to complete prior to undertaking a qualification and the time to attain the qualification is significantly lower for those with a university degree. Each PAO sets out its own minimum criteria for students who enter with different levels of previously attained education. 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 many 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.

In 2016, the Securities and Exchange Commission of Pakistan (SECP) amended the SECP Act 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 ICAP’s QAB and 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 IPD and CPD requirements for CAs, the operation of a QA and I&D 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.

There are three professional accountancy organizations in Pakistan.

Institute of Chartered Accountants of Pakistan (ICAP)

ICAP was established in 1961 to regulate CAs in Pakistan and its functions are established under the CA Ordinance and ICAP Byelaws. ICAP’s responsibilities include establishing IPD and CPD requirements for CAs, the operation of a QA and 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 ACA and FCA designations. 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 CMA Act 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 ACMA and FCMA 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 APFA and FPFA designation. PIPFA is a Member of IFAC.

Under the CA Ordinance, the Institute of Chartered Accountants of Pakistan (ICAP) is responsible for mandatory quality assurance (QA) reviews. The QA mechanism in Pakistan is called the quality control review (QCR) program and has been operational since 1987. In 2005, ICAP established its quality assurance board (QAB) to oversee the execution of the QCR program. The composition of the QAB includes representation from ICAP, SECP, the State Bank of Pakistan, and the Pakistan Stock Exchange. Overseeing the QAB is the independent AOB which was established in 2016, following amendments to the SECP Act.

The QCR program was developed in line with the requirements of SMO 1. The last review against SMO 1 requirements was conducted by ICAP and AOB in 2023 to ensure the system continues to comply. Relevant standards—ISQM 1, 2, and ISA 220 (revised)—are also adopted. 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.

Current Status: Adopted

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 administering the Chartered Accountants program.

Under Section 42 of the Companies Ordinance, the Pakistan Institute of Public Finance (PIPFA) is responsible for administering the Public Finance Accountant program, which is revised after every 3 years, lastly revamped in 2020.

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.

All three PAOs report that their educational programs are aligned with the latest IES.

Current Status: Adopted

Under the Companies Act, 2017 (formerly Companies Ordinance of 1984), all companies, except for private companies whose paid up capital is less than one million rupees, are required to undergo statutory audits using International Standards on Auditing (ISAs) adopted by ICAP under the oversight of the AOB. Currently the latest ISA is adopted in Pakistan.

Current Status: Adopted

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

Under the Chartered Accountants Ordinance of 1961, ICAP is responsible for establishing ethical requirements for its members. The extant ICAP Code of Ethics is based on the 2018 IESBA Code with some changes, which are required by local law but more stringent than IESBA requirements. ICAP is working to adopt the latest IESBA Code. An Exposure Draft was issued on the draft ICAP Code of Ethics (Revised 2024) and the comments received from members are under review and deliberations are ongoing within the relevant committee of ICAP.

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. ICMAP has adopted the 2022 International Code of Ethics.

The Pakistan Institute of Public Finance Accountants (PIPFA) Byelaws establish PIPFA’s responsibility to adopt a Code of Ethics for its members. The institute reports that it has adopted the 2018 Code and planned to adopt the 2022 Code by June 2024.

Current Status: Partially Adopted

The 1973 Constitution of Pakistan authorizes the Auditor General of Pakistan (AGP) to set public sector accounting standards in the jurisdiction. Pakistan’s national public sector accounting standards are cash-basis. The Auditor General mandates that all provincial government offices apply IPSAS, and this authority is established under the Controller General of Accounts Ordinance of 2001. According to ICAP, the government of Pakistan has established an objective to converge with IPSAS and that there are plans to revise national public sector accounting standards with the goal of eliminating differences with the IPSAS. However, a timeline has not been established.

Current Status: Not Adopted

All three professional accountancy organizations 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 regarding auditors in Pakistan.

Under the Chartered Accountants Ordinance of 1961, ICAP has established an I&D system for its members and students. ICAP conducted a review of its I&D system against the SMO 6 benchmark and is addressing one area for improvement—a process for an independent review of complaints where no follow-up—by amending the CA Ordinance.

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 its system is aligned with the requirements of SMO 6.

The Pakistan Institute of Public Finance Accountants (PIPFA) Articles of Association, approved by the Securities and Exchange Commission of Pakistan, establishes the legal foundation for PIPFA to implement an I&D system for its members. PIPFA’s system, as of February 2026, is aligned with the requirements of SMO 6.

Current Status: Partially Adopted

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 ICAP, who has adopted all the IFRS except for IFRS 1. Further, the ICAP’s Accounting Standards Board (ASB) is working with SECP and SBP to eliminate the gaps that are stated in IFRS implementation dates due to the exemptions given to various sectors.

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.

The ASB is also actively working to develop capacity building and skill set of its members before the adoption and implementation of International Sustainability Disclosure Standards, IFRS S1 and IFRS S2 in Pakistan, issued by International Sustainability Standards Board (ISSB).

Current Status: Partially Adopted

Relevant Organizations

• Institute of Chartered Accountants of Pakistan (ICAP)
• Institute of Cost and Management Accountants of Pakistan (ICMAP)
• Pakistan Institute of Public Finance Accountants (PIPFA)
• Securities and Exchange Commission of Pakistan (SECP)

Relevant Legislation

• Chartered Accountants Ordinance, 1961
• Constitution of the Islamic Republic of Pakistan
• Controller General of Accountants Ordinance, 2001

Relevant Publications

• ICAP, SMO Action Plan, January 2020.
• ICMAP, SMO Action Plan, March 2019.
• IFRS Foundation, IFRS Application around the World, Jurisdictional Profile: Pakistan, September 2019.
• PIPFA, SMO Action Plan, November 2020.
• World Bank, Report on the Observance of Standards and Codes, Accounting and Auditing, January 2017.