2005年-世界发展银行全球_Pakistan___Accounting_and_Auditing_25页_167kb

Summary of the Report on the Observance of Standards and Codes (ROSC) - Pakistan

Core Content

This report, titled "Report on the Observance of Standards and Codes (ROSC) - Pakistan," evaluates the state of accounting and auditing practices in Pakistan against international standards, specifically the International Financial Reporting Standards (IFRS) and International Standards on Auditing (ISA). It is part of a joint initiative by the World Bank and the International Monetary Fund (IMF) aimed at promoting transparency and accountability in financial reporting.

The report was prepared between October and December 2004, with input from a wide range of stakeholders, including regulatory bodies, professional institutions, and industry participants. It was finalized on March 31, 2005, and further updated based on feedback from a dissemination workshop held in November 2005 in Islamabad.

Main Findings

I. Progress in Adopting International Standards

• Pakistan has made strides in aligning its corporate financial reporting with IFRS and ISA.
• The Securities and Exchange Commission of Pakistan (SECP) and State Bank of Pakistan (SBP) have established statutory frameworks to regulate financial reporting and auditing.
• IFRS compliance is mandatory for listed companies and group incorporated companies, but not yet fully implemented due to lack of notification by SECP of all IASs and IFRSs issued by the International Accounting Standards Board (IASB).

II. Institutional Framework

• The Companies Ordinance sets the primary legal framework for financial reporting and auditing in Pakistan.
• SECP is responsible for enforcing IFRS compliance in listed companies and has issued special regulatory orders to ensure adherence.
• SBP and SECP also regulate banks and financial institutions, with specific requirements for quarterly financial reporting and audit procedures.
• Insurance Ordinance 2000 mandates audit and actuarial certification for insurance companies, with audits conducted by ICAP members.
• Non-banking financial institutions are regulated by SECP, with audits performed by ICAP members.
• State-owned enterprises (SOEs) are regulated by the Controller General of Accounts and Auditor General of Pakistan, but there is a lack of awareness of IFAC pronouncements among SOE auditors.

III. Professional Bodies

• The Institute of Chartered Accountants of Pakistan (ICAP) is the self-regulated body overseeing the accounting profession. It is a member of IFAC, South Asia Federation of Accountants (SAFA), and Confederation of Asia Pacific Accountants (CAPA).
• ICAP has 3,377 members, of which 17% are engaged in public practice.
• ICAP has revised its Code of Ethics in 2003 to align with IFAC standards, but enforcement mechanisms remain inadequate.
• Professional indemnity insurance is not legally required in Pakistan, and most auditors lack access to it due to high costs.
• ICAP members are allowed to associate with two audit firms, which has raised concerns about "sleeping partners" and potential conflicts of interest.
• The Institute of Cost and Management Accountants of Pakistan (ICMAP) also plays a role in cost audit and financial reporting, with 2,190 members primarily working in industry.

IV. Challenges and Gaps

• There are varying compliance gaps in both accounting and auditing practices.
• Inadequate technical capacity of regulators and professional bodies is a major issue.
• Lack of implementation guidance for IFRS and ISA contributes to non-compliance.
• Independent oversight of the auditing profession is lacking.
• Professional education and training need to be upgraded to ensure compliance with international standards.
• Auditor independence is threatened by involvement in non-audit services such as tax advocacy.
• SME reporting requirements are not simplified, making compliance difficult.

Key Recommendations

• Improve the capacity of regulators and professional bodies to enforce standards.
• Upgrade accounting education and training with a focus on practical application of IFRS and ISA.
• Issue and disseminate implementation guidance for international standards.
• Institute a system for independent oversight of the auditing profession.
• Develop simplified SME reporting requirements.
• Upgrade the licensing procedure for professional accountants and auditors.
• Enhance continuing professional education.
• Ensure that all IASs and IFRSs issued by the IASB are notified and implemented.
• Address the issue of auditor independence by limiting non-audit services.
• Promote professional indemnity insurance to mitigate risks of malpractice.

Conclusion

Despite progress in adopting international standards, Pakistan still faces significant challenges in ensuring compliance and quality in corporate financial reporting. Strengthening regulatory capacity, improving professional education, and enhancing independent oversight are essential to further improve the accounting and auditing regime in the country. These recommendations aim to consolidate past achievements, improve the knowledge base of professionals, and strengthen monitoring and enforcement mechanisms for compliance with international standards.