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Saturday April 13, 2024

SHC restrains audit oversight board from concluding inquiry against KE

By Jamal Khurshid
March 26, 2024
This image shows the building of the Sindh High Court in Karachi. — Facebook/Sindh High Court Bar Association Karachi/File
This image shows the building of the Sindh High Court in Karachi. — Facebook/Sindh High Court Bar Association Karachi/File

The Sindh High Court on Monday restrained the audit oversight board from concluding an inquiry against K-Electric but observed that the inquiry may be continued without any restrictions.

The interim order came on a lawsuit of KE with regard to the inquiry being conducted by the audit oversight board with regard to the KE audit affairs.

The plaintiff’s counsel submitted that audit oversight board, an independent audit regulator, had issued notice to a private charter accountant firm of KE, seeking information with regard to services rendered to the plaintiff for the fiscal year June 30 2017 and onwards.

The counsel submitted that information raised in the notice was already a subject matter of the KE lawsuit against the former KE director in which an interim stay order has been passed by the court.

The counsel submitted that the inquiry being initiated by the AOB was contrary to Section 7 A of Audit Oversight Board (operations) regulations 2018 and beyond the jurisdiction of AOB as matter was already pending before the court.

He submitted that the AOB under the garb of inquiry was attempting to adjudicate the veracity of allegations levelled by the former director of KE in its letter to the Pakistan Stock Exchange and other regulators with regard to major financial reporting irregularities by KE in the published financial statements.

The counsel submitted that the interim injunction may be granted in respect of the inquiry as the identical matter was already being heard before the court of the law and the defendant board has no jurisdiction to proceed with the matter.

A high court single bench headed by Justice Mahmood A Khan, after the preliminary hearing of the lawsuit, issued notices to the AOB and the private chartered accountant firm and called their comments on April 16. The court in the meantime ordered that the AOB shall not conclude the inquiry being conducted; however, the proceedings may be continued without any restrictions.

A former KE director had issued a letter to the Pakistan Stock Exchange, alleging that the KE’s financial statements carried material misstatements due to which the published financial statements are rendered misleading.

The letter alleged that KE has indulged in incorrect recognition of revenue and receivables from the government of Pakistan for last several years in respect of its write-offs of trade receivables (which the KE management asserts are recoverable as tariff differential, as explained in ensuing paragraphs) without specific approval from National Power Regulatory Authority (NEPRA or the authority) or any acknowledgement from the government of Pakistan.