Shifting blame to auditors in PTI funding case: LTBA urges CEC to expunge his observation from order

ISLAMABAD, August 23: The Lahore Tax Bar Association (LTBA) has deplored the PTI lawyers’ bid to shift the blame to the auditors for any wrongdoing traced in the PTI foreign funding case and urged the chief election commissioner (CEC) to expunge his observations from the ECP order.

In a letter dated August 20 addressed to Chief Election Commissioner Sikandar Sultan Raja, President LTBA Akhter Mahmood Mian wrote, “It is deplorable to use such kind of profession for own motives without caring and measuring the loss to be borne by such noble profession. Under these circumstances, it is prayed that the observation and reliance statements of the PTI lawyers may please be expunged or obliterated from the ECP order.”

The letter says shifting of wrongdoings on the auditor ‘other profession of the state is being maligned, disgraced or put on unnecessary criticism of the general public.

“The misdeeds or wrongdoing of the management of an organization which might be beneficiary of it, cannot be put upon the shoulders of the auditors and cannot be disreputed. Learned (PTI) lawyers were not justified to use the credentials of the auditors for their own purposes,” the letter reads.

The LTBA president also re-produced related portion of the order to substantiate his contention and wrote, “…Through this observation by the Election Commission even it was the plea of the lawyer of the respondent that he has relied upon and taken the shelter of the chartered accountant firm and described that the auditors of the respondent are QCR rated as issued by ICAP, as on the basis of which list, there are only 120 firms out of 691 firms (These 120 firms include big, medium and small sized and sole proprietor as well) and the Auditors are falling in category A of the State Bank in which there are only 14 firms”.

Mahmood Mian said the arguments advanced by the lawyer were based on this impression, fact and reason that the audit was being conducted by such firm which was carrying out such kind of credentials and track record thus these accounts were correct, therefore, this proceeding as started on the complaint of Akbar Sher Babar should be closed because there was no wrong in these accounts but the honourable election commission said in this order that there were a plenty of undeclared or concealed accounts and prohibited funds as well.

However, the LTBA president clarified that it was not the purpose of this representation to become party to this case or to defend to any political party or any other person who may have been affected by any financial misdeed of whatever nature, rather, to defend our profession of chartered accountancy which has principally legitimate authority, source, technology and ability to conduct the audit service.

“That this order/report of Election Commission which is carrying observations about the chartered accountant firm namely Munif Ziauddin & Co Chartered Accountants and finally order is passed that there are prohibited funds and concealed accounts, has left the impression and a strong view in the general public that the audit is not being conducted by the auditors properly and they were negligent about duties and as the auditors are QCR rated by ICAP.

The fingers have been raised upon QCR rated firm, QCR process and the Institute of Chartered Accountants of Pakistan which is Public Body being created through the Chartered Accountants Ordinance, 1961, as the federal government has strong representation in the Council of ICAP as nominees of the government.

The federal government has such strong control upon the powers of the Council of ICAP that the Council cannot amend or frame its by-laws until the prior approval of the government is sought,” he noted.

“The audit is not being conducted for the government or semi-government department, regulators, financial institutions, creditors or potential investors rather audit is being conducted to report the members or appointing authority of any company, enterprise or non- profit organization.

The company, enterprise or any organization can provide its copy to any department because the said financial statement coupled with auditors’ report is the property of the said company, enterprise or organization.

The recipient of the financial statement annexed with auditors’ report has no authority or legitimate right to examine or analyse or check the financial statements and prove that these financial statements are wrong or incorrect and the audit is not being conducted by the auditors up to his satisfaction and the auditors are held responsible or held for bad name,” he wrote in the letter.

He said the auditors did not prepare the accounts nor were they authorized legally to do necessary disclosures in the accounts and decide the accounting policies based upon which the accounts are finalized.

The accounting assumptions and estimates are also selected and adopted by the management itself. The auditors express an opinion on the financial statements as prepared by the management.

The auditors do not issue the certificate that the accounts are correct instead the auditors express an opinion that the accounts are giving a fair view... On the basis of representation as issued by the management, the auditors release the auditors’ report as required by International Standard on Auditing 580.

“Although the auditors received the written representation from the management that the management has fulfilled its responsibility for preparation of the financial statements and for completeness of the information provided to the auditors, the auditors conducted the audit and got themselves satisfied on the financial statements provided for audit.

The auditors designed the audit programs keeping in view the risk of mistake, error or misstatement. Through these audit procedures including compliance and substantive, the audit job is completed. During the currency and completion of the audit International Standard on Auditing, Technical directives of ICAP, disclosures require as prescribed by the Companies Act, 2017 or other relevant laws regulating the relevant businesses are kept in view,” he noted.

“That misdeeds or wrongdoing of the management of an organization, which might be beneficiary of it cannot be put upon the shoulders of the auditors and cannot be disreputed. The learned lawyers were not justified to use the credentials of the auditors for their own purposes and reliance, as the auditors doing practice as practicing members of ICAP are equal and enjoy equal status when they perform their professional services.

If any practicing chartered accountant is being criticized or maligned, the whole profession is being put on risk in the eyes of the general public and the person and organization seeking the services of chartered accountants on national or international level.

It may be brought on record that the Institute of Chartered Accountants of Pakistan is a member of International Federation of Accountants and is doing full compliance of all Standards and Regulations of IFAC.

Concluding, Mahmood Mian said it was deplorable to use such kind of profession for own motives without caring and measuring the loss to be borne by such noble profession. Under these circumstances, it is prayed that the observation and reliance statements of the lawyer may please be expunged or obliterated from the order.