Government invests audit watchdog with sweeping powers

KARACHI: The government has added to the authorities of a recently-formed audit watchdog through new regulations, issued with an aim to set the bar of standard/quality even higher for auditing/accounting firms operating in the country, officials said on Wednesday.

“'The Audit Oversight Board (Operations) Regulations, 2018' empower Audit Oversight Board (AOB) to register and deregister firms, carry out reviews, and monitor the work of the Quality assurance Board (QAB) of the Institute of Chartered Accountants of Pakistan (ICAP),” a statement said.

“The regulations authorise the AOB to advise the ICAP to adopt auditing standards and quality control review framework (QCRF) as issued/approved by the Board, or require the alteration or modification of the existing auditing standards and framework.”

The statement added that audit firms, which carry out or intend to carry out audit of a public interest company, are required to register with the AOB through a due process.

An official said the AOB was perceived to align with international standards and best practices on an independent audit oversight as well as to address the concerns raised by local and international regulators on the existing mechanism of audit oversight in Pakistan. “One of the principal objectives underlying the independent oversight function is to reinforce the concept of the auditor's independence and to improve the governance and regulation of the auditing profession,” the official said.

The statement further said the AOB has also been authorised to carry out a systemic review of the QAB work, and could appoint consultants to carry out the review. “The board can also inspect the records of QAB of the ICAP, audit firms listed with ICAP and even the public interest company,” the statement said.

It said public confidence in the audit was seriously eroded by a number of high-profile corporate scandals in Europe, United States of America and other parts of the world. “One of the legislative responses to the audit failures was to put in place a mechanism for an independent oversight of the audit profession which has been established by many countries across the world,” the statement said.

The ICAP, it added, has been the lead organisation involved in regulating auditing professionals along with the Securities and Exchange Commission of Pakistan (SECP) and the State Bank of Pakistan (SBP). “However, questions regarding auditor’s independence, poor quality of audits, lackluster audit reports, self-regulation and ineffectiveness of current regulatory mechanism rendered creation of an oversight body,” the statement said.