Financial sector means banks, non-banking financial companies (NBFCs), modarabas and insurance or takaful insurance companies. It is mandatory that all listed companies other than those in the financial sector shall, at the minimum, rotate the engagement partner after every five years: provided that in case the audit firm is a sole proprietorship then after completion of five years such audit firm shall be changed.
It is mandatory that no company shall appoint as external auditor, a firm of auditors which has not been given a satisfactory rating under the Quality Control Review programme of the Institute of Chartered Accountants of Pakistan and registered with Audit Oversight Board of Pakistan under section 36I of the Securities and Exchange Commission of Pakistan Act, 1997, said the SECP.
It is mandatory that no company shall appoint as external auditor, a firm of auditors which or a partner of which is non-compliant with the International Federation of Accountants' Guidelines on Code of Ethics, as adopted by the Institute of Chartered Accountants of Pakistan. It is mandatory that the board of a company shall recommend appointment of external auditors for a year and its remuneration, as suggested by the audit committee and such recommendations shall be included in the Directors' Report and in case a recommendation for appointment of an auditor is other than the retiring auditor, the reasons for the same shall be included in the Directors' Report.
It is mandatory that no company shall appoint its external auditors to provide services in addition to audit except in accordance with these regulations and shall require the 18 auditors to observe applicable International Federation of Accountants guidelines in this regard, said the SECP.
It is mandatory that the company shall ensure that the auditors do not perform management functions or make management decisions, responsibility for which remains with the Board and management of the company.
It is mandatory that no company shall appoint a person as an external auditor or a person involved in the audit of a company who is a close relative (spouse, parents, dependents and non-dependent children) of the chief executive officer, the chief financial officer, the head of internal audit, the company secretary or a director of the company, said the SECP.
It is mandatory that every company requires the external auditors to furnish a management letter to its Board within 45 days of the date of audit report: Provided that any matter deemed significant by the external auditor shall be communicated in writing to the Board prior to the approval of the audited accounts by the Board, added the SECP.