ISLAMABAD: The Audit Oversight Board (AOB) has revoked the registration of an audit firm and thereby stopped it from carrying out the audit of public interest companies.
In line with its regular monitoring plan, AOB initiated an inspection of records to assess the audit quality of the firm, Mudassar Ehtisham & Co., in March 2019. The firm requested that inspection be delayed by three months. The firm’s request was declined because the inspection was of past audit records that should have been readily available.
Later, the firm did not let the AOB inspectors conduct the inspection on the scheduled date when they visited the office of the firm in Lahore. Accordingly, AOB served a show-cause notice on the firm and provided an opportunity to explain its position in writing and also provided an opportunity of being heard.
In the third hearing on 30 April 2019, the firm informed AOB that it is willing to get its records inspected. However, when AOB inspection team visited the office of the firm on 6 May 2019, it still did not provide complete information and the information that it provided carried instances of falsification.
AOB provided further opportunities to the firm to explain itself, however, the firm did not submit any written explanation, nor did it attend the opportunity of being heard.
Not providing required information to the regulator and falsification of the provided information are grave violations. At that stage, AOB informed the firm that under the circumstances, it shall have no option but to bring the matter to its logical end through an appropriate order.
“Shareholders and lenders rely on audited financial statements of companies for their financial decisions and they trust the external auditor’s opinion that the financial statements prepared by the management present a true and fair view of the company’s financials,” said AOB CEO Usman Hayat.
AOB is the independent audit regulator in Pakistan established by the parliament in 2016 to protect the public interest by overseeing the quality of audit of financial statements of public interest companies.
There are more than 1,000 public interest companies in Pakistan which include all listed companies and non-listed public sector companies. Out of over 550 audit firms in Pakistan, 121 have a satisfactory quality rating and 101 are currently registered with AOB. Only the audit firms registered with AOB can audit the financial statements of a public interest company.