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MEMBERS' HANDBOOK

PART TITLE
I CHARTERED ACCOUNTANTS ORDINANCE, 1961 (X OF 1961)
II CHARTERED ACCOUNTANTS BYE-LAWS, 1983
III FORMS OF APPLICATIONS, CERTIFICATES, AGREEMENTS
ETC
IV DIRECTIVES & IMPORTANT DECISIONS OF THE COUNCIL
AND ITS COMMITTEES
V ACCOUNTING
SECTION
A STATEMENTS OF STANDARD ACCOUNTING PRACTICES
B STATEMENTS OF GUIDELINES ON ACCOUNTING
PRINCIPLES AND PRACTICE
C TECHNICAL RELEASES
VI AUDITING
SECTION
A STATEMENTS OF STANDARD AUDITING PRACTICES
B STATEMENTS OF AUDITING GUIDELINES
C TECHNICAL RELEASES
















PART I


CHARTERED ACCOUNTANTS ORDINANCE, 1961
(X OF 1961)

AS AMENDED UP TO JUNE, 1983
I

CHARTERED ACCOUNTANTS ORDINANCE, 1961
(X OF 1961)
AS AMENDED UP TO JUNE, 1983

CONTENTS

CHAPTER I PRELIMINARY PAGE
SECTION PARTICULARS 1
1. Short title, extent and commencement 1
2. Definitions
CHAPTER II

THE INSTITUTE OF CHARTERED
ACCOUNTANTS OF PAKISTAN
4
SECTION PARTICULARS
3. Incorporation of the Institute 4
4. Entry of names in Register 4
5. Associates and Fellows 5
6. Certificate of Practice 6
7. Members to be known as Chartered
Accountants
7
8. Disabilities 7
CHAPTER III COUNCIL OF THE INSTITUTE 9
SECTION PARTICULARS 9
9. Constitution of the Council of the Institute 9
10. Mode of election of the Council 10
11. Nomination in default of election 10
12. President and Vice-President or Vice-Presidents 11
13. Resignation of membership and casual
vacancies
12
14. Duration and dissolution of Council 12
15. Functions of the Council 13
16. Staff, remuneration and allowances 14
17. Finances of the Institute 15

II
CHARTERED ACCOUNTANTS ORDINANCE, 1961
(X OF 1961)
AS AMENDED UP TO JUNE, 1983

CONTENTS

SECTION PARTICULARS PAGE
CHAPTER IV REGISTER OF MEMBERS 16
18. Register 16
19. Removal from the Register 16
CHAPTER V REGIONAL COMMITTEES
SECTION PARTICULARS
20. Constitution and functions of Regional
Committees
18
CHAPTER VA MISCONDUCT 19
SECTION PARTICULARS
20A Facts, etc. to be laid before the Investigation
Committee
19
20B Enquiry by the Investigation Committee 21
20C Member or student not found guilty 21
20D Orders by the Council if member found guilty 21
20E Orders by the Council if student found guilty 22
20F Hearing of case by the High Court 22
20G Effect of inquiry 22
20H Council and Investigation Committee to have
powers of Civil Court
23
20I Publication of findings and decisions 23
20J Return of Certificate 23
20K Appeal and revision 23
CHAPTER VI PENALTIES 25
SECTION PARTICULARS
21. Penalty for falsely claiming to be a member, etc. 25
22. Penalty for using name of the Council,
awarding degree of Chartered Accountancy, etc.
25
III
CHARTERED ACCOUNTANTS ORDINANCE, 1961
(X OF 1961)
AS AMENDED UP TO JUNE, 1983

CONTENTS

CHAPTER VI PENALTIES PAGE
SECTION PARTICULARS
23. Companies not to engage in accountancy 26
24. Unqualified persons not to sign documents 26
25. Sanction to prosecute 26

CHAPTER VII MISCELLANEOUS 27
SECTION PARTICULARS
26. Maintenance of branch offices 27
27. Powers to make bye-laws 27
28. Powers of Federal Government to direct
bye-laws to be made or to make or amend
bye-laws
29
29. References to registered accountants, etc.
to be construed as references to Chartered
Accountants
30
30. Amendment of section 144 of the
Companies Act, 1913 (VII of 1913)
30
31. Savings 30
SCHEDULES
I
Part 1 Professional Misconduct in relation to
chartered accountants in practice
33
Part 2 Professional Misconduct in relation to
members engaged in management
consultancy
35
Part 3 Professional Misconduct in relation to
members of the Institute in service
38
IV
CHARTERED ACCOUNTANTS ORDINANCE, 1961
(X OF 1961)
AS AMENDED UP TO JUNE, 1983

CONTENTS

SECTION PARTICULARS PAGE
Part 4 Professional misconduct in relation to
members of the Institute generally
38
SCHEDULES
II
Part 1 Professional Misconduct in relation to
Chartered Accountants in practice requiring
action by a High Court
40
Part 2 Professional Misconduct in relation to
members engaged in Management
Consultancy requiring action by a High
Court
42
SCHEDULES
III
Professional Misconduct in relation to the
students of the Institute
42

1

THE CHARTERED ACCOUNTANTS ORDINANCE, 1961


(X OF 1961)

AN ORDINANCE

to make provision for the regulation of the professional Accountants

WHEREAS it is expedient to make provision for the regulation of the profession of
accountants and for that purpose to establish an Institute of Chartered
Accountants:

Now, THEREFORE, in pursuance of the Proclamation of the seventh day of
October, 1958 and in exercise of all powers enabling him in that behalf the
President is pleased to make and promulgate the following Ordinance:-

CHAPTER I

PRELIMINARY

1. Short title, extent and commencement.- (1) This Ordinance may be
called the Chartered Accountants Ordinance, 1961.

(2) It extends to the whole of Pakistan

[and shall apply to all
members, wherever they may be.]

(3) It shall come into force on such date as the Federal Government may,
by notification in the official Gazette, appoint in this behalf.

2. Definitions.- (1) In this Ordinance, unless there is anything repugnant in the
subject or context, -

(a) “associate” means an Associate member of the Institute;

(b) “chartered accountant” means a person who is a member of the
Institute;


This Ordinance received the assent of the President on 3
rd
March, 1961 and was published in Part 1 of the Gazette of
Pakistan Extraordinary dated the 10
th
March, 1961.

Added by Section 2 of Chartered Accountants (Amendment) Ordinance, 1983.
2

(c)
“Council” means the Council of the Institute;



*
[(cc) “fellow” means a fellow member of the Institute;]

(d) "Institute" means the Institute of Chartered Accountants of
Pakistan constituted under this Ordinance;

(e) "prescribed" means prescribed by the bye-laws of the Institute;

(f) "Register" means the Register of the Members of the Institute
maintained under this Ordinance;

(g) "registered accountant" means any person who has been enrolled on the
Register of Accountants maintained by the Federal Government
under the Auditors' Certificates Rules, 1950.

**
[(gg) “student” means a person who is or has been trainee under a training
contract with a member of the Institute entitled to train students
under this Ordinance and the bye-laws made thereunder, and has not
successfully completed the examinations of the Institute;] and

(h) "year" means the period commencing on the first day of J uly of any
year and ending on the thirtieth day of June of the succeeding year.

(2) A member of the Institute shall be deemed "to be in practice" when
individually or in partnership with chartered accountants in practice, he,
in consideration received or to be received-

(i) engages himself in the practice of accountancy; or
(ii) offers to perform or performs services involving the
auditing, or verification of financial transactions, books,
accounts, or records or the preparation, verification or
certification of financial accounting and related statements or
holds himself out to the public as an accountant; or
(iii) renders professional services or assistance in or about
matters of principle or detail relating to accounting procedure

*
Inserted by Section 3 (a) (i) of Chartered Accountants (Amendment) Ordinance, 1983.
**
Inserted by Section 3 (a) (ii) of Chartered Accountants (Amendment) Ordinance, 1983.

3
or the recording, presentation or certification of financial
facts or data; or

(iv) renders such other services as, in the opinion of the Council,
are or may be rendered by a chartered accountant in
practice; and the words "to be in practice" with their
grammatical variations and cognate expressions shall be
construed accordingly.

Explanation - An associate or a fellow of the Institute who is
salaried employee of a chartered accountant in practice or a
firm of such chartered accountants shall, notwithstanding such
employment, be deemed to be in practice for the limited
purpose of the training of [students]
.*



*
Substituted for the words 'articled clerks' by Section 3 (b) of the Chartered Accountants (Amendment) Ordinance, 1983.
4
CHAPTER II

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF PAKISTAN

3. Incorporation of the Institute.- (1) All persons whose names are entered
in the Register at the commencement of this Ordinance and all persons who
may hereafter have their names entered in the Register under the provisions
of this Ordinance, so long as they continue to have their names borne on the
said Register, are hereby constituted a body corporate by the name of the
Institute of Chartered Accountants of Pakistan, and all such persons shall be
known as members of the Institute.

(2) The Institute shall have perpetual succession and a common seal and
shall have power to acquire, hold and dispose of property, both movable
and immovable, and shall by its name sue and be sued.

4. Entry of names in Register.- (1) Any of the following persons
*
shall
be entitled to have his name entered in the Register, namely.-

(i) any person who is a registered accountant at the commencement of
this Ordinance;

(ii) any person who has passed such examination and completed such
training as may be prescribed;

(iii) any person who has passed such other examination and completed
such other training outside Pakistan as is recognized by the Federal
Government or the Council with the approval of the Federal
Government as being equivalent to the examination and training
prescribed for members of the Institute:

**
[Provided that, in the case of any such person, the Council may, with
the approval of the Federal Government, impose such conditions as it
may deem fit.]

*
Substituted for the words 'articled clerks' by Section 3 (b) of the Chartered Accountants (Amendment) Ordinance, 1983.
**
Substituted for the proviso reproduced below by Section 4 of the Chartered Accountants (Amendment) Ordinance, 1983.
“Provided that in the case of any person who is not permanently residing in Pakistan the Federal Government or the Council
with the approval of the Federal Government, as the case may be, may impose such further conditions as it may deemfit.”


5

(iv) any person domiciled in Pakistan, who at the commencement of this
Ordinance is studying for any foreign examination and is at the same
time undergoing training, whether within or without Pakistan, or,
who, having passed such foreign examination, is at the
commencement of this Ordinance undergoing training whether
within or without Pakistan:

Provided that any such examination or training was recognized before
the commencement of this Ordinance for the purpose of conferring
the right to be registered as an accountant under the Auditors’
Certificates
Rules, 1950, and provided further that such person passes the
examination or completes the training.

(2) The name of every person belonging to the class mentioned in
clause (i) of sub-section (1) shall be entered in the Register without
the payment of any entrance fee or any application being made in
that behalf and shall, for the purpose of sub-section (1) of Section 3,
be deemed to have been so entered at the commencement of this
Ordinance.

(3) Every person belonging to any of the classes mentioned in clauses
(ii), (iii) and (iv) of sub-section (1) shall have his name entered in
the Register on application being made and granted in the prescribed
manner and on payment of the prescribed fee, which shall not
exceed rupees five hundred in any case.

(4) The Federal Government shall take such steps as may be necessary
for the purpose of having the names of all persons belonging to the
class mentioned in clause (i) of sub-section (1) entered in the Register.

5. Associates and Fellows.- (1) The members of the Institute shall be
of two classes designated respectively as associates and fellows.

(2) Every person shall, on his name being entered in the Register,
become an associate member of the Institute and be entitled to use
the letters A.C.A. after his name to indicate that he is an associate
member of the Institute of Chartered Accountants.

6
*
(3) [An associate member who has been in practice for at least five
years or an Associate member of the Institute for a period of not less
than ten years shall, on payment of the prescribed fee, have his name
transferred to the Register of fellows, of the Institute, and on having
his transferred to the Register of fellows, he shall be entitled to use
the letters F.C.A after his name to indicate that he is a Fellow
member of the Institute.

Explanation:- For the purpose of this sub-section, two years as a non-
practicing Associate shall be counted as one year of practice of such
Associate.

6. Certificate of practice.- (1) No member of the Institute shall be
entitled to practice as an auditor of a public company as defined in the
Companies Act, 1913 (VII of 1913), unless he has obtained from the
Council a certificate of practice:

**
[ …………… .............................................................. ]

(2) Every such member shall pay such annual fee for his certificate as may
be prescribed, and such fee shall be due on the first day of J uly in each
year.

*
Substituted for sub-section 3 of Section 5, reproduced below, by the Chartered Accountants (Amendment) Ordinance,
1983.

“(3) A member, being an associate who has been in continuous practice in Pakistan for at least five years, whether before or
after the commencement of this Ordinance, or whether partly before and partly after the commencement of this Ordinance,
and a member who has been a registered accountant or an associate for a continuous period of not less than ten years
whether beforeor after the commencement of this Ordinance or whether partly beforeand partly after thecommencement of
this Ordinance shall, on payment of the prescribed entrance fee, which shall not exceed rupees five hundred in any case, and
on an application made and granted in the prescribed manner, havehis nameentered in theRegister as a fellow of theInstitute
and shall be entitled to use the letters F.C.A. after his name to indicate that he is a fellow of the Institute of Chartered
Accountants.”
“Explanation:- For the purpose of this sub-section two years as a non-practicing registered accountant or as non-practicing
associate shall be counted as one year of practice of such registered accountants or associate”
**
Proviso reproduced below deleted by Section 6 of the Chartered Accountants (Amendment) Ordinance, 1983.
“Provided that nothing contained in this sub-section shall apply to person who, immediately before the commencement of this
Ordinance, has been in practice as registered accountant until one month has elapsed fromthe date of the first meeting of the
Council.”

7

7. Members to be known as Chartered Accountants.- Every
member of the Institute in practice and any other member may, use the
designation of a Chartered Accountant and no member using such
designation shall use any other designation, whether in addition thereto or in
substitution therefor:

Provided that nothing contained in this section shall be deemed to prohibit any
such person from adding any other description or designatory letters to his
name, if entitled thereto, to indicate membership of such other institute of
accountancy, whether in Pakistan or elsewhere as may be recognized in
this behalf by the Council, or any other qualification that he may possess, or
to prohibit a firm, all the partners of which are members of the Institute and
in practice, from being known by its firm name as Chartered Accountants.

8. Disabilities.- Notwithstanding anything contained in Section 4, a person shall
not be entitled to have his name entered in or borne on the Register if he-

(i) has not attained the age of twenty-one years at the time of his
application for the entry of his name in the Register; or

(ii) is of unsound mind and stands so adjudged by a competent Court;
or

(iii) is an undischarged insolvent; or

(iv) having been discharged of insolvency, has not obtained from the
Court a certificate stating that his insolvency was caused by
misfortune without any misconduct on his part; or

(v) has been convicted by a competent Court, whether within or without
Pakistan, of an offence involving moral turpitude and punishable
with transportation or imprisonment or of an offence, not of a
technical nature, committed by him in his professional capacity
unless in respect of the offence committed he has either been granted
a pardon or, on an application made by him in this behalf, the Federal
Government has, by an order in writing, removed the disability; or
8

(vi) has been removed from the membership of the Institute on being
found on inquiry to have been guilty of such professional or other
misconduct, as may be prescribed:

Provided that a person who has been removed from the membership of
the Institute for a specified period, shall be entitled to have his name entered
in the Register after the expiry of such period.

9

CHAPTER III

COUNCIL OF THE INSTITUTE

9. Constitution of the Council of the Institute.- (1) There shall be a
Council of the Institute for the management of the affairs of the Institute and
for discharging the functions assigned to it under this Ordinance.

(2) The Council shall be composed of the following persons, namely,-

*
(a)[the prescribed number of persons, not being less than twelve, elected
from the two prescribed regional constituencies by the members of
the Institute belonging to such constituencies from among such
members of at least five years' standing, the number of members to be
elected from each such constituency being such as may be prescribed:

Provided that each such regional Constituency shall consist of two
zones, to be known as Zone “A” and Zone “B” having the prescribed
limits:

Provided further that at least one member shall be elected from each
of the aforesaid Zones; and

(b) not more than four persons nominated by the Federal Government.]
**
(3)[……………………………………………………]

*
Substituted for clauses (a) and (b) of sub-section (2) of Section 9, reproduced below, by clause (a) of Section 7 of the
Chartered Accountants (Amendment) Ordinance, 1983:-

“(a) the prescribed number of persons, not being less than six, elected fromthe three regional constituencies to be specified
by the Federal Government, by notification in the Official Gazette, by themembers of theInstitutebelonging to such
constituencies fromamong such members of at least three years standing, the number of members to be elected froma
constituency being such as may be fixed therefore by the Federal Government; and

(b) not less than seven persons nominated by the Federal Government of whomnot less than three shall be qualified
accountants representing each of the said regional constituencies.

Explanation:- In computing the period of a persons’ standing with the Institute for
purposes of clause (a), the period for which he has been a registered accountant before
the commencement of this Ordinance shall be reckoned as period of membership of the
Institute.”
**
Deleted sub-section 3 of Section 9 reproduced below by clause (b) of Section 7 of the Chartered Accountants
(Amendment) Ordinance, 1983.

10
10. Mode of election of the Council.- (1) Elections under clause (a) of sub-
section (2) of section 9 shall be conducted in the prescribed manner.

*
(2) Where any dispute arises regarding any such election, the matter
shall be referred by the Council to a Tribunal appointed by the
President of the Council in this behalf and the decision of such
Tribunal shall be final:

Provided that in case the President of the Council in office is
himself a party to such dispute or is unwilling to make such
appointment, the immediate past President of the Council shall
appoint the Tribunal:

Provided further that no such reference shall be made except on
an application made to the Council by an aggrieved party, within
thirty days from the date of the declaration of the result of the
Election.

(3) The expenses of the Tribunal shall be borne by the Institute.

**
11. Nomination in default of election.- (1) If the members of the Institute
referred to in clause (a) of sub-section (2) of Section 9 fail to elect the
required number of members which they are empowered under that
section to elect from a zone of a constituency, the members declared

“(3) Notwithstanding any thing contained in sub-section (2) all the members of the first Council to be constituted under this
Ordinance shall be nominated by the Federal Government.”


* Substituted sub-section (2) of Section 10 reproduced below by the Section 8 of the Chartered Accountants (Amendment)
Ordinance, 1983.

“(2) where any dispute arises regarding any such election, the matter shall be referred by the Council to a Tribunal
appointed by the Federal Government in this behalf and the decision of such Tribunal shall be final:-

Provided that no such reference shall be made except on an application made to the Council by an aggrieved party within
days fromdate of the declaration of the result of the election.”

**
Section 11 reproduced below substituted by Section 9 of the Chartered Accountants (Amendment) Ordinance,
1983.

11. Nomination in default of election.- if any body of persons referred to in section 9 fails to elect any of the
members of the Council which it is empowered under that section to elect, the Federal Government may
nominate a person duly qualified to fill the vacancy, and any person so nominated shall be deemed to be a
member of the Council as if he had been duly elected."


11
elected from that zone shall nominate the number of members not elected
who shall be deemed to be members of the Council as if they had been
duly elected.

(2) Where the members of the Institute referred to in clause (a) of sub-
section (2) of section 9 do not at all elect any member, the Council shall
nominate the required number of members from the respective regional
constituencies and such members shall be deemed to be the members of
the Council as if they had been duly elected.

12. President and Vice President or Vice-Presidents.- (1) The Council
shall elect from among its members a President and one or, if the
Council so decides, two Vice-Presidents of the Institute, who shall also be
the President and Vice-President or Vice Presidents of the Council
respectively and so often as the office or offices of the President or the
Vice-President or Vice-Presidents becomes vacant, the Council shall choose
from among its members a President or a Vice-President or Vice-
Presidents, as the case may be:

*
[ ........................................... ]

(2) The President shall be the chief executive authority of the Council.

(3) The President and the Vice-President or Vice-Presidents shall hold
office for a period of one year from the date on which they are
chosen but so as not to extend beyond their term of office as
members of the Council, and, subject to their being members of the
Council at the relevant time, they shall be eligible for re-election for a
total period not exceeding three consecutive years.

**
Provided that, notwithstanding the expiry of the term of their office,
the President and the Vice-President or Vice-Presidents of the Council,
shall continue to hold office till such time as their successors are
elected.

*
Proviso reproduced below deleted by clause (a) of Section 10 of the Chartered Accountants (Amendment) Ordinance,
1983.
“Provided that on the first constitution of the Council, members of the Council nominated in this behalf by the Federal
Government shall discharge the functions of the President and the Vice-President for the termof the first Council.”
**
Inserted by clause (b) of Section 10 of the Chartered Accountants (Amendment) Ordinance. 1983.
12

(4) On the dissolution of the Council, the President of the Council at
the time of such dissolution shall continue to hold office and
discharge such administrative and other duties as may be
prescribed until such time as a new President shall have been
elected and shall have taken over charge of his duties.

13. Resignation of membership and casual vacancies.- (1) Any member of
the Council may at any time resign his membership by writing under his
hand addressed to the President and the seat of such member shall become
vacant when such resignation is notified in the official Gazette.

(2) A member of the Council shall be deemed to have vacated his
seat if he is declared by the Council to have been absent without
sufficient excuse from three consecutive meetings of the Council,
or if his name is, for any cause, removed from the Register under
the provisions of Section 19.

(3) A casual vacancy in the Council shall be filled by fresh election
from the constituency concerned or by nomination by the Federal
Government, as the case may be, and the person elected or
nominated to fill the vacancy shall hold office until the dissolution
of the Council:

Provided that no election shall be held to fill a casual vacancy
occurring within six months prior to the date of the expiry of the
duration of the Council but such a vacancy may be filled by
nomination by the
*
[Council.]

(4) No act done by the Council shall be called in question on the
ground merely of the existence of any vacancy in, or defect
in the constitution of, the Council.

14. Duration and dissolution of Council.- (1) The duration of the Council
constituted under this Ordinance shall be
**
['four'] years from the
date of the first meeting of the Council on the expiry of which it
shall stand dissolved and a new Council constituted in accordance
with the provisions of this Ordinance.

*
Substituted for the words “Federal Government” after consultation with the President of the Council by Section 1 I of the
Chartered Accountants (Amendment) Ordinance, 1983.
**
Substituted for the word "three"' by clause (a) of Section 12 of the Chartered Accountants (Amendment) Ordinance, 1983.

13

*
Provided that the duration of the Council existing immediately before the
commencement of the Chartered Accountants (Amendment) Ordinance,
1983, shall be three years.

(2) Notwithstanding the expiry of the duration of the Council it shall continue to
function until a new Council is constituted in accordance with the provisions of this
Ordinance and upon such constitution, the Council so functioning shall stand
dissolved.

15. Functions of the Council.- (1) The duty of carrying out the provisions of the
Ordinance shall be vested in the Council.

(2) In particular, and without prejudice to the generality of the foregoing
provisions, the
**
[functions] of the Council shall include.-

(a) the examination of candidates for enrolment and the prescribing of fees
therefor;

(b) the regulation of the engagement and training of
***
[students]

(c) the prescribing of qualifications for entry in the Register;

(d) the recognition of the foreign qualifications and training for purposes of
enrolment;

(e) the granting or refusal of certificates of practice under this
Ordinance;

(f) the maintenance and publication of a register of persons qualified to
practice as chartered accountants;

(g) the levy and collection of fees from members, examinees and other
persons;


*
Inserted by clause b of Section 12 of the Chartered Accountants (Amendments) Ordinance, 1983.
**
Substituted for the word “duties” by clause (a) of Section 13 of the Chartered Accountants (Amendments) Ordinance,
1983.
***
Substituted for the words “articled and audit clerks” by clause (b) of Section 13 of the Chartered Accountants
(Amendments) Ordinance, 1983.
14
(h) the removal of names from the Register and the restoration to the
Register of names which have been removed;

(i) the regulation and maintenance of the status and standard of
professional qualifications of the members of the Institute;

(j) the carrying out, by financial assistance to persons other than members
of the Council or in any other manner, of research in accountancy;

(k) the maintenance of a library and publication of books and
periodicals relating to accountancy;

(1) the exercise of such disciplinary powers over the members and
servants of the Institute as may be prescribed;

(m) the formation of such Standing Committees as may be prescribed;

*
(mm) the constitution of an Investigation Committee consisting of
such members as may be prescribed; and

(n) such other powers as may be conferred on the Council by the
Federal Government.

16. Staff, remuneration and allowances.- For the efficient performance of its
duties, the Council may-

(a) appoint a full-time Secretary who may also, if so decided by the
Council, act as Treasurer;
(b) appoint such other officers and servants as it deems necessary;
(c) require and take from the Secretary or from any other officer or
servant of the Council such security for the due performance of his
duties, as the Council considers necessary;
(d) fix salaries, fees, allowances and other conditions of service of the
officers and servants of the Council;

*
Added by clause(c) of Section 13 of the Chartered Accountants (Amendment) Ordinance, 1983.


15
(e) with the previous sanction of the Federal Government, fix the
allowances of the President, Vice-President or Vice-Presidents and
other members of the Council and members of its Committees.

17. Finances of the.
*
[Institute-] There shall be established a fund under
the management and control of the Council into which shall be paid all
monies received by the
**
[Institute] and out of which shall be met all expenses
and liabilities properly incurred by the **[Institute].



*
Substituted for the word "Council" by clause (a) of Section 14 of the Chartered Accountants (Amendment) Ordinance, 1983.
**
Substituted for the word "Council" by clause (b) of Section 14 of the Chartered Accountants (Amendment) Ordinance,
1983.
16

CHAPTER IV

REGISTER OF MEMBERS

18. Register.- (1) The Council shall maintain in the prescribed manner a
Register of the Members of the Institute.
(2) The Register shall include the following particulars about every
member of the Institute, namely,-

(a) his full name, date of birth, domicile, residential and professional
address;
(b) the date on which his name is entered in the Register;
(c) his qualifications;
(d) whether he holds a certificate of practice; and
(e) any other particulars which may be prescribed.

(3) The Council shall cause to be published, in such manner as may be
prescribed, a list of members of the Institute as on the first day of J uly
of each year, and shall, if requested to do so by any such members,
send to him a copy of such list.

(4) Every member of the Institute shall, on his name being entered on the
Register pay such annual membership fee, as may be prescribed and
different fees may be prescribed for associates and for fellows.

19. Removal from the Register.- (1) The Council may remove from the
Register the name of any member of the Institute-

(a) who is dead; or
(b) from whom a request has been received to that effect; or
(c) who has not paid any prescribed fee required to be paid by him; or
(d) who is found to have been subject at the time when his name was
entered in the Register, or who at anytime thereafter has become
subject, to any of the disabilities mentioned in section 8, or who for
any other reason has ceased to be entitled to have his name borne on
the Register,
*
[or]
*(e) against whom an order has been passed under this Ordinance

*
Added by clause (a) of Section 15 of the Chartered Accountants (Amendment) Ordinance, 1983.

17
removing him from the membership of the Institute.

*
(2) The Council may, on an application made to it by a person whose
name has been removed from the Register for a specified period restore his
name if he is otherwise eligible to such membership;

Provided that he shall have paid before such restoration the admission fee
for the year during which his name is restored, and if his name has been
removed under clause (b) or clause (c) of sub-section (1), all arrears on
account of annual membership fee subject to maximum of five years of
annual membership fee according to the scale applicable to him.

(3) The restoration of the name of a member shall be notified in the
Official Gazette and in such journal or journals as the Council thinks desirable
and shall also be communicated in writing to the person concerned.

*
Added by clause (b) of Section 15 of the Chartered Accountants (Amendment) Ordinance. 1983.
18

CHAPTER V

REGIONAL COMMITTEES

20. Constitution and functions of Regional Committees.- (1) For the
purpose of advising and assisting it on matters concerning its functions the
Council may constitute such Regional Committees as and when it deems
fit for one or more of the regional constituencies that may be
*
[prescribed]
under clause (a) of sub-section (2) of section 9.

(2) The Regional Committees shall be constituted in such manner and
exercise functions as may be prescribed.

*
Substituted for the word, "specified” by the Federal Government, by Section 16 of the Chartered Accountants
(Amendment) Ordinance. 1983.

19

** CHAPTER VA

MISCONDUCT

20A. Facts, etc., to be laid before the Investigation Committee.- (1) The
Secretary of the Institute shall, and any member or any aggrieved person may
lay before the Investigation Committee any fact indicating that-

**


**
Inserted by Section 17 of the Chartered Accountants (Amendment) Ordinance, 1983 for the following chapter in the C.A.
Bye-laws 1961.


CHAPTER X OF C.A. BYE LAWS, 1961
SUSPENSION, EXCLUSION AND RESTORATION
(Procedure in inquiries relating to misconduct of members)

98. Matter to be laid before Investigation Committee.- ( 1 ) It shall be the duty of the Secretary and the
right of any member or of any aggrieved person to lay before the Investigation Committee any fact indicating.

(a) that a member has become liable to exclusion, suspension or reprimand under any provision of the
Ordinance or these bye-laws; or

(b) that an articled clerk or an audit clerk has been guilty of felony or misdemeanour or has been declared by a
competent court to have been guilty of fraud or has been guilty of an act of default of such a nature as to
render himunfit to become a member of the Institute.

(2) Where a complaint has been received by the Institute, the Council or the Secretary, that any member has
become liable as aforesaid or that any articled or audit clerk has been guilty as aforesaid, the complaint shall
forthwith be laid before the Investigation Committee.

99. Duties of the Investigation Committee.- (1) It shall be the duty of the Investigation Committee to consider the
facts or complaint laid before it under the provisions of the last preceding bye-law and where it is of the opinion
that the facts or compliant require investigation, it shall forthwith give to the member or articled or audit clerk notice of
its intention to consider the complaint. The Investigation Committee shall give such member or articled or audit clerk an
opportunity of being heard before it and shall, if the member or articled or audit clerk so desires, permit such member
or articled or audit clerk to be represented before it by counsel or by solicitor or by a member of the Institute. The
Investigation Committee shall thereafter report the result of its inquiry to the Council.

(2) The investigation Committee may at the request of any member or articled or audit clerk advisesuch member or
articled or audit clerk in regard to any matter of professional conduct.

100. Duties of the Council (1) If on receipt of such report the Council finds that a formal complaint has not been
proved, it shall record its finding accordingly and direct that the proceeding shall be filed or the complaint shall be
dismissed as the case may be.

(2) If on receipt of such report the Council finds that a formal complaint has been proved it shall record a finding to
that effect and shall afford to the member or to the articled or audit clerk, either personally or through council or a
solicitor or a member of the institute, an opportunity or being heard before orders are passed against himon the
case, and may thereafter make any of the following orders, namely:-

(a) reprimand the member or articled or audit clerk; or
(b) suspend the member frommembership for such period, not exceeding five years, as the Council thinks fit: or
20

(a) a member of the Institute has prima facie been guilty of any
professional misconduct specified in Schedule I or Schedule II; or

(b) a student has prima facie been guilty of any professional misconduct
specified in Schedule III.

(2) Where a complaint is received by the Institute that any member of the
Institute or student is guilty of professional misconduct referred to in
sub-section (1), the complaint shall, with relevant and necessary
facts, be laid before the Investigation Committee.

(c) exclude the member frommembership: or
(d) direct the cancellation of, or extend theperiod of articles or serviceas an audit clerk, or that any period already
served under such articles or service or service as an audit clerk shall not bereckoned as such service for the purpose
of sub-clause(b) of clause82 and a person whose articles or service as an audit clerk have been so cancelled
under this bye-law shall not, except with thepermission of theCouncil, beretained or taken as an articled or audit
clerk by a member of the Institute.
(3) Notice of the finding and decision of Council shall forthwith be given to the member or articled or audit
clerk concerned and the decision shall thereupon take effect.
101. Publication of finding and decision.- (1) When the Council finds that a formal complaint has been proved it shall
cause its finding and decision to be published in the Gazette of Pakistan and in such journals as it shall think
desirable and as soon as practicable after such finding and decision are pronounced. The publication shall in all
cases include the name of the member or articled or audit clerk concerned unless in a particular case the Council
considers that there exist special circumstances which justify the commission of the names from such
publication.

(2) Where the Council finds that a formal complaint has not been proved me Council may make such publication if any,
as in the circumstances of the ease it considers desirable.

102. Return of certificates in the event of suspension or exclusion.- In the event of the suspension or
exclusion of a member, every certificate of membership, fellowship or practice then held by himshall bedeemed
to becancelled fromthe date on which and during theperiod for which thenameof its holder is removed fromthe
register and shall bedelivered up by the member to the Secretary, in the case of suspension to be retained during the
period of suspension, or in thecase of exclusion, be cancelled.

103. Restoration to membership.- (1) The Council may on an application received in this behalf from a person
whose name has been permanently or temporarily removed from the Register under section 19 restore his
name if he is otherwise eligible to such membership:

Provided he shall have paid beforesuch restoration (the admission fee and) the annual fee or fees for the year during
which his nameis resorted, and, if his namehas been removed under clauses (b) and (c) of section 19. all arrears on
account of annual membership feesubject to a maximumof five years annual membership fee according to the
scale applicable to him.

(2) The restoration of a name to the membership shall be notified in the Gazette of Pakistan and in such
journals as the Council think desirable and shall also be communicated in writing to the person concerned.

104. Professional and other misconduct defined.- For the purpose of the Ordinance and these bye-laws, the
expression "Professional and other misconduct" shall be deemed to include any act or omission specified in
[Schedules "C" and "D"] but nothing in this section shall be construed to limit or abridge in any way the power
conferred or duty imposed on the Council or the Investigation Committee under these bye-laws to inquire into the
conduct of any member or articled or audit clerk under any other circumstances.


21

20B. Enquiry by the Investigation Committee.- (1) If on considering
the facts or complaint laid before it under section 20A, the Investigation
Committee is of opinion that such facts or complaint require investigation, it
shall after giving a notice to the member of the Institute or student whose
conduct is in question, hold an inquiry.

(2) A member of the Institute or a student whose conduct is in question
shall be given an opportunity of being heard and, if such member or
student so desires, the Investigation Committee shall permit such
member or student to be represented before it by a counsel or by a
member of the Institute.

(3) After the conclusion of inquiry, the Investigation Committee shall
report the result of the inquiry to the Council.

20C. Member or student not found guilty.- If, on receipt of the report
under Section 20B, the Council finds that the member of the Institute or
student, as the case may be, is not guilty of any professional misconduct,
it shall record its finding accordingly and direct that the proceedings or, as
the case may be the complaint be filed.

20D. Orders by the Council if member found guilty (1) If, on receipt of the
report under Section 20B, the Council is of the opinion that the member of the
Institute has been guilty of any professional misconduct specified in Schedule
I, it may, after affording such member an opportunity of being heard, either
personally or through counsel or another member of the Institute, make any
of the following orders, namely:-

(a) reprimand or warn such member;

(b) impose such penalty as it may deem necessary not exceeding one
thousand rupees; and

(c) remove the name of such member from the Register for a period not
exceeding five years:

Provided that, where it appears to the Council that the case is one in which
the name of such member ought to be removed from the Register for a period
exceeding five years or permanently, it shall not make any order but shall
22
refer the case to the High Court with its recommendations thereon.

(2) If the Council is of opinion that the member of the Institute is guilty
of professional misconduct specified in Schedule II, it shall refer the
case to the High Court with its recommendations thereon.

20E. Orders by the Council if student found guilty- If, on receipt of report
under Section 20B, the Council is of opinion that the student is guilty of any
professional misconduct specified in Schedule III, it shall, after affording
such student an opportunity of being heard, either personally or through a
counsel or a member of the Institute, make any of the following orders,
namely:-

(a) reprimand or warn the student; or

(b) suspend the student from training, or extend the period of training of the
student, for such period as it may deem fit; or

(c) debar the student from training

20F. Hearing of case by the High Court.- On receipt of a reference under
Section 20D, the High Court shall fix a date for the hearing of the
reference and cause notice of the date so fixed to be given to the member
of the Institute and the Council, and shall, after affording such member and
the Council, either personally or through counsel or a member of the
Institute, an opportunity of being heard, make any of the following orders,
namely:-

(a) direct that the proceedings be filed, or dismiss the complaint, as the
case may be;

(b) reprimand such member;

(c) remove him from membership of the Institute either permanently or for
such period as it may deem fit; or

(d) refer the case to the Council for further inquiry and report.

20G. Effect of inquiry.- For the purposes of this Chapter, "member of the
Institute" includes a person who was a member of the Institute on the date
of the alleged misconduct but has ceased to be a member of the Institute at
the time of inquiry for any reason.

23

20H. Council and Investigation Committee to have powers of Civil Court.
The Council and the Investigation Committee shall, for the purpose of an
inquiry under this Chapter, be deemed to be a civil court and shall have the
same powers as are vested in a civil court under the Code of Civil
Procedure, 1908 (Act V of 1908), in respect of the following matters,
namely:

(a) summoning and enforcing the attendance of any person and
examining him on oath;

(b) the discovery and production of any document; and

(c) receiving evidence on affidavits.

20I. Publication of findings and decisions.- Where a member of the
Institute or a student is found guilty, the Council shall cause the findings and
decisions given against such member or student, as the case may be, to be
published in the official Gazette and in such journal or journals as the Council
may deem fit:

Provided that, where the Council deems necessary, it may omit the name
of such member or student from publication.

20J . Return of certificate.- (1) Where the name of a member of the Institute is
removed from the Register, whether for a specified period or
permanently, every certificate of membership or practice held by such
member shall be deemed to be cancelled from the date of the order
removing his name from the Register and shall stand so cancelled for the
said period or, as the case may be, permanently.

(2) The certificate referred to in sub-section (1) shall be returned by the
member of the Institute to the Secretary of the Council who shall, in
the case of a member whose name is removed from the Register for a
specified period, return the certificate to the member on the expiration of
the said period.

20K. Appeal and revision.- (1) Any member of the Institute aggrieved by an
order of the Council imposing on him any of the penalties referred to in
Section 20D may, within sixty days of the date of communication of such
order to him, prefer an appeal to the High Court.
24

(2) The High Court may, on its own motion or on an application made to it,
call for the record of any case in which the Council has made an order
under Section 20D and may-

(a) confirm, modify or set aside the order;

(b) impose any penalty or set aside, reduce, confirm or enhance the
penalty imposed by the order;
(c) remit the case to the Council for such further inquiry as the High
Court may consider proper in the circumstances of the case; or
(d) pass such other order as it may deem fit:

Provided that no order of the Council shall be modified or set aside
unless the Council has been given an opportunity of being heard and
no order imposing or enhancing a penalty shall be passed unless the
person concerned has also been given an opportunity of being heard.

25

CHAPTER VI

PENALTIES

21. Penalty for falsely claiming to be a member, etc.- Any person
who-

(i) not being a member of the Institute,-

(a) represents that he is a member of the Institute; or
(b) uses the designation Chartered Accountant;

*
[ ................................ ] or

(ii) being a member of the Institute, but not having a certificate of
practice, represents that he is in practice or practices as a
chartered accountant,

shall be punishable on first conviction with fine which may extend to
one thousand rupees, and on any subsequent conviction with
imprisonment which may extend to six months or with fine which
may extend to five thousand rupees, or with both.

22. Penalty for using name of the Council, awarding degree of
Chartered Accountancy, etc.- (1) No person shall-
(i) use a name or a common seal which is identical with the
name or the common seal of the Institute or so nearly
resembles it as to deceive or as is likely to deceive the public;

(ii) award any degree, diploma or certificate or bestow any designation
which indicates or purports to indicate the possession or attainment of
any qualification or competence possessed by a person by virtue of
his being a member of the Institute; or

(iii) seek to regulate in any manner whatsoever the profession of
chartered accountants.

*
Deleted the words ‘unless he is a member of any other Institute of Chartered Accountants’ by Section 18 of the Chartered
Accountants (Amendment) Ordinance, 1983.
26
(2) Any person contravening the provisions of sub-section (1) shall,
without prejudice to any other proceedings which may be taken
against him, be punishable with fine which may extend on first
conviction to one thousand rupees, and on any subsequent conviction
with imprisonment which may extend to six months, or with fine
which may extend to five thousand rupees, or with both.

23. Companies not to engage in accountancy.- (1) No company, limiting the
liability of its members, whether incorporated in Pakistan or
elsewhere shall practice as Chartered Accountants:

*
Provided that the members of the Institute shall be permitted to form into a
limited company solely for practicing as ‘Management Consultants’.

(2) If any company contravenes the provisions of sub-section (1) then,
without prejudice to any other proceedings which may be taken against
the company, every director, manager, secretary and any other officer
thereof, who is knowingly a party to such contravention, shall be
punishable with fine which may extend on first conviction to one
thousand rupees and on any subsequent conviction to five thousand
rupees.

24. Unqualified persons not to sign documents.- (1) No person other than a
member of the Institute shall sign any document on behalf of a Chartered
Accountant in practice or a firm of such Chartered Accountants in his or its
professional capacity.

(2) Any person contravening the provisions of sub-section (1) shall,
without prejudice to any other proceedings which may be taken against
him, be punishable with fine which may extend on first conviction to
one thousand rupees, and on any subsequent conviction with imprisonment
which may extend to six months, or with fine which may extend to five
thousand rupees, or with both.

25. Sanction to prosecute.- No person shall be prosecuted under this
Ordinance except on a complaint made by or under the order of the
Council or of the Federal Government.

*
Added by Section 19 of the Chartered Accountants (Amendment) Ordinance, 1983.


27
CHAPTER VII

MISCELLANEOUS

26. Maintenance of branch offices.- (1) Where a Chartered
Accountant in practice or a firm of such chartered accountants has more
than one office [
*
] each one of such offices shall be in the separate charge
of a member of the Institute
**
[who ordinarily resides in the area served
by such office;]

Provided that the Council may in suitable cases exempt any Chartered
Accountant in practice or a firm of such Chartered Accountants from the
operation of this sub-section.

(2) Every Chartered Accountant in practice or a firm of such Chartered
Accountants maintaining more than one office shall send to the
Council a list of offices and the persons in charge thereof and shall keep
the Council informed of any change in relation thereto.

27. Power to make bye-laws.- (1) The Council may, by notification in the
official Gazette, make bye-laws for the purpose of carrying out the object of
this Ordinance, and a copy of such bye-laws shall be sent to each member
of the Institute.

(2) In particular, and without prejudice to the generality of the foregoing
power, such bye-laws may provide for all or any of the following
matters:-

(a) the standard and conduct of examinations under this Ordinance;

(b) the qualifications for the entry of the name of any person in the
Register;

(c) the conditions under which any examination or training may be
treated as equivalent to the examination and training prescribed
for the membership of the Institute;

(d) the conditions under which any foreign qualifications may be
recognized;

*
Omitted thewords ‘in Pakistan’ by sub-section (i)(a) of Section 20 of theChartered Accountants (Amendment) Ordinance, 1983.
**
Added by clause (1)(b) of Section 20 of the Chartered Accountants (Amendment) Ordinance, 1983.
28

(e) manner in which and the conditions subject to which applications for
entry in the Register may be made;

(f) the fees payable for membership of the Institute and the annual
fees payable by Associates and Fellows of the Institute in respect
of their certificates;

(g) the manner in which elections to the Council at the Regional
Committees may be held;

(h) the particulars to be entered in the Register;

(i) the functions of Regional Committees;

(j)
*
the training of the students and suspension of the training of
student, for misconduct or for any other cause;

(k) the regulation and maintenance of the status and standard of
professional qualifications of members of the Institute;

**
(kk) the issue of directives to the members of the Institute on
professional matter;

(l) carrying out of research in accountancy;

(m) the maintenance of a library and publication of books and periodicals
on accountancy;

(n) the management of the property of the Council and the maintenance
and audit of its accounts;

(o) the summoning and holding of meetings of the Council, the times

*
Substituted for clause (i) of sub-section 2 of Section 27 reproduced below by sub-section (2)(a) of Section 21 of the
Chartered Accountants (Amendment) Ordinance, 1983.
(i) training of articled and audit clerks, the fixation of limits within which premier may be charged from
articled clerks and the cancellation of articles and termination of audit service for misconduct or for
any other sufficient cause.
**
Added by sub-section (2) (b) of Section 21 of the Chartered Accountants (Amendment) Ordinance, 1983.

29
and places of such meetings, the conduct of business thereat and
the number of members necessary to form a quorum;

(p) the powers, duties and functions of the President and the Vice-
President or Vice-Presidents of the Council;

(q) the functions of the Standing and other Committees and the
conditions subject to which such functions shall be discharged;

(r) the terms of office, and the powers, duties and functions of the
Secretary and other officers and servants of the Council;

(s) the rules of professional and other misconduct, and the exercises
of disciplinary powers, and

(t) any other matter which is required to be or may be prescribed
under this Ordinance.

(3) All bye-laws made by the Council under this Ordinance shall be
subject to the condition of previous publication and to the approval of the
Federal Government.

(4) Notwithstanding anything contained in sub-sections (1) and (2), the
Federal Government may frame the first bye-laws for the purposes
mentioned in this section and such bye-laws shall be deemed to have
been made by the Council, and shall remain in force from the date of the
coming into force of this Ordinance until they are amended, altered
or revoked by the Council.

28. Powers of Federal Government to direct bye-laws to be made or to
make or amend bye-laws.- (1) Where the Federal Government considers it
expedient so to do, it may, by order in writing, direct the Council to make
any bye-law or to amend or revoke any bye-law already made within such
period as it may specify in this behalf.

(2) If the Council fails or neglects to comply with such order within the
specified period, the Federal Government may make or amend, with or
without modifications, or revoke, any bye-laws, directed to be made,
amended or revoked by that order.

30
29. References to registered accountants, etc., to be construed as
references to Chartered Accountants.- Any reference to a Chartered
Accountant or a registered accountant or a certified or qualified auditor in any
other law or in any document whatsoever shall be construed as a reference
to a Chartered Accountant in practice within the meaning of this
Ordinance.

30. Amendment to Section 144 of the Companies Act, 1913 (VII of
1913).- In Section 144 of the Companies Act, 1913 (VII of 1913) for sub-
sections (1), (2), (2A) and (2B), the following sub-section shall be
substituted, namely-

"(l) No person shall be appointed as an auditor of any company other
than a private company not being the subsidiary company of a public
company, unless he is a Chartered Accountant within the meaning of
the Chartered Accountants Ordinance, 1961;

Provided that a firm whereof all the partners practicing in Pakistan are
Chartered Accountants may be appointed by its firm name to be auditors of a
company and may act in its firm name".

31. Savings.- Notwithstanding the amendment of Section 144 of the
Companies Act, 1913 (VII of 1913), made by the preceding section, the
Auditors Certificates Rules, 1950, shall, so far as applicable, continue in force
as if they are bye-laws made under this Ordinance.

31
*
SCHEDULE 1

*
Schedules inserted by Section 22 of the Chartered Accountants {Amendment) Ordinance, 1983.

Note:- AboveSchedules substituteScheduleC and ScheduleD, reproduced below, of theChartered Accountants Bye Laws, 1961
(Replaced):-

SCHEDULE ‘C’

A member of the Institute shall be guilty of professional and other misconduct if he:-

(1) places his professional serviceat thedisposal of or enters into partnership with an unqualified person or persons in aposition to
obtain business of thenaturein which chartered accountants engage by means which are not open to a member of the
Institute:

Provided that this paragraph shall not beconstrued as prohibiting a member frompracticing in a country outside Pakistan
in association with a person who is entitled under the law in force in that country to performfunctions similar to those
a member of the Institute is entitled to performin Pakistan.

(2) allows any person to practice in his name as a chartered accountants unless such person is also a chartered accountant
and is in partnership with or employed by him;

(3) pays or allows or agree to pay or allow directly or indirectly any share, commission, or brokerage in the fees or
profits of his professional business to any person other than a member of the Institute or partner or retired partner or
the legal representative or widow of a deceased partner;

(4) accepts or agrees to accept any part of the profits of the professional work of a lawyer, income-tax practitioner,
auctioneer, broker or other agent or any other person other than a member of the Institute;

(5) accepts a position as auditor previously held by some other member without first communicating with him
in writing;

(6) accepts an appointment without first ascertaining fromthe company that the requirements of section 144 (6) of the
Companies Act, 1913 (VII of 1913}, or if the company is registered in an acceded State, the requirements of any
analogous provision of laws in force in that State, have been duly complied with;

(7) accepts a position as auditor previously held by some other member in such conditions as to constitute-under-cutting;

(8) publishes or sanctions the publication of expressions of thanks or appreciation by clients or promotes in any way
laudatory notices with regard to professional matters;

(9) solicits clients or professional work either directly or indirectly by circular, advertisement, personal communication or
interview or by any other means practicing of the nature of advertisement;

(10) advertises his professional attainments or services or uses any designation or expressions other than chartered
accountant on professional documents, visiting cards, letter heads or sign boards unless it bea degreeof a University
established by law in Pakistan or recognized by the Federal Government or a title indicating membership of the Institute of
Chartered or may be recognized by the Council;

(11) allows his nameto beinserted in any directory, either in themain section or an classified list, whether printed or not; so
as to appear in leaded type or in any manner, which could be regarded as of an advertising character;

(12) certifies any accounts, exhibits, statements, schedules or other forms of accountancy work which have not been
verified entirety under the personal supervision of himself, a member of his staff, another member of the Institute or
his partner;

Provided that theabovewill not apply in cases of accounts of foreign branches or subsidiaries of his clients which have
been duly certified by a public accountant;

32
(SEE SECTION 20A)

(13) gives estimates of future profits for publication in a prospectus or otherwise, or certifies for publication statements of
average profits over a period of two or more years without at the same time stating the profits of losses for each
year separately;

(14) charges or offers to charges, accepts or offers to accept in respect of any professional employment, fees which
are based on a percentage of profits or which are contingent upon thefindings or results of such employment; [except
in cases which arepermitted under any regulations of Government or requirements of law]:

(15) [being chartered accountant in practice engages] in any business or occupation other than the profession of chartered
accountants unless permitted by the Council so to engage;

Provided that nothing contained herein shall disentitle a chartered accountant frombeing a director of a company
unless he or any of his partners is interested in such company as an auditor;

(16) allows a person not being a member of the Institute or a member not being his partner to sign on his behalf or on behalf
of his firm, any report or financial statement or any other document required by his client;

(17) discloses information acquired in the course of his professional engagement to any person other than his client,
without the consent of his client or otherwise than as required by any law for the time being in force;

(18) expresses his opinion on financial statements of any business or any enterprise in which he his firmor a partner in his
firmhas a substantial interest, unless he discloses the interest also in his report;

(19) fails to disclose a material fact known to himwhich is not disclosed in a financial statement, but disclosure of which is
necessary to make the financial statement not misleading;


(20) fails to report a material mis-statement known to himto appear in a financial statement with which he is
concerned in a professional capacity;


(21) is grossly negligent in the conduct of his professional duties;


(22) fails to obtain sufficient information to warrant the expression of an opinion or his qualifications are
sufficiently material to negate the expression of opinion;


(23) fails to keep moneys of his client in a separate banking account or to use such money for purposes for which they
are intended;

(24) has been guilty of any act or default discreditableto a chartered accountant or a member of the Institute;

(25) (i) contravenes any of the provisions of the Ordinance or the bye-laws made fromtime to time;

(ii) is guilty of such other act or omission as may be specified by the Council in this behalf, by notification in the
Gazette of Pakistan;

(26) not being a fellow styles himself as a fellow;

(27) does not supply the information called for or does not comply with the requirements asked for, by the Council or any
of its Committees.






33

PART I

Professional misconduct in relation to chartered accountants in practice

A Chartered Accountant in practice shall be deemed to be guilty of professional
misconduct, if he-

(1) allows any person to practice in his name as a chartered accountant, unless
such person is also a chartered accountant in practice and is in partnership
with, or employed by, him;

(2) pays or allows or agrees to pay or allow, directly or indirectly, any share,
commission or brokerage or the fees or profits of his professional business to
any person other than a member of the Institute or a partner or a retired
partner or the legal representative of a deceased partner.

Explanation:- In this clause, "partner" includes a person residing outside
Pakistan with whom a Chartered Accountant in practice has entered into
partnership which is not in contravention of clause (4) of this part;

(3) accepts or agrees to accept any part of the profits of the professional work
of a lawyer, auctioneer, broker, or other agent who is not a member of the
Institute.

(4) Places his professional service at the disposal of, or enters into
partnership with, an unqualified person in a position to obtain business of
the nature in which chartered accountants engage by means which are not
open to a member of the Institute:

Provided that this paragraph shall not be construed as prohibiting a
member from practicing in a country outside Pakistan in association with a
person who is entitled under the laws in force in that country to perform
functions similar to those of a member of the. Institute is entitled to perform
in Pakistan:

(5) Solicits clients for professional work either directly or indirectly by
circular, advertisement, personal communication or interview or by
any other means;

34
(6) Advertises his professional attainments or services, or uses any
designation or expression other than chartered accountant on
professional documents. Visiting cards, letter head or sign boards,
unless it be a degree of a University established by law in Pakistan
or recognized by the Federal Government or the Council;

(7) Accepts a position as auditor previously held by another member of
the Institute without first communicating with him in writing;

(8) accepts appointments as auditor of a company without first
ascertaining from it whether the requirements of sub-section (6) of
section 144 of the Companies Act, 1913 (VII of 1913), in respect of
such appointment have been duly complied with;

(9) charges or offers to charge, accepts or offers to accept in respect of any
professional employment fees which are based on a percentage of profits or
which are contingent upon the findings or results of such employment
except in cases which are permitted under any law for the time being in
force or by an order of the Government;

(10) Engages in any business or occupation other than the profession of
Chartered Accountants unless permitted by the Council so to engage;

Provided that nothing contained herein shall disentitle a Chartered
Accountant from being a director of a company unless he or any of his
partners is interested in such company as an auditor;

(11) accepts a position as auditor previously held by some other Chartered
Accountant in such conditions as to constitute undercutting;

(12) allows a person not being a member of the Institute or a member not being
his partner to sign on his behalf or on behalf of his firm; any balance
sheet, profit and loss account, report or financial statement; or

(13) gives estimates of future profits for publication in a prospectus or
otherwise or certifies for publication the statements of average profits over
a period of two years or more without, at the same time, stating the profits
or losses for each year separately.

35

Schedule I - Contd.

Part 2
*


*

REGULATIONS SCHEDULE 'D'
(a) members in practice: subject to the prior consent of the Council, a member in
practice may act as a proprietor, partner or director of a management
consultancy firmor an unlimited company.
(b) members not in practice; A member not in practice may act as a director or an employee of a
management consultancy firmor an unlimited Company.

CODE OF ETHICS:

A member engaged in management consultancy:-

1. shall not advertise or solicit for work or issue any circular, calendar or publicity material;

2. shall not issue brochures, except to existing clients or in response to an unsolicited request;

3. shall not use designatory letters indicating qualifications of the directors and members of the company on letter-
heads, note papers or professional cards except as provided in paragraph (10) of Schedule ‘C’.

4. shall not refer to associated firms of management consultants on their letter-heads or professional cards or
announcements and vice-versa;

5. shall not adopt a name or associate himself as a partner or director of a firmor a company whose name is
indicative of its activities;

6. shall not use the designation "CHARTERED ACCOUNTANT(S)" for his management consultancy firmor
company;

7. shall not share profits or remuneration in a manner contrary to paragraphs (3) and (4) of Schedule 'C' except
when he associates with non-members as stated in regulation 13 of this Schedule;

8. shall not accept, nor, shall a partner in any firmin which he is a partner accept, auditing taxation or other
conventional accountancy work fromany client introduced to himfor management consultancy services by the
client's own professional accountant;

9. may write a personal letter to make a direct approach to another member of the profession in practice offering
his firm's or company's services;

10. may only use the term'MANAGEMENT CONSULTANT (S) 'where he is connected with an organization in
the consulting field as proprietor, partner or director. This is intended to exclude such terms as "BUSINESS
CONSULTANT" "ADVISORS TO MANAGEMENT" "INDUSTRIAL CONSULTANT", etc.

11. shall abide by the rules of professional conduct of the Institute and shall ensure that the firmor company with
which he is associated either as proprietor, partner or director abide by those rules;

12. shall be responsible fromthe standpoint of ethics for the conduct of the company and its director's and officers
as if the company were a firmin which he is partner. Further an employeemember shall beheld responsiblefor
any action of his employer which contravenes the rules of professional conduct of the Institute if he is a party
thereto;

13. may associate with non-members for the rendering of various management services as long a such non-members
observe the bye-laws and code of professional ethics of Institute;

14. shall communicate as a matter of professional courtesy with the existing professional accountant or consultant
informing himof the special work he has been asked to undertake in the event of an introduction for management
36
Professional misconduct in relation to members engaged in management
consultancy

A member of Institute engaged in management consultancy shall be deemed
to be guilty of professional misconduct, if he-

(1) advertises or solicits for work or issues any circular, calendar or publicity
material;

(2) issues brochures, except to existing clients or in response to an
unsolicited request;

(3) uses designatory letters indicating qualifications of the directors and
members of the company on letter head, note-papers, or professional
cards excepts as provided in clause (6) of Part 1 of this Schedule;

(4) refers to associate firms of Chartered Accountants on his letter head
or professional cards or announcements;

(5) adopts a name or associates himself as a partner or director of a firm
or a company whose name is indicative of its activities;

(6) uses the term chartered accountants for his management consultancy
firm or company;

(7) shares profits of remuneration in a manner contrary to clauses (2) and (3) of
Part 1 of this Schedule, except when he associates with non- members as

consultancy work other than through the existing professional account;

15. shall not do under the guise or through the mediumof a company or firmanything which he is not allowed to do as an
individual.

Merchandise accounting or computer services:

In addition to the rules of ethics applicable to management consultancy work, the following rules shall apply to
mechanized accounting or computer services:

1. Such services shall not be advertised nor shall there be soliciting other than by direct communication with other
members of the profession who are in practice.

2. A member offering such services shall not accept auditing, taxation or other commercial accounting work fromany
client introduced to hi m by the clients' own professional accountant for the provision of mechanized accounting
or computer service.

3. A member shall communicate as a matter of professional courtesy with the existing accountant notifying himof
the special work he has been asked to undertake in the event of an introduction for mechanized accounting or
computer services other than through the existing accounting.

37
stated in clause (10) of this part;

(8) or his partner in any firm accepts auditing, taxation, or other conventional
accounting work from any client introduced to him for management
consultancy services by the client's own professional accountant;

(9) uses the term "Management Consultant(s)" except in respect of a
company engaged in management consultancy field;

(10) associates with non-members for the rendering of various management
services except as long as such non-member observes the bye-laws and
code of professional ethics of the Institute;

(11) does not communicate with the existing professional accountant or
consultant, if a member of the Institute, informing him of the special work
he has been asked to undertake in the event of an introduction for
management consultancy work other than through the existing professional
accountant; or

(12) Under the guise or through the medium of a company or firm does
anything which he is not allowed to do as an individual.




Schedule I - Contd.
38

PART 3

Professional misconduct in relation to members of the Institute in service

A member of the Institute (other than a member in practice) shall be deemed to be
guilty of professional misconduct, if he, being an employee of any company, firm or
person:

(1) pays or allows or agrees to pay directly or indirectly to any person any share
in the emoluments of the employment undertaken by the member;

(2) accepts or agrees to accept any part of fees, profits or gains from a
lawyer, chartered accountant or broker engaged by such company, firm
or person or agent or customer of such company, firm or person by way of
commission or gratification; or

(3) discloses confidential information acquired in the course of his
employment except as and when required by law or except as permitted by
the employer

PART 4

Professional misconduct in relation to members of the Institute generally

A member of the institute, whether in practice or not, shall be deemed to be guilty
of professional misconduct, if he-

(1) includes in any statement, return or form to be submitted to the Institute
any particulars knowing them to be false;

(2) not being a fellow styles himself as a fellow;

(3) does not supply the information called for by the Institute or does not
comply with the requirements asked to be complied with or does not
comply with any of the directives issued or pronouncements made by the
Council or any of its Standing Committees;

(4) generally, willfully maligns the Institute, the Council or its Committee to
lower their prestige, or to interfere with performance of their duties in
relation to himself or others;

39

(5) has been guilty of any act or default discreditable to a member of the
Institute; or

(6) contravenes any of the provisions of the Ordinance or the bye-laws made
there under.

40
SCHEDULE II

(SEE SECTION 20A AND 20D)

Part 1

Professional misconduct in relation to chartered accountants in practice
requiring action by a High Court

A chartered Accountant in practice shall be deemed to be guilty of Professional
misconduct, if he-

(1) discloses information acquired in the course of his professional
engagement to any person other than his client, without the consent of his
client or otherwise than as required by any law for the time being in force;

(2) certifies or submits in his name or in the name of his firm a report of a
examination of financial statement unless the examination of such
statements and the related records has been made by him or by a
partner or an employee in his firm or by another chartered accountant in
practice;

(3) permits his name or the name of his firm to be used in connection with any
estimates of earnings contingent upon future transactions in a manner which
may lead to the belief that he vouches for the accuracy of the forecast;

(4) expresses his opinion on financial statements of any business or any
enterprise in which he, his firm or a partner in his firm has a substantial
interest, unless he discloses his interest in his report;

(5) fails to disclose a material fact known to him which is not disclosed in a
financial statement, but disclosure of which is necessary to ensure that the
financial statement is not misleading;

(6) fails to report a material mis-statement known to him to appear in a
financial statement with which he is concerned in a professional
capacity;

(7) is grossly negligent in the conduct of his professional duties;


41
(8) fails to obtain sufficient information to warrant the expression of an
opinion or his exceptions are sufficiently material to negate the
expression of an opinion; or

(9) fails to keep moneys of his client in a separate banking account or fails to use
such moneys for purposes for which they are intended.

42
Schedule II - Contd.

PART 2

Professional misconduct in relation to members engaged in management
consultancy requiring action by a High Court

A member engaged in management consultancy shall be deemed to be guilty of
professional misconduct, if he-

(1) discloses information acquired in the course of his professional
engagements to any person other than his client, without the consent of his
client or otherwise than as required by any law for the time being in force;

(2) is grossly negligent in the conduct of his professional duties; or

(3) fails to keep moneys of his client in a separate banking account or fails to
use such moneys for purposes to which they are intended.

SCHEDULE III

(SEE SECTION 20A AND 20E)

Professional misconduct in relation to the students of the Institute

A student of the Institute shall be deemed to be guilty of professional misconduct if
he-

(1) contravenes any of the provisions of the Ordinance or the bye-laws made
there under;

(2) does not supply the information called for by the Institute;

(3) does not comply with any requirements which he is asked by the Institute to
comply with;

(4) does not comply with any of the directives issued by the Council or any of its
committees;

(5) discloses confidential information acquired in the course of his training

43
except as and when required by law or except as permitted by his
principal;

(6) includes in any statement or form to be submitted to the Institute, any
particulars knowing them to be false; or

(7) has been guilty of any act or omission discreditable to a student of the
Institute.















PART II



CHARTERED ACCOUNTANTS BYE-LAWS, 1983


AS AMENDED UP TO FEBRUARY 26, 2010

V
CHARTERED ACCOUNTANTS BYE-LAWS, 1983

AS AMENDED UP TO FEBRUARY 26, 2010

CONTENTS

CHAPTER I PARTICULARS PAGE
PRELIMINARY
1. Short title and commencement 44
2. Definitions 44
2A Member in Practice 46
3. Forms 47
4. Notice to members 47
CHAPTER II

MEMBERS OF THE INSTITUTE

5. Register 49
6. Admission of members 49
7. Particulars to be supplied by members 49
8. Certificate of Practice 49
9. Certificate of Admission and Practice 50
10. Fees 50
CHAPTER III ELECTIONS OF THE COUNCIL

11. Date of election 52
12. Members entitled to vote 52
13. Qualifications of members to stand for election 53
14. Number of members to be elected 53
15. List of voters 53
16. Nominations 54
17. Fee for election 54
18. Scrutiny of nominations 54
VI
CHARTERED ACCOUNTANTS BYE-LAWS, 1983

AS AMENDED UP TO FEBRUARY 26, 2010

CONTENTS

PARTICULARS PAGE
19. Preparation of list of valid nominations 55
20. Withdrawal of candidature 55
21. Intimation of final list of nominations to voters 56
22. Death or cessation of membership of a candidate 56
23. Uncontested election, etc. 56
24. Admissible number of votes to a voter 56
25. Mode of election 57
26. Election stations 57
27. Election Officer 57
28. Secret chamber 58
29. Ballot paper 58
30. Presence of the candidates and their authorized
representatives at the election stations
58
31. Voting to be in person and not by proxy 58
32. Assistants to Election Officer 58
33. Identification of voters 58
34. Record to be kept by the Election Officer 59
35. Manner of recording of votes after receipt of
ballot paper
59
36. Procedure at the election station 59
37. Eligibility to vote by post 60
38. Election committee to send ballot papers by post 60
39. Ballot papers to be returned after recording votes
thereon
60
40. Issue of undelivered and fresh ballot papers 61

VII
CHARTERED ACCOUNTANTS BYE-LAWS, 1983

AS AMENDED UP TO FEBRUARY 26, 2010

CONTENTS

PARTICULARS PAGE
41. Grounds for declaring ballot papers invalid 61
42. Appointment of time and place for the counting
of votes
61
43. Presence of candidates at the time of counting of
votes
61
44. Counting of votes 62
45. Notification of results 63
46. Election not to be invalid due to accidental
omission etc.
63
47. Disciplinary action against a member in
connection with conduct of election
63
47A Presentation by each candidate 65
48. Election dispute 66
CHAPTER IV
MEETINGS AND PROCEEDINGS OF THE
COUNCIL

49. Meetings of the Council 67
50. Notice of meeting 67
51. Special meetings 67
52. Presiding over meetings 67
53. Quorum at meetings 67
54. Adjournment of meeting 67
55. Procedure for transaction of business 68
56. Passing of resolution at meetings 68
57. Records of minutes 68
58. Absence of members of the Council from
Pakistan
69
VIII
CHARTERED ACCOUNTANTS BYE-LAWS, 1983

AS AMENDED UP TO FEBRUARY 26, 2010

CONTENTS

PARTICULARS PAGE
CHAPTER V

MEETINGS AND PROCEEDINGS OF THE
INSTITUTE

59. Annual meeting 70
60. Special meetings 70
61. Notice of meeting 70
62. Notice of motion to be given 70
63. Meetings to be presided by the President etc. 71
64. Quorum at meetings 71
65. Adjournment of meeting 71
66. Voting at meetings and demand for poll 71
67. Appointment of scrutinizers 72
68. Procedure when poll demanded 72
69. Result of poll 72
70. Demand for poll not to prevent other business 73
71. Minutes of the meeting 73
CHAPTER VI STANDING AND OTHER COMMITTEES
72. Committees of the Council 74
73. Executive Committee 74
74. Examination Committee 75
75. Investigation Committee 76
76. Chairman of the Standing Committees 77
77. Term of office of members of the Committees 77
78. Meetings of the Committees 77
79. Notice of meeting 78

IX
CHARTERED ACCOUNTANTS BYE-LAWS, 1983

AS AMENDED UP TO FEBRUARY 26, 2010

CONTENTS

PARTICULARS PAGE
80. Quorum, etc., at meetings 78
81. Procedure for transaction of business 78
82. Casting vote 79
83. Secretary of the Committees 79
84. Minutes 79
CHAPTERVII
REGIONAL
COMMITTEES

85. Regional Committees 80
86. Admission and removal from Regional Register 80
87. Resignation from the Regional Committee and
casual vacancies
80
88. Date of election 81
89. Election to the Regional Committees 81
90. Duties and functions of Regional Committees 82
91. Office bearers in the Regional Committee 83
92. Finance and accounts 83
93. Meetings of Regional Committees 84
94. Meetings of the members of the Regional
Constituency
84
95. Duration of the Regional Committee 85
96. Dissolution of a Regional Committee 85
CHAPTER
VIII
STUDENTS

97. Admission of students as trainees 86
98. Probationary period 86
X
CHARTERED ACCOUNTANTS BYE-LAWS, 1983

AS AMENDED UP TO FEBRUARY 26, 2010

CONTENTS

PARTICULARS PAGE
99. Period of training and registration of training
contract
87
100. Provisions to be included in training contract 87
101. Premium 87
102. Criteria to train students 87
103. Transfer and execution of fresh training contracts 88
104. Maximum number of students to be trained by a
member
89
105. Permission to train additional students 89
106. Students not to engage in other business 89
107. Power to terminate the training of a student 90
108. Registers to be maintained 91
CHAPTER IX TRAINING AND EXAMINATION
109. Conditions to become a member of the Institute 92
110. Study courses & materials 93
111. Time and places of examinations 93
112. Registration of examinees 94
113. Subject and syllabus of the examinations 94
114. Application for admission to an examination 94
115. Admission fee for examinations 94
116. Refund of examination fee 94
117. Examination results 95
118. Failure of candidates at examinations 95

XI
CHARTERED ACCOUNTANTS BYE-LAWS, 1983

AS AMENDED UP TO FEBRUARY 26, 2010

CONTENTS

PARTICULARS PAGE
119. Examination certificates 95
ENTRANCE EXAMINATION
120. Admission to Pre-entry Proficiency or Aptitude
test
95
FOUNDATION AND INTERMEDIATE
EXAMINATION

121. Admission to Foundation Examinations 96
122. Admission to Intermediate Examinations 96
122 A
Direct Admission to Foundation and
Intermediate Examination
96
123. Exemption Policy 96
FINAL OR PROFESSIONAL EXAMINATIONS
124. Admission to Final or Professional Examinations 96
125. Certificate of service and fitness 97
CHAPTER X MISCELLANEOUS
126. Finances 98
127. Audit of accounts of the Institute 98
128. Powers and duties of the President and Vice
President or Vice Presidents
99
129. Powers and duties of the Secretary 99
129 A Power to issue directives 101
130. Indemnity 101
131. Constitution of students’ associations 101
132. Method of payment of fees 102
133. Publication of list of members 102
134. Custody and use of Common Seal 102
XII
CHARTERED ACCOUNTANTS BYE-LAWS, 1983

AS AMENDED UP TO FEBRUARY 26, 2010

CONTENTS

PARTICULARS PAGE
135. Other Functions of chartered accountants in
practice
103
136. Location of the office of the Institute 103
137. Power to remove difficulties 103
138. Repeal of Chartered Accountants Bye-Laws, 1961 103
Schedule ‘A’ Forms
44
CHARTERED ACCOUNTANTS BYE-LAWS, 1983
*


S.R.O.51(KE)/83

Karachi, the 1st November, 1983

In exercise of the powers conferred by sub-section (1) of section 27 of the
Chartered Accountants Ordinance, 1961 (X of 1961), the Council of the Institute
of Chartered Accountants of Pakistan, with the approval of the Federal
Government makes the following bye-laws, the same having been previously
published as required by sub-section (3) of that section, namely:-

CHAPTER I

PRELIMINARY

1. Short title and commencement.- (1) These bye-laws may be called the
Chartered Accountants Bye-Laws, 1983.

(2) They shall come into force at once.

2. Definitions.- (1) In these bye-laws, unless there is anything repugnant in
the subject or context:-

(a) “certificate of practice” means a certificate granted under these
bye-laws, entitling the holder to practice as a chartered accountant
or Management Consultant;

(b) “date of election” means the date of polling or palings of an
election;

(c) “form” means a form set out in the Schedule;

(d) “graduate” means a graduate of a University constituted by law in
Pakistan, or a graduate of any other University recognized by the
Council;

**
(da) “member responsible for training” means the Principal and
includes a member responsible for approved training under the

*
These bye-laws were published in part-II of the Gazette of Pakistan Extraordinary dated December 1, 1983.
**
S.R.O. 12 (KE)/2006 dated 27.01.2006, Part-II, Extra-ordinary Gazette of Pakistan dated 04.02.2006.

45
Training Regulations designated as such by a training organization on
whose behalf he will be signing a training contract with students;

(e) “Ordinance” means the Chartered Accountants Ordinance, 1961 (X
of 1961)

(f) “President” means the President of the Institute;

(g)
*
Omitted

(h) “principal place of business” means the place of business
registered by a member of the Institute or, where more than one
place of Business is registered, the place of business indicated by
him as his principal place of business;

(i) “registered address” means, in the case of a member in practice
his principal place of business, and in the case of a member not in
practice, the address last notified by him to Institute as his address
for communication;

(j) “schedule” means the schedule annexed to these bye-laws; these
bye-laws were published in part-II of the Gazette of Pakistan
Extra-ordinary dated December 1, 1983.

(k) “seal” means the seal of the Institute;

(l) Secretary” means the Secretary of the Institute and includes a
Deputy Secretary or an Assistant Secretary of the Institute, or any
person acting as Secretary under direction of the Council;

(m) section” means a section of the Ordinance;

*
(ma) “specified degree awarding institute” means a university or its
affiliated institute recognized by the Higher Education
Commission of Pakistan and which fulfills the criteria specified
by the Council from time to time;


*
S.R.O. 21 (KE)/2010, Part-II, Extra-ordinary Gazette of Pakistan dated 26.02.2010.

46

(n)
*
deleted

(o) “training” means training under training contract with a
*
*Training Organization entitled to train students under the
Ordinance and these bye-laws:

*
(oa) “training organization” means a firm of chartered accountants
including a member in practice or an undertaking approved as
determined by the Council to provide suitable environment to students
for gaining competence based practical experience prior to admission
to membership of the Institute;

*(ob) “training regulations and guidelines” means training regulations and
guidelines as approved by the Council;

(p) “Tribunal” means the Tribunal appointed under section 10 of the
Ordinance; and

(q) Vice President” means the Vice-President of the Institute.

(3) Any reference in these bye-laws to members, associates, or
fellows shall, unless the contrary intention appears, be
construed as a reference to members, associates and fellows
respectively of the Institute.

*
2A. Member in practice.- (1) A member shall be deemed “to be in practice”
when individually or in partnership with chartered accountants in practice,
he in consideration received or to be received,-

(i) engages himself in the practice of accountancy; or


*
S.R.O. 12(KE)/2006 dated 27.01.2006, Part-II, Extra-ordinary Gazette of Pakistan dated 04.02.2006.
(n) “student” means a person who is or has been a trainee under training contract with a principal, and has
not successfully completed the examinations of the Institute, or who has been admitted to the Basic
Accountancy Course.
*

*
S.R.O. 21 (KE)/2010, Part-II, Extra-ordinary Gazette of Pakistan dated 26.02.2010.



47
(ii) offers to perform or performs services involving the auditing or
verification of financial transactions, books, accounts, or records or
the preparation, verification or certification of financial accounting
and related statements or holds himself out to the public as an
accountant; or

(iii) renders professional services or assistance in or about matters of
principle or detail relating to accounting procedure or the
recording, presentation or certification of financial facts or data; or
(iv) renders services in the field of management consultancy; or

(v) renders such services as, in the opinion of the Council, are or may
be rendered by a chartered accountant in practice and the
expression “to be in practice” with its grammatical variations and
cognate expressions shall be construed accordingly; or

(vi) an associate or a fellow of the Institute who is a salaried employee
of a chartered accountant in practice or a firm or a training
organization of such chartered accountants shall, notwithstanding
such employment, be deemed to be in practice for the limited
purpose of training of students.

(2) A member shall be entitled to practice as a chartered accountant or
a management consultant on being granted a certificate of practice
provided that for granting certificate of practice the Council may
impose such conditions as it may deem fit.

(3) Every such member in practice shall pay an annual fee for his
certificate in such manner and in such amount as may be approved
by the Council from time to time.

3. Forms.- The forms set out in the Schedules shall be used in matters which
they purport to relate and all notes and directions contained in the forms
shall be observed accordingly.

4. Notice to members.- (1) All notices required by the Ordinance and these
bye-laws to be given or sent to members shall be sent under certificate of
posting or by messenger to the registered address of each member and for
proving that such notice has been given or sent it shall be sufficient to
prove that notice was properly addressed and posted or delivered.

48
(2) The non-receipt of any such notice shall not invalidate any such
notice, meeting, resolution, proceeding or action in any meeting.

49

CHAPTER II

MEMBERS OF THE INSTITUTE

5. Register.- The register of members shall be maintained in Forms I and II
specified in Schedule ‘A’.

6. Admission of members.- (1) Every applicant for admission as an
associate or a fellow shall satisfy the Council of his having fulfilled the
conditions specified in the Ordinance and these bye-laws in such manner
as the Council may require and shall produce for being enrolled as an
associate or a fellow such documentary evidence about his eligibility for
admission and removal of disqualification, if any, as the Council may
deem necessary and the Council, on being so satisfied, shall admit him on
payment of the fees prescribed in these bye-laws.

(2) Every person before becoming a member shall undertake to be
bound by the Ordinance, these bye-laws and the pronouncements
issued by the Council from time to time.

7. Particulars to be supplied by members.- Every member shall inform the
Secretary of any change in his registered address, or place or places of
business or employment and shall also supply the Council with any other
information relating to his practice or employment which the Council may
reasonably require for carrying out the provisions of the Ordinance or
these bye-laws.

8. Certificate of practice.- (1) A member may apply to the Council for
*
a
certificate to practice entitling him to practise as a chartered accountant or
management consultant and the Council shall grant to him such a
certificate on his establishing to its satisfaction in such manner as it may
require that
**
he has complied with the requirements as stipulated in bye
law 109 and any other directive of the Council and that he will be in
practice as a chartered accountant or management consultant as his main
occupation.


*
SRO 84 (KE)/94 dated 21.2.1994.
**
SRO 2 (KE)/99 dated 10-2-1999.
50
(2) The certificate shall be issued in the form prescribed by the
Council and shall be valid until the thirtieth day of J une next
following.

(3) The validity of the certificate shall, on payment of the annual fees,
*
and on fulfillment of the directives of the Council be extended
from time to time by a renewal certificate to be issued by the
Secretary in the form prescribed by the Council.

(4) A member in practice, on ceasing to be in practice, shall-

(i) inform the Council immediately of the fact of his having done
so, but in any case not later than one month from the date he
ceases to practice; and

(ii) return the certificate of practice to the Secretary.

9. Certificate of admission and practice.- Upon a person being admitted as
an associate or a fellow and being permitted to practice, he shall in each
event be entitled to a certificate to that effect under seal.

10.
**
Fees.- (1) Every member shall pay to the Institute such fee, as
applicable to him, within such time and in such manner, as prescribed by
the Council from time to time.

Provided that-

i. half the amount of annual membership fee only shall be payable by
a person admitted on or after the first J anuary and before the first
J uly in any year;

ii. an associate, on being admitted as a fellow during a year, shall pay
for that year any additional fee necessary to increase his fees to the
amount then applicable to him; except that where the said change
takes place after the last day of December, one-half only of the
said additional amount shall be payable;


*
SRO 5 (KE)/97 dated 12.10.96 published on 20.2.97.
**
SRO 23 (KE)/95 dated 19.1.1995 published on 28.1.95

51
iii. a member attaining the age of 60 years and not holding a certificate
of practice and also holding no office of profit shall pay
*
one
hundred and twenty rupees only as annual fee *or one-time fee of
three thousand rupees as a lifetime membership fee. No admission
fee shall be charged from such Associate member on being
enrolled as a Fellow if he is otherwise eligible to be enrolled as
such.

iv.
**
A member may apply to the Council as a special case for the
waiver or concession of membership fee. Before granting such
relief, the Council must satisfy itself that because of severe
personal hardship, special circumstances exist to warrant granting
of such waiver or concession in membership fee. The waiver or
concession granted will be at the discretion of the Council and
according to the circumstances which may include illness
diagnosed as incurable, permanent or temporary incapacity and
unable to work for a period.

Provided further that, the Council if deemed necessary may ask
such member to surrender practicing certificate.

(2) All annual fees shall be payable by the first day of J uly each year.


*
SRO.54(KE)/2008 dated 05.06.2008, Part-II of Extraordinary Gazette of Pakistan dated 21.07. 2008.
**
SRO 6 (KE)/2010 dated 04.01.2010, Part-II of Extraordinary Gazette of Pakistan dated 06.04.2010.
52
CHAPTER III

ELECTION OF THE COUNCIL

11. Date of election.- (1) The Council shall decide and notify to the members
the date of election at least four months before such date.

(2) The President shall, within a fortnight of the date of notification of
the date of election by the Council, appoint three members who are
not members of the Council to act as Election Committee.

(3) The Election Committee, not later than thirty days from the date of
notification of the date of election may, by notification, call upon
the members to elect members of the Council and shall specify
therein:-

(i) a day, at least twenty days after the issue of the notification,
on or before which nomination of candidates is to be made;

(ii) a day, at least one day after the nomination day, for the
scrutiny of nomination papers;

(iii) a day, at least ten days after the nomination day, on or before
which candidature may be withdrawn;

(iv) a day, at least forty-five days after the date of the withdrawal
of the candidature, on or before which ballot papers by post
should reach the Election Committee under bye-law 39;

(v) a day for counting of votes; and

(vi) a day for the declaration of results.

(4) In the notification issued under clause (3), the Election Committee
shall also specify the number of members to be elected to the
Council from each zone of the regional constituency.

12. Members entitled to vote.- Subject to the provisions of these bye-laws, a
member whose name is borne on the Register on the date immediately
preceding four months from the date of election shall be entitled to vote in

53
the election from the respective zone of the regional constituency within
whose territorial jurisdiction his address falls on the said date:

Provided that his name has not been removed from the Register after
publication of the list of voters.

13. Qualifications of members to stand for election.- Subject to the
provisions of these bye-laws, a member of at least five years continuous
standing with the Institute on the date of election, shall be eligible to stand
for election to the Council from the respective zone of the regional
constituency in which his name is included.

14. Number of members to be elected.- The number of members to be
elected to the Council from each zone of the two regional constituencies
shall be as under:-

(a) SOUTHERN REGION:
(i) Zone A: Comprising the province of Sindh *
8
(ii) Zone B:

Comprising the province of Baluchistan 1
TOTAL 9

(b) NORTHERN REGION:
(i) Zone A: Comprising the province of the Punjab
including Federal Capital of Islamabad.
*
5
(ii) Zone B: Comprising the North-West Frontier
Province, Tribal Areas and Azad Kashmir.
1
TOTAL 6

15. List of voters.- At least three months before the date of election, the
Election Committee shall notify to the members of each zone of a regional
constituency a list of members eligible to vote in that zone, with their
addresses, and the manner in which the voters in any particular place shall
exercise their right of vote.


*
S.R.O.10(KE)/2009 dated 23.02.2009, published in the Part II of Extraordinary Gazette of Pakistan dated 24.02.2009

54
Explanation:- Subject to the provisions of these bye-laws, the address of a
member published in the list of voters shall be final for determining the
manner in which he shall be entitled to cast his vote or the zone of the
constituency to which he shall belong for the purpose of casting his vote.

16. Nominations.- The nomination of a candidate shall be in the appropriate
form duly signed by the candidate and by the proposer and the seconder
both of whom shall be persons entitled to vote in the election of the zone
of the regional constituency to which the candidate belongs and shall be
forwarded by registered A.D. or hand delivery to the Election Committee
so as to reach it not later than 4.00 p.m. on the nomination date.

17. Fee for election.- (1) A candidate for election shall pay, irrespective of the
number of nominations, in all a fee of two hundred rupees by a demand
draft payable to the Institute.

(2) A candidate whose nomination is held to be invalid shall be
entitled, on an application made by him in this behalf to the refund
in full of the fee.

18. Scrutiny of nominations.- (1) The Election Committee shall scrutinize
the nomination papers of all the candidates and shall endorse on each
nomination paper its decision whether it accepts or rejects the nomination.

(2) The Election Committee shall record in brief the reasons for
rejecting a nomination.

(3) The Election Committee shall reject a nomination if it is satisfied
that-

(i) the candidate was ineligible to stand for election; or

(ii) the proposer or the seconder was not qualified to subscribe to
the nomination paper; or

(iii) the signature of the candidate or the proposer or the seconder
was not genuine; or

(iv) there has been a failure to comply with the provisions of bye-
laws 16 or 17.

55

Provided that:-

(i) the Election Committee shall not reject a nomination paper
on the ground of a technical defect which is not of a
substantial character; and

(ii) the rejection of a nomination paper by reason of any
irregularity in respect of that nomination paper shall not
invalidate the nomination of a candidate by any other valid
nomination paper.

(4) If a proposer or a seconder incurs any disability by reason of the
operation of the provisions of the Ordinance or these bye-laws
subsequent to the date of signing the nomination, it shall not
invalidate the nomination paper.

(5) In case where a nomination paper or more than one nomination
papers were filed and one or more of each nomination papers of a
candidate has or have been rejected, the Election Committee shall
give notice of its decision together with a brief statement of its
reasons therefor to the candidate concerned by registered post.

19. Preparation of list of valid nominations.- (1) The Election Committee
shall, after the scrutiny of nomination papers, prepare a list of validly
nominated candidates for each zone of the constituency and cause a copy
of the list to be sent by registered post to each candidate from the zone
within ten days of the nomination date.

(2) The list shall contain full names in alphabetical order and the
addresses of validly nominated candidates for each zone of the
constituency.

20. Withdrawal of candidature.- (1) Any validly nominated candidate may
withdraw his candidature by notice in writing subscribed by him and
delivered to the Election Committee before 4.00 p.m. of the withdrawal
date.

(2) The withdrawal of candidature shall be intimated by the Election
Committee to the other candidates standing for election from the
same zone of the constituency.
56

(3) A candidate who has withdrawn his candidature in accordance
with clause (1) shall be entitled to the refund in full of the fee paid
by him under bye-law 17.

21. Intimation of final list of nominations to voters.- The Election
Committee shall omit from the list of validly nominated candidates the
name of candidates who have withdrawn their candidature and send the
final list of such candidates, hereinafter referred to contesting candidates,
to all the candidates and voters of the respective zones by registered post
at least one month before the date of election.

22. Death or cessation of membership of a candidate.- (1) If a validly
nominated candidate who has not withdrawn his candidature dies or
otherwise ceases to be a member before the date of election, the election in
that zone of the constituency shall be conducted among the remaining
candidates.

(2) The votes cast in favour of any such candidate shall be ignored for
counting purposes.

23. Uncontested election, etc.- (1) Where after at the scrutiny under bye-law
18, or after the withdrawal under bye-law 20, the number of validly
nominated candidates from any zone of the constituency remains equal or
less than the number of members to be elected from that zone of the
constituency or where the number of candidates from any zone of the
constituency, becomes equal to or less than the number of members to be
elected from that zone of the constituency, by reason of death or cessation
of membership of one or more candidates before the date of election, such
candidates shall be deemed to have been elected and the Election
Committee shall declare such candidates to be elected from that zone.

(2) Where the number of such candidates from a zone of the
constituency is less than the number of members to be elected from
that zone of the constituency, the members declared elected from
that zone of the constituency shall nominate members of the Council
from that zone of the constituency for the remaining seat or seats.

24. Admissible number of votes to a voter.- A voter shall have as many
numbers of votes as the number of seats reserved for the zone of the
constituency in which the voter resides.

57

25. Mode of election.- (1) The election shall be by poll and a voter shall cast
his vote in person at an election station set up for the purpose-,
*
[……………]

**“Provided that all voters, having an overseas registered address
or a local address of a district where a polling station has not been
established, shall be entitled to vote in an electronic form or through a
ballot subject to provision of sub-bye-law (3).”

(2) If any voter is allowed to vote either by post or exercises his option
to cast his vote in electronic form, he shall be entitled to cast his vote only
in such mode and not by or in any other mode.

(3) **Where a voter under proviso to sub-bye-law (1) intends to
exercise his option to cast his vote in the electronic manner, he shall
inform the Election Committee in writing of his intention to do so in the
prescribed manner at least forty days prior to the date of election. A voter
not exercising the option within aforesaid timelimit shall only be eligible
to cast his vote through post.

(4) All provisions relating to ballot papers shall be applicable to ballot
sent in the electronic form.

(5) For the purpose of ballot in electronic form, the Election
Committee shall cause the ballot to be in the form such that the identity of
the voter casting the vote is not disclosed.

26. Election stations.- The Election Committee shall set up such number of
election stations at such places as it may deem necessary:

Provided that no election station shall be set up in any town or city having
less than ten voters, according to their addresses as given in the list of
members eligible to vote.

27. Election Officer.- (1) The Election Committee shall appoint an Election
Officer for each election station and may also appoint such other person as
it may deem necessary to assist the Election Officer.

*
Deleted the words “except where he exercises option to cast his vote by post or in electronic form”. S.R.O. 30(KE)/2013
dated May 29, 2013 published in the Extra-ordinary Gazette of Pakistan dated J une1, 2013
** S.R.O. 30(KE)/2013 dated May 29, 2013 published in the Extra-ordinary Gazette of Pakistan dated J une 1, 2013

58

(2) The Election Officer shall, in addition to performing the duties
imposed upon him by these bye-laws, be in general charge of all
arrangements at the election station and may issue order as to the
manner in which persons shall be admitted to the election station and
generally for the preservation of peace and order at or in the vicinity
of the election station.

28. Secret chamber.- There shall be a secret chamber or chambers at each
election station for casting votes by voters.

29. Ballot paper.- The ballot paper shall contain a list of the candidates
validly nominated for a zone of the constituency and shall bear the seal of
the Election Committee.

30. Presence of the Candidates and their authorized representatives at the
election stations.- (1) A contesting candidate shall be entitled to be
present at the election station or stations in the respective zone.

(2) A contesting candidate may, before the commencement of the poll,
appoint for each polling booth at an election station two polling
agents, who shall be members of the Institute but only one of them
shall be entitled to be present at a time on his behalf at that
particular polling booth.

(3) No appointment of a polling agent shall be valid unless the
candidate has issued a letter of authority to such polling agent and
that letter shall contain the full name, membership number, address
of the polling agent and the name of the polling booth of an
election station at which he is authorized to be present.

31. Voting to be in person and not by proxy.- Voting shall be by ballot and
voter desiring to record his vote shall do so in person and not by proxy.

32. Assistants to Election Officer.- The Election officer may appoint such
person as he thinks fit to assist him in carrying out his duties under these
bye-laws.

33. Identification of voters.- (1) Every person claiming to be a voter shall be
required to sign the copy of the list of members eligible to vote provided
by the Election Committee.

59
(2) At any time before a ballot paper is delivered to a person claiming
to be a voter, the Election Officer or a person appointed by him
may, of his own accord, if he has reason to doubt the identity of the
person or his right to vote at the polling booth, and shall, if so
required by a candidate or his polling agent, satisfy himself in any
manner as he may deem advisable as to his identity.

(3) If the Election Officer or a person appointed by him is not satisfied
as to the identity of the person claiming to be a voter, he may
refuse to allow such person to vote in the election.
(4) In case permission to vote is refused, the reasons for refusal shall
be recorded, and objections to such refusal if made in writing, shall
also be taken on record.
34. Record to be kept by the Election Officer.- The Election Officer or a
person appointed by him shall, at the time of delivery of the ballot paper,
place a mark against the name of the voter in the list of members eligible
to vote to denote that voter has received a ballot paper.

35. Manner of recording of votes after receipt of ballot paper.- (1) On
receiving the ballot paper, the voter shall forthwith proceed into the secret
chamber set apart for the purposes and shall record his vote on the ballot
paper, fold it and leave the secret chamber and insert the ballot paper in
the ballot box provided for the purpose, in the presence of the Election
Officer or a person appointed by him.

(2) Where any ballot paper, which was delivered to a voter, is found,
with or without any writing thereon, in the secret chamber, it shall
be treated as cancelled.
36. Procedure at the election station.- (1) Polling booth or booths at an
election station shall be kept open on the date of election from 9.00 a.m. to
5.00 p.m.

(2) The Election Officer shall close the polling booth or booths at an
election station at the end of the day, at the hour appointed under
clause (1) and no voter shall be admitted thereto after that hour.

(3) No person shall be given any ballot paper or be permitted to vote
after the hour fixed for the enclose of the poll, except the persons
present within the building, tent, room or enclosure in which the
polling station is situated and have not voted but are waiting to
vote.
60

(4) The Election Officer or the person appointed by him shall, as soon
as practicable after the close of the poll, in the presence of any
candidates or their polling agents who may be present, open the
ballot box(es) and count the total number of votes cast, the number
of valid and invalid ballot paper as well as the number of votes cast
in favour of each candidate and shall prepare a statement thereof.

(5) Any candidate or his polling agent may sign the statement if he so
desires.

(6) The Election Officer or a person appointed by him shall give a
copy of the statement to the candidates or their polling agents on a
written request. Thereafter, the Election Officer or a person
appointed by him in the presence of a candidate or candidates or
their polling agents who may be present shall seal the ballot box
with his own seal and the seals of such candidates or polling agents
as he may desire.

37. Eligibility to vote by post.- (1) A member whose name is included in the
list of voters and whose name is not shown under any election station may
vote either by post or in electronic form.

(2) A member who is residing outside Pakistan shall, notwithstanding
anything contained in these bye-laws, be eligible to vote either by
post or in the electronic form for the candidate or candidates, as the
case may be, of the zone of the constituency where he had his last
registered address in Pakistan.

38. Election Committee to send ballot papers by post.- At least thirty days
before the date of election the Election Committee shall send by registered
post or cause to be sent by post or in electronic form to the voters eligible
to vote, the ballot papers, together with a letter, or through electronic
communication, as the case may be, explaining the manner in which the
vote shall be recorded thereon, and specify the date and hour by which it
should reach the Election Committee.

39. Ballot papers to be returned after recording votes thereon.- A voter on
receiving his ballot paper sent under bye-law 38 may record his vote
thereon, either in person, by post or in electronic form for the contesting

61
candidate or candidates, as the case may be, as specified in bye-law 24 and
send it to the Election Committee so as to reach it before the time
specified in this behalf.

40. Issue of undelivered and fresh ballot papers.- Where a ballot paper and
other connected paper sent physically by post under bye-law 38 are lost or
damaged in transit or for any reason returned undelivered, the Election
Committee may reissue them by registered post or deliver them or cause
them to be delivered to the voter on his applying for the same, if it is
satisfied with the reasons for such loss, damage or return.

41. Grounds for declaring ballot papers invalid.- A ballot paper including
ballot by post or in the electronic form shall be declared invalid if-

(a) a voter signs his name or writes any word or figure upon it or
makes any mark upon it by which the ballot paper becomes
recognizable or by which the voter can be identified; or

(b) it does not bear the seal of the Election Committee; or

(c) the cross is not marked on it; or

(d) the cross is marked opposite the name of the candidates over and
above the number of votes the voter is entitled to cast; or

(e) the cross and some other sign(s) are put opposite to the name of the
same candidate; or

(f) it is unmarked or void for uncertainty.

42. Appointment of time and place for the counting of votes.- The Election
Committee shall appoint time and place for the final counting of votes and
shall also give notice of such time and place in writing to all the contesting
candidates.

43. Presence of candidates at the time of counting of votes.- Every
contesting candidate shall be entitled to be present in person or to appoint
a member as a representative to be present on his behalf at the time of the
counting of votes.
62

44. Counting of votes.- On the date notified under (3) of bye-law 11 for
counting of votes and at the time and place appointed under bye-law 42,
the Election Committee shall, for the purpose of counting of votes in
respect of a zone of the constituency:-

(a) open the cover containing the postal ballot papers received
physically by it under bye-law 38, take out the ballot papers from
each cover and record the number thereof in statement; and shall
make a separate packet of these postal ballot papers;

“(aa) print from the computer postal ballot papers received
through electronic transmission and record the number thereof in a
statement and make a separate packet of such postal ballot papers”.

(b) allow the contesting candidates and their authorized
representatives present at the counting an opportunity to inspect
the ballot boxes and packets containing the relevant papers
received from the Election Officers and their seals for satisfying
themselves that they are in order; and

(c) proceed as follows:-

(i) If it is satisfied that the ballot boxes and packets containing
the relevant papers which have been received are in order,
it shall take up the counting of the ballot papers contained
in the ballot boxes and to these shall be added the postal
ballot papers;

(ii) If it finds that any of the ballot boxes has been tampered
with, it shall not count the ballot papers contained in such
boxes for the purpose of election, but shall keep a record of
such ballot papers for the purpose of election petitions, if
any;

(iii) The ballot papers shall be examined and the invalid ballot
papers shall be rejected;

(iv) It shall then count the number of votes cast in favour of
each candidate; and


63
(v) Such number of candidates from any zone of the regional
constituency as there are vacancies to be filled receiving
the highest number of votes shall be declared elected but in
the event of an equality of votes between two or more
candidates, lots shall be drawn in the presence of the
contesting candidates or their authorized representatives, if
any, and the candidates in whose favour lot is drawn shall
be declared elected.

45. Notification of results.- The names of all the candidates declared elected
shall be officially notified by the Election Committee to the candidate and
members of the Institute within fifteen days of the date of election.

46. Election not to be invalid due to accidental omission, etc.- No election
shall be deemed to be invalid merely by reason of any accidental
irregularity or informality in the conduct of the election including
accidental omission to send or delay in sending the ballot paper to a voter
or the accidental non-receipt of, or delay in receipt of a voting paper by a
voter or accidental delay or any change in the election schedule necessitate
on account of any circumstances beyond control.

47. Disciplinary action against a member in connection with conduct of
election.- (1) A member shall be liable to disciplinary action by the
Council,
*
except as provided under bye-law 47A, if, in connection with
election to the Council he is found to have taken part, directly or
indirectly, either himself or through any person, in-

(i) issuing manifestos circulars; or

(ii) organizing parties to entertain voters.

(2) A member shall be liable to disciplinary action if he adopts any or
more of the following practices with regard to the election to the
Council, namely:-

(a) Bribery that is to say, any gift, offer or promise of any gifts
or gratification to any person by a candidate or any other
person, with his connivance, with the object, directly or
indirectly; of

*
S.R.O. 1(KE)/2005 dated 24.12.2004, published in the Extra-ordinary Gazette of Pakistan dated 04.01.2005.
64

(i) inducing a member to stand or not to stand as a
candidate at an election or rewarding him for such
an act or omission; or

(ii) inducing a member to withdraw his candidature or
rewarding such withdrawal; or

(iii) inducing a voter to vote or not to vote at an election,
or rewarding for such an act or omission.

Explanation:- For the purpose of this clause, the term
“gratification” is not restricted to pecuniary gratification or
gratification estimable in money but it includes all forms of
entertainment and reward.

(b) Undue influence, that is to say, any direct or indirect
interference or attempt to interfere on the part of a
candidate or by any other person, with his connivance, with
the free exercise of any electoral rights.

(c) The publication by a candidate or by any other person, with
his connivance, of any statement of fact which is false, and
which he either believes to be false or does not believe to
be true or in relation to the personal character or conduct of
any candidate or in relation to the candidature or
withdrawal of any candidate, being a statement reasonably
calculated to prejudice the prospects of that candidate’s
election.

(d) The obtaining or procuring or betting, or attempting to
obtain or procure by a candidate or by any other person,
with his connivance, any assistance for the furtherance of
the prospects of the candidates’ election from any person
serving under the Government of Pakistan or the
Government of any of the Provinces other than the giving
of vote by such person, if he is a member entitled to vote.

(e) The hiring or procuring, whether on payment or otherwise,
of a vehicle by a candidate or by any other person, with his
connivance, for the conveyance of voters.


65
(f) The receipts by a member, or an agreement by a member,
to receive any gratification-

(i) as an inducement or reward for standing or not
standing as candidate; or

(ii) as an inducement or reward for withdrawing his
candidature; or

(iii) as an inducement or reward for himself or any other
person for voting or refraining from voting; or

(iv) as an inducement or reward for inducing or
attempting to induce any voter to vote or refrain from
voting; or

(v) for inducing or attempting to induce any candidate to
withdraw his candidature; or

(g) contravention or misuse of any of the provisions of these
bye-laws or making of any false statements knowing it to
be false while complying with any of the provisions of
these bye-laws.

*
47A. Presentation by each candidate.- (1) The Institute may, at its discretion,
organize a presentation of approximately ten minutes duration to be made by each
candidate before the members at least four weeks before the date of election.
Separate presentations may be arranged by the Institute for Southern Region at
Karachi, and for Northern Region at Lahore, Islamabad, **Peshawar, Multan and
Faisalabad.

***[…………………..]

(2) In addition to the presentations as may be arranged by the Institute,
each candidate shall be allowed to submit a write up not exceeding
two pages of the size 8.5 x 13 inches. The write up shall cover the
ideas and views of the candidate that he has about the activities and

*
S.R.O. 1(KE)/2005 dated 24.12.2004, published in the Extra-ordinary Gazette of Pakistan dated 04.01.2005.
** S.R.O. 30(KE)/2013 dated May 29, 2013, published in the Extra-ordinary Gazette of Pakistan dated J une 1, 2013.
*** Deleted the proviso “provided that the Institute shall not be bound to organize such presentations at any other location”.
S.R.O. 30(KE)/2013 dated May 29, 2013, published in the Extra-ordinary Gazette of Pakistan dated J une 1, 2013.
66
contributions of the Institute to the profession of chartered
accountants.

(3) The write up shall be placed on website of the Institute and the
same shall also be circulated by the Institute in a special bulletin to
be issued by it for such purpose.

(4) Canvassing shall not be permissible except in the following limited
manner, namely:-

(a) By personal visits to the members;

(b) By telephonic contacts with the members; and

(c)
*
In any other manner approved by the Council.


48. Election dispute.- (1) On receipt of an application under sub-section (2)
of section 10, the Council shall refer the matter to the Tribunal within
thirty days of its receipt.

(2) At the time of giving its decision, the Tribunal may pass such order
as to costs as it may consider appropriate.

(3) If the Tribunal is satisfied that the application made under sub-
section (2) of section 10 is not founded on valid grounds, the
Tribunal may while dismissing the application, award costs to the
Council.


*
S.R.O. 30(KE)/2013 dated May 29, 2013, published in the Extra-ordinary Gazette of Pakistan dated J une 1, 2013.



67
CHAPTER IV

MEETINGS AND PROCEEDING OF THE COUNCIL

49. Meetings of the Council.- The first meeting of the Council shall be held
within three months of the date of its being elected and thereafter the
Council shall meet at least twice in twelve months at such time and place
as the President may determine.

50. Notice of meeting.- Notice of the time and place of the meeting of the
Council shall be sent to the registered address of every member of the
Council not less than fourteen days before such meeting and such notice
shall, so far as practicable, contain a statement of the business to be
transacted at such meeting;

Provided that in case of urgency a meeting may be summoned to meet
within three days by the President who shall inform the members of the
subject matter to be considered at the meeting and the reasons for which
he considers the matter to be urgent.

51. Special meetings.- On a requisition in writing by at least twenty-five per
cent of the members of the Council, the President shall call a special
meeting within four weeks of the receipt of such requisition.

52. Presiding over meetings.- All meetings of the Council shall be presided
over by the President and in his absence, by the Vice-President and, in the
absence of both the President and the Vice-President, by a person elected
by the members of the Council present from among themselves.

53. Quorum at meetings.- Five members of the Council shall constitute a
quorum for a meeting of the Council and if a quorum is not available
within half an hourfrom the time appointed for the meeting, the meeting
shall stand adjourned to such future date and time as the President may
appoint.

54. Adjournment of meeting.- Subject to the provision of these bye-laws, the
person presiding over a meeting of the Council may, with the consent of
the majority of the members of the Council present, adjourn the meeting
from time to time and from place to place; but no business shall be
transacted at any adjourned meeting other than the business left unfinished
68
at the previous meeting.

Provided that no notice and quorum shall be necessary for holding an
adjourned meeting, unless it be so decided by the Council at the time of
adjourning the meeting.

55. Procedure for transaction of business.- (1) The business of the Council
shall ordinarily be transacted at a meeting of the Council:

Provided that the President or a Vice-President may, in an appropriate
case, circulate the papers among the members of the Council for deciding
any question:

Provided further that if five members of the Council require that any
question be decided at a meeting, the President or the Vice-President shall
withdraw the papers from circulation and have the question determined at
a meeting of the Council.

(2) Where the papers relating to any question are circulated among the
members of the Council, a period of not less than ten days,
commencing from the date of the circulation of the papers, shall
elapse before any decision is taken on the question:

Provided that a decision may be taken before the expiry of such
period if the opinion of all the members of the Council is received
earlier.

(3) The decision shall be in accordance with the opinion in writing of
the majority of the members.

(4) A decision taken by circulation of papers shall be communicated to
all the members of the Council.

56. Passing of resolution at meetings.- At all meetings of the Council and in
the event of difference of opinion, the vote of the majority shall prevail
unless otherwise required by the Ordinance or these bye-laws and in the
event of equality of votes, the person presiding shall have a casting vote in
addition to his own vote.

57. Records of minutes.- Proper minutes shall be kept of all proceedings of
the meetings of the Council and shall contain every resolution passed and

69
decision taken at the meeting and shall be signed by the person presiding
over the meeting or the meeting held next thereafter, and the minutes so
signed shall be sufficient evidence on the matters stated therein.

58. Absence of members of the Council from Pakistan.- (1) Before a
member of the Council, other than a member who is in the service of the
Government, leaves Pakistan for a period exceeding sixty days:-

(i) he shall intimate the Council the date of his departure from,
and the date of his expected return to, Pakistan.

(ii) if he intends to be absent from Pakistan for a period of more
than six months, he shall tender his resignation or apply to the
Council for leave of absence and on receipt of such application
the Council may at its discretion grant leave of absence, or if it
considers necessary, treat the application as the members’
resignation.

(2) If any member of the Council other than a member who is in the
service of the Government, leaves Pakistan for a period exceeding
sixty days without taking either of the courses mentioned in sub-
clause (ii) of clause (1), the Council at its discretion may terminate
his membership of the Council after giving him an opportunity of
being heard.

70
CHAPTER V

MEETINGS AND PROCEEDINGS OF THE INSTITUTE

59. Annual meeting.- The annual meeting of the Institute for transacting the
ordinary annual business of the Institute (namely the receipt and
consideration of the annual report of the Council and the accounts of the
Institute with the auditor’s report thereon and the appointment of auditors)
shall be held in Pakistan on such day and at such place as the Council may
from time to time appoint:

Provided that a meeting shall be held in every calendar year and that not
more than fifteen months shall have elapsed since the date of the previous
annual meeting.

60. Special meetings.- The Council may whenever it thinks fit convene a
special meeting of the Institute and shall do so within four weeks from the
receipt by the Secretary of a requisition in writing signed by not less than
twenty per cent of the members stating the object of the proposed meeting.

61. Notice of meeting.- (1) The Secretary shall, not less than fourteen days
before any annual or special meeting of the Institute, send to each member
a notice specifying the day, hour and place of the meeting and the business
to be transacted thereat.

(2) In the case of annual meeting, the Secretary shall send to each
member with such notice a copy of the annual report of the
Council and a copy of the accounts of the Institute with the
auditor’s report thereon and particulars of all motions to be brought
before the meeting under bye-law 62.

(3) The non-receipt by any member of such notice or of any of the
aforesaid documents shall not invalidate the proceedings of any
meeting.

62. Notice of motion to be given.- A member wishing to bring before the
annual meeting any motion not relating to the ordinary annual business of
the Institute may do so:



71
Provided that:-

(i) notice in writing of the proposed motion, duly endorsed by five
other members entitled to vote at the annual meeting, be sent or
given to the Secretary and be received by him not later than ten
days before the date of the annual meeting; and

(ii) the proposed motion relates to matters affecting the Institute or the
accountancy profession.

63. Meetings to be presided by the President, etc.- All meetings of the
Institute shall be presided over by the President and, in his absence, by the
Vice-President and, in the absence of both the President and the Vice
President, by a person elected by the members from amongst the members
of the Council present, and in the absence of all of them, from amongst
themselves.

64. Quorum at meetings.- Ten members present in person shall constitute a
quorum for a meeting of the Institute, and if a quorum is not available
within half an hour from the time appointed for the meeting, the meeting
shall stand adjourned to such future time and date as the President or in his
absence the Vice-President may appoint:

Provided that no quorum shall be necessary for such adjourned meeting.

65. Adjournment of meeting.- Subject to the provisions of these bye-laws,
the person presiding over the meeting of the Institute may, with the
consent of majority of members present, adjourn the meeting from time to
time and from place to place; but no business shall be transacted at any
adjourned meeting other than the business left unfinished at the previous
meeting:

Provided that no notice shall be necessary for holding an adjourned
meeting unless it be so decided in the meeting at the time of adjournment.

66. Voting at meetings and demand for poll.- (1) Every resolution and
amendment proposed and seconded at the meeting of the Institute shall be
put to vote by the person presiding over the meeting and decided by show
of hands and the person presiding shall declare the decision of the
meeting.

72
(2) In the event of an equality of votes, the person presiding shall have
casting vote in addition to his own vote.

(3) The declaration made by the person presiding under clause (1)
shall be final:

Provided that not less than ten members present in person and
entitled to vote at the meeting may demand in writing a poll of all
members in respect of that decision.

67. Appointment of Scrutineers.- At every meeting of the Institute at which
a poll is demanded the meeting shall appoint two members as Honorary
Scrutineers.

68. Procedure when poll demanded.- (1) On a poll being demanded under
bye-law 66, the person presiding shall forthwith, or as soon as reasonably
practicable after the conclusion of the meeting at which the poll is
demanded, state the resolution or amendment in form of proposition,
which in his opinion, will be most suitable to ascertain the views of the
members.

(2) Upon the substance of such resolution or amendment and upon the
manner of so stating the resolution or amendment the decision of
the person presiding shall be final.

(3) The voting paper setting out the proposition so stated, together
with an envelope and all necessary directions, shall, within
fourteen days after the meeting, be issued by the Council to all
members entitled to vote.

(4) The members shall send the said voting papers duly completed to
the Secretary sealed in the envelopes provided for such purposes so
as to reach him on or before the twenty-first day after the day on
which the said voting papers were sent to the members and the
Secretary shall hand over the sealed envelopes to the Honorary
Scrutineers.

69. Result of poll.- (1) The Honorary Scrutineers shall, within forty-eight
hours from the last date fixed for the return of the voting papers, submit a
report to the person presiding detailing:-


73
(i) the result of the voting; and

(ii) the votes rejected and the reasons for such rejection.

(2) The person presiding shall send a copy of the report to each
member as soon as practicable and in the event of equality of
votes, he shall exercise a casting vote in addition to his own vote,
and convey to the members the manner in which his casting vote
has been exercised.

(3) The report of the Honorary Scrutineers as to the result of the
voting, along with the casting vote, if any, shall be conclusive.

70. Demand for poll not to prevent other business.- The demand for a poll
at a meeting shall not prevent the transaction of any business other than
that on which the poll has been demanded or any business directly
dependent thereon.

71. Minutes of the meeting.- (1) Proper minutes shall be kept of all
proceedings of the meetings of the Institute and shall contain every
resolution passed and decision taken at the meeting.

(2) The minutes shall be signed by the person presiding over the
meeting or the meeting held next thereafter, and the minuets so
signed shall be sufficient evidence of matters stated therein.

74
CHAPTER VI

STANDING AND OTHER COMMITTEES

72. Committees of the Council.- (1) The Council shall constitute from
amongst its members the following standing committees namely:-

(i) The Executive Committee;

(ii) The Examination Committee; and

(iii) The Investigation Committee.

(2) The Council may also form such other committees and Boards
*

from amongst its members, the members of the Institute and other
persons as it deems necessary, for the purpose of carrying out the
provisions of the Ordinance and these bye-laws, and any
Committee or Board so formed, may with the sanction of the
Council, co-opt such other members of the Institute or other
persons, not exceeding two-third of the members of the Committee
or Board, as the Committee or Board thinks fit, and any member so
co-opted shall be entitled to exercise all the rights of a member of
the Committee or Board.

73. Executive Committee.- (1) The Executive Committee shall consist of the
President and Vice-President or Vice-presidents, ex-officio, and not less
than three other members of the Council elected by the Council.

(2) The Executive Committee shall perform the following functions,
namely:-

(a) Maintenance of the office of the Institute and for this
purpose the Executive Committee may employ, suspend,
discharge or re-employ the necessary staff other than the
Secretary on such terms and conditions as it may deem fit.

(b) Maintenance of true and correct accounts of all receipts and

*S.R.O. 77(KE)/2005 dated 11.05.2005, published in part-II of Extra-ordinary Gazette of Pakistan dated 30.05.2005.


75
payments on behalf of the Institute and the matters in
respect of which such receipts and payments take place and
of all the property, securities, debts, funds and liabilities of
the Institute.

(c) Maintenance of the Register, Register of
*
training
organizations, Register of Students and all other registers
which are prescribed by the Ordinance or these bye-laws.

(d) Custody of the property, assets and funds of the Institute.

(e) Investment of the spare funds of the Institute in securities
approved by the Council.

(f) Disbursements from the funds on account of expenditure
from the income or the capital in accordance with the
estimates previously sanctioned by the Council:

Provided that in emergent cases expenditure in excess of
the estimates may be incurred by the Committee but such
excess expenditure shall be brought to the notice of the
Council at its next meeting.

(g) Admission of associates and fellows, removal and
restoration of names of members, issue and cancellation of
certificates of practice, permission to members to engage in
management consultancy, issue of certificates of
membership, publication of list of members and issue of
journal and other publications of the Institute.

(h) Any other function delegated to it by the Council:

Provided that the Council shall always have the power to
review any decision of the Executive Committee in
exercise of its aforesaid function.

74. Examination Committee.- (1) The Examination Committee shall consist
of the President and the Vice-President or Vice Presidents, ex-officio, and
not less than three other members of the Council elected by the Council.

*
S.R.O. 21 (KE)/2010, Part-II, Extra-ordinary Gazette of Pakistan dated 26.02.2010.
76

(2) It shall perform the following functions, namely:-

(a) All the functions of the Council in regard to holding of
examinations, admission thereto, selection and appointment of
examiners, prescription of books for the guidance of candidates
and declaration of results, fixation of remuneration of the
examiners, assistant examiners, superintendents of the
examinations and other and deal with other matter arising out
of the holding of examinations.

(b) According recognition to coaching institutions for preparation
of candidates for the examinations of the Institute subject to
such conditions, as it may deem fit.

(c) Maintenance of proper standard of conduct at the
examinations.

(d) Providing of proper facilities where the Committee may
consider necessary, to the students to obtain coaching in the
subject in which they are to be examined by the Council.

(e) All functions in relation to students, except as otherwise
provided in these bye-laws.

(f) Any other functions delegated to it by the Council.

Provided that the Council shall always have the power to review any
decision of the Examination Committee in exercise of its aforesaid
functions.

75. Investigation Committee.- (1) The Investigation Committee shall consist
of.-

(a) the President and the Vice-President or Vice-Presidents, ex-officio;

(b) not less than three other members of the Council, elected by the
Council; and

(c) two other persons (not being members of the Council), nominated
by the Council, of whom:-

77

(i) one shall be a person who has exercised the powers of, or is
or has been, a judge of High Court or who is or has been an
advocate of a High Court and is qualified to be a J udge of a
High Court; and

(ii) the other one shall be a person who, in the opinion of the
Council is suitable for such nomination.

Provided that the persons under clause (c) shall be nominated for a period
of four years or till the completion of the tenure of the Council, whichever
is earlier.

(2) It shall perform the functions assigned to it under the Ordinance
and such other functions as may be delegated to it by the Council.

76. Chairman of the Standing Committees.- The President shall be the
Chairman of every Standing Committee and if, for any reason, he is
prevented from attending to the affairs of a Committee, the Vice President
and, in the absence of the Vice President, a member of the Committee
elected by the members present shall act as Chairman of the Committee.

77. Term of office of members of the Committees.- A member of a
Standing Committee shall hold office for one year from the date of his
election and shall be eligible for re-election:

Provided that he is a member of the Council at the time of such election:

Provided further that notwithstanding the expiry of the tenure of his office,
a member shall continue to hold his office till such time as a new member
has been elected in his place.

78. Meetings of the Committees.- The President or Vice-President at any
time may, and on requisition by any two members of a Committee or
Board
*
shall, call a meeting of the Committee or Board.*



*S.R.O. 77(KE)/2005 dated 11.05.2005, published in Part-II of Extra-ordinary Gazette of Pakistan dated 30.05.2005.

78
79. Notice of meeting.- Notice of the date, time and place of the meeting of
every Committee or Board* shall be sent to the registered address of every
member of the Committee or Board not less than fourteen days before
such meeting and such notice shall, so far as practicable, contain a
statement of the business to be transacted at such meeting:

Provided that in case of urgency a meeting may be summoned to meet
within three days by the President or Vice-President who shall inform the
members of the Committee or Board* of the subject matter to be
considered at the meeting and the reasons for which he considers the
matter to be urgent.

80. Quorum, etc., at meetings.- (1) Three members of a Committee present
in person shall constitute a quorum for a meeting of the Committee or
Board.
*


(2) The procedure laid down for adjourned meetings for want of
quorum in respect of the Council shall mutatis mutandis apply to
such meetings of the Committees or Boards.*

81. Procedure for transaction of business.- (1) The business of every
Standing Committee shall ordinarily be transacted at a meeting of the
Committee:

Provided that the President or a Vice-President may, in an appropriate
case, circulate the papers among the members of the Committee for
deciding any question:

Provided further that if the members of the Committee require that any
question be decided at a meeting, the President or the Vice-President shall
withdraw the papers from circulation and have the question determined at
a meeting of the Committee.

(2) Where the papers relating to any question are circulated among the
members of the Committee, a period of not less then ten days,
commencing from the date of the circulation of the papers, shall
elapse before any decision is taken on the question:

Provided that a decision may be taken before the expiry of such

*
S.R.O. 77(KE)/2005 dated 11.05.2005, published in Part-II of Extra-ordinary Gazette of Pakistan dated 30.05.2005.


79
period if the opinion of all the members of the Committee is
received earlier.

(3) A decision taken by circulation of papers shall be communicated to
all the members of the Committee.

82. Casting vote.- All questions before a Committee or Board* shall be
decided by a majority of votes and in the event of equality of votes, the
person presiding shall have a casting vote in addition to his own vote.

83. Secretary of the Committees.- The Secretary of the Institute shall be the
Secretary for each Committee or Board.*

84. Minutes.- The Secretary shall maintain a record of all business transacted
by the Committee or Board*, whether by circulation of papers or at a
meeting of the Committee or Board
*
.


*
S.R.O. 77(KE)/2005 dated 11.05.2005, published in Part-II of Extra-ordinary Gazette of Pakistan dated 30.05.2005.

80
CHAPTER VII

REGIONAL COMMITTEES

85. Regional Committees.- (1) There shall be a Regional Committee for
every regional constituency.

(2) Each Regional Committee shall consist of six elected members
comprising five members from Zone A and one member from
Zone B in both the regional constituencies.

(3) The following shall be the territorial limits of the regional
constituencies:-

(i) Southern Region comprising the Province of Sind to be
known as Zone ‘A’ and the Province of Baluchistan to be
known as Zone ‘B’.

(ii) Northern Region comprising the Province of the Punjab
including Federal Capital of Islamabad to be known as
Zone ‘A’ and the North West Frontier Province, Tribal
Areas and Azad Kashmir to be known as Zone ‘B’.

86. Admission and removal from Regional Register.- (1) Each Regional
Committee shall maintain a Regional Register in which shall be entered
the names of all the members of the Institute in a Region.

(2) If the name of a member is removed from the Register maintained
by the Council, it shall stand removed from the Regional Register
and if he is a member of the Regional Committee, he shall also
cease to be such member.

87. Resignation from the Regional Committee and casual vacancies.- (1)
Any member of the Regional Committee may at any time resign his
membership by writing under his hand addressed to the Chairman of the
Regional Committee concerned and the seat of such member shall become
vacant when such resignation is accepted by the Regional Committee.

(2) A member of the Regional Committee shall be deemed to have
vacated his seat if he is declared by the Regional Committee to

81
have been absent without sufficient excuse from three consecutive
meetings of the Regional Committee.

(3) Any casual vacancy in the Regional Committee shall be filled by a
fresh election and the person so elected shall hold office until the
dissolution of the Regional Committee:

Provided that no election shall be held to fill a casual vacancy
occurring within six months prior to the date of the expiry of the
duration of the Regional Committee and such casual vacancy shall
be filled by nomination by the Regional Committee with the
approval of the Council.

(4) No act or proceeding of the Regional Committee shall be invalid
merely on the ground of the existence of any vacancy in, or defect
in the constitution of the Regional Committee.

88. Date of election.- The Council shall determine and notify the date of
election to the Regional Committees.

89. Election to the Regional Committees.- (1) Election to the Regional
Committee shall be conducted by the Council or the Council may direct
the Regional Committees to hold the election if it considers desirable to do
so.

(2) Subject to the other provisions of these bye-laws a member of not
less then three years’ continuous standing with the Institute on the
date of election shall be eligible to stand for election to the
Regional Committee from the zone of the constituency in which
his name is included.

(3) The provisions relating to elections to the Council in regard to the
qualifications of members to vote,
*
disciplinary action,
presentations by candidates, the procedure for elections, the
declaration and the notification of election results shall mutatis
mutandis be applicable to the elections to the Regional
Committees:


*
S.R.O. 1(KE)/2005 dated 24.12.2004, published in Part-II of Extra-ordinary Gazette of Pakistan dated 04.01.2005.
82
Provided that the Election Committee for the purpose of elections
to the Regional Committee shall be appointed by the Council.

90. Duties and functions of Regional Committees.- (1) The Regional
Committees shall be at all times function subject to the control,
supervision and direction of the Council.

(2) In particular and without prejudice to the generality of the
foregoing provision, the duties of the Regional Committees shall
be-

(a) to advice the Council on all matters referred to it by the
Council and to offer such other help as may be required;

(b) to make representations to the Council in connection with
matters of professional and business interest in the region
and to offer suggestions for raising the standard and status
of the profession and for improvement of the law applying
to it;

(c) to supply necessary information to members or to the
prospective students for training and examination;

(d) to recommend either on their own motion, or on a reference
by the Council, names for inclusion in the panel of
examiners;

(e) to arrange, if found practicable, for the coaching of
candidates for the aforesaid examination in the various
centers of the region and to maintain an up-to-date and
well-equipped library and reading-room for the use of the
members and students;

(f) to run study circles with different sub-committees or
branches or arrange for regular meetings of the members
for discussion on topical subject affecting the accountancy
profession;

(g) to maintain an Employment Register for securing suitable
employment for chartered accountants and finding suitable
chartered accountants for employers;

83

(h) to carry out such other functions as may be entrusted from
time to time to the respective Regional Committees by the
Council.

(3) The Council may take such action and impose such sanctions
against a Regional Committee as it deems fit if it is satisfied after
giving proper hearing to the Regional Committee that the Regional
Committee has not carried out any of its directives or has acted
detrimentally to the interest of the Institute.

91. Office bearers in the Regional Committees.- (1) Each Regional
Committee shall elect at its first meeting, to be held within
*
three months
of its formation, a Chairman and a Secretary for that Committee from
amongst its members*:

Provided that a Regional Committee shall not hold its first meeting before
the first meeting of the Council.

(2) The Chairman and the Secretary shall hold office for a period of
one year from the date on which they are elected but so as not to
extend beyond their term of office as a member of the Regional
Committee and, subject to their being a member of the Regional
Committee at the relevant time, they shall be eligible for re-
election.

(3) The Chairman of the Regional Committee shall be the Chief
Executive of the Regional Committee.

92. Finance and accounts.- (1) Each Regional Committee shall be financed
by such fees as the Council may fix and direct to be paid to the Regional
Committee and such aid as the Council thinks fit to grant but no Regional
Committee shall borrow or obtain credit without the previous sanction of
the Council.

(2) The funds of the Regional Committee shall be utilized for such
purposes as may from time to time be sanctioned by the Regional
Committee:

*
S.R.O. 91(KE)/2000 dated 29.5.2000, published in Part-II of Extra-ordinary Gazette of Pakistan dated 30.06.2000.

84

Provided that no such funds shall be applied either directly or
indirectly for payment to the members of the Regional Committee
except for reimbursing them for any expenses incurred by them in
connection with the business of the Regional Committee.

(3) The Secretary of the Regional Committee shall be responsible for
the maintenance of its accounts which shall be audited by a
member belonging to the region who is not a member of the
Committee or a member in partnership with a member of the
Committee, as may be appointed at the annual general meeting of
the members of that region.

(4) A copy of the audited accounts and report, as adopted at the annual
general meeting, shall be sent to the Council not later than one
month from the date of that meeting.

93. Meetings of Regional Committees.- The meetings of Regional
Committees shall be held and conducted in the manner prescribed for the
meetings of the Council and all provisions applying to meetings of the
Council shall mutatis mutandis apply to the meetings of the Regional
Committee:

Provided that the quorum at a meeting of a Regional Committee shall be
three members present in person.

94. Meetings of the members of the Regional Constituency.- The meetings
of the members of the regional constituencies shall be held and conducted
in the manner prescribed for the meetings of the Institute and all
provisions applying to the meetings of the Institute shall mutatis mutandis
apply to the meetings of the regional constituency.

Provided that-

(i) the quorum at a meeting of the regional constituency shall be five
members present in person;

(ii) the demand for a poll at any meeting shall have to be made in
writing by at least five members present in person or by proxy and
entitled to vote at that meeting.

85

95. Duration of the Regional Committee.- Unless earlier dissolved under
bye-law 96, the duration of the Regional Committee elected shall be four
years from the date of the first meeting of the Committee:

Provided that notwithstanding the expiration of the duration of the
Committee, it shall continue to exercise its functions until a new
Committee is elected in accordance with the provisions of these bye-laws:

Provided further that the Council may, if in its opinion circumstances so
warrant, extend or shorten the life of a Regional Committee by a
notification in this behalf:

Provided further that the duration of the Committee in office at the time
these bye-laws come into force shall be three years from the date of the
first meeting of the Committee.

96. Dissolution of a Regional Committee.- (1) A Regional Committee shall
stand dissolved if.-

(i) the members of the regional constituency in a general
meeting pass a resolution for its dissolution by a majority
of three-fourth of its members; or

(ii) the Council, after giving proper hearing to the Regional
Committee decides to dissolve the Regional Committee.

(2) On the dissolution of a Regional Committee, all its property, assets
and funds shall vest in the Council until such time as the new
Regional Committee is elected and inducted into office.

86
CHAPTER VIII

STUDENTS

97. Admission of students as trainees.- A
*
training organization shall, before
accepting a student for training satisfy
**
that such student:

(i) is not less than sixteen years of age on the date of commencement
of his training;

(ii) has passed or obtained exemption from Pre-entry Proficiency Test
of the Institute;

*(iii) has passed or obtained exemption from all examinations up to
Intermediate Level or equivalent thereof of the Institute; or;

(iv) *Omitted

(v) is a graduate in second Division or equivalent and has passed Pre-
entry Proficiency Test; or

(vi) is a graduate in first Division or equivalent and has obtained
exemption from Pre-entry Proficiency Test; or

(vii) holds a Master’s degree in second Division or equivalent and has
obtained exemption from Pre-entry Proficiency Test.

98. Probationary period.- (1) A*training organization shall keep a student on
probation for a period of two months and if the student completes the
probation period successfully, he will be registered as a student.

*
S.R.O. 21 (KE)/2010, Part-II, Extra-ordinary Gazette of Pakistan dated 26.02.2010.
**
S.R.O.12(KE)/2006 dated 27.01.2006, Part-II, Extra-ordinary Gazette of Pakistan dated 04.02.2006.

87

(2) The probation period served under clause (1) shall be treated
towards the total period of studentship required to be completed
under these bye-laws.

99. Period of training and registration of training contract.- (1) Every
student shall be required to undergo a specified period of training
*
as may
be determined by the Council from time to time.

(2) The training contract of every student shall, within three months of
the commencement of the probation of the student and within one
month after execution thereof (or within such longer period as the
Council may, in its discretion, allow in any particular case), be
lodged with the Institute to be registered, together with a copy of
the training contract for retention by the Institute and with such
evidence as to age and qualifications as may be required and such
registration fee as may be **determined by the Council in this
behalf shall be paid to the Institute.

100. Provisions to be included in training contract.- The Council may from
time to time prescribe provisions which shall be included in training
contract and the training contracts executed after date of such prescription
shall include the said provisions and no training contract not containing
the said provision shall be registered by the Institute:

Provided that the Council may, in its discretion, and on the application of
the parties to the training contract, waive the inclusion of some or all of
the said provisions and register the training contract notwithstanding that
some or all of the said provisions are not included therein.

101. Premium.- No premium shall be charged from a student by his *training
organization while registering his training contract.

102.
**
Criteria to train students.- No
***
member, firm of Chartered
Accountants or training organization shall be permitted to engage students
in training specified under the Ordinance and these Bye-Laws unless
authorized as a training organization and meets the criteria as laid down by

*
S.R.O. 78(KE)/2005 dated 12.05.2005 published in the Part-II of Extra-ordinary Gazette of Pakistan dated 31.05.2005.
**
S.R.O.12(KE)/2006 dated 27.01.2006, Part-II, Extra-ordinary Gazette of Pakistan dated 04.02.2006.
***
S.R.O. 21 (KE)/2010, Part-II, Extra-ordinary Gazette of Pakistan dated 26.02.2010.
88
the Council in Training Regulations and Guidelines and on payment of
such fees as may be determined by the Council:

Provided that the permission to train students shall stand withdrawn if the
training organization fails to comply with the laid down criteria.

(2)
*
Omitted

103. Transfer and execution of fresh training contracts.- (1) Training
contracts may, by agreement between the parties thereto and subject to the
permission of the Council, be transferred to another *training organization
entitled to train a student and shall be subject to the provisions of bye-law
99 regarding registration and the payment of fee and the training contract
of such student shall be filed with the Institute within one month of the
date of transfer.

* (2) If a training organization ceases to exist or ceases to be an
approved training organization due to any reason, the students
under the training in such training organization shall enter into a
fresh contract with any other approved training organization in the
manner specified by the Council.

(2A) *Omitted

(3) Where there is a dispute between the *student and the *training
organization regarding the transfer of the studentship, the
aggrieved student may apply to the Council for permission to
transfer the studentship to another *training organization.

(4) The Council may, after giving the student and the *training
organization an opportunity of being heard, permit the student to
have him transferred to another *training organization subject to
such conditions as it may deem necessary:

Provided that the Council may appoint a sub-committee to decide
this matter after giving the student and the *member responsible
for training a hearing in this behalf.

(5) On such permission, the training of the student shall be transferred
to another
**
training organization, subject to the provisions of bye-

*
S.R.O. 21 (KE)/2010, Part-II, Extra-ordinary Gazette of Pakistan dated 26.02.2010.
**
S.R.O.12(KE)/2006 dated 27.01.2006, Part-II, Extra-ordinary Gazette of Pakistan dated 04.02.2006.

89
law 99 regarding registration and payment of fees and such other
conditions as the Council may deem fit.

104. Maximum number of students to be trained by a
*
training
organization.-
**
(1)

Omitted

*(2) Each training organization shall be authorized to engage up to a
maximum of ** ten students per partner:

** Provided that if a partner is also a fellow member of the
Institute, he may train five additional students.


**(3) In case a member is a partner in more than one training
organization, his entitlement of students shall be divided amongst
such training organizations according to his advice or, in the
absence of any such advice, shall be divided equally amongst such
training organizations after rounding off the fractional entitlements
appropriately; and

**(4) The Council may in special circumstances, allow training of
students in excess of the entitlements computed in clauses (2) and
(3) and in bye-law 105.

105. **Permission to train additional students.- A training organization may,
in addition to number of students permitted under bye-law 104, engage ten
extra students for each member employed on full- time basis in its service.

*106. Students not to engage in other business.- (1) A student shall throughout
his term of training serve in his training organization on his training
organization’s business and he shall not, during such term of training,
practice as a public accountant or engage in any other business or
occupation:

Provided that a student may, with the consent of his training organization,-

(i) have leave of absence, for examination preparation and any other
purpose for a total period not *exceeding one hundred and thirty
days; and

*
S.R.O.12(KE)/2006 dated 27.01.2006, Part-II, Extra-ordinary Gazette of Pakistan dated 04.02.2006.
**
S.R.O. 21 (KE)/2010, Part-II, Extra-ordinary Gazette of Pakistan dated 26.02.2010.
90

(a) *Omitted

(d) *Omitted

(ii) spend a period not exceeding twelve months in all in such
industrial commercial or other suitable organization as the Council
may approve and subject to such conditions and control as the
Council may impose or exercise.

Provided further that in suitable cases the Council may sanction to a
student leave in excess of prescribed limit on the condition that he shall be
required to undergo training in lieu of the excess leave as sanctioned by
the Council.

(2) Every training organization shall on completion, discontinuation or
termination *of the training of a student send a report forthwith to
that effect to the Secretary.

107. Power to terminate the training of a student.-
*
(1) A
**
training
organization may terminate the training of a student if he is guilty of
misconduct, misbehaviour or breach of any of the provisions laid down in
the training contract or fails to progress satisfactorily as per Training
Regulations.

(2) A student aggrieved by the termination of his training under clause
(1) may, within thirty days of such termination, prefer an appeal to
the Council.

(3) On receiving appeal under clause (2), the Council shall refer it for
report to any one of its members.

(4) The member to whom an appeal is referred shall, after giving the
parties an opportunity of being heard, submit a report together with
his recommendation to the Council.

(4) The decision of the Council taken after considering the
recommendation of the member shall be final and binding on both
parties.

*
S.R.O.12(KE)/2006 dated 27.01.2006, Part-II, Extra-ordinary Gazette of Pakistan dated 04.02.2006.
**
S.R.O. 21 (KE)/2010, Part-II, Extra-ordinary Gazette of Pakistan dated 26.02.2010.

91

108. Registers to be maintained.-
*
The Council shall maintain a Register of
training organizations and a Register of students in which the names of
training organizations and the students shall, respectively, be entered.


*
S.R.O. 21 (KE)/2010, Part-II, Extra-ordinary Gazette of Pakistan dated 26.02.2010.
92
CHAPTER IX

TRAINING AND EXAMINATION

109. Conditions to become a member of the Institute.- (1) A person shall not
be eligible for enrolment on the Register unless.-

(i) he has passed all the prescribed examinations of the Institute or has
been granted exemption from such examinations under these bye-
laws
*
and has completed the specified training period; or

(ii) he has passed the *examinations and has completed the specified
training from such accounting bodies outside Pakistan the
examinations and training of which have been recognized
equivalent to the examinations and training prescribed under these
bye-laws:


Provided that if such member desires to start practice as a Chartered
Accountant or Management Consultant, he shall pass the papers of
Advanced Taxation and Corporate Laws *of the Final examinations:

Provided further that the condition in the above proviso shall not apply to
a person who has either started or completed articleship or training
contract outside Pakistan before these bye-laws came into force:

*Provided also that if a person referred to in sub-clause (i) and (ii) of
clause (1) desires to start practice as Chartered Accountant or
Management Consultant, he shall do so if his training comprises at least
two years training with training organization in practice or has undergone
further training with training organization in practice so as to complete the
aggregate training of two years with training organizations in practice.

(2) A person referred to in sub-clause (i) of clause (1) shall produce a
certificate from a
**
training organization in such form as the
Council may direct that he has completed the requisite period of
training.



*
S.R.O. 21 (KE)/2010, Part-II, Extra-ordinary Gazette of Pakistan dated 26.02.2010.
**
S.R.O.12(KE)/2006 dated 27.01.2006, Part-II, Extra-ordinary Gazette of Pakistan dated 04.02.2006.

93
(3) A person referred to in sub-clause (ii) of clause (1) shall produce a
certificate in such form as the Council may require that he has
completed training under articles or a training contract outside
Pakistan with a member of the respective institute for such period
as is prescribed under its regulations as prerequisite to become its
member:

Provided that a person who has completed a part of the training
outside Pakistan under articles or a training contract with a
recognized Institute shall be required to complete only the balance
of period of training in Pakistan to make the total period as
prescribed under these Bye-Laws.

(4) The Council may in suitable cases condone a break in the training
of a student in order to keep continuity in training.

*
(5) In addition to the fulfillment of the requirements contained in
clauses (1), (2), and (3) the Council may, be directives issued from
time to time, prescribe additional requirements and criteria to be
fulfilled and met by the applicants for grant of certificates of
practice and renewals of certificates of practice.

110. Study courses and materials.- (1) The Council may prescribe study
material or correspondence course and may require students to attend the
tutorial courses.

(2) Unless otherwise exempted, a student shall not be admitted to any
examination of the Institute unless he attends and completes the
prescribed tutorial course and has obtained the requisite study
material or completed the correspondence course.

(3) The Education and Training Committee may, with the approval of
the Council, exempt a person from complying with all or any of
the conditions specified in sub-clause (2).

111. Time and places of examinations.- (1) All examinations shall be held
twice a year at such time as the Examination Committee may from time to
time direct and at such place or places as it shall from time to time
appoint.

*
S.R.O. 21 (KE)/2010, Part-II, Extra-ordinary Gazette of Pakistan dated 26.02.2010.
94

(2) The dates and places of the examinations and other particulars
shall be notified at least one month before the dates of the
examinations.


112. Registration of examinees.- Any person desiring to appear in an
examination of the Institute shall get his name registered with the Institute
in such manner and on payment of such annual fee as may be determined
by the Council from time to time in this behalf.

113. Subject and syllabus of the examinations.- The examinations shall be
conducted in the subject and syllabus or as may be determined by the
Council from time to time:

Provided that the subject and syllabus of the examinations shall be
effective from the date and in the manner as may be notified by the
Council in the official Gazette.

114. Application for admission to an examination.- (1) Applications for
admission to an examination shall be in such form as may be prescribed
by the Council, a copy of which may be obtained from the Institute or the
Regional Committees or from such other agencies as may be specified by
the Council.

(2) Every application under clause (1) together with such documentary
evidence as may be required and the prescribed fee shall be sent so
as to reach the Institute in accordance with the direction given by it
in the matter.

115. Admission fee for examinations.- Every candidate for admission to an
examination conducted by the Institute shall pay such fees as may be
prescribed by the Council from time to time.

116. Refund of examination fee.- The fee paid by a candidate who has been
admitted to an examination shall not be refunded:

Provided that where a candidate applies to the Examination Committee for
refund of fee before the last date to apply for admission to an examination
on the ground that he is prevented from attending an examination on

95
account of circumstances beyond his control, the Examination Committee
may refund the fee paid by such candidate.

117. Examination results.- (1) The Examination Committee shall consider the
reports of the examiners and moderators on each examination and may
accept them or reject them or may accept them subject to any modification
or alteration which may seem desirable.

(2) The Examination Committee shall then report to the Council the
result of each examination and upon the approval and adoption by
the Council of the report of the Examination Committee; a list of
successful candidates shall be published in the official Gazette.

(3) Every candidate shall also be individually informed of his result.

118. Failure of candidates at examinations.- (1)
*
Omitted

(2) A candidate shall retain a pass in a paper(s) or part(s) of a paper(s)
under the Modular scheme of examinations as the Council may
determine from time to time.

*(3) A candidate shall be allowed a certain maximum number of
attempts and time limit for qualifying any examination of the
Institute. The number of attempts and time limit shall be as
specified by the Council.

119. Examination Certificates.- Every candidate passing or obtaining
exemption from any examination of the Institute shall be furnished with a
certificate to that effect, in the form to be specified by the Council and
such certificate shall be signed by the President and the Secretary.

ENTRANCE EXAMINATION

120. Admission to Pre-entry Proficiency or Aptitude test.- A candidate
seeking admission to Pre-entry Proficiency or Aptitude Test of the
Institute shall be required to fulfill such conditions as may be specified by
the Council from time to time.

*
S.R.O. 21 (KE)/2010, Part-II, Extra-ordinary Gazette of Pakistan dated 26.02.2010.
96


FOUNDATION AND INTERMEDIATE EXAMINATIONS

121. Admission to Foundation Examinations.- No person shall be admitted
to Foundation Examinations, unless he has passed or obtained exemption
from Pre-entry Proficiency Test subject to Exemption Policy and
fulfillment of eligibility conditions as laid down by the Council from time
to time.

122. Admission to Intermediate Examinations.- No person shall be admitted
to Intermediate Examinations unless he has passed or obtained exemption
from the Foundation Examinations subject to Exemption Policy and
fulfillment of eligibility conditions as laid down by the Council from time
to time.

*
122A Direct Admission to Foundation and Intermediate Examination.-
Notwithstanding anything contained in bye-laws 121 and 122, a person
who has completed or is undertaking degree program from a specified
degree awarding institute, may be admitted to any examination of
Foundation and Intermediate and may take up examinations of Modules A
to D in any order he may consider appropriate.

123. Exemption Policy.- The Council may, in accordance with its policies,
consider requests for exemption or credits from candidates who have
passed certain examinations of other recognized accountancy bodies or
recognized educational institutions, for appearing in Pre-entry Proficiency
Test or examinations as a whole or part thereof and allow such exemption
or credits from papers of examinations subject to such conditions as the
Council may determine.

FINAL OR PROFESSIONAL EXAMINATIONS

124. Admission to Final or Professional examinations.- (1) No person shall
be admitted to Module E of Final Examination, unless:-

(a) *he has passed or has obtained exemption from all examinations
up to Intermediate level or equivalent thereto: and;


*
S.R.O. 21 (KE)/2010, Part-II, Extra-ordinary Gazette of Pakistan dated 26.02.2010.

97
(b) he has completed such period of training as a student as
determined by the Council.

(c)
*
Omitted

(2) No person shall be admitted to Module F of Final Examination
unless-

(a) *he has passed or has obtained exemption from Module E
of Final Examination or examination equivalent thereto or
has cleared all papers except one of Module E of Final
Examination; and

(b) *he has at least completed twenty-four months of the
period of training as a student on the first day of the month
in which the examination is held:

Provided that if a candidate who has passed, from outside Pakistan,
any examination of the accounting bodies, the examinations of
which have been recognized by the Council as equivalent to a part
of the Final Examination prescribed under these bye-laws, he shall
be admitted to the Final Examination in the manner specified by
the Council.

125. Certificate of service and fitness.- Every student desiring to present
himself for any examination for first time shall produce to the
Examination Committee a certificate from his
**
training organization to
the effect that he is a fit and proper person to be admitted to the
examination and the specific period of training which has been duly
completed by him.


*
S.R.O. 21 (KE)/2010, Part-II, Extra-ordinary Gazette of Pakistan dated 26.02.2010.
**
S.R.O.12(KE)/2006 dated 27.01.2006, Part-II, Extra-ordinary Gazette of Pakistan dated 04.02.2006.
98
CHAPTER X

MISCELLANEOUS

126. Finances.- (1) All moneys received by the Institute shall be paid into an
account of the Institute at its bankers and cheques drawn upon its bankers
shall be signed by two members of the Council or by a member of the
Council and the Secretary or the persons authorized to sign cheques shall
have been named by a resolution of the Council.

(2) The funds of the Institute shall be employed for such purposes as
may from time to time be sanctioned by the Council and all funds
not needed immediately for the ordinary purposes of the Institute
may be invested by the Council in any government security or
securities or in any other security or securities approved by the
Federal Government.

(3) The Council may from time to time borrow from a scheduled bank
or from the Federal Government any money required for meeting
its liabilities on capital account or for the purpose of meeting
current liabilities pending the receipt of income.

(4) The Council shall keep proper accounts of all income and
expenditure and have the annual account duly audited.

(5) A copy of the audited accounts and the report of the Council for
that year shall be forwarded to the Federal Government as soon as
practicable after its adoption at the annual meeting of the Institute.

127. Audit of accounts of the Institute.- (1) The members at each annual
meeting shall appoint two auditors who shall be members in practice at
such remuneration, if any, as the meeting may determine:


*
Provided that the members shall only be eligible for appointment
if they are engaged in a firm of Chartered Accountants holding
satisfactory Quality Control Review rating by the Institute.


*
SRO 44(KE)/2013 dated J uly 23, 2013 published in the Gazette of Pakistan (Extraordinary) – J uly 26, 2013.


99
(2) No member of the Council or a member who is in partnership with
such a member shall be eligible for appointment as auditor.

(3) In the event of any vacancy, occurring in the office of auditor
between two annual meetings or in the event of a vacancy not
being filled at an annual meeting, the said vacancy may be filled
by the Council at a meeting summoned with notice of the object:

Provided that during such vacancy the continuing auditor may act
alone.

(4) The auditors shall hold office until the next annual meeting but
shall be eligible for re-appointment.

(5) The auditors shall be nominated by two members of the Institute
and such nomination shall be signed by the members nominating
and by the candidate, and must reach the office of the Institute at
least ten days before the annual meeting.

(6) The auditors who are in office shall be deemed to be nominated at
each annual meeting unless they have intimated in writing to the
Secretary their desire not to be re-elected.

(7) Notice shall be given to members and especially to the retiring
auditors of the names of all other persons nominated for
appointment.

128. Powers and duties of the President and Vice-President or Vice-
Presidents.- (1) The President shall exercise such powers and perform
such duties as are contained in the provisions of the Ordinance and these
bye-laws and as may be delegated by the Council or entrusted by the
Standing Committees from time to time.

(2) The President or a Vice-President may direct any business to be
brought before the Council or the Standing Committees for
consideration.

(3) If the Office of the President is vacant or if the President for any
reason is unable to exercise the powers or perform the duties of his
office the Vice-President or one of the Vice-Presidents shall act in
his place and shall exercise the powers and perform the duties of
the President.

100
129. Powers and duties of the Secretary.- (1) Subject to the provisions of the
Ordinance and these bye-laws and under the general supervision of the
President, the Council and the Standing Committees concerned, the
Secretary shall be incharge and administrative head of the office of the
Institute.

(2) In particular and without prejudice to the generality of the
foregoing power, the powers and duties of the Secretary shall
include:

(i) the management of the office of the Institute and attending
to all correspondence and other matters relating to it;

(ii) enrolment of associates, admission as fellows, removal
from the membership owing to death, restoration of
membership, issuing notifications therefor and the signing
of notifications on behalf of the Council;

(iii) sanctioning and renewing of certificates of practice for
associates and fellows and cancelling of certificates of
practice at the request of members;

(iv) maintenance of all the Registers, documents and forms as
required by the Ordinance and these bye-laws;

(v) the management of all the property of the Institute;

(vi) incurring revenue and capital expenditure within the limits
sanctioned by the Council or the Standing Committees,
receive moneys due to the Institute and issue receipts
therefor’ pay staff salaries and allowances’ maintain or
cause to be maintained proper accounts and deliver the
books of accounts and information to the Institute’s
auditors appointed by the Council for the purpose of audit
of the accounts of the Institute;

(vii) exercising of disciplinary control over the staff except
dismissal which should have the sanction of the President;

(viii) admitting candidates to the examinations held under these
bye-laws and making all necessary arrangements for the
conduct of examinations;


101
(ix) refunding or transferring of fees received in accordance with
these bye-laws for the examinations, enrolment, issue of
certificates of practice and allied matters;

(x) registering and noting of suspensions, cancellations and
terminations of studentship;

(xi) appointing solicitors or advocates and filling papers,
swearing affidavits and subscribing to plaints, writs and other
documents for court purpose;

(xii) taking all steps necessary for proper conduct of elections; and

(xiii) performing such other duties and functions as are incidental
and ancillary to, and may be required for the performance of,
the above duties and exercising such other power as may be
delegated by the President, the Council or the Committees
from time to time.

129A.
*
Power to issue directives.- The Council or any Standing Committee
constituted under bye-law 72, may issue directives, from time to time, to
the members and students on professional matters.

130. Indemnity.- (1) The members of the Council, officers and auditors shall
be indemnified by the Institute from all losses and expenses incurred by
them in the discharge of their respective duties, except such as happen
from their own respective willful default or in the case of an auditor from
his own negligence or willful default or that of the partner or employee of
such auditor.

(2) No member of the Council, officer or auditor shall be liable for
default of any other member or members of the Council, officers or
auditors, or for signing any receipt or document, or for any act of
conformity, or for any loss or expense happening to the Institute,
unless the same happens from his own willful default, or in the
case of an auditor from his own negligence or willful default or
that of any partner or employee of such auditor.

131. Constitution of students’ associations.- (1) The Council may constitute a
students’ association in each Regional constituency as and when it deems

*
SRO 22(KE)/2004 dated December 31, 2003 published in the Gazette of Pakistan (Extraordinary) – J anuary 16, 2004.
102
fit and may frame rules laying down the conditions, functions and duties
of such associations and such rules shall be notified in the official Gazette:

Provided that a students’ association constituted under the Chartered
Accountants Bye-Laws, 1961, shall be construed to have been constituted
under these bye-laws.

(2) Any person who is admitted as a student shall become a member of
the students’ association of his Region on payment of such fees, as
may be prescribed, with his application for registration of his
training contract.

(3) The amount so collected shall be transferred to the respective
students’ association and the Council may, in addition, give such
financial grants to the students’ associations as may be decided by
it from time to time.

(4) No student shall become a member of, or associate himself, with,
any other students’ association, by whatever name called, parallel
to the one constituted under these bye-laws.

132. Method of payment of fees.- All fees prescribed under these bye-laws,
shall be paid to the Institute in such manner as the Council may direct.

133. Publication of list of members.- (1) The Council shall publish the list of
members required under sub-section (3) of section 18 in any manner it
thinks fit and may distinguish between the associates and fellows in
practice and between the associates and fellows not in practice.

(2) Such publication shall be supplied to members and other
gratuitously or at such price as the Council may from time to time
determine.

134. Custody and use of Common Seal.- (1) The Common Seal shall be kept
in such custody as the Council may from time to time determine.

(2) The Common Seal shall not be affixed to any instrument except by
order of the Council and every such instrument shall be signed by
the President or two members of the Council and by the Secretary.

103


135. Other functions of chartered accountants in practice.- Without
prejudice to the discretion vested in the Council in this behalf, a chartered
accountant in practice may act as a liquidator, trustee, executor,
administrator, arbitrator, receiver, advisor or a representative for costing,
financial, company law and taxation matters or may take up an
appointment that may be made by Federal Government or Provincial
Government and Courts of law or any other Authority established under
any law, or may act as Secretary in his professional capacity not being a
whole-time salaried employee.

136. Location of the office of the Institute.- The head-quarters of the Institute
shall be located at Karachi or such other place as the Council may decide.

137. Power to remove difficulties.- (1) If any difficulty arises in giving effect
to the provisions of these bye-laws, the Council may, by general or special
order, do anything not inconsistent with these provisions which appear to
it to be necessary or expedient for the purpose of removing the difficulty.

(2) In particular and without prejudice to the generality of the
foregoing power, any such order, may provide for continuing in
force such provisions of the Chartered Accountants Bye Laws,
1961, or such other provisions as conferred any right or privilege
or as imposed any obligation or liability.

138. Repeal of Chartered Accountants Bye-laws, 1961.- (1) The Chartered
Accountants Bye-Laws, 1961, are hereby repealed.

(2) Notwithstanding the repeal of the Chartered Accountants Bye-
Laws, 1961, any appointment, notification, order, election,
examination, result of an examinations, service as an articled or
audit clerk, made, issued, held, declared, rendered or any other
thing done under the repealed bye-laws, shall, so far as it is not
inconsistent with the provisions, of the bye-laws, be deemed to
have been made, issued, held, declared, rendered or done under the
provisions of these bye-laws unless and until it is superseded by
action taken in accordance with these bye-laws.
MEMBERS' HANDBOOK
PART IV
DIRECTIVES AND IMPORTANT DECISIONS OF
THE COUNCIL AND ITS COMMITTEES
THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN
MEMBERS' HANDBOOK

DIRECTIVES AND IMPORTANT DECISIONS

CONTENTS

Directive
No.
Particular
1. STUDENTS’ TRAINING, EDUCATION AND EXAMINATION
2. FOREIGN QUALIFICATIONS AND TRAINING
3. FEES AND SUBSCRIPTIONS
4. PRACTICES ADMINISTRATION AS CHARTERED ACCOUNTANTS
5. PRACTICE ADMINISTRATION AS MANAGEMENT CONSULTANTS
6. ETHICS
7. MEMBERS' CONDUCT-GENERALLY
8. CONTINUING PROFESSIONAL DEVELOPMENT (CPD)

MEMBERS' HANDBOOK
PART IV
1. STUDENTS’ TRAINING EDUCATION
AND EXAMINATIONS
THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN
SECTIONAL INDEX
1. STUDENTS TRAINING, EDUCATION AND EXAMINATIONS
CONTENTS
1.01 Filing of registration papers of students
1.02 Further Educational/Professional studies by trainee students
1.03
Requirement for permission to train students
(Training Regulations and Guidelines)
1.04
Coaching classes made compulsory for students
(Withdrawn)
1.05
Instructions to Principals - Terms and Conditions for
Trainee Students
1.06
Students prohibited from using description like C.A. (Inter),
C. A (CC), CA (Groups I & II) or any other description
1.07 Referral concession – appearance in all papers necessary
1.08
Minimum period of training to be served vis-à-vis
appearance at Intermediate Examination
1.09
Condition of enrolling trainee without passing Entrance
Exanimation deferred (Withdrawn)
1.10
Acceptance of application for admission to examinations with
late fee
1.11 Refund of Examination Fee (Withdrawn)
1.12
Council member's attendance at meeting considering
Examination results involving close relatives
1.13
Procedure on Termination of Students’ Training Contract
(Bye-Law 107 (1) of CA Bye-Laws 1983)
1.14
Notification on exemption to candidates who have passed
Examinations of ACCA, CIMA and ICMAP
1.15
Notification Regarding Directive 1.15 of the Council
(Exemption From Pre-Entry Proficiency Test)
SECTIONAL INDEX
1. STUDENTS TRAINING, EDUCATION AND XAMINATIONS
CONTENTS
1.16
Period of training
1.17 Minimum stipend rates
1.18
Exemptions available to graduates of Specified
Degree Awarding Institutes (SDAIs)
1.19 Declaration Of Specified Degree Awarding Institute(SDAI)

1.01
FILING OF REGISTRATION PAPERS OF STUDENTS

"After an
*
articled clerk is engaged he should be kept on probation for a period of
two months from the date of engagement. If he completes the probation period
successfully, his articles should be executed immediately and filed with the Institute
in terms of bye-law
**
68 of the C.A. Bye-Laws, 1961. The Process of execution and
filing of papers should be completed in such a way that the papers must reach the
Institute within one month of the date the articled clerk completed his probation
period."

(Institute's Circular No. 1/1/CA-68 dated March 9, 1968)

"Attention of principals is invited to bye-law **68 of the C. A. Bye-Laws, 1961 and
Council's directive dated March 9, 1968.

2. It has been observed that members entitled to train *articled clerks in certain
cases were found to be not complying with the provisions of the bye-laws
and the directive of the Council in respect of filling papers for registration of
articled/audit service.

3. In order to avoid delay in registration and the exchange of unnecessary
correspondence which results in hardship to the students, the principals are
advised to see the documents are complete in every respect and are
submitted to the Institute for registration within the stipulated time".

(Institute's Circular No. 6/12/CA-74 dated February 3, 1977)


*
Now designated as trainee student
**
New bye- law 99
1.02


FURTHER EDUCATIONAL/ PROFESSIONAL STUDIES BY TRAINEE
STUDENTS

It has been decided that trainee students wishing to continue or pursue further
educational/professional studies (pertaining to accounting and related disciplines) outside
the working hours of their Principal's, offices/business may do so, provided such
activities do not interfere with their training and prior permission of their Principals
has been obtained. The requirement for obtaining the Institute's permission in this
respect, as hitherto before, shall no longer to be necessary.

(It supersedes the directives issued on the subject in pursuance of meeting of
Examination Committee dated December 10, 1962 and Institute's Circular No.
6/2/CA-74 dated 13 June 1974).





(126th Meeting of the Council – April 14, 1998)
APRIL 2006
1.03
Training
Regulations and
Guidelines
CONTENTS PAGE Nos.
Training Guidelines
1. Short Title, Objective and Commencement
2. Interpretations
3. Competency Framework for Practical Experience
4. Transactional Arrangements
5. Application for Authorisation as Approved Training Organization
6. Appeal
Annexure A
(Work Experience Categories)
Training Guidelines
1. Overview
2. Development
3. Our Approach
4. Introductory Guidance
5. Monitoring, Counseling and Supervision
6. The Training Record System
7. Monitoring of a Training Organization by the Institute
8. Pooling of Resources and Secondment Arrangements
Annexure A
(Authorisation Process for Registration as Training Organization)
Annexure B
(Introduction and Explanation of Training Organization)
Appendix 1
(Training in Industrial, Commercial and other Suitable Organization)
Registration Forms
01
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1
ICAP Training Regulations
TRAINING REGULATIONS
1. SHORT TITLE, OBJECTIVE AND COMMENCEMENT
1.1 These Regulations shall be known as Training Regulations.
1.2 The aims and objects of these Regulations are to specify minimum requirements on work
experience / training of chartered accountancy Students.
1.3 These Regulations shall become effective from the date of publication through the Transitional
Arrangements as mentioned in Regulation 4.2.
2. INTERPRETATIONS
In these Regulations, unless there is anything repugnant in the subject context:
Approved Training (AT) means practical experience obtained by Students at or from
Training Organizations under these Regulations, and shall include instructions and
theoretical training imparted during the course of training;
Bye-Laws mean the Chartered Accountants Bye-Laws, 1983, as amended from time to
time;
Chairman means the Chairman of ETCOM;
ETCOM means the Education and Training Committee;
Committee means the ETCOM and shall include any sub-committee of ETCOM
constituted for regulating the training;
Competence means the ability to perform the task and roles to the standards reasonably
expected of a newly qualified chartered accountant by the Institute;
Consortium of Training Organizations (CTO) means a number of Training Organizations
which have grouped together, in furtherance of the objective to provide competence
based training in all key areas/competencies under a mutually agreed arrangement as
approved by the Committee;
Continuing Professional Development (CPD) means the learning activities for developing
and maintaining the capabilities of Members to perform competently within their
professional environments.
Council means the Council as defined under the Ordinance;
Counseling Person(s) mean(s) a person or persons responsible for counseling and
advising Students in a Training Organization on personal and professional developments;
who shall be a Member with up-to-date knowledge and adequate practical experience;
Desktop Review means the scrutiny and verification of the information about the
prospective training organization contained in the prescribed form for registration and
its annexure / attachments prior to authorization by the ETCOM.
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ICAP Training Regulations
Director means the director or any official appointed by the Council for education and
training of Students;
Guidelines mean the guidelines for the implementation of the Training Regulations,
evolved and issued by the Council, as may be amended or substituted from time to time;
Institute means the Institute of Chartered Accountants of Pakistan;
Member means a person whose name appears in the Register of Members of the Institute;
Member in Practice means a Member in Practice as defined under the Bye-Laws;
Member Responsible for Training (MRT) means a Member Responsible for Training
as defined under the Bye-Laws to be appointed by a Training Organization for each
Training Office;
Ordinance means the Chartered Accountants Ordinance, 1961;
Supervisor(s) mean(s) a Member or Members in a Training Organization designated for
supervising Students;
Student means a Student as defined under the Ordinance;
Training Office(s) mean(s) an office or offices designated as such within a Training
Organization;
Training Organization (TO) means a Training Organization as defined under the Bye-
Laws.
Note: Wherever the word “he” appears in these Regulations it shall include “she” the word
“his” shall include “her” and the word “him” shall include “her” as and how the context
so permits.
3. COMPETENCY FRAMEWORK FOR PRACTICAL EXPERIENCE
3.1 Prerequisites for Authorisation of Training Organization
An Organization shall be authorized as a Training Organization (TO) if it meets with the
under-mentioned criteria:
a. it is an Organization of Members operating in Pakistan or in any other country
approved by the Council;
b. it satisfies such conditions as the Committee may determine from time to time;
c. it pays to the Institute the authorisation fee for becoming a Training Organization
as prescribed by the Council from time to time;
d. it has a minimum of 25 audits of which 15 must be limited companies with a
minimum paid up capital aggregating to at least Rs 15 million;
e. the Training Organization has at least one Member with a minimum post qualification
experience of three years as a Member in Practice or four years in other disciplines;
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ICAP Training Regulations
f. the MRT, the partner(s), the Counseling Person(s) and the Supervisor(s) are in the
opinion of the Committee abreast with professional matters to impart adequate
training;
g.* the entitlement to train students will be worked out in accordance with the Bye-
Law 104 and 105.
h. the Training Organization agrees to monitoring visits by the Institute’s consultants
and to implement recommendations resulting from such visits;
i. the Training Organization nominates a Member Responsible for Training (MRT)
for each Training Office; and
j. an MRT shall be based at the Training Organization and at each pertinent Training
Office and:
shall be a Member who is a sole practitioner or a partner in the Training
Organization;
shall have knowledge of the Institute’s schemes of education, guidelines on
Training Regulations, Training Regulations, code of ethics guidelines,
professional and technical issues relating to training and other areas;
shall have adequate knowledge of the Ordinance, the Bye-Laws, the Regulations,
the Guidelines and the directives issued by the Council from time to time on
training and shall undertake to comply with the same;
shall have the ability to advise, counsel, evaluate, motivate and provide
direction to Students;
shall have the ability to assume the responsibility of ensuring that six monthly
evaluations are made and a final evaluation based on the written submissions
as recorded in the half yearly form and possibly supported by oral submissions
is made; and
shall have the ability to assume the responsibility of maintenance of the
records strictly as prescribed in these Regulations and/or the Guidelines, or
otherwise as may be directed by the Committee from time to time.
-
-
-
-
-
-
In case the Training Organization falls short of the required authorisation criteria at any time,
the MRT shall forthwith inform the Committee for appropriate guidance towards remedial
measures.
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** Bye-Law 104 Maximum number of students to be trained by a training
organization:-
(1) Omitted
(2) Each training organization shall be authorized to engage up to a maximum of ten students
per partner.
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ICAP Training Regulations
1.03
Provided that if a partner is also a fellow member of the Institute, he may train five
additional students.
(3) In case a member is a partner more than one training organization, his entitlement of
students shall be divided amongst such training organizations according to his advice
or, in the absence of any such advice, shall be divided equally amongst such training
organizations after rounding off the fractional entitlements appropriately., and
(4) The Council may in special circumstances, allow training of students in excess of the
entitlements computed clauses (2) and (3) and in bye-law 105.
Bye-Law 105 Permission to training additional students._ A training organization may,
in addition to number of students permitted under bye-law 104, engage ten extra students
for each member employed on full-time basis in its service.
Bye-Law 105 Permission to training additional students. A training organization
may, in addition to number of students permitted under bye-law
104, engage ten extra students for each member employed on full-
time basis in its service.
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ICAP Training Regulations
3.2 Responsibilities of a Training Organization towards Students
a. A Training Organization shall provide all facilities for meeting the requirements
of on-the-job training and practical experience of the Students as mentioned in
these Regulations.
b. A Training Organization shall monitor the training provided to the Students, and
shall supervise and appraise the progress and competence of the Students periodically.
In particular, before issuing the certificate of fitness to a Student for sitting in the
Institute's examinations as required under the Bye-Laws, the Training Organization
shall refer to his periodic assessments made upto that time. At the end of the training
period, the Training Organization will issue a certificate of completion of training
based on a summary of the Students’ periodical assessments and the training
records.
c. The Students shall be provided necessary guidance so that they may achieve the
expected standards required for passing examinations of the Institute.
d. As far as practicable, overtime work by Students should be avoided / minimized
so as to allow them adequate time for studies. However, where overtime work is
unavoidable, the Students shall be suitably compensated or given time off in lieu
of overtime worked provided the requirements of standard working hours as
determined by the Committee are met.
e. The Students shall be provided paid leave, within the prescribed entitlement (under
Bye- Law 106), and such fee may be reimbursed for structured course(s) and study
material as may be decided by the Council.
f. The Students shall be paid stipend and the amount will not be less than that
determined by the Council from time to time.
3.3 Responsibilities of Students to Training Organizations
The Student is required to carry out work related to gaining professional experience at
his Training Organization and at other locations as required by his Training Organization
and shall:
a. serve the Training Organization in accordance with the terms of his Training
Contract;
b. participate in educational programmes as required by the Institute and the Training
Organization;
c. observe and uphold the ethical and professional standards of the Institute and the
Training Organization; integrity being the hallmark of the profession and the
Student shall be expected at all times to religiously uphold this attribute;
d. provide promptly and willingly all possible information and assistance when asked
to do so by the Institute;
e. properly carry out the duties lawfully assigned by the Training Organization and
diligently pursue his studies for the Institute’s examinations;
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ICAP Training Regulations
f. maintain strict confidentiality in respect of all information and affairs of the Training
Organization and its clients, including the names and the nature of the business of
such clients;
g. not engage in any other business, occupation or vocation;
h. regularly maintain records of Approved Training in such forms as may be required
by these Regulations; and
i. meet minimum standards expected by the Training Organization and make up for
the deficiencies, if any, as may be pointed out in the periodical evaluation.
j. not indulge in political activities of any nature.
k. not indulge in any activities which may be considered as an offence of moral
turpitude or bring a bad name to his Training Organization and/or to the Institute.
3.4 Training Areas, Period and its Phasing
a. The period of training shall be determined in accordance with Student’s qualification
at the time of entry, as prescribed by the Council from time to time.
b. As the period of practical training is limited, the training programme shall be
formulated to ensure that the Student progressively and in distinct phases receives
the necessary instructions and experience in all of the key areas and competencies
he is required to acquire.
c. In case the Student continues to be assessed negatively and is found guilty of
misdemeanor/misconduct as per Bye-Law 107(1), the Training Organization may
terminate the Training Contract. An appeal shall lie to the Council against such
termination in the manner provided in Bye-Law 107 (2).
d. Key areas covered under total training shall be categorised as under:
- Technical work experience
- Other approved training
These are elaborated in Annexure A of these Regulations. These shall be kept under a periodic
review by the Training Organization and the Institute, so as to ensure that the competencies required
and the experience gained therein are relevant and appropriate.
e. The technical work experience shall include:
- Audit and assurance Core
- Accounting and Financial Reporting Core
- Taxation Core
- Financial Management and
Corporate Services Others
- Information Technology
}
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f. The categorisation of work experience mentioned in para (e) may not be considered
rigid as it is not unlikely that work of a particular category may overlap with other
areas. [For instance, work experience in the area of accounting, auditing, financial
reporting and IT applications may not be distinguishable as, in actual practice,
these areas are quite inseparable from each other and shall be apportioned
appropriately].
g. Calculation of Standard Working hours and categorisation shall be as under:
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ICAP Training Regulations
Standard working hours * Period of Training
Total number of days
Weekends (Sundays)
Gazetted & other Holidays (14 days/year)
Leave as per Bye-Law 106
Less : Sundays considered above
Standard working days
Standard No of hours (40 hours/week)
Rounded off
3 years 3½ years 4 years 5 years
Categorisation * Period of Training
Core
3 years 3½ years 4 years 5 years
1095
156
42
1277
182
49
1460
208
56
1825
260
70
130
018
130
018
180
025
180
025
112
785
112
934
155
1041
155
1340
5230 6230 6940 8930
5200 6200 6900 8900
- Audit & assurance
- Accounting & Financial Reporting
- Taxation
Aggregate
Others
- Financial Management &
Corporate Services
- Information Technology
- Other approved training
Aggregate
Secondment & Exchange Programme
Standard Working Hours
3100 3700 4100 5400
2100 2500 2800 3500
5200 6200 6900 8900
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ICAP Training Regulations
- Record keeping shall be in terms of hours only.
- Overtime hours shall not be counted towards completion of training period.
- It is recommended that 40% of the total standard working hours shall be spent by
the Student on audit and assurance, 10% on Accounting & Financial Reporting and
10% on taxation work. The balance of 40% training time may be flexible and can
be allocated towards “core” or “others” according to availability of work in Training
Organization.
- Secondment in industry shall be for a maximum period of one year. Hours of relevant
experience acquired shall be allocated according to work performed. Where 180
days study leave shall be applicable, proportionate adjustment may be made in time
allocation.
4. TRANSITIONAL ARRANGEMENTS
4.1 Implementation of Training Regulations by Training Organizations
a. These Regulations shall come into force from the date of their publication and
shall be implemented in various phases, through transitional arrangements, as
mentioned hereafter.
b. All new applicants for authorisation as Training Organization on and after publication
of these Regulations shall follow the registration process given in Regulation 5
hereafter.
c. All existing firms who are entitled to train Students shall be required to meet the
criteria set forth in these Regulations within the time frame mentioned in para 4.2
hereafter.
4.2 Transitional Arrangements for Existing Firms conducting Training of Students
a. All existing firms of 10 partners and above who are currently conducting training
of Students shall fully implement these Regulations within a period of six months
from the date of the publication of these Regulations.
b. All existing firms of 5 to 9 partners who are currently conducting training of
Students shall fully implement these Regulations within a period of one year from
the date of the publication of these Regulations.
c. All existing firms of 4 partners and below who are currently conducting training
of Students shall fully implement these Regulations within a period of two years
from the date of the publication of these Regulations.
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ICAP Training Regulations
4.3 General Provisions for Transition
Application for Registration as Training Organization
a. An existing firm with 10 or or more partners shall apply for authorisation as a
Training Organization within a period of thirty days from the date of publication
of these Regulations; an existing firm with five to nine partners shall apply for
authorisation as a Training Organization within a period of six months from the
date of publication of these Regulations and an existing firm with four or less
number of partners shall apply for authorisation as a Training Organization within
a period of one year from the date of publication of these Regulations.
b. An application to be submitted by an existing firm under para (a) above shall be
on the duly prescribed form to be completed and accompanied by the requisite
documents.
c. Provisional authorization by the ETCOM upon receipt of such application may be
accorded upon a Desktop Review.
d. Final authorisation for Training Organization by the ETCOM shall be based on
appraisal, subsequently conducted, where considered necessary.
e. In case an existing firm meets with the criteria for authorisation as Training
Organization, the ETCOM shall issue the requisite authorisation in writing. In case
an existing firm does not in the opinion of the ETCOM meet with the criteria for
authorisation as Training Organization, the ETCOM shall communicate the
shortcomings to such firm and give such firm the opportunity of being heard. The
final decision of the ETCOM shall be communicated to such firm in writing.
f. An existing firm which fails to apply for authorisation as a Training Organization
within the applicable period prescribed in para 4.3 (a) above, or according to the
decision of the ETCOM, does not meet with the criteria, as mentioned in para
4.3(e) above, shall cease to train any new Students (other than the existing Students
already registered with such firm for completion of the remainder of their training
period of not more than six months) and the existing permission to train any further
Students in the name(s) of its Principal(s) shall stand withdrawn.
4.4 Transitional Arrangements for existing Students
a. Existing Students in provisionally approved Training Organizations shall continue
their training in such Training Organizations under existing arrangements till
completion of their respective training periods.
b. In case a provisionally approved Training Organization is not finally authorised
or any existing practicing firm does not apply for authorisation, its Students whose
remaining training contract is over six months shall join any other approved Training
Organization. Students with less than six months period for completion shall
continue training with their respective Principals, as mentioned in para 4.3(f) above.
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ICAP Training Regulations
c. Existing firms who are in the process of becoming compliant with the Training
Organization criteria prescribed under these Regulations, as well as those firms
who do not apply for Training Organization status shall maintain training records
as per these regulations in respect of their Students.
------------ xxxxxxxxxxxxxxxxxxx ------------
5. APPLICATION FOR AUTHORISATION AS TRAINING Organization
5.1 A prospective applicant for authorisation as Training Organization (Prospective
Training Organization) may apply to the Education and Training Committee
(ETCOM) and submit the prescribed application form along with all requisite
documents and information.
5.2 The application for authorisation by a Prospective Training Organization may at
the discretion of the ETCOM be accepted, accepted conditionally or rejected.
Provided that an application shall not be rejected unless the applicant has been
given a right to be heard by the ETCOM.
6. APPEAL
6.1 If an existing firm is dissatisfied or aggrieved by the decision of the ETCOM under
Regulation 4.3(e), it may prefer an Appeal before the Council within a period of
not more than fifteen days from the date of communication of such decision to
such existing firm. The decision of the Council shall be final.
6.2 If a Prospective Training Organization is dissatisfied or aggrieved by the decision
of the ETCOM under Regulation 5.2, it may prefer an Appeal before the Council
within a period of not more than fifteen days from the date of communication of
such decision to such existing firm. The decision of the Council shall be final.
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ICAP Annexure-A
WORK EXPERIENCE CATEGORIES
Total approved training should be categorised as follows:
a. Technical Work Experience
b. Other Approved Training
c. Secondment and Exchange Programme
TECHNICAL WORKS
EXPERIENCE
COMMON AREAS
OF ACTIVITY
EXAMPLES
Audit &
Assurance
External Audit
Internal Audit
Accounting
& Financial
Reporting
Taxation
n Planning, controlling, executing and documenting audit work
n Assessing adequacy of accounting systems
n Gathering and evaluating audit evidence
n Evaluating and testing internal controls
n Reviewing financial statements
n Applying Auditing Standards and Guidelines
n Compliance with regulatory requirements
n Drafting audit and similar reports
n Forensic accounting
n Use of I.T. in any of the above
n Recording financial transactions
n Preparing financial statements including consolidations
n Applying Financial Reporting Standards, Companies Ordinance,
Listing regulations and other requirements to financial statements
n Analyzing and interpreting financial statements
n Preparing and reviewing budgets, comparison against performance,
profit and cash flow forecasts
n Designing and implementing management accounting, information
and control systems
n Use of IT in any of the above.
n Analysis of income, expenditure and other relevant data
n Preparation of personal and corporate tax returns and computations
n Preparation of returns and administration of GST and other Excise
Duties
n Communication with tax authorities
n Other work to ensure compliance with statutory tax obligations
n Tax planning reviews
n Back duty/in-depth investigations
n Use of I.T. in any of the above
Financial Accounting
Cost & Management Accounting
Corporate tax compliance
Personal tax compliance
Tax planning and advising
GST
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ICAP Annexure-A
Time spent will be allocated in rel evant category of t echnical &
other work experience.
Financial
Management
and
Corporate
Services
Information
Technology
OTHER APPROVED
TRAINING
SECONDMENT &
EXCHANGE PROGRAMME
Treasury
Project appraisal
Resource management
Company secretarial practices
Corporate finance
Corporate advisory services
Management Information
Systems
IT Strategy and Management
Security Control and
Management
Role of Manager
n Education and Professional Development
n Administrative work
n Other time spent in a training contract not recorded elsewhere
n Business Information Systems and their Management
n Information Systems Control Competencies
n Computer Assisted Audit Techniques
n IT Strategy and planning for business
n Implementation of IT Solutions
n Disaster and recovery planning
n Evaluating investment proposals
n Recommending appropriate sources of finance
n Management of borrowings, cash and other liquid resources
n Analyzing and interpreting financial statements
n Foreign exchange transactions
n Formulating corporate structures and business plans
n Investigation and due diligence
n Preparing investigation reports/circulars
n Preparation and submission of Forms, Returns
n Business and General Management
n Use of I.T. in any of the above
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1. OVERVIEW
The Chartered Accountancy qualification is a premier accounting qualification introduced under
the Chartered Accountants Ordinance, 1961. The Institute of Chartered Accountants of Pakistan
(hereinafter referred to as the ‘Institute’) was established in the year 1961 as a statutory
autonomous body to regulate the profession of chartered accountancy. In addition to regulating
the profession, granting membership and conducting examinations, one of the main functions
of the Institute is to facilitate education and training of prospective chartered accountants and
continuing professional development of its Members. This qualification has a unique characteristic
of imparting theoretical education and practical training simultaneously. The principal purpose
in developing these regulations is to provide the Members / Training Organizations a complete
and updated system to conform to international standards and best practices for imparting
professional education and training especially instilling a commitment to life-long learning.
2. DEVELOPMENTS
The accounting profession faces unprecedented environmental forces that emphasize the need
for appropriate and relevant professional experience for Members. These forces include the
globalisation of business, rapid development and implementation of new information technology
and expansion of services provided by accountants. In view of these forces and trends, it is
important that future Members of the profession acquire relevant professional education and
competence based practical experience to allow them to work more effectively in the rapidly
changing working environment.
Practical training is a blend of in-depth knowledge and experience of practical aspects of the
education a chartered accountant receives. Further, a chartered accountant is expected to
inculcate a professional attitude and develop interpersonal skills.
Most worldwide professional bodies have formalised and redesigned their training requirements
to recognise the importance of training and practical experience provided to professional
accountants.
3. OUR APPROACH
The Institute has kept pace with developments in professional education and its policies have
generally been consistent with that of other accountancy bodies. In order to further strengthen
the aspects of gaining practical experience, Training Regulations have been devised. Training
Regulations generally cover the requirements as stipulated in International Education Standard
(IES 5) – “Practical Experience Requirement”, however, Training Organizations and their
Members Responsible for Training are advised to refer to IES 5, other relevant standards,
pronouncements and guidelines of IFAC for further details.
Training Regulations are designed to ensure that future Members acquire skills and values
necessary for responding to the dynamics of the profession. This includes introduction of
redefined scope and responsibility for both Students and Members. Training Regulations cover
the training that should be imparted to Students registered for the chartered accountancy
qualification. The Training Regulations intend to balance exposure of Students to work within
the professional practice as well as outside the Training Organization with the additional features
of interpersonal and professional skills development.
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ICAP Training Guidelines
TRAINING GUIDELINES
1.03
In view of the foregoing Training Regulations address the following:
- Advising Members in practice of their obligations and responsibilities towards their
Students
- Prescribing the responsibilities of Students including the role they are expected to play
in the professional functions of the Organization and matters relating to the Institute
- Endeavoring that the Students receive proper, planned and coordinated training, structured
in such a way that there is a blend of work experience and theoretical education
- Suggesting nature and scope of practical training and formulating regulations specifying
technical content and progression in a systematic and structured manner
- Identifying and laying down duties of a Member Responsible for Training (MRT) for
imparting adequate practical and theoretical training to Student at the Training Organization
- Covering different aspects of training outside the Training Organization such as training
in industry, secondment and exchange programme
- Prescribing format of Students' Training Records to be maintained by all Training
Organizations
- Prescribing suitable formats for recording and review.
- Prescribing methodology for appraisal of Training Organizations and their regular
monitoring
- This provision would increase the quota of Students for Small and Medium Practices
(SMPs).
4. INTRODUCTORY GUIDANCE
4.1 Training Programme
Training Organizations would make arrangements to implement a training programme
for their Students. An ideal training programme would include:
a. Acquisition of knowledge
To enhance the understanding and knowledge of the Student in the core and other
disciplines, organization, functioning of business and inculcate the attitude of life-
long learning.
b. Development of skills by applying theoretical knowledge to practical situations
The practical training should encompass sufficient range and depth of work
experience providing opportunity to the Student, by participation in activities
performed by professional accountant and imparting necessary skills to apply
theoretical knowledge to practical problems faced by the Student. It shall make
the Student aware of the environment in which services will be provided to the
clients and prepare them for the same.
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ICAP Training Guidelines
1.03
c. Information Technology skills
The training programme should encourage the Student to make maximum use of
computers to achieve skills and proficiency in Information Technology.
d. Disciplined attitude and professional orientation
Practical training scheme should also have the effect of disciplining and conditioning
the mind of the Student so that he gets attuned to the work environment and learns
the virtues of patience and methodical work. Apart from independence and integrity,
training must imbibe professional orientation towards clients, social consciousness
and the attitude of life-long learning. Development of skills to communicate
effectively with the client and third parties is an essential part of the training
programme.
e. Developing ethical values and attitudes
Practical training should help the student to develop appropriate ethical values and
attitudes expected of a professional accountant in performance of his work.
4.2 Following features in a training programme are expected to make the practical experience
more effective and meaningful:
a. It is preferable to assign all aspects of the work to a Student in progressive stages
rather than small portions of unrelated jobs. The assignment should be discussed
with the Student in advance and he should be informed about the nature of the
client's business, the general economic conditions in which the client operates and
special features, if any, regarding the assignment. The following steps may be taken
in this direction:
- Ensuring that before undertaking the work, the Student is advised of the
objectivesof the task and receives the knowledge, skill and understanding
required to performthe work effectively.
- As a normal part of the supervisory process provi ding necessary
explanat ion, instructions or correction during the work.
- Clarifying relevant issues during the review of completed work.
b. For maximum benefit, it is recommended that the review of working papers should
be conducted in the presence of the Student, and additional work or inquiry should
be assigned to the same Student. It needs little emphasis that practical experience
should not be confined to particular areas of work, but should cover all aspects in
which he / she is required to acquire experience.
c. Review of the Student’s work on a continuous basis would ensure that work
performed by the Student is of requisite standard. Deficiencies in the work experience,
if any, can be taken care of while allocating subsequent assignments. MRT is to
ensure that Students are rotated on various jobs / client assignments. Such a review
would also assist the MRT in subsequent completion of training records and
evaluation of the Student’s performance.
Arrangement for pooling of resources amongst Training Organizations or secondments to
industry or other suitable organizations are being encouraged to make up any deficiencies in
training and to expose the Student to multidisciplinary work and to a variety of business
situations.
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ICAP Training Guidelines
1.03
4.3 Training Organizations
a. The MRT represents an important link between the Student and the Institute.
Further, in order to complete the whole process of implementation of Training
Regulations and achieve the required results, the Institute has laid down some
benchmarks for MRT in a Training Organization as described in Training Regulations.
b. A Training Organization would also nominate Counseling Person(s) and Training
Supervisor(s) for effective conduct of training functions in its offices. Where the
incharge of a Training Office in a Training Organization is a Member other than
a partner in that Training Organization, that Member shall be designated as a
Counseling Person or Supervisor who shall report to that Training Organization’s
nominated MRT.
c. The Committee will nominate Authorisation Sub-Committee to evaluate an applicant
for functioning as a Training Organization. The Sub-Committee may appoint an
Appraisal Consultant for this purpose, where so required. The Institute will extend
appropriate advice if requested by the applicants who are encouraged to seek such
assistance. The authorisation process for Appraisal as an approved Training
Organization is set out in Annexure A.
d. Appraisal / Monitoring of the Training Organization may be outsourced to consultants
or ICAP representatives may be deputed for these tasks.
e. The Committee shall give or withhold approval to organizations applying to become
or to remain Training Organizations. The authorisation process should not take
more than 4 months from the date of receipt of application, provided all conditions
are met.
f. In order to assist in the transition, provisions may be made for, as approved by the
Council, for existing firms conducting training.
g. The existing arrangements for training will continue so far as the Students already
under training are concerned; however, their inclusion under the new scheme for
the purpose of maintaining their training records is encouraged.
4.4 Theoretical Training by a Training Organization
Theoretical training programme should include the following:
a. An induction course for new Students introducing them to the structure and
practices of the Training Organization/Training Office(s), training records to be
maintained, requirements regarding professional attitude and ethical standards,
general behaviour, office discipline and dealing with client personnel and third
parties;
b. Periodic courses, whether conducted in-house or formal courses organised outside
the Training Organization at appropriate responsibility levels may include:
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ICAP Training Guidelines
1.03
· Preparation of statutory accounts
· Analytical review of accounts
· Preparation of working papers
· Introduction of new auditing and accounting standards or major changes in these
standards or in relevant local laws, pronouncements or practices with emphasis on
practical areas
· Introduction of continuing developments in the auditing techniques to ensure
efficiency in planning, execution and finalisation of audit assignments Overall
project management skills emphasising basic supervisory, communication and
presentation skills
· Interaction and usage of computer information system and hands-on computer
training
· Flow-charting of internal control systems, etc
In-house theoretical training may be carried out by Training Organization or jointly by
a consortium of Training Organizations. The Institute would help by holding classes
from time to time for theoretical / simulated training.
4.5 Personal and Professional Development
In addition to the technical knowledge, the Students should develop the following work
competencies, which are elaborated in subsequent passage:
- Skills for overall management of assignments
- Communication, presentation and interpersonal skills
- Commercial awareness
- Business management skills
- Professional ethics, values and attitudes
Above skills and attitudes are essential for the Students to achieve maturity and experience
while performing their work. These should be introduced among the Students through
induction courses and subsequently developed through in-house training. MRT should
be aware of the need to identify and explain matters relating to these competencies as
they arise during the normal work of the Training Organization. Special emphasis should
be placed on group discussions and presentations by the Student.
The MRT should facilitate the understanding of the Institute’s ethical and technical
standards and also such matters as:
- Confidentiality of clients’ affairs
- Publicity and Advertising
- Obtaining professional work, etc
The MRT should monitor Students' understanding of and development in above skills
and attitude at each half yearly review.
The MRT is to encourage participation of Students in CPD activities.
17
ICAP Training Guidelines
1.03
5. MONITORING, COUNSELLING AND SUPERVISION
Throughout the training period, the Students' work must be properly managed, monitored and
supervised. Training management can be divided into three broad areas and roles:
18
ICAP Training Guidelines
Member responsible for training
Counseling person
Supervisor
Area of Responsibility Training Role
Management
Counseling
On the job supervision
Larger Training Organizations may have more than one individual in each role. Smaller
organizations may find that most, or all of the responsibilities, devolve upon the Member
Responsible for Training. In order to carry out above responsibilities a training record system
is put in place.
6. THE TRAINING RECORD SYSTEM
The effectiveness of the monitoring, counselling and supervisory arrangements relies absolutely
on full usage of the recording system described below. The focal point of both monitoring the
training and the training record system is a formal progress review which must be:
- undertaken at half yearly intervals; and
- based on an accurate record of the work undertaken, compiled over the previous six
months by the Student, and reliable written assessments of performance and progress in
the following main areas by the MRT:
· Technical knowledge and skills
· Personal and professional development
· Examination study and success
The aims of these arrangements are:
- to confirm that the Student is on course to meet the training requirements for membership
of the Institute; and
- to enable the MRT in providing the Student the prescribed certificate of completion of
work experience on successful completion of training period.
For achieving the above purposes Institute has developed the training records which are set out
in Annexure B. Students should maintain such records on a regular basis and Training
Organization shall ensure that such records are maintained and made available to representatives
of the Institute for monitoring of the Training Organization as mentioned in para 7.
1.03
7. MONITORING OF A TRAINING ORGANISATION BY THE INSTITUTE
The Institute would develop a standard software package and provide to Training Organizations
to facilitate maintenance of records. Formation of a Training Evaluation Committee would
be considered by the Institute once Training Regulations are up and running.
The Institute would monitor (at least once in three years) the approved Training Organizations
principally based on a review of records maintained by the Training Organization. In addition,
representatives / consultants as authorised by the Institute may visit the Training Organization
if the Training Organization is not fully in compliance with the criteria for Training Organization.
Initially only Desktop monitoring may be carried out based on prescribed returns. Subsequently
monitoring may be gradually made more effective. Visits and reviews would be constructive,
educative, reformative and comprise essentially of the following:
a. Ensuring that regulations and procedures relating to training are understood and complied
with.
b. Observation of training policies & procedures and related resources.
c. Checking of records of training programme; theoretical training and courses conducted
for professional development of skills.
d. Interviews with MRT and other partners (if any).
e. Interviews with Counselling persons and Supervisors.
f. Review of six monthly training record (Form III of Annexure B) maintained by the
Training Organization.
g. Review of other Student records such as: leave records; overtime records; and Student
attendance records.
8. POOLING OF RESOURCES AND SECONDMENT ARRANGEMENTS
8.1 Pooling of Resources for Training
Pooling of resources for training is envisaged amongst Training Organizations where a
Training Organization may not be in a position to provide experience in a competency
area and may enter on a mutually agreed arrangement with another Training Organization
for the benefit of the Students. The Institute would facilitate pooling arrangements. The
procedure to be followed may be flexible as long as the following requirements are met:
a. the aggregate period for such training arrangements shall not exceed one year;
b. the receiving Training Organization shall not be entitled to train more than four
such Students at a time;
c. the number of Student(s) received from another Training Organization shall be
within the Student quota of the receiving Training Organization;
19
ICAP Training Guidelines
1.03
20
ICAP Training Guidelines
1.03
d. the receiving Training Organization shall maintain prescribed training records and
forward the same to the sending Training Organization upon completion of agreed
training period; and
e. during such period of training the sending Training Organization will pay stipend
to the Students, instead of the receiving Training Organization and shall be
responsible for complying with training regulations and guidelines.
Practicing firms which are unable to meet the criteria for a Training Organization
on their own, may also pool resources as may be mutually agreed among them and
apply for establishing a Training Organization provided they are in a position to
satisfy the prescribed requirements.
8.2 Secondment for Training to Industrial, Commercial or other Suitable
Organization
a. Secondment arrangements for training in industrial, commercial, or other suitable
organizations are encouraged to enhance training in some competency areas and
to expose the Students to multidisciplinary work and to a variety of business
situations and working environments.
b. The industrial / commercial / other suitable organization to which the Student is
sent on secondment should not be a client of the Training Organization, however,
this restriction shall not apply to industrial / commercial / other suitable organizations
who are merely attestation clients of a Training Organization.
8.3 Criteria for industrial, commercial or other suitable organization
The following minimum criteria shall apply for industrial, commercial or other suitable
organization where Students can be seconded for training. For details reference be made
to Appendix 1.
a Business and commercial interests of the organization shall be such as considered
appropriate by the Committee on case to case basis.
b The organization shall be in compliance with ethical and professional standards.
c A Member of a recognized accounting body serving in a senior executive position
in the organization should be willing to act as 'Mentor' of the Student. Depending
on the size of the organization the number of Students seconded to a Mentor shall
not be more than four.
d The organization should be capable of and willing to fulfill the training requirements
as outlined by the Institute.
e The organization shall give an undertaking to comply with specific provisions for
the Student(s) in respect of: payment of stipend; leave; time off for attending courses
/ examinations; working hours; overtime and compensation for overtime or giving
time off in lieu of overtime and any others as required by the Institute.
8.4 Terms and conditions for a Student opting for training in industrial,
commercial or other suitable organization
a. A Student shall be eligible to undertake such training after completing first half
of his training period.
b. An application on the prescribed form (Annex 2 to Appendix 1) shall be submitted
to the Institute through the Student's MRT with his consent and recommendation
along with the willingness of the organization to accept the Student on secondment
(specimen of letter of consent as Attachment 2 of Annex 2 to Appendix 1).
8.5 Secondment for training between member firms
Secondment of Students for gaining experience in an affiliate of CA firm within the
country or abroad is also permitted. The MRT shall ensure that any such secondment
is relevant to acquisition of work experience and has been mutually agreed between the
Training Organization and the Student pursuant to an understanding between the Training
Organization and its affiliate member firm.
The availability of training environment and other facilities as required of a Training
Organization shall also be ensured by the MRT in respect of the receiving firm / Training
Organization. Based on this the Training Organization may request the Committee for
grant of standing permission to second Students to its affiliate.
8.6 Period of Secondment
The maximum period of secondment to member firm, another Training Organization and
industrial/commercial and other suitable organization shall be limited to one year in all.
During the period of secondment, the Student shall continue to remain on the training
records of his MRT under the contracted training arrangements. The Student shall also
continue to be subject to Chartered Accountants Ordinance / Chartered Accountants Bye-
laws and any rules, regulations and directives made or issued by the Council from time
to time in respect of discipline, administrative and training / education / examination
matters.
8.7 Student Exchange Programme outside Pakistan
Such exchange programmes are presently organised by the Institute with CA firms of
member bodies of SAFA for periods not exceeding three months. This would continue
to be so organised from time to time. Such arrangements may be extended between the
ICAP and other overseas Institutes of Chartered Accountants subject to understanding
arrived at through MOUs.
21
ICAP Training Guidelines
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1.03
i
ICAP Annexure-A
THE AUTHORISATION PROCESS FOR REGISTRATION AS A TRAINING ORGANISATION
1.03
a. The prospective Training Organization (TO) may apply to the Directorate of
Education and Training and submit the prescribed application form alongwith all
requisite documents.
b. The Directorate shall conduct the desktop review of the application by reviewing
the application form and other documents and consider the fitness of the applicant.
The assessment shall be supplemented by visiting the prospective TO, where
applicable, and evaluation of the arrangements made by the applicant.
c. The Directorate shall forward the application of the prospective TO alongwith the
appraisal report to the Executives of the Institute (Comprising Director Education
& Training, Secretary and Executive Director).
d. The Executives shall consider the report of the Directorate and after due deliberation
either concur or disagree with the recommendations set forth by the Directorate.
In the final outcome the application for registration of the prospective TO might
be accepted or rejected.
e. Provided that an application shall not be rejected unless the applicant has been
given a right to be heard by the Executives.
f. The decision of the Executives shall be communicated to the prospective TO and
ratified by the Education & Training Committee.
g. The TOs which feel aggrieved by the decision shall have the right of appeal to the
Council.
ii
ICAP Annexure-B
INTRODUCTION AND EXPLANATION OF TRAINING RECORDS
Training Records to be maintained under the Training Regulations include:
a. Diary Sheet
b. Half Yearly Training Assessment
DIARY SHEET
It should follow the pattern as given in Form-II. In-house equivalents may also be used.
Diary would be filled on a daily basis as per pattern given in Form - I and incorporated in a Monthly Diary
sheet as pattern given in Form II. The purpose of the Diary Sheet is to help the Students record information
in preparation for their half yearly reviews.
The Diary sheet will be kept and maintained at the MRT’s office during the Students’ training period as part
of their training records.
HALF YEARLY TRAINING ASSESSMENT
This should be maintained in the pattern as given in Form-III.
This Form prompts a discussion of all aspects of the Student' s training, including examination performance
and future needs. The review should be a two-way process enabling the Students to provide feedback to the
organization on the quality, range and depth of training they are obtaining, as well as reviewing assessment
on their individual performance. In order to help the MRT or Counsellor in conducting six monthly review,
an outline list of competencies is given below which will help them assess student’s progress through the
training contract.
Technical Work Skills

• Applying theoretical knowledge to practical work.
• Performing technical tasks as assigned, applying common sense.
• Drawing logical conclusions from available information and work performed.
• Identifying problems and taking prompt and appropriate action.
• Producing organized, well documented working papers for tasks assigned.
• Applying appropriate IT skills.
Overall Management of assignments
• Is aware of the need to provide an effective and timely service.
• Understands the business environment.
• Manages the assignment in an appropriate and adaptable way.
• Is able to communicate the progress of the assignment to colleagues and clients.
• Is able to accept responsibility for more than one assignments at a time and prioritizes effectively.
• Works effectively within a team, taking a leadership role when appropriate.
• Identifies opportunities to improve efficiency on assignments.
• Completes job within appropriate timescales.
1.03
iii
ICAP Annexure-B
Communication Skills

• Presenting information in written, numeric form and using images.
• Interpersonal skills including dealing with individual in person.
• Participation in meetings.
• Making presentations.
Information Technology
• Using information sources.
• Using databases.
• Using spreadsheets.
• Understanding accounting packages.
• Using word-processing systems.
• Using presentation packages.
• Understanding computer based system controls.
• Using computer assisted auditing techniques (CAAT).
Commercial Awareness
• Understanding the organization’s business profile.
• Analysing clients’ business fundamentals.
• Preparing recommendations for clients.
• Contributing to profit or efficiency.
• Project management.
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iv
SPECIMEN Form-I
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ROUGH DAILY DIARY
NATURE OF WORK UNDERTAKEN AND TRAINING RECEIVED DATE Hours
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vi
SPECIMEN Form-III
HALF YEARLY TRAINING ASSESSMENT
Period from July 2005 to December 2005
Name of Student: ICAP CRN:
Training Organization :
1. Technical Works skill:
2. Overall management of assignments :
-
-
-
Student Record of
experience gained
Assessor’s Comments
on Student performance
Action Points
-
-
-
Student Record of
experience gained
Assessor’s Comments
on Student performance
Action Points
3. Communication skills :
-
-
-
Student Record of
experience gained
Assessor’s Comments
on Student performance
Action Points
4. Information Technology :
-
-
-
Student Record of
experience gained
Assessor’s Comments
on Student performance
Action Points
5. Commercial awareness :
-
-
-
Student Record of
experience gained
Assessor’s Comments
on Student performance
Action Points
1.03
vii
SPECIMEN Form-III
Hours accrued
during period
under report
Examination progress of the Student:
Signature of Student: ________________________________________ Date: _________________
Overall comments about the performance of the Student:
Signature of MRT or Counselling Person: _________________________________________________
Name of MRT or Counselling person: _________________________ Date: _________________
Stamp of Training Organization:
Note for filling this form:
1. The assessor’s comments are to be based on guidance given in Annexure B.
2. Additional sheets may be used as required
Audit & Assurance
Accounting and Financial Reporting
Taxation
Financial Management & Corporat e
Services
Information Technology
Subt otal (A)
Education and Professi onal Development
Administrative work
Others
Subtotal (B)
Total (A+B)
Level Practical Experience Components
Hours from previous
report
Total hours
earned to -date
1618
921
598
722
399
4258
74
-
-
74
4332
325
165
100
145
80
815
-
55
55
870
129
5202
-
55
74
5073
867
479
1943
1086
698
1.03
viii
APPENDIX 1
Training Guidelines
TRAINING IN INDUSTRIAL, COMMERCIAL
AND OTHER SUITABLE ORGANIZATIONS
1. In accordance with provision (ii) of Bye-Law 106, a Student with the consent of his Member
Responsible for Training (MRT) and the approval of the Council of ICAP, may spend a period
not exceeding twelve months in all in industrial, commercial or other suitable organizations
subject to such conditions and controls as the Council may impose or exercise.
2. The concept of such training envisages the preparation of trainees who on becoming Chartered
Accountants, intend to build a career in industrial / commercial organizations (referred to as
“Organisation(s)” hereafter). Such training would not only be beneficial to the Student but also
to such organizations in the country.
3. The type of industrial / commercial training to be received by a Student would largely depend
on the nature of the organization and the facilities available there. Normally, large sized and
professionally managed organizations would be most suited for such training and are also more
likely to offer to impart such training.
4. The Institute will recognize a variety of types of industrial units, financial institutions and
commercial houses for this purpose of training provided they meet the training requirements
of the Institute. For example, industries may be as diverse as Iron and Steel, Textiles, Cement,
etc and fields of banking, financing, insurance, shipping, manufacturing etc will also be suitable.
An outline training programme covering essential competencies to be acquired is given as
Annex 1 so that a thorough and well-rounded training is imparted within the parameters of the
organization. The outline of training programme is a guideline and may be conformed to the
extent possible during the period of attachment of a Student, however, an all round coverage
would be preferred diluting the contents as necessary. The programme outline may also be
modified suitably to conform to the organization’s needs but should remain consistent with the
responsibility to enable the Student to acquire the art, science and knowledge of accountancy.
Employing the Student as a routine working hand would be inconsistent with such an objective.
Terms and Conditions
5. For the Student
a. Students would be eligible to undertake such training in the second half of their training
period.
b. An application Form to be submitted to the Institute through the Student’s MRT as
attached in Annex 2. A processing fee of Rs 1000/= will be paid to ICAP for such
secondments.
c. During the period of training in the organization, the Student will continue to be borne
on the books of his Training Organisation under the contracted training arrangements.
d. The industrial / commercial / other suitable organization to which the Student is sent on
secondment should not be a client of the Training Organization, however, this restriction
shall not apply to industrial / commercial / other suitable organizations who are merely
attestation clients of a Training Organisation.
1.03
e. The Student will also continue to be subject to current CA Ordinance / CA bye-laws /
Rules and Regulations prescribed / determined by the Council of ICAP in respect of
discipline, administrative and training / education / examination matters during the period
of secondment.
6. For Industrial / Commercial / or other Suitable Organizations
a. The Organization should have a minimum paid up capital of Rs 100 million or a turnover
of Rs 500 million.
b. The Organization should be in compliance with ethical and professional standards.
c. Where a member of a recognised accounting body is serving as the CFO, he should be
willing to act as ‘Mentor’ of the Student.
d. Willingness of the organization to accept the Student.
e. The organization should be capable of fulfilling the training requirements as outlined by
the Institute.
f. The organization will give an undertaking to comply with specific provisions for the
Student(s) in respect of: payment of stipend; leave; time off for attending courses /
examinations; working hours; overtime and compensation for overtime or giving time
off for overtime and any others as required by the Institute.
g. The organization will maintain the following records in respect of each Student:
i) Attendance record
ii) Leave record including record of leave applications and decisions
thereon.
iii) Overtime record
iv) Rough Daily Diary and Monthly Diary Sheet as per formats
given in Annex 3.
v) Periodic Report. Report format as per Annex 4.
Records so maintained shall be transferred to the Student’s MRT in his parent Training
Organisation on completion of secondment period.
The Student’s final report shall be sent to his Training Organization on completion of
secondment period.
ix
APPENDIX 1
Training Guidelines
1.03
x
Annex - 1
to Appendix 1
1. ORIENTATION
- Study of the industry to which the organization belongs and its salient characteristics.
- Aims and objectives of the organization.
- Analysis of the organizational structure.
- Study of the basic documents like, Memorandum and Articles of Association, Annual
Report, etc.
- Understanding the decision making process.
- Study of the control systems and procedures by reference to manual or other appropriate
documents.
- Identifying and understanding the critical areas of operation.
2. FINANCIAL ACCOUNTING
- Study of the Accounting Manual, if any
- Understanding of the accounting system and the accounting control in operation and
their effectiveness.
- Understanding of the division of responsibility and authority within the Financial
Accounting Section.
- Study of the manner in which transactions data are: (a) recorded and accumulated; (b)
further processed; and (c) converted into meaningful information for review and decision
making.
- Undertaking specific work responsibility in various accounting areas like cash accounting,
sales accounting, purchase accounting, bank accounting and reconciliation, books of
original entry, etc.
- Preparation of monthly / quarterly accounts.
- Preparation of final accounts and incorporation of branch or unit or divisional accounts
in the consolidated final accounts taking special note of the (a) treatment given for internal
transfer, (b) valuation of various assets and liabilities, (c) creation of necessary provisions,
(d) compliance with accounting policies, statutory requirements on form and disclosure
and applicable accounting standards/principles.
- Preparation of the notes to financial accounts.
- Verification/preparation of the reconciliation statements and schedules
attached to the accounts.
OUTLINE OF TRAINING PROGRAMME
1.03
xi
Annex - 1
to Appendix 1
3. INVENTORY
- Study of the inventory policies and norms followed in the organization.
- Preparation/Review of reports issued to various internal authorities and external agencies
like banks.
- Periodic verification of inventory to identify slow moving or obsolete or damaged Items.
- Periodic reconciliation of inventory items as per inventory ledger/cards with the respective
bin cards.
- Inventory management.
4. FINANCE
- Study of the basic financial structure of the organization.
- Dealings with bank in regard to cash credit, overdrafts, guarantees, transfer of funds, bill
transactions, periodic statements for working capital needs, foreign exchange etc.
- Preparation of proposals for loan applications to banks and financial institutions.
- Raising of resources through issue of shares, debentures, deposits, etc., registration with
stock exchange and related work in this connection.
- Preparation of cash budgets and cash flow statements.
- Capital budgeting in respect of a new project or an expansion scheme including the
feasibility report, financing plan, collaboration arrangement, foreign exchange resource
requirements and related issues.
- Credit (debtors) management.
5. COSTING AND BUDGETING
- Preparation of budgets - departmental and consolidated.
- Preparation of cost sheets and maintenance of cost accounts.
- Knowledge of the costing system and methods in use.
- Preparation/review of standards with variances in periodic budgets and action taken
thereon.
- Knowledge of the follow up method used for unreasonable variances.
- Understanding the relationship between costing and pricing.
1.03
xii
Annex - 1
to Appendix 1
- Preparation of contribution statement for different products.
- Study of effectiveness of the costing system in use.
- Reconciliation of financial accounts with cost accounts.
- Knowledge of cost minimization and cost control techniques.
6. INTERNAL AUDIT AND OPERATIONAL AUDIT
- Review of the scope of internal audit and operational audit to assess any serious deficiency
in the coverage, alongwith the study of related manuals, if any.
- Understanding the nature of internal and operational audit as an aid to management.
- Participation in internal audit and operational audit including special assignments, system
audit and management audit.
- Preparation / review of internal audit and operational audit reports.
- Participation in inventory verification and valuation.
7. INFORMATION TECHNOLOGY
- Knowledge of the various IT tools in use for accounting / auditing and other office
purposes with the statements produced therefrom and the controls.
- Knowledge of the areas of work under computerized system.
- Understanding data processing technique from the input data preparation stage to the
output document stage.
- Understanding the controls-hardware and software in the computer system.
- Systems design and analysis.
- MIS practice at the organization.
8. COMPANY LAW & SECRETARIAL FUNCTIONS
- Preparation of agenda, working papers minutes, etc of meetings.
- Participation in the work connected with the issue of shares, debentures, bonds etc.
- Recording of issue and transfer of shares, debentures, etc.
- Study of the major financial transactions like borrowings, investments, etc of the company
in relation to provisions of Company Law.
1.03
xiii
Annex - 1
to Appendix 1
- Preparing and filing of various Returns with the Registrar of Companies and other
government bodies.
- Attending General Meetings, and if possible a Board and Committee Meeting (as a
trainee observer).
9. TAXATION
- Knowledge of the incidence of various taxes on the organization, e.g. Income-tax, Sales-
tax, Excise Duty, etc.
- Understanding of the work in the Taxation Division.
- Preparation and filing of tax returns including returns for tax deducted at source from
salary, interest etc.
- Representation before Assessing Authorities.
- Preparation of Appeals.
- Computation of provision for income-tax etc., for the purpose of annual accounts.
- Study of the assessment or appeal orders.
- Study of the published tax decision reports.
- Participation in tax planning.
- Study of the impact of changes in Taxation Laws on the organization.
10. OTHER OPERATIONAL AREAS
- Study and understanding of the functions and management of sales, purchase, production,
human resources, advertising, transport, etc.
- Study of the records maintained in the above areas.
- Preparation/Study of routine and non-routine reports.
- Study of the feedback and follow-up on the reports.
- Participation in interdepartmental discussion groups.
Note: The above outline training programme is only very general in nature as the exact scope
of programme will depend upon the nature of organization where the Student is seconded
for training.
1.03
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF PAKISTAN
FORM OF APPLICATION FOR I NDUSTRIAL / COMMERCIAL TRAI NING
(Bye-Law 106)
It i s r equest ed that I may be per mit ted t o undergo t rai ni ng on secondment to
M/s__________________________________ for a period of ________ months __________ days
in accordance with C A Bye-Law 106 (ii). My particulars and the particulars of the Organization
are as given below:
Name
Father’s Name
CRN
Training Period Commenced on
ICAP Foundation Exam Passed on
ICAP Intermediate Exam Passed on
ICAP Module E Exam Passed on
ICAP Module F Exam Passed on
(Copies of exam passing letters to be attached as Attachment-1)
Name of Member
Responsible for Training
Name of Training
Organization
Completed on
xiv
Annex - 2
to Appendix 1
1.03
Paid up Capital :
Letter of Consent from the Organisation is attached as Attachment-2
I hereby undertake to abide by all terms and conditions of the training contract under paras (5),(6)
and (7) during the period of secondment to the above mentioned industrial/commercial Organization
and understand fully well that such terms and conditions will continue to apply to me during the
period of such secondment.
Name and address of
Industrial / Commercial /
Other Suitable Organization
Nature of Business
xv
Annex - 2
to Appendix 1
Place:
Signature of MRT
(Name )
Seal of TO
Date
D M Y
Signature
(Name )
MRT’s Consent and Recommendation
Date
D M Y
1.03
xvi
Annex - 2
to Appendix 1
For Office Use Only
Particulars of above named Student checked by :
Attachments : Received / Not Received
Forwarded to ETCOM :
Forwarded to the Council :
Signature
Date
Date
(Signature)
Decision : Approved for month days/Not Approved
1.03
xvii
Attachment 2
to Annex 2
Our Organization is in compliance with ethical and professional standards; is capable of meeting
the training requirements of ICAP; will maintain the required records in respect of the Student and
undertakes to comply with ICAP’s specified instructions in respect of: payment of stipend; leave;
time off for attending courses/examinations; working hours; overtime and compensation for overtime;
and any others as required by ICAP during the above named Student’s period of secondment to our
Organization.
A report on the Student will be submitted to the Member Responsible for Training (MRT) at his
parent Training Organisation with a copy to ICAP on completion of training. In case of unsatisfactory
progress or any exceptional development in respect of the Student, the MRT will be kept informed
of the development(s) through interim report(s).
Letter of Consent from the
Industrial/Commercial Organization
M/s __________________________________________________________ agree to provide the required
training as specified by ICAP to Mr/Ms _________________________________________________________
for a period of _________________________________________________ under the supervision of a Mentor;
who is a Qualified Accountant and CFO of the company as mentioned below:
Name of CFO in the Company
Qualification(s)
Membership No.
Designation in the Organization
Date
D M Y
Place
Signature
(Chief Executive/Managing Director)
(Name )
Seal of Office
1.03
xviii
Annex-3
to Appendix-1
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ROUGH DAILY DIARY
NATURE OF WORK UNDERTAKEN AND TRAINING RECEIVED DATE Hours
SPECIMEN
1.03
xix
Annex-3
to Appendix 1 SPECIMEN
1.03
xx
Annex-4
to Appendix 1
FINAL REPORT OF TRAINING IN INDUSTRIAL,
COMMERCIAL OR OTHER ORGANIZATIONS
I hereby certify that the aforesaid information is based on training records and the performance of
the Student during secondment to our organization.
Notes: - Technical progress of a Student may be judged in relation to his / her seniority.
- General comments may include specific information on level of progression.
Name of the Industrial and
Commercial Organization
Period of Secondment
Name of the Mentor
Qualification
Designation
Name of Trainee Student
CRN
Training Organization
from which seconded
1. Audit and Assurance
2. Accounting and Financial Reporting
3. Taxation
4. Financial Management and Corporate Services
5. Information Technology
6. Any other areas (to be specified)
(attach extra sheets as necessary)
Number of Hours of Experience Gained Category of Work Experience
Comments / Remarks:
Signature of Student
Place:
Date:
Signature of Mentor
(Name: )
Date:
Seal of Officer:
1.03
xxi
xxii
xxiii
xxiv
xxv
xxvi
xxvii
xxviii
1.03

____________________________________________________________________________________
The Directive was replaced by Training Regulation and Guideline 2006

REQUIREMENT FOR PERMISSION TO TRAIN STUDENTS

The Council adopted the following basis as the criteria for granting permission to members to train
*
articled clerks under bye-law 71
**
.

(i) the minimum of 25 audits of all kinds. Of these at least 15 should be limited companies.

(ii) The total paid-up capital of limited companies should be at least Rs. 50 lacs.

Members applying for permission to train * articled clerks will be required to furnish particulars in
the following form:

FORM X

Name of the Member Date of admission Particulars of audit (to
be given in the
Proforma below)
Number of salaried
staff with details

PROFORM A

S. No. Name of the
Concern
being audited
with Address
Nature of
business
Public,
private, Sole-
Proprietary or
partnership
Paid up
capital
(where
applicable)
Remarks on
general
status of the
concern

It was also decided that while applying for permission to train *articled clerks the applicants should also fulfill
the following requirements:

(i) the statement of audits furnished along with the application should bear the signature of the applicant;

(ii) a certificate be furnished to the effect that the applicant currently holds the position as auditor of all
the audits shown in the statement ; and

(iii) while applying for permission to train students the Council desired that an undertaking be
appended to the effect that the applicant has thoroughly read and understood the relevant Sections
of the Ordinance, bye-laws and directives of the Council and shall comply with all the future
directives and requirements to this effect and is in full awareness of the ethics governing the meaning,
purview and obligations of a practicing member authorized to train students under bye-law 102 of the
C.A. Bye-laws, 1983 and that the applicant binds himself fully responsible for any default to this
effect.

(Executive Committee meeting dated November 03, 1994)



*
Now designated as trainee student
**
New bye-law 102
Attention of members is invited to
*
Proforma for furnishing certain particulars by members of the Institute applying
for permission to train
**
articled clerks. The Council has desired that the members applying for such permission
should give their current audits only in the above quoted proforma. The members are, therefore, advised that
while making application for permission to train articled clerks the above directive of the Council is kept in
view.


(Institute's Circular No. 1/4/CA-76 dated February 10, 1976)












*
See Proforma and Form ‘X’ (1.03)
**
Now designated as trainee student

1.04
(Withdrawn)
__________________________________________________________________
The Directive was replaced by New Modular Scheme in 1993 as approved by the Board of Studies
in its 55
th
meeting held on October 22
nd
, 1992

*
COACHING CLASSES
MADE COMPULSORY FOR STUDENTS

"It was decided that Evening Coaching Classes introduced by the Institute will be compulsory for all
such Final Examination students as were previously required to attend short term refresher course
arranged by the Regional Committees, the compulsory condition will apply for students based in
cities where Coaching Classes are held".


(Board of Studies meeting December 23, 1984)


*
Coaching classes are no more held by the Institute presently.

1.05
(Revised 1998)

INSTRUCTIONS TO PRINCIPALS – TERMS
AND CONDITIONS FOR TRAINEE STUDENTS

The Council of the Institute has reviewed its instructions to the Principals in the
matter of training of their students and revised them as under for strict compliance.

Probationary period: The Principals should require prospective trainee students to be
on probation in their offices for a period of two months. This would enable a
trainee student to form an opinion as to whether he would like to join this
profession and at the same time enable his employer to determine if the candidate
was suitable for the profession. Formal registration of trainee students should take
place only after satisfactory performance during the probationary period.

Registration of Training Contract: Under the Chartered Accountant Bye-Laws,
1983 training contract of every student is required to be filed with the Institute
within one month after execution thereof. This one month period is counted from
the date of execution of the deed from which date the contract is taken to be effective.
In order to avoid delay in registration and the exchange of unnecessary
correspondence, the Principals are advised to see that the persons desiring to join
as trainee students with them possess the requisite qualifications under the said
bye- laws. They should further see that the documents required for registration are
complete in every respect before they are submitted to the Institute for registration.
In case the documents are not received within the specified period the registration
would be effective from the date of receipt of documents only irrespective of the
period of delay.

Working Hours: The Principal should not require a trainee student to work for
more than 40 hours, excluding recess hours, per week. The actual office time may
be regulated by the Principal according to the convenience of his clients.

Stipend: A minimum scale of stipend and reimbursement of study material costs
for the trainee students during their period of engagement under registration is
prescribed by the Council and revised from time to time. At its 60
th
meeting on July
14, 1980 the Council had decided that their recommendations in regard to stipend
and other terms are binding on all Principals.



1.05
(Revised 1998)

Overtime: As far as practicable, overtime work by trainee students should be
avoided so as to allow adequate time for studies. But where overtime work is
unavoidable because of urgency of work, the students should be suitably
compensated or given extra leave.

Leave: Trainee students should be granted leave to the extent due, when they
apply for it, for the purpose of preparing for the Institute's examinations, provided the
request for such leave is made at least one month before the date from which the
leave is required.

The Council recommends that the Principals should, wherever practicable, allow their
trainee students to avail the leave to the maximum extent permissible under the
rules.

The period of leave specified under Bye- law 106 is inclusive of all kinds of leave.
Furthermore, in calculating the leave availed the weekends and public holidays
falling at the start and the end of leave period will not be counted as part of leave.

If a trainee student on leave does not appear in the examination for which he had
taken leave, he should resume duty immediately.

Reimbursement of travelling, boarding and lodging expenses: Trainee student s
are reimbursed for expenses incurred on local traveling as well as on outstation
assignments. The Council emphasizes that the scale of reimbursements
should be based on current costs and should be reasonable. Accommodation
where not provided by the clients should be provided by the Principals in a
reasonable accommodation.

Transfer of Service: The Principals are requested to be liberal in issuing No
Objection Certificate to trainee students.

Advisory and Supervisory Functions: In addition to practical training the
Principal shall also assume advisory and supervisory functions over the course
studies and examination preparation of the trainee students as per training
regulations.




1.05
(Revised 1998)


Library: The Principal should maintain an adequate library of books of
professional interest for use by the trainee students. The trainee students should be
encouraged to make use of the library.

External Training: As per training regulations trainee students should be
encouraged to take training in an industrial, commercial or other suitable
organization or an affiliate of a CA firm within the country or abroad in terms of
proviso to Bye-Law 106 of the C.A Bye-Laws, 1983. This training should be
served in such organizations, which employ members of recognized accounting
bodies so that the students could remain under their supervision during this period
of training as well.
Professional Ethics: It is extremely important that the Principal should impress upon
his trainee student the professional standards required of him as a prospective
member of the Institute. The ethics of the profession must be explained not only
with reference to the legal requirements of the Institute but also with the aim and
objectives of the profession as a whole.

General Guidance: It would also be advisable for a Principal to instruct the
trainee students in matter of putting on suitable dress, observing good manner,
dealing properly with clients, colleagues and other employees. A student should be
guided in such manner; as would not only enable him to acquire the necessary
theoretical and practical knowledge with regard to his work, but also the
necessary confidence in himself.

(Approved by Council in I7th meeting on December 28-29, 1966 and
31st meeting held on August 12, 1972 and revised in 60
th
meeting held
on July 14, 1980, 67
th
meeting held on December 30, 1982, 79
th

meeting held on February 9, 1986, 98
th
meeting of the Council held on
December 16, 1991 and 125
th
meeting of the Council held on 07
January, 1998)

1.06

(Revised)

STUDENTS PROHIBITED FROM USING THE DESCRIPTION
LIKE (C.A. INTER), C.A. (CC) C.A (GROUPS I & II)
OR ANY OTHER DESCRIPTION

"C.A Student or any other person who has completed his training as
*
Articled/ audit
clerk, or passed C.A. Intermediate Examination or part of Final Examination is
prohibited from using the descriptions such as C.A. (Inter) or C.A (CC) or C.A
(.Group I, II) or any other description purporting to convey a qualification of any
sort on the letterhead forms, business calls or on any other stationery or form of
communication. Such descriptions tend to particularly violate the provisions of
Section 21 of the Chartered Accountants Ordinance, 1961. A student or any other
person using such description will not only render himself so be disqualified from
appearing in the Institute's examinations but may also be liable to further action
under the provisions of the Chartered Accountants Ordinance, 1961".




(27th meeting of the Council - August 20, 1971)
(91st meeting of the Council - July 06, 1989)

*
Now designated as trainee student.

Directive 1.07
(Revised)
December 31, 2012

PERMANENT CREDIT AND LIMIT ON ATTEMPT
In exercise of the powers conferred by Section 15 (2) (a) of the Chartered Accountants Ordinance,
1961 read with Bye Law 118 and 129A of the Chartered Accountants Bye Laws 1983, the Council
of the Institute in its 240
th
meeting held on November 7, 2012 has revised the Directive 1.07
issued on March 26, 2010 on the above subject as follows:

1. A candidate shall retain a pass in paper(s) irrespective of the marks obtained in other
papers.

2. Candidates appearing in Modules A to D shall attempt the examinations subject to the
following conditions:
a. candidates appearing in Modules A and B shall be allowed maximum of six
attempts for passing each module;
b. candidates appearing in Modules C and D shall be allowed maximum of eight
attempts for passing each module;

Provided that an attempt shall not be counted if the candidate is absent or does not
appear in any attempt; and

Provided further that the attempts taken before March 26, 2010 shall not be counted
under this policy.

3. Candidate appearing in Module E and F shall be allowed ten years to qualify both
Modules. The period of ten years shall be counted from the first day of the month in
which the candidate becomes eligible to appear in Module E for the first time.

Provided that the period before J une 01, 2010 shall not be counted for this policy.

(210
th
meeting of the Council – August 15, 2009)
(240
th
meeting of the Council – November 7 and 8, 2012)

Before the revision, the Directive 1.07 was as follows:
March 26, 2010

CHANGES IN EXAMINATION POLICY

We are pleased to inform you that the amendments in Bye Laws relevant to the above have been published in
the official Gazette of Government of Pakistan with the approval of the Federal Government on February 26,
2010. Official copy of the Gazette has been received by the Institute on March 16, 2010. Consequently, the
following changes, as approved by the Council, are being implemented:

1. At present, the candidates retain a pass in paper(s) if they obtain specified marks in other paper(s)
of the same module. Effective from J une 01, 2010, a candidate shall retain a pass in paper(s)
irrespective of the marks obtained in other papers.

2. Effective from Autumn 2010 examinations and onwards, candidate appearing in Module A to D
shall be allowed maximum of six attempts for passing each module. An attempt shall be counted
even if the candidate is absent or does not appear in any attempt.

3. Candidate appearing in Module E and F shall be allowed ten years to qualify both Modules. The
period of ten years shall be counted from the first day of the month in which the candidate becomes
eligible to appear in Module E for the first time. For all existing candidates who are already eligible
for Module E and F examinations, the period of ten years shall be counted from J une 01, 2010.

(210th meeting of Council - August 15, 2009)
1.07

REFERRAL CONCESSION – APPEARANCE
IN ALL PAPERS NECESSARY

There exists an impression among the C.A Students that Referral concession would
automatically be given in one paper if the candidate appearing in the Intermediate
or one or both the Group of Final Examination sit and pass in all but one paper of
that examination or group or groups. This is not true.

The correct position is the "Referral" concession is given only to such candidates who
fall in the category of near miss cases. This means that candidates must appear in
all papers and should not avoid one paper altogether in the hope of claiming a
"Referral"

(71
st
meeting of Council - December 23, 1983)
(Institute's Circular No. 5/2/CA-79 dated February 14, 1984)

The Council decided that in future the “Referral” concession would be available
only to those candidates who pass in all papers of the examination except one and
obtain certain specified number of marks in the paper in which they fail. This
condition is applicable to both Intermediate and Final Examinations.

(75
th
meeting of Council - February 12, 1985)
1.08

MINIMUM PERIOD OF TRAINING
TO BE SERVED VIS A VIS APPEARANCE
AT INTERMEDIATE EXAMINATION

"The Council approved a decision of the Examination Committee that the
registered students who had served the minimum period for qualifying to sit in the
Intermediate Examination and were allowed to appear in an examination should
be allowed to repeat the examination in case of failure even if they discontinue their
training without completing the period specified under the bye-laws. This means that a
candidate having attained his eligibility once should not be debarred from
reappearing in case of discontinued training.''


(77th meeting of Council - August 10, 1985)

1.09
(Withdrawn)
_______________________________________________________________
The Directive is replaced by revised Bye Law 97

CONDITION OF ENROLLING
TRAINEE WITHOUT PASSING
ENTRANCE EXAMINATION DEFERRED

The Council decided that the condition of enrolling trainee students without passing the Entrance
Examination as per requirements of bye-law 97 may be put off for the time being and for that purpose
the first proviso to clause (3) of bye-law 97 be amended so as to read as follows:-

“Provided that the condition of passing the Entrance Examination shall not apply till such date
as the Council may decide.”

(77
th
meeting of Council - August 10, 1985)

1.10
ACCEPTANCE OF APPLICATION
FOR ADMISSION TO EXAMINATION WITH LATE FEE

In certain cases students want to submit their examination form even after expiry
of the time allowed to submit form with late fee.

The examination Committee after due consideration, approved that a further
period of 7 working days be allowed for submission of form subject to 200% late
fee.
(Meeting of Examination Committee – January 28, 2005)

In view of several requests received from the students who could not deposit their
examination forms in time due to certain reasons it was resolved that henceforth an
additional late fee equal to the examination fee be charged from students who fail
to submit forms in time up to seven days from the last date of submission of
examination forms. After the expiry of seven days no form be accepted in any
case.
(Meeting of Examination Committee – March 22-24, 1997)

The Committee accepted the suggestion that applications for the C.A.
Intermediate and Final Examinations should be accepted on paying late fees. The
Committee decided that a late fee of Rs. 50/= for Intermediate and for Final
Examinations should be charged from the applicants. Only 15 days additional
time was allowed after the last date of filing application. No relaxation beyond 15
days additional time was allowed after the last date of filing application. No
relaxation beyond 15 days is to be allowed under any circumstances.

(Meeting of Examination Committee -
December 11, 1967 & December 26, 1979)

The Committee considered the suggestion and in relaxing the existing policy decided that
candidates desiring to take examinations of the Institute should be permitted to file
an application even after expiry of late submission date on paying double the
admission fee i.e .Rs. 200 in the case of Intermediate and Rs. 300 for both groups
and Rs. 200 for any one group of the Final Examination.

This concession is allowed up to 30 days prior to the date of the examination and
is available to candidates appearing at a center in Pakistan only.

(Meeting of Examination Committee –
December 26, 1984)
[N.B. Sec Section Index 3.01 - Revised Schedule of various fees]
1.11
(Withdrawn)

________________________________________________________________________
The Directive is replaced by Bye Law 116
REFUND OF EXAMINATION FEE

The Council decided that pursuant to bye-law
*
*87 (2) fee paid for an examination could be
"appropriated towards the fee payable for the next examination only" and for the purpose of such
transfer the term circumstances beyond his control may preferably be taken to mean sickness of the
candidate duly supported by a medical certificate from a registered medical practitioner submitted
either immediately before or within a fortnight after the examination.


(1st meeting of the Council - August 17, 1961)

*
New bye-law 116

1.12

COUNCIL MEMBER'S ATTENDANCE
AT MEETING CONSIDERING EXAMINATION
RESULTS INVOLVING CLOSE RELATIVES

It was felt that since coded roll numbers are used in
tabulation of results, the confidentiality of information
is not impaired if any member of the Council attended
the meeting where the results of examination are
considered and where their close relatives had
appeared. Such members of Council and staff shall,
however, continue to dissociate themselves as at present
from the meetings of Moderation and Examination
Committees.



(73rd meeting of the Council - August 7, 1984)

Procedure to be Followed by Principals for Termination of
Students’ Training Contracts, In Accordance With
Bye-Law 107 (1) of CA Bye-laws, 1983
Conditions for Termination of Contract
A Principal may terminate the training contract of a student if he is guilty of:
- misconduct;
- misbehaviour;
- misdemeanor;
- breach of any of the provisions of the Training Contract.
Procedure to be followed
If the Principal is satisfied that a trainee student is prima facie, guilty of any act(s)
mentioned in clause (I) of bye-law 107; he should;
a. Issue a show-cause notice to the student under a Registered Cover on
through recorded mode of delivery, on the address or address as
notified by the student.
b. If on receipt of the student’s response, the Principal is not satisfied, he
should grant an opportunity of hearing to the student.
c. In case, the student does not respond or does not attend the hearing, he
should be informed about the exparte proceeding in the matter.
d. If the Principal is satisfied, after hearing the student or no response from
him, that the student is guilty of any act(s), the training contract of the
student may be terminated under intimation to the Institute along with a
Report on Termination (Specimen enclosed).
e. All correspondence made in this regard by the Principal or the student
should be through recorded mode of delivery with proof of delivery.
f. In the event of Professional misconduct by a student, falling under
schedule III of the CA Ordinance, the Principal should report the matter to
the Institute.
1.13
REPORT ON TERMINATION OF TRAI NI NG
CONTRACT UNDER BYE-LAW 107(I),
OF THE CA BYE-LAWS, 1983
Name of
Trainee Student :
Registration No :
Period
Commenced on :
Principal’s Name:
Firm’s Name :
Firm’s Address :
Date of
Termination
Pri nci pal’s Report
Cert ified Copies of Following Documents Enclosed :
1. Snow Cause Notice
2. Student’s Reply to Show Cause Notice
3. Hearing Proceedings
4. Any other relevant correspondence / papers in respect of the matte.
Signature & Seal of Office
Continued on reverse
D M Y
1.13
For ICAP Use Only
Act i ons
1. Documents Checked
2. Termination Recorded
3. Letter of Acknowledgement to
Principal and copy to student issued
4. Receipt of Appeal from Student (if any)
5. Reference of Appeal to the Council
6. Decision of the Council
DATE
D M Y Signature
1.13
1.14

NOTIFICATION ON EXEMPTIONS TO CANDIDATES WHO HAVE
PASSSED EXAMINATIONS OF ACCA, CIMA AND ICMAP
This is to notify that the Council of the Institute of Chartered Accountants
of Pakistan has reviewed the present exemption policy of the Institute in
its meeting held on December 24, 2010 and has decided the following:
A. Available exemptions
The exemptions from the following papers will be granted to the students
who have passed all examinations of ACCA, CIMA and ICMAP:
Qualification ICAP
Module
ICAP Paper Additional
Condition
1. ACCA Pre-entry Proficiency Test
A Functional English
A Quantitative Methods
B Introduction to Financial
Accounting

C Financial Accounting
C Taxation Exemption will
be granted to only
those candidates
who have passed
F6 Taxation
(Pakistan variant)
D Cost Accounting
D Auditing Exemption will
be granted to only
those candidates
who have passed
F8 Audit and
Assurance; and
P7 Advanced
Audit and
Assurance.



1.14

Qualification ICAP
Module
ICAP Paper Additional
Condition
2. CIMA Pre-entry Proficiency Test
A Functional English
A Quantitative Methods
B Introduction to Economics &
Finance

B Introduction to Financial Accounting
C Financial Accounting
D Cost Accounting
3. ICMAP Pre-entry Proficiency Test
A Functional English
A Quantitative Methods
B Introduction to Economics &
Finance

B Introduction to Financial Accounting
B Mercantile Law
C Financial Accounting
C Taxation
C Business Communication &
Behavioral Studies

D Company Law
D Cost Accounting
D Information Technology
B. Effective date
This Directive will become effective from April 1, 2011.
C. Repeal
Effective April 1, 2011 this Directive supersedes the Council’s Directive 2.02
to the extent that the said Directive relates to ACCA and CIMA.

(222
nd
meeting of the Council held on December 24, 2010)





1.15

NOTIFICATION REGARDING DIRECTIVE 1.15 OF THE COUNCIL
(EXEMPTION FROM PRE-ENTRY PROFICIENCY TEST)

This is to notify that the Council of the Institute of Chartered Accountants of
Pakistan in its meeting held on September 17, 2011 has reviewed the
exemption policy for Pre-entry Proficiency Test notified through Directive
1.15 dated March 5, 2011 and has decided to keep the application of the
Directive in abeyance till further notice. Therefore, the exemption policy as
applicable before the issuance of Directive 1.15 now stands restored.

(228
th
meeting of the Council held on September 17, 2011)
DIRECTIVE FOR MODIFICATION IN THE EXEMPTION POLICY FOR PASSING
THE PRE-ENTRY PROFICIENCY TEST
I n exercise of the powers conferred under bye-law 123 of the Chartered Accountants Bye
Laws, 1983, the council in its 224
th
meeting held on March 5, 2011 has approved the
following policy in respect of exemption from the Pre-entry Proficiency Test (PPT).
A. Criteria for Exemption
i. Academic Examination
Students who have passed the following academic qualifications with the
specified minimum number of marks/grades given against each of the same.
Examinations Marks/Grades
Masters 55% and above
Bachelors 65% and above
HSSC 70% and above
A Levels One B & One C
ii. Examination held by others Professional bodies.
Passing full examination of any of the following accountancy institutions
leading to their membership:
ACCA, AI CPA, CI MA, I CMAP and PI PFA.
B. Effective date
This directive will become effective from J uly 1, 2011
.

C. Withdrawal
Effective J uly I , 2011 all previous directives on the matters of exemption from
passing the Pre-entry Proficiency Test ( PPT ) would stand withdrawn.
(224
th
meeting of the Council held on March 5, 2011)
1.16
PERIOD OF TRAINING
In exercise of the powers conferred by Section 4 of the Chartered
Accountants Ordinance, 1961 read with Bye Law 99 of the Chartered
Accountants Bye Laws 1983, the Council of the Institute in its 229
th
meeting
held on November 4 and 5, 2011 has approved the following policy for the
training period:
A. PERIOD OF TRAINING

S. No. Qualification on the commencement of training
Period of
Training
(i) CA Intermediate Passed or equivalent thereto 3.5 years
(ii) Four year Graduate / Post Graduate from
universities approved by the Education and
Training Committee of the Institute
3 years
(iii) All other Qualifications 4 years

B. EFFECTIVE DATE
This Directive shall become effective on all training contracts
commencing from December 1, 2011.

C. REPEAL
EffectiveDecember 1, 2011 this Directive supersedes paragraph 3 of the
letter No.DET/Council/001/08/001 dated October 31, 2008.

(229
th
meeting of the Council held on November 4 and 5, 2011)





1.17

MINIMUM STIPEND RATES

In exercise of the powers conferred by Section 15 of the Chartered
Accountants Ordinance, 1961 read with Bye Law 100 of the Chartered
Accountants Bye Laws 1983, the Council of the Institute in its 229
th
meeting
held on November 4 and 5, 2011 has approved the following minimum rates of
stipend during the training period:

A. SPECIFIED RATES

1. CA Intermediate Passed or equivalent thereto (Training period 3.5 years):
Criteria
Rupees per month
On Commencement of Training 8,000
On Passing Module E or F 11,000
On Passing Module E and F 30,000

2. Four year Graduate / Post Graduate from universities approved by the
Education and Training Committee (Training period 3 years):
Criteria
Rupees per month
On Commencement of Training 10,000
On Passing Module E or F 11,000
On Passing Module E and F 30,000

3. All other Qualifications (Training period 4 years):
Criteria
Rupees per month
On Commencement of Training 7,000
On Passing Module E or F 11,000
On Passing Module E and F 30,000

B. EFFECTIVE DATE

This Directive shall become effective from July 1, 2012 on all training
contracts registered under the Chartered Accountants Bye Laws, 1983.

(229
th
meeting of the Council held on November 4 and 5, 2011)
1.18

EXEMPTIONS AVAILABLE TO GRADUATES OF SPECIFIED
DEGREE AWARDING INSTITUTES (SDAIs)

In exercise of the powers conferred by Section 27(2)(c) of the Chartered
Accountants Ordinance, 1961 read with Bye Law 2(1)(ma), 123 and 129A of the
Chartered Accountants Bye Laws 1983, the Council of the Institute approves the
following scheme of exemption for Specified Degree Awarding Institutes
(SDAIs):

1. Exemptions from examinations
Candidate who has completed or pursuing a four year degree program of
an SDAI shall be eligible to claim exemptions from papers of Modules A
to D if:

a. the course contents of the subjects, on the basis of which
exemptions are sought, cover at least 70% of the syllabus as
prescribed by ICAP from time to time; and

b. the candidate has secured minimum 75% marks in the subject from
which exemption is sought.

2. Application for exemption
a. The application for exemption may be submitted during or after
completion of the four year degree program.

b. The Institute shall grant provisional exemption during the degree
program, which will be confirmed after award of degree by SDAI.

c. The applicant shall be required to produce a certificate issued by
SDAI regarding the syllabus covered by the applicant.

3. Direct admission to examination
Student who has completed or is undertaking degree program of SDAI
may be directly admitted to examinations according to bye-law 122A.


(241
st
Council meeting held on December 7 and 8, 2012)
_______________________________________________________________________________
Bye-law 122A is reproduced below for ready reference:
“122A Direct Admission to Foundation and Intermediate Examination.- Notwithstanding anything
contained in bye-laws 121 and 122, a person who has completed or is undertaking degree program from a
specified degree awarding institute, may be admitted to any examination of Foundation and Intermediate and
may take up examinations of Modules A to D in any order he may consider appropriate.”

1.19

DECLARATION OF SPECIFIED DEGREE AWARDING INSTITUTE
(SDAI)


In exercise of the powers conferred by Section 27(2)(c) of the Chartered
Accountants Ordinance, 1961 read with bye-laws 2(1)(ma), 123 and 129A of the
Chartered Accountants Bye-Laws 1983, the Council of the Institute declares
Institute of Business Administration, Karachi as itsSpecified Degree
Awarding Institute for the purposes of exemption scheme prescribed under
Directive 1.18.

(241
st
Council meeting held on December 7 and 8, 2012)


MEMBERS' HANDBOOK
PART IV
2. FOREIGN QUALIFICATIONS AND TRAINING
THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN
SECTIONAL INDEX


2. FOREIGN QUALIFICATIONS AND TRAINING

CONTENTS


2.01 Foreign training and examination (Whole) Revised 2008
2.02 Foreign training and examination (Part)
2.03 Residence in Pakistan a pre-requisite





*
2.01
(Revised 2008)

FOREIGN TRAINING AND EXAMINATION (WHOLE)

“UK and other Institutes: The Council resolved that a person who has passed all
the requisite examinations and has completed prescribed training and is eligible to
be admitted as a member or is a member of any of the following Institutes, will be
treated as having passed equivalent examinations and fulfilled the training
requirements prescribed under the C.A. Bye- laws, 1983 for the purpose of
membership of the Institute of Chartered Accountants of Pakistan:

1. The Institute of Chartered Accountants in England & Wales

2. The Institute of Chartered Accountants in Ireland

3. The Institute of Chartered Accountants of Scotland

4. The Institute of Chartered Accountants in Australia

5. The Canadian Institute of Chartered Accountants

Provided that if such members desire to start practice as Chartered
Accountants, they will have to pass the papers of “Advanced Taxation” and
“Corporate Laws” of the Final examination and also undergo training with a
firm in practice in Pakistan for one year if their training did not involve at least
50% training with a firm enterprise in practice.”

This directive was approved by the Council in its meeting held on July 16, 1997.

The Council in its 125th meeting held on January 07, 1998 took a decision on the
matter deferred from the meeting of July 16, 1997 that for the time being no
recognition can be given to the training of the Institute of Chartered Accountants of
India.

(This directive supersedes earlier Directive 2.01 pursuant to 19
th
meeting of the
Council held on December 11, 1967, 126
th
meeting of the Council held on April
14, 1998 and 187
th
meeting of the Council held on January 26, 2007)

(198th meeting of the Council August 25-26, 2008)

* This Directive prescribes the institutes for the purposes of Bye Law 109. For revised conditions refer to new Bye-Law
109.
2. 02

FOREIGN TRAINING AND EXAMINATION (PART)

ACCA and CIMA
The Council decided that:

a. Candidates / students who have successfully completed all examinations of
ACCA / CIMA on or after June 1, 2002 and apply for exemption and
registration to ICAP would be exempted from the under mentioned
examinations only:
(i) Pre-entry Proficiency
(ii) Foundation and Intermediate

b. The Council also decided in respect of ACCA/CIMA qualified students
registered with ICAP upto May 31, 2002, to extend the following facility to
the said students:

(i) ACCA/CIMA qualified candidates who were granted exemptions from
certain papers of Professional examinations upto May 31, 2002 shall be required to
sit for a Specified paper of Advanced Accounting and Financial Reporting;
Management Accounting; Business Finance Decision at Module F examination
with effect from June 2003 Examination Session. The said paper shall be in
addition to other than the exempted papers of Module F required to be taken by
them. The syllabus of specified paper will be as prescribed and shall be subject to
changes as applicable to ICAP students. In particular the following may be noted:

Questions will not be set on new legislation, standards, guidelines,
statements and exposure drafts at any examination held within the six
months of the publication thereof. Six months are to be counted from the
date of publication of International Accounting Standard / Exposure
Draft by ICAP.

Notifications and circulars in respect of Finance Act / Ordinance, issued
within a period of less than six months from the examination date will not
be tested. However, the Finance Act / Ordinance would be examined
from the attempt following its date of enforcement.
(ii) The procedure described in paragraph b (i) above shall be valid upto
December 2005 Examination Session whereafter the facility offered shall
stand automatically withdrawn.

(156th Meeting of the Council - April 5, 2003)
2. 02
ICAEW and AICPA:

The Council decided that:

(i) The exemptions currently available for candidates who had completed
the PE-1 examination of The Institute of Chartered Accountants in
England and Wales (ICAEW) be withdrawn as the said examination had
been discontinued at ICAEW.

(ii) Cases of exemptions to AICPA qualified candidates be dealt with on a
case to case basis as different states in the US follow different policies.

(155th Meeting of the Council - February 1, 2003)

Bangladesh Institute: “The Council decided that such students who had
completed their service as an audit/articled clerk before December 16, 1971 and
passed equivalent examination in Bangladesh subsequently be considered for
exemption from the examination of the Pakistan Institute in the relevant Part or
Parts on case to case basis and after getting confirmation of result from the Institute
of Bangladesh as is the practice for other recognized Institutes”.

(71
st
meeting of the Council - December 21, 1983)

UK Institute:
The Council decided that:

i. Students who completed training and passed Intermediate Examination
from the UK Institute should be exempted from Intermediate
Examination.

ii. Students having completed training and passed Foundation / Intermediate
and Professional Examination I (PE I) Part I should be exempted from
Intermediate and paper II and IV of Final Group II.

iii. Students availing exemptions in Final Group II will not be entitled to
referral concession and they will be allowed only three successive
attempts to clear the remaining subject failing which they will be required to
appear in all the subjects of Final Group II".

(64th meeting of the Council - December 24, 1981
2.03

RESIDENCE IN PAKISTAN A PRE-REQUISITE

“The Council of the Institute of Chartered Accountants of Pakistan has decided that
a person who is not permanently residing in Pakistan should spend a minimum
period of 180 days in the country to enable him to be eligible for membership of
the Institute.”

Provided that the above condition will not be applicable to the Pakistani nationals.


(16th meeting of the Council - August 22, 1966 / 152nd meeting of the Council -
July 19-20, 20)

MEMBERS' HANDBOOK
PART IV
3. FEES AND SUBSCRIPTIONS
THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN








SECTIONAL INDEX


3. FEES AND SUBSCRIPTIONS

CONTENTS


3.01
Schedule of various fees, (Effective 1
st
July 2013)

3.02

Retired members to pay fee at Concessional rates.






Directive 3.01

SCHEDULE OF VARIOUS FEES
(Effective from 1st July 2013)


MEMBERSHIP FEES: Pak Rupees

ADMISSION FEE:
Associate (ACA) 500
Fellow (FCA) 2,550
Restoration Fee 5,000


ANNUAL FEE:
Associate - *(ACA) (including Benevolent Fund fee of Rs. 1750) 11,900
Fellow - *(FCA) (including Benevolent Fund fee of Rs. 1750) 17,150
Concessional ACA / FCA (for retired members) 120
Life Membership fee 3,000
Foreign Affiliation 60, 500
Duplicate Membership Certificate 2,400
Duplicate Membership Card/ITAG 220
Dispatching charges of documents to outside Pakistan through courier 2,400


ANNUAL PRACTICE FEE:
Associate *(ACA) 8,750
Fellow *(FCA) 11,600

Benevolent Association Life Membership Fee 2,650


* Please note that as per Council’s decision, if payment received after July 31, 2013 will be subject to late payment charges
of 5% on total fee. The rate would be enhanced to 10% if a member would unable to pay by September 30, 2013.
















Directive 3.01

SCHEDULE OF VARIOUS FEES
(Effective from 1st July 2013)


Cover: Rs. 5,000,000 (18-59 yrs.)
GROUP LIFE INSURANCE PREMIUM 2012-13
16,250
Cover: Rs. 4,000,000 (18-59 yrs.) 13,000
Cover: Rs. 3,000,000 (18-59 yrs.) 9,750
Cover: Rs. 2,000,000 (18-59 yrs.) 6,500
Cover: Rs. 1,000,000 (18-59 yrs.) 3,250

Cover: Rs. 5,000,000 (60-64 yrs.) 14,700
Cover: Rs. 4,000,000 (60-64 yrs.) 11,750
Cover: Rs. 3,000,000 (60-64 yrs.) 8,800
Cover: Rs. 2,000,000 (60-64 yrs.) 5,900
Cover: Rs. 1,000,000 (60-64 yrs.) 2,950

Cover: Rs. 5,000,000 (65-69 yrs.) 133,200
Cover: Rs. 4,000,000 (65-69 yrs.) 106,560
Cover: Rs. 3,000,000 (65-69 yrs.) 79,920
Cover: Rs. 2,000,000 (65-69 yrs.) 53,280
Cover: Rs. 1,000,000 (65-69 yrs.) 26,640


HEALTH INSURANCE PREMIUM [AUGUST 2012-JULY 2013]
Plan A Plan B
Member/Spouse/Parents < 60 yrs. 4,950 4,950
Maternity Premium 18,000 N/A
Member/Spouse/Parents (60 to 69 yrs.) 11,000 11,000
Member/Spouse/Parents (70 to 79 yrs.) 14,000 14,000
Child < 18 yrs. 3400 3400
Child (18 to 25 yrs.) 4,950 4,950










Directive 3.01

SCHEDULE OF VARIOUS FEES
(Effective from 1st July 2013)


Pak Rupees
RAET Application Fee
REGISTERED ACCOUNTING EDUCATION TUTORS [RAET] FEES:
5,500
Induction of New RAET 100,000
RAET Appraisal Fee 60,000
RAET Appraisal Fee for 2nd inspection 10,000
RAET Annual Renewal Fee – Category A – First Campus 50,000
RAET Annual Renewal Fee – Category B – First Campus 25,000
RAET Annual Renewal Fee – Additional Campus

- Main Cities 25,000
- Other than Main Cities 10,000


REGISTRATION FEES:
Registration Fee Trainee Student 13,200
Registration Fee Full Time Student (FTS) 9,700
Registration as a new Training organization 25,000
Opening of each new Training office 11,000
Training Contract Amendment Fee 1,000


TRANSFER OF REGISTRATION FEES:
Transfer Fee for Trainee Student 10,700


FEES FOR CERTIFICATES / TESTIMONIALS:
Bonafied Trainee Student Certificate Fee 500
Duplicate Letter of Completion of Training Contract 200


Directive 3.01

SCHEDULE OF VARIOUS FEES
(Effective from 1st July 2013)


Pak Rupees
EXAMINATION FEE:
Foundation / Intermediate 1 Paper (w. e. f. Autumn 2013Session)

2,850

" " " 2 Papers of same module (w. e. f. Autumn 2013 Session ) 3,850
" " " 3 Papers of same module (w. e. f. Autumn 2013 Session ) 4,100
" " " 4 Papers of same module (w. e. f. Autumn 2013 Session ) 4,400
Final 1 Paper 5,400
" " " " 2 Papers of same module 6,100
" " " " 3 Papers of same module 7,300
4 Papers of same module 8,250
Final Exams (For candidates appearing in Dubai & Riyadh) $ AED SR
1 Paper 215 780 800
2 Papers of same module 245 880 900
3 Papers of same module 265 965 1000
4 Papers of same module 295 1070 1100
Annual Examinee Reg. Fee (For candidates appearing in Dubai & Riyadh) 12 45 45
Computer Practical Examination 850
Annual Examinee Reg. Fee 850
Pre-entry Proficiency Test Fee (w. e. f. Sept. 2013 Attempt) 3,300
Exemption Fee

Pre-entry Proficiency Test (w. e. f. July 1, 2013 Session) 3,100
Foundation Examination-Per Paper (w. e. f. July 1, 2013 Session) 2,550
Intermediate Examination-Per Paper (w. e. f. July 1, 2013 Session) 3,100
Final Examination-Per Paper (w. e. f. July 1, 2013 Session) 4,850
Module E or F (Full module) (w. e. f. July 1, 2013 Session) 15,200


Directive 3.01

SCHEDULE OF VARIOUS FEES
(Effective from 1st July 2013)


Pak Rupees
EXEMPTION FEE
For PIPFA qualified candidates Module A and B
:
12,750
For ICAEW/ICAI/ICAS/ICAA/CICA qualified candidates 64,850
For ICMAP qualified candidates (w. e. f. July 1, 2013) 34,450
For CIMA qualified candidates (w. e. f. July 1, 2013) 19,500
For ACCA qualified candidates (w. e. f. July 1, 2013)

Exemption from five papers 16,950
Exemption from six papers 20,050
Exemption from seven papers 23,150


DUPLICATE CERTIFICATE FEE:
Duplicate Examination Certificate 2400
Duplicate Passing Letter/Grade Sheet 240
Verification letter 360
Attested Syllabus 600
Dispatching charges of documents to outside Pakistan through courier

2,400
Re-checking of answer script (per paper) 900
Attestation of certificate/passing letter/grade sheet (each copy) 50
Letter of equivalence 240
Medium of instruction letter 330
Any correction of name in passing letter/grade sheet on request 600
Verification letter to different Embassies 200


RENTAL CHARGES FOR ICAP FACILITIES:
Auditorium Rent (For 4 Hours) 25,000
Auditorium Rent [Rs. 6000 for each additional hour]

1st Floor or 2nd Floor without AC (Full day) 12,000
1st Floor or 2nd Floor with AC (Full day) 18,000
Class Room without AC 4,000
Class Room with AC 6,000




3.02

RETIRED MEMBERS TO PAY FEE AT CONCESSIONAL RATES

"The question of charging concessional fee from the retired/superannuated
members of the institute has been under consideration of the Council for
some time past. It has been decided that from 1st July 1985 members of the
Institute both Fellows and Associates, who are not in practice and have
reached the age of 60 years and have not been holding any office of profit
but leading a retired life should be charged annual membership fee @ Rs.
120/*- only. Moreover it has been decided that no admission fee should be
charged from the Associates falling in the above category desiring to be
admitted as Fellows of the Institute on fulfilling other requirements of the
C. A. Bye-Laws, 1983 in that respect.

Members desiring to avail this concession will be required to produce a
proof of their age and an affidavit to the effect that they are leading a
retired life and are not holding an office of profit. Members eligible to avail
themselves of the concession of reduced fees may write to the Institute
giving the information regarding their age and the required affidavit."

(Institute's Circular No. 1/5CA-83 dated July 13, 1985)








____________________________________________________________
*See 3.01- Schedule of fees effective from 1.7.2013
MEMBERS' HANDBOOK
PART IV
4. PRACTICE ADMINISTRATION AS
CHARTERED ACCOUNTANTS
THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN
SECTIONAL INDEX

4. PRACTICE ADMINISTRATION AS CHARTERED
ACCOUNTANTS

CONTENTS

4.0 Practice Administration as CAs
4.01 Association with different firms
4.02 Offices to be manned by Chartered Accountants
4.03 Partnership firms to send particulars in the prescribed Proforma
4.04 Status of employee members
4.05 No ban on styling firm against member's name occupying high
Government position
4.06 Styling of firms
4.07 Use of designation 'Auditors' by practicing firms prohibited
4.08 Sleeping partners of professional firms not to sign Form ‘C’
4.09 Permission to engage in non-professional work by sleeping partners
while holding practice certificate
4.10 Withdrawn
4.11 Withdrawn
4.12 Attestation of partnership deed for submission to the Institute
4.13 Quality Control Review Programme
4.14 Corporate Governance
4.15 Quality Control Review
4.16 Withdrawn
4.17 Absence from office for a practicing member
4.18 Procedures of network amongst the firms/ practices registered with
the Institute of Chartered Accountants of Pakistan

4.01

ASSOCIATION WITH DIFFERENT FIRMS

"The Council did not have an objection to the management of a branch office
of a firm of chartered accountants in another city through an arrangement with
another chartered accountant having his main office in the city provided a
regular partnership deed had been signed. A Certified copy of the partnership
deed is required to be deposited with the Institute".

(7th meeting of the Council - August 30, 1963)

"The Council of the Institute considered the question of association of
members of the Institute with different firms and management of branch
offices and took the following decisions:-

i) It was decided that the same partners of a firm of chartered
accountants should not be permitted to constitute another firm under a
different name.

ii) A member in practice intending to join a partnership may associate
with two firms only including his sole-proprietary concern, if any.

iii) Arrangement by a member with another member for looking after his
branch office should not be allowed. Such an arrangement, if it has to
take place, should be only through a regular partnership deed (under
the Partnership Act), a copy of which will be filed with the Institute.
Any other arrangement will not be accepted.

(16th meeting of the Council - August 22, 1966)

As there appeared to be some doubt regarding the meaning of clause (ii) of
Council's Directive No. 4.01 regarding Association with Different Firms, the
matter was considered by the Council in its 127th meeting held on July 5,
1998 and it was decided to issue the following clarification:-





4.01
A member having a sole proprietary concern can enter into one more
partnership. A member who does not have a sole proprietary concern can
enter into partnership in two firms.

In other word association of a member would not exceed two firms at a time,
whether one is sole proprietary and the other partnership or both are
partnerships.

(127th meeting of the Council - July 05, 1998)
4.02

OFFICES TO BE MANNED BY CHARTERED ACCOUNTANTS

"Attention of the members is invited to bye-law
*
114 of the Chartered
Accountants Bye- Laws, 1961 whereby a chartered accountant in practice or a
firm of such chartered accountants having any branch office in Pakistan at the
commencement of the Ordinance is required to place such branch office under
the separate charge of a member of the Institute. A two years' period from the
date of enforcement of the Ordinance and Bye-Laws i.e. 1
st
July. 1961 was
allowed to regularize the position. The grace period of two years expired on
30th June, 1963".

(c.f. Para 12 of Circular 9 dated April 8, 1963)


"Of late certain cases have come to notice in which practicing members were
found to be not complying with the directives of the Council, which require
members to ensure that their various offices are functioning under charge of a
member of the Institute. A serious view has been taken of this irregularity and
it has been decided that provisions of bye- law *114 of the Chartered
Accountants Bye- Laws, 1961 read with the Council's directives dated 8th
April, 1963 should be specifically brought to the notice of the members.
Members are requested to make note of these important provisions".


(Institute's Circular No. 1/60/CA-74 dated December 20, 1974)

"The Council in its directive dated the 8th April, 1963 had advised that a
Chartered Accountant in practice or a firm of such Chartered Accountants
having any branch office or offices in Pakistan is required to place such office
or offices under the separate charge of a member of the Institute. In further
clarification of this directive the Council has decided that such branch office
or offices of the members will be considered to be in charge of a member of
the Institute only if a member resides physically and permanently at the place
of such branch office or offices.



*
Now see Section 26 of C.A. Ordinance, 1961 as amended.
4.02

"Members in practice having branch offices of their firms are requested to
take a note of the above directive of the 'Council and to regularize the position
by placing their branch office or offices under the charge of a member of the
Institute who should be present physically and permanently at a place where
such office or offices are situated".


(50th meeting of Council - July 31, 1976)


The Council in its directive dated the 8th April, 1963 had directed that a
Chartered Accountant in practice or a firm of such Chartered Accountants
having any branch office or offices in Pakistan is required to place such office
or offices under the separate charge of a member of the Institute. In further
clarification of this directive the Council had decided that such branch office
or offices of the members will be considered to be in charge of a member of
the Institute only if a member resides physically and permanent ly at the place
of such branch office or offices. However in view of the fact that the
Rawalpindi / Islamabad are twin cities and situated in close proximity of each
other, it is not feasible to enforce the above decision. The Council in its
meeting held on July 25, 1990, therefore, decided to exempt the
Rawalpindi/Islamabad offices from the application of Section 26 of the C.A.
Ordinance, 1961. This Council's directive shall be deemed to have complied
with if either of the offices in Rawalpindi/Islamabad are kept in charge of a
member of the Institute if a member resides physically and permanently at
either of the said places.

(94th meeting of the Council - July 25,1990)
4.03

PARTNERSHIP FIRMS TO SEND PARTICULARS IN THE
PRESCRIBED PROFORMA

The Institute maintains separate records of Firms of chartered accountants
functioning as partnership concerns. For this purpose Form 'C'
*
has been
devised. The form duly completed and signed by all the partners of each firm
are required to be filed with the Institute for record. Any change in the
constitution of the firm as and when takes place, is also required to be
intimated to the Institute in the same form.

(Institute's Circular No. 9 dated April 8, 1963)

Attention of members is also invited to bye- law 7 of the C.A Bye-Laws 1961
making it incumbent upon the members to notify any change in their address
to the Institute promptly. Members are requested to convey to the Institute any
change in their address within one month under all circumstances.

Attention of members practicing in partnership is particularly invited to form
*'C' wherein certain particulars are required to be furnished by them. It is
important that a fresh form duly completed is submitted whenever any change
in partnership takes place and the information must be furnished within one
month of change.

(Institute's Circular No. 1/60/CA-74 dated December 20, 1974)

“For this purpose, all the requirements of this Directive will be considered to
be fulfilled in case changes are notified by the firms to the Institute by using
online web portal developed for this purpose”.

221 Meeting of the Council-November 7, 2010


*
Now Form ‘C’, See Page 107.
4.04
STATUS OF EMPLOYEE MEMBERS

"The Council decided that an associate or a fellow of the Institute who is a
salaried employee of a chartered accountants or a firm of such Chartered
Accountants is to be deemed to be in practice for the limited purpose of
training of the articled clerks. Such members will not to be deemed to be in
practice for other purpose and will not be granted practice certificates under
the Chartered Accountants Bye-Laws. An employee member will, however,
be entitled to train articled clerks provided he fulfils the requirements of
Bye-Laws
*
71 and other requirements. In other words he will be deemed to
have completed 3 years continuous practice whilst serving in a firm of
chartered accountants but will be permitted to train articled clerks after
having acquired sufficient number of audits. As determined by the Council
in his individual name or in partnership with a firm of chartered
accountants".

(3rd meeting of the Council - May 9-11, 1962)

Enquiry-(B)
In this connection the following specific queries were received which were
referred to the Ministry of Law for clarification. The queries and advice
received are reproduced below:

Whether-
(a) practicing members can form a limited company for
management consultancy;

(b) practicing members can form an unlimited company for
management consultancy;

(c) non-practicing members can form a limited company for
management consultancy; and

(d) non-practicing members can form an unlimited company for
management consultancy.




*
New Bye-law 102

4.04

"We confirm the presumption that the expression "member of the Institute"
as it occurs in the opening part of schedule
**
'C' to the bye- laws includes the
case of non-practicing member as well. A reference to section 4 of the
Chartered Accountants Ordinance, 1961 will show, that for entry of name in
the register of the Institute practicing in accountancy is not necessary and
this gets added support from bye- laws 5 to 10 as also from the contents of
Schedule 'A' to the Bye-Laws. We will invite attention to column 13 of the
said schedule.

"As far as queries are concerned we think that our earlier advice in this behalf
would not bear repetition. We dispose of the queries with the remarks that
practicing member can form an unlimited company for management
consultancy provided provision of Schedule 'C' to the bye- law are not
contravened and permission of the Council under paragraph 15 of that
Schedule is obtained. As for a formation of a limited company in the case of
practicing members is concerned that will be in violation of Section.
*
23 of the
Ordinance. We may add that the attempted distinction in the case of non-
practicing member introduces a fallacy. All that we need say in this regard is
that no sooner non-practicing members will go far management consultancy
they will become practicing members. On this view of the matter therefore we
need not dilate any further and our answer to the queries as framed may be
taken in the negative".

(Ministry of Law advice dated May 25, 1967)

*
See part 1 of Schedule 1 of C.A. Ordinance 1961, as amended.

** Section 23 since amended to permit functioning of limited companies for practising as "Management
Consultants".
4.05

NO BAN ON STYLING FIRMS AGAINST MEMBERS' NAMES
OCCUPYING HIGH GOVERNMENT POSITIONS

"A question was considered by the Council whether there was any objection
to styling practicing firms after members' name who are occupying
Government positions. These firms were established by the respective
members prior to joining the Government. According to the legal advice
obtained there was no bar to continue the firms under the names of such
members."


(49th meeting of Council - December 26, 1975)
4.06
(Revised – 2010)
STYLING OF FIRMS

A. Criteria for Approval of Trade/Firm Name:
1. The Council reaffirms to the effect that trade names of practicing
members shall represent the name of the members in practice in the
case of a sole proprietor or in the name or names of the partners for
a partnership firm.
2. However, in the case of a partnership, a firm may , subject to the
approval of the Council, style itself by adopting the abbreviations of
the first names, the last names or the full names of the partners in a
manner as explained below for the purpose of clarity:
Example: Names of the partners are:
i. Cee Dee

ii. Why Zed

Initials of the first names, or last names or the full names are
permitted for styling the firm in one of the following manners:
(i) C.W. [& Co./ and Co./ & Company/ and Company/ &
Associates/ and Associates]
(ii) D.Z. [& Co./ and Co. / & Company/ and Company/ &
Associates/ and Associates]
(iii) C.D.W.Z. [& Co./ and Co. / & Company/ and Company/
& Associates/ and Associates]
The use of abbreviated names shall only be permitted subject to
the prior approval of the Council on a case to-case basis.
Provided that a firm shall not be allowed to be registered by a
name identical with that by which a firm or a company in existence
is already registered, or by a name which resembles or can be
construed to resemble the brand name or initials by which a firm or
a company is generally known whether in Pakistan or
internationally or so nearly resembles that name or a brand
name or initials so as to be calculated to deceive or misrepresent.


4.06
(Revised – 2010)
However, where the firm or a company in existence is in the
course of being dissolved and signifies its consent in such a
manner as the Institute may require, the new firm or company may
be registered in the name of the firm or the company being
dissolved.
B. Inclusion of the Name of a Foreign Firm in the Name of the
Pakistani Firm:
3. A recognition of an affiliation with a foreign firm may be
permitted to be indicated in the name and style with which the
Pakistani firm is allowed to practice in Pakistan by the Institute in
a manner as referred to in this section B.
4. A Pakistani firm in practice may enter into any one of the
following relationships with a foreign firm:
a) As an integrated firm;
b) as a member firm; or
c) in an other form.
The nature of each relationship as listed above has been explained
for the purpose of this Directive in its appendix A.
5. The manner in which the name of a firm shall be styled to
demonstrate the relationship as stated under paragraph 4 is
explained below.
The initials / full name of the international firm may be included as
a part of the name of the local firm using one of the three options
as set forth:
Example:
Exe Why & Co. ABG / AlphaBeta Gamma
(Pakistani name complying (Initials/name
with this Directive ) of the foreign firm)
4.06
(Revised – 2010)


Option (a)
The name of the firm can therefore be:
Exe Why & Co.- ABG, Chartered Accountants
Option (b)
Abbreviated initials of the foreign firm may be made a part of
the name of the Pakistani firm as follows:
ABG - Exe Why & Co., Chartered Accountants
Option (c)
The full name of the foreign firm may be made a part of the
name of the Pakistani firm as follows:
Alpha Beta Gamma - Exe Why & Co., Chartered Accountants
or
Exe Why & Co. – Alpha Beta Gamma, Chartered Accountants
The insertion of a dash (–) between the two names, in any of
the forms as mentioned above, is not compulsory.
The nature of the relationship between the Pakistani firm and
the foreign firm should be mentioned on the letterheads and
other stationery of the Pakistani firm.
6. The abbreviated initials or full foreign name will only be included
as a part of the name of a Pakistani firm subject to each of the
following conditions, as applicable:
a) A Pakistani firm which has a relationship as referred to
in sub-paragraphs 4 (a) and 4 (b) above shall only be
entitled to style its name in the manner as referred to
under the options in paragraph 5 above.


4.06
(Revised – 2010)

b) The Pakistani firm which is affiliated with a foreign
firm in any of the relationships as mentioned in
paragraph 4 above shall have an exclusive right to
operate in Pakistan on behalf of its affiliate subject to
conditions laid down in this Directive.
c) The term foreign name, as used in this Directive, means
a known name of an international network of firms (a
foreign firm) which is primarily engaged in public
accounting practice and recognised as such within and
outside its own country of domicile.
d) Use of the Pakistani firm’s name under any of the
options shall be subject to approval of the Council on a
case to-case basis.
e) The Council before granting the requisite approval may
obtain confirmation from the foreign firm that it has
given permission to the applicant Pakistani firm for the
sole use of its name in Pakistan.
f) The Pakistani firm shall ensure that all legal formalities,
as required under the laws of Pakistan, for a change in
the name of the firm by addition of the foreign name
are complied with and documentary evidence thereof is
provided to the Institute of Chartered Accountants of
Pakistan (ICAP).
g) The Pakistani firm shall make an application to ICAP
for registration of the revised name in the prescribed
form, alongwith all the required documents and deposit
the requisite fee as prescribed by the Council from time
to time.
h) The Pakistani firm shall file with ICAP a copy of the
affiliation agreement, by whatever name called, or
relevant extracts therefrom, with the foreign firm or
network of firms evidencing the existence and the
nature of the relationship, duly attested by the senior
partner of the Pakistani firm.
i) The Council shall be advised in writing by the Pakistani
firm of any change in the nature of its affiliation with
the foreign firm within a period of one month of the
change taking place.
j) The Pakistani firm, which will have been granted
permission by the Council to use a foreign name in
accordance with the terms as stated above, and all its
partners in Pakistan shall comply with the requirements
of the Chartered Accountants Ordinance, 1961, its bye-
laws, all directives of the Council and Technical
Releases and all the other requirements as prescribed by
the Institute from time to time and shall be subject to
the Quality Control Review and the Investigation and
Disciplinary processes of ICAP.
k) Any partner in the foreign / international network of
firms who is not a member of ICAP shall not be
permitted to hold out as being in practice in Pakistan
until such time that he/ she has complied with the
requirements contained in the Council Directive 2.01
(Revised 2008).
l) Upon revocation of the affiliation agreement(s), by
whatever name called, by and between the Pakistani
firm and the foreign firm or network of firms, it will be
incumbent upon the Pakistani firm to inform ICAP of
such an occurrence within one month thereof
whereupon the permission granted for use of the foreign
name as a part of the local name shall be withdrawn
forthwith.
C. Other matters
7. The following should be considered when styling the name of a firm
or adopting the name of the foreign firm as a part of the Pakistan
firm’s name:

(a) The members should not represent to the public at large
that their firm has partners who in fact are not Chartered
Accountants in practice within the meaning of the
Chartered Accountants Ordinance, 1961.
(b) Inanimate or abstract names partaking of the
designatory character of services to be rendered should
not be allowed in order to avoid disguised attempts at
publicity.
8. The restrictions relating to styling of firms shall not apply in matters
of succession in which case the continuation of the name of the
previous firm, including where the initials or name of a foreign firm
is included, is permissible. However, the inclusion of the name of the
foreign firm shall continue to be subject to the requirements referred
above.
9. The policies stated in this Directive shall also be applicable in
respect of members engaged in the business of management
consultancy.

The existing Directive 4.06 is superseded by this Directive No. 4.06
(Revised – 2010).

(214
th
meeting of the Council - January 28, 2010)


Appendix to the Council Directive No. 4.06 (Revised - 2010)


Integrated Firm

An integrated firm represents a form of a membership firm wherein in
addition to the requirements for a member firm as referred below, as a result
of an affiliation (by whatever name called) with the foreign firm or network of
firms, the profits / losses of the Pakistan firm are integrated with the financial
results of the foreign firm / network of firms in whatever manner.

Membership Firm

A membership firm is a form of an affiliation where the Pakistan firm forms a
part of the organisation / network of a foreign firm or a network of foreign
firms being a firm / organisation / network recognised to practice as a
professional accounting entity by any country being a member of the
International Federation of Accountants (IFAC), and the Pakistani firm is
identified as a ‘member’ of that firm / organisation / network. The sole
proprietor / partner / partners of the Pakistani firm form a part or a member or
a constituent of that foreign entity.

Others

Any other form of relationships that does not fall within the definition of an
integrated firm or a membership firm.


The Directive No. 4.06 (Revised-2005) before this revision reads as under:













4.06
(Revised – 2005)
STYLING OF FIRMS

1. Keeping in view the requirements of profession, locally and internationally and the developments in the
status of Pakistani firms in relation to their affiliation with the foreign firms, it has been decide that an
Identification of affiliation with a foreign firm / enterprise may be allowed to be indicated in the name and
style with which the Pakistani firm is allowed to practice in Pakistan by the Institute.
2. A Pakistani firm in practice may enter into anyone of the following relationships with a foreign enterprise /
firm: -
a) An integrated firm;
b) A member firm;
c) Others
The nature of each category as listed above has been explained for the purpose of this Directive in Appendix
"A".
3. For the sake of clarity the relationship under 2 (a) and (b) above, the manner of styling the name has been
explained as under:
The abbreviated initials / full name of the international firm may be i ncluded as a part of the name of the
local firm as under:
Example (a) "Yahya Mehmood & Co. ABG / Alpha Beta Gamma
(Pakistan name complying (Abbreviated
with revised Directive 4.06 ) initials/name of the
foreign firm)
The name shall therefore be:
Yahya Mehmood & Co. - ABG . Chartered Accountants

Example (b)
Abbreviated initials / name of foreign firm may also be placed as under:
ABG - Yahya Mehmood & Co.
Example (c)
Alpha Beta Gamma - Yahya Mehmood & Co.
Nature of relationship should be mentioned on letterheads and other stationery.
4. The abbreviated initials or full foreign name will only be included as a part of name subject to
the following conditions:-
a) Only the Pakistani firms having the relationship under 2(a) and (b) will be entitled to style
their name in this manner;
b) The Pakistani firm having the nature of affiliation as mentioned in clause (a) shall have
Pakistan as it exclusive territory to operate;
c) Use of name will be subject to approval by the Council on a case-t o-case basis;
d) Any change in the nature of affiliation will be require to be intimated to the Council within
one month of the change;
e) The term foreign names, as used in this revised D irective, mean a known name of
international; networks of firms (foreign firms) which are primarily

engaged in public
accounting practice and recognized as such within and outside their own respective countries;
f) The Institute of Chartered Accountants of Pakistan (ICAP) before granting the requisite
permission may obtain confirmation from the foreign firm that has given permission for the
sole use of its name in Pakistan by the local/Pakistani firm;
g) Pakistani firms which will have been granted permission by ICAP to use a foreign name on
the terms stated above shall comply with other requirements prescribed by the Institute from
time to time;
h) The policy stated herein shall also be applicable in respect of members engaged in
Management Consultancy business;
i) The Pakistani firm shall file a copy of t he Management and Licensing agreement or relevant
extracts there from, duly attested by the local Senior Partner, with the International Firm or
network of firms to establish the nature of relationship;
j) The Pakistani firm shall ensure that all legal for malities, as required under the laws of
Pakistan, for a change in name of the firm by addition of the foreign name are complied
with and documentary evidence thereof provided to ICAP;
k) The Pakistani firm shall make an application in the prescribed form, along with all
documents required to ICAP and deposit the requisite administrative fee as prescribed by
the Council from time to time;
I) The Pakistani firm and all its partners in Pakistan shall f ol l ow the C.A. Ordinance, bye-
laws, all Council Directives and Technical Releases and be subject to the Quality Control
Review and Investigation and Disciplinary process of the ICAP;
m) Non-Members of ICAP who are partners in the International network or firm shall not be
permitted to hold themselves out as being in practice in Pakistan until such time that they
have complied with the Council Directive 2.01 (Revised 1998); and
n) Upon revocation of the agreement(s) by and between local firm and the International
Firm or Network of Firms, it will be incumbent upon the local firm to inform ICAP of
such occurrence, whereupon the permission granted for use of name shall be forthwith
withdrawn.
5. In order to ensure the professional interest of members, the following objectives needed to be
kept in view in the matter of adopting firm' name:
(a) The members should not represent to the public at large that their firm has partners who in
fact are not Chartered Accountants in practice within the meaning of Chartered
Accountants Ordinance, 1961.
(b) Inanimate or abstract na mes partaking of the designatory character of services to be
rendered should not be allowed in order to avoid disguised attempts at publicity.
6. The Council reaffirms to the effect that trade names of practicing members shall be after the name
of the members in practice in the case of a sole proprietor or in the name or names of the partners in
the case of a firm. This restriction shall not apply in the case of a succession in which case the
continuation of the name of the previous firm is permissible and in case of name of international
firm as specified in paragraph 3 above.
7. The Council further decided that the above policy shall also be applicable in respect of members
engaged in Management Consultancy business.
The existing Directive 4.06 and 4.11 are superseded by this Directive No. 4.06 (Revised-2005)

( 171
st
meeting of the Council – April 29, 2005)
Appendix to Council Directive No. 4.06 ( Revised – 2005)

Integrated Firm
Is the form of membership firm wherein in addition to the requirements for member firm as referred above, as a
result of an agreement / with the foreign firm / enterprise the profit / losses of Pakistan firm are integrated
with worldwide / foreign enterprise in certain manner.

Membership Firm
Its a form of affiliation where the Pakistan firm forms part of the organization of a foreign firm / enterprise
being a firm / organization recognized to practice as professional accounting firm by any country being the
member of International Federation of Accountants (IFAC), and the Pakistani firm is identified as "member".
The partners / partner of the Pakistani firm form part / constituent of international enterprise / entity.

Others
Any other form of relationships that does not fall within the definition of a membership / integrated firm.

4.07

USE OF DESIGNATION 'AUDITORS' BY PRACTICING FIRMS
PROHIBITED

"The Council decided that the members should use only CHARTERED
ACCCOUNTANTS(S) as their designation on letter head forms etc. and
should drop the use of word AUDITORS(S) since the words CHARTERED
ACCOUNTANTS(S) ordinarily covered a number of functions including
auditing".

(2nd meeting of Council - January 8-9, 1962)
4.08

SLEEPING PARTNERS OF PROFESSIONAL FIRMS NOT TO SIGN
FORM 'C'

"While considering a question of obtaining signatures on form *'C' by all the
partners of practicing firms it was decided not to require signatures of
sleeping partners on form*' W' provided the partnership agreement of the firm
includes a clause that the interest of the sleeping partners in the firm was
restricted to the sharing of profits to the extent of retiring benefits only. Such
agreement duly signed by all the partners should be filed with the Institute
within six months of the filing of form *'C' in this respect."

(70th meeting of the Council - September 12, 1983)

*
New Form ‘C’
4.09

PERMISSION TO ENGAGE IN NON-PROFESSIONAL WORK BY
SLEEPING PARTNERS WHILE HOLDING PRACTICE
CERTIFICATE

"Considering a request from a member for permission to engage in non-
professional work while holding practice certificate, the Council decided to
accept the request and to approve the basis of grant of such permission in the
future on the following criteria:-

1. 20 years of membership of the Institute; and

2. 15 years association with the same practicing firm either as a
sole proprietor, partner and/or employee".

(61st meeting of Council - December 30, 1980)
4.12

ATTESTATION OF PARTNERSHIP DEED FOR SUBMISSION TO
THE INSTITUTE

The Executive Committee in its meeting held on April 1, 1989 decided that
partnership deed submitted to the Institute by the practicing firms should not
necessarily be attested by the Notary Public as the same is not required under
the C.A Bye-Laws. Members therefore, have the option henceforth to get
partnership deed certified by a Notary public or a member of the Institute
other than the Partners listed in the Deed.

(Meeting of the Executive Committee April 1, 1989)
4.13

QUALITY CONTROL REVIEW PROGRAMME

The Council has decided that firms/ sole proprietorships of practicing
Chartered Accountants should furnish to the Institute a complete list of their
audit clients as of 30th June (within 3 months) each year, and as and when
required, to enable the Professional Standards Compliance Department to
carry out its Quality Control Review (QCR) programme. Ail practicing
members are directed to extend full cooperation to successfully implement the
QCR programme so as to ensure maintenance of the highest standards in
practice.

Attention of members is drawn to Bye- Law 8 (3) of the Chartered
Accountants Bye-Laws, 1983 which states that the validity of the Certificate
(of practice) shall, on payment of the annual fee, and on fulfillment of the
directives of the Council, be extended from time to time …………. Thus,
in order to renew the Certificate of Practice, it is essential for members to
comply with the above requirement.

It was also decided that all firms / sole proprietorship of practicing Chartered
Accountants may include a clause in their letter of engagement to all their
limited liability company clients, stating that the working paper files
pertaining to the client would be subject to Quality Control Review by the
Institute of Chartered Accountants of Pakistan without any reference to the
client.

(135th Meeting of the Council - 6 December, 1999)
4.14

CORPORATE GOVERNANCE

The Council draws attention of members, who hold the position of director or
chief executive officer or chief financial officer or any other position in a
corporate entity, to their responsibility for ensuring good corporate
governance in letter and spirit. This would particularly include establishing
and maintaining a proper system of internal controls, as well as preparation
and presentation of financial statements in conformity with International
Accounting Standards applicable in Pakistan, the requirements of the
Companies Ordinance 1984 and any other relevant corporate legal framework
applicable to the organization in which they are working.

(135th meeting of the Council - 6 December 1999)
4.15

QUALITY CONTROL REVIEW

The Council has reiterated that it is a professional requirement for practicing
Chartered Accountants to submit their audit working paper files for a Quality
Control Review (QCR) by the Institute. Thus practicing members are directed
to only accept audit engagements, if the client gives consent to a QCR.

(142nd Meeting of the Council - 7 April , 2001)
4.17

ABSENCE FROM OFFICE FOR A PRACTICING MEMBER

1. Pursuant to bye- law 8 of the Chartered Accountants Bye-laws, 1983
practicing members are required to be present at the office, identified
in their practicing certificate. However, absence from office in certain
circumstance is allowed subject to the following situations:

(a) absence not exceeding three months (in a financial year);

(b) absence for a period exceeding three months in a financial year
provided:

(i) the absence is for training or education; and

(ii) the office is looked after by another qualified member of the
Institute, who is a partner or in full time employment.

Provided that the period of such absence would not exceed one year.

2. Council is empowered to review the renewal of certificate practice if
absence exceeds any of the above prescribed period. This will require
special approval from the Council.


(166
th
Meeting of the Council held on September 17-18, 2004)

4.18

PROCEDURES OF NETWORK AMONGST THE FIRMS/
PRACTICES REGISTERED WITH THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN

1. These Directives will apply to firms/ practices opting to form a
network or to become part of the existing network and will be called as
‘Procedures for Network amongst the firms/ practices registered
with the Institute of Chartered Accountants of Pakistan’.

2. Definition

2.1 Bye Laws means The Chartered Accountants Bye-Laws, 1983
as amended or added to from time to time.

2.2 Code of Ethics – Code of Ethics means the Code of Ethics
issued by the Institute and decisions of the Council in this
regard.

2.3 Council – Council means the Council of the Institute.

2.4 Firm

2.4.1 A sole practitioner, partnership or Corporation of
professional accountants;
2.4.2 An entity that controls such parties; and
2.4.3 An entity controlled by such parties.

2.5 Formal Network - Formal network means a network amongst
two or more firms/ practices registered with the Institute, where
the object of network is to use the collective resources of the
affiliates for execution of professional services of one or more
types at one and/or at multi- locational points. The resources
would include human, financial, technical and other logistic
support required to execute the professional assignments. In such
type of network, the common resources may be pooled and
exhibited together before the service user as those belonging to
one particular set of professionals.
4.18

2.6 Institute – Institute means the Institute of Chartered
Accountants of Pakistan.

2.7 Member in Practice:
A member of the Institute shall be deemed “to be in practice”
when individually or in partnership with chartered accountants
in practice, he, in consideration received or to be received-

2.7.1 engages himself in the practice of accountancy, or
2.7.2 offers to perform services involving the auditing, or
verification of financial transactions, books, accounts,
or records or the preparation, verification or
certification of financial accounting and related
statements or holds himself, out to the public as an
accountant; or
2.7.3 renders professional services or assistance in or about
matters of principle or detail relating to accounting
procedure or the recording, presentation or certification
of financial facts or data; or

2.7.4 render such other services as, in the opinion of the
Council, are or may be rendered by a chartered
accountants in practice; and

2.7.5 the words “to be in practice” with their grammatical
variations and cognate expressions shall be construed
accordingly.

Explanation – An associate or a fellow of the Institute who is
salaried employee of a chartered accountant in practice or a
firm of such chartered accountants shall, notwithstanding such
employment, be deemed to be in practice for the limited
purpose of the training of (students).

2.8 Ordinance – Ordinance means The Chartered Accountants
Ordinance, 1961. (X of 1961).


4.18
2.9 Network
“Network amongst two or more firms/ practices means an
arrangement to facilitate the better functioning of the affiliate
member firms/practices in the common economic interest of the
profession and not for acquisition of any gain for the network.
Such Network shall include the formal Network to use the
collective resources such as turnover, infrastructures, manpower
and location for execution of Professional services of one or more
type.
[Explanation] –

2.9.1 An affiliation as referred to above shall also include: -

2.9.1.1 having an association with an accounting entity such
that it results directly or indirectly in a common
professional economic or beneficial interest.
2.9.1.2 one or more of the entities holding out that it is so
affiliated or networked.

2.9.2 An entity shall not be treated as an affiliate of another merely
for the reason that they

2.9.2.1 share professional knowledge and data base;
2.9.2.2 refer certain professional assignments or authorize the
other to represent certain specific matters.

2.10 Practice
A sole practitioner, a partnership or a corporation of
Professional accountants which offers professional services to
the public.
2.11 Referral Practice – Referral Practice means a practice to refer
professional work by a firm to one of its associate/affiliate
either situated at a different place or rendering professional
services not provided by it, to the user of the services. The pre-
dominant objective of such an arrangement is not to pool in
their collective resources and exhibits them as those belonging
to one particular set of professionals.
4.18
All other terms and expressions used but not defined in these rules
shall have the same meaning as assigned to them in the Chartered
Accountants Ordinance, 1961, Bye-Laws and Council Directives
issued and amended from time to time.

3. Name of Network:
3.1 The Network may have distinct name from its constituent’s and
from other networks. To distinguish a “Network” from a “firm”
of Chartered Accountants, standards provided in Directive 4.06
shall be applicable to the name of the network. The prescribed
format of application for approval of Name for Network is at
Form NWA-1 (enclosed).
3.2 If the name is subsequently found to be undesirable then the
Institute may require withdrawal of such name, which
directions of the Institute shall be complied with forthwith.
3.3 The Council Directive 6.04 ‘Code of Ethics for Chartered
Accountants’ permitting advertisement and use of logo will be
applicable on networks
3.4 The firms/ practices constituting the network are permitted to
print network name on their professional stationery.

4. Registration:

4.1 A Formal Network is required to be registered with the
Institute in a prescribed Form NWA-2 (enclosed).
4.2 Referral Practice requires no registration.
4.3 It is for each firm/ practice to decide whether its affairs and
relations with another firm results in creation of a Formal
Network. The firms shall evaluate for themselves whether or
not a formal relationship exists among them which warrants
registration of network with the Institute.


4.18
4.4 If different firms/ practices are networked with a common
Multinational Entity (MNE) then irrespective of the
presence/absence of any ‘network’ relationship between the
firms/ practices inter-se, they shall be considered as part of a
network. As such, for these firms/ practices the registration
with the Institute is not mandatory. It is only if these firms/
practices decide to constitute a Formal Network, then the
registration with the Institute is mandatory.

5. Ethical Compliance:
Once the network is registered with the Institute, it will be necessary
for such a network to comply with all applicable ethical requirements
prescribed by the Institute from time to time in general and the
following requirements in particular: -

5.1 If one firm of the network is the statutory auditor of a listed
entity then the constituent firms directly/indirectly should not
accept the internal audit or book-keeping or such other
professional assignments which are prohibited for the statutory
auditor firm as per clause (xl) of Code of Corporate
Governance.
5.2 Clause (xli) of the Code of Corporate Governance relating to
rotation of firm would be equally applicable on net work.

5.3 The Constituent member firms/ practices of a Network and the
Network shall comply with all the Ethical Standards prescribed
by the Council from time to time.

6. Quality Control:
It is the responsibility of Individual firms/ practices constituting the
network to obtain satisfactory ‘Quality Control Review’ rating from
the Institute. Firms/ practices not having satisfactory QCR rating but
are part of any network of firms/ practices in which other firm(s)
would have satisfactory QCR rating(s) are not allowed to accept and
conduct audit of listed companies in strict compliance of the
requirements of clause (xxxvii) of the Code of Corporate Governance.
4.18
7. Consent of Client:
The network firm shall obtain consent of the client to engage other
network firms in discharging the professional assignments.

8. Constitution of Network:
8.1 Proprietory/partnership firm(s) are permitted to form a
Network.
8.2 Proprietory/partnership firms are allowed to join only one
Formal network.
8.3 A Firm/ practice will be allowed to join only one formal
network.

9. Object of Network:
The Network itself will not carry on any business for acquisition of
gain for itself and only act as a facilitator for its members/constituent
Member firms/ practices to pursue their professional jobs.

10. Responding to Enquiries:
Only one firm can apply on behalf of the network showing the
collective strength of all the constituent firms/ practices of the
network, when responding to any enquiry.

11. Issuing Reports:
Only the constituent member firm(s)/ practice(s) which is/are part of
the network, and originally undertaken the assignment in its/ their own
name is/ are eligible to issue/sign/attest any
certificate/Report/professional document/assignment irrespective of
the fact that resources from other constituent firms have also been
engaged on the assignment.



4.18
12.
*
Violation of Ordinance:
In case of alleged violation of the provisions of the Ordinance, Bye-
laws, Directives/ guidelines laid down by the Council from time to
time and Code of Ethics by the Network firm, the
proprietary/partnership firm(s) constituting the Network which
originally undertakes the assignment as per paragraph 11 would be
answerable. Thus, the responsibility would rest with the Engagement
Partner who signs the report.

13. Exit From Network:
A constituent Member firm of a Network may after clearing dues of
network, if any, exit from the network by sending the declaration in
Form NWA-3 (enclosed) at the registered office of the network and to
the Institute. The concurrence/acceptance of the same by other firms/
practices forming part of the network firm shall not be required.

14. Framework of Internal Byelaws of Network requiring
Registration:
To streamline the networking, a network shall formulate operational
byelaws. Byelaws may contain the following clauses on which the
member firms/ practices of the network may enter into a written
agreement among themselves (a copy whereof should be sent to the
Institute):
14.1 Appointment of a Managing Committee, from among the
managing partners of the member firms/ practices of the
network and the terms and conditions under which it should
function. The minimum and maximum number of members of
the Managing Committee shall also be agreed upon.
14.2 Administration of the network.
14.3 Contribution of membership fees to meet the cost of the
administration of the network.



*
Rule 12 was amended by the Council in its 200
th
Meeting held on October 16, 2008.

4.18
14.4 Dispute settlement procedures through arbitration, Alternate
Dispute Resolution (ADR) and mediation.
14.5 Development of training materials for members of the network.
14.6 Issue of News-letters for staff and clients.
14.7 Development of software’s for different types of assignments.
14.8 Development and maintenance of data bases relevant for
different types of assignments.
14.9 Setting up Library.
14.10 Appointment of a Chief Executive/ Technical Director to
whom references can be made.
14.11 Determining the methodology for drawing resources from each
member firm.
14.12 Determining compensation to member firms/ practices for
resources to be drawn from them.
14.13 Peer review of the member firms/ practices.
14.14 Development of a disclaimer statement such that the member
firms of the network are independent firms and are only
associated/ affiliated with the network and the network itself
provides no client services. No member firm has any authority
to obligate or bind any other network member firm vis-à-vis
third parties, nor does network itself have any such authority to
obligate or bind any of its member / constituent firm.
These clauses are illustrative.

(ICAP 193
rd
Council Meeting – November 7, 2007)

Form ‘NWA-1’
APPLICATION FOR APPROVAL OF NAME FOR NETWORK OF
FIRMS/ PRACTICES
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF PAKISTAN
[See Rule 3 of Procedures of Network amongst the firms/ practices
registered withThe Institute of Chartered Accountants of Pakistan]

1. Proposed name of Network (in order of preference) if the Network has a distinct name:
a)
b)
c)
d)
2. Name(s) of the
firm(s)/Member(s)
forming network
Firm Name/
Member
Name
Membership
No.
a)
b)
c)
d)
3. Address of the Office of the Network:


4.
We hereby declare that the above firm(s)/ practice(s) proposed to have entered into an
understanding to form a network in accordance with Rules of Network amongst the
firms/ practices registered with The Institute of Chartered Accountants of Pakistan
and further affirm and confirm that the partner signing the application has been duly
authorized by the other partners of the respective firms/ practices.


Place : ............................

Name(s) with Membership No(s) and signature(s) of duly authorized
Partner(s)/Proprietor(s) of the firms/ practices/ Member constituting Network

Date : .............................


Form ‘NWA-2’

DECLARATION FOR REGISTRATION OF FORMAL NETWORK
AMONGST FIRMS/ PRACTICES REGISTERED WITH THE
INSTITUTE OF CHARTERED ACCOUNTANTS OF PAKISTAN
[See Rule 4 of Procedures of Network amongst the firms/ practices
registered with The Institute of Chartered Accountants of Pakistan]
PARTICULARS OF NETWORK

1. Name of the Network

2. Address of the Network

3. Names and addresses of firms/ practices/Member constituting the
Network
Names and addresses of Membership No.
Firm(s)/Member(s)

4. (a) Date of formation of Network

(b) Date on which present network arrangement was entered into

5. We undertake to comply with the guidelines/directions laid down by
the Council regarding Network from time to time.
We hereby declare that:
(a) the network constituents have entered into an agreement
to form this network.

(b) that the partner(s) signing this declaration has been duly
authorized by the other partners of the firm.

Place : .............................
Name(s) with Membership No(s). and signature(s) of duly authorized
Partner(s)/ Proprietor(s) of the firms/ practices/

Date : .............................

Form ‘NWA-3’

DECLARATION FOR DISSOCIATION FROM A NETWORK

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF PAKISTAN
[See Rule 13 of Procedures of Network amongst the firms/ practices
registered with The Institute of Chartered Accountants of Pakistan]

1. Name of the Network

2. Address of the Network

3. Names and addresses of firms/ practices constituting the Network

Names and addresses of Membership No.
Firm(s)/Member(s)

4. Name and address of the firm/member willing to dissociate from the
Network

Name and address of Membership No.
Firm(s)/Member(s)

In pursuance to the Rule 13 of Rules of the Network issued by The
Institute of Chartered Accountants of Pakistan, We/I
…………….hereby declare our dissociation from the Network w.e.f.
……………….

I hereby declare that I have been duly authorized by the other partners
to issue this declaration.


Place : ........................... Name with Membership No(s).
and signature(s) of duly authorized
Date : ........................... Partner(s)/Proprietor(s) of the firm/
Member dissociating from the Network
MEMBERS' HANDBOOK
PART IV
5. PRACTICE ADMINISTRATION
AS MANAGEMENT CONSULTANTS
THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN
SECTIONAL INDEX
5.0 Practice Administration as Management Consultants
CONTENTS


5.01 Engagement in Management Consultancy business
5.02 Formation of Companies for Management Consultancy
5.03 Use of Foreign names for Management Consultancy
5.01
ENGAGEMENT IN MANAGEMENT CONSULTANCY BUSINESS

1. A Chartered Accountant can practice either as a Chartered Accountant or
only as a Management Consultant as sole proprietor, through a partnership
firm or a limited liability company. In case he opts to practice as a
Chartered Accountant he can engage in all those functions which a
Chartered Accountant in practice undertakes including management
consultancy after obtaining the certificate of practice as a Chartered
Accountant under Bye-Law 8 of C.A. Bye- laws 1983.

Management Consultancy Practice by Chartered Accountants in practice

2. A Chartered Accountant in practice can also engage in management
consultancy practice by forming a separate sole proprietary concern,
partnership firm or a company. In case he wishes to associate non-
members, he is required to form a company and to undertake that such
non- members would observe the bye-laws and code of professional ethics
of the Institute.

3. The practicing Chartered Accountants who wish to practice as
"management consultants" through a limited liability company can style
themselves as "Management Consultants" under the company's name e.g.
XYZ Co., Ltd., Management Consultants". There should, however be
separate sign boards and stationery for practice as “"Chartered
Accountants”" and as “Management Consultants.”

4. However, the designation "Management Consultants" cannot be used by
the practicing Chartered Accountants either individually or by sole
proprietary concern or a partnership firm.

Management Consultancy Practice by Members Not in Practice as
Chartered Accountants

5.01

5. A member who is interested in practicing only as a Management
Consultant, can engage in such practice either as sole proprietor or through
a partnership firm or a limited company after obtaining a certificate of
practice to practice as "Management Consultant" under Bye- law 8 of the
C.A. Bye-Laws, 1983.

6. Such members should be entitled to practice only as Management
Consultants and cannot engage in other functions which are normally
under-taken by Chartered Accountants in practice.

7. In case a member wishes to associate non- member in his Management
Consultancy practice he could do so only in case of practice as a limited
liability company and he would undertake that such non- member would
observe the bye- laws and code of professional ethics of the Institute.

8. In case a member not practicing as a Chartered Accountant is associated
with a Management Consultancy practice he would be required to obtain a
certificate of practice as a "Management Consultant".

9. The obligation to ensure that non- members observe the bye- laws and code
of professional ethics of the Institute under clause 10 of Part-2 of
Schedule-I of the Chartered Accountants Ordinance, 1961 would arise if a
member associates with non- members in any of the following capacities:

(a) a shareholder in a management consultancy company

(b) a director of the management consultancy company

(c) a shareholder and a director of the management consultancy
company.

10. However, association as an employee or an Executive Director in a
management consultancy company would not attract the above
requirement.

5.01

11. The above directive summarizes the official amendment in Bye- law 8 of
the Bye- laws of the Institute and various decisions of the Council and
substitutes the earlier directives issued as 5.01 and 5.02 of Volume I of the
Members' Handbook.

(106
th
meeting of the Council - July 9-10, 1994)

5.02

FORMATION OF COMPANIES FOR MANAGEMENT CONSULTANCY

The Council of the Institute has noted that certain members of the Institute form
companies to practice as Management Consultants without any intimation to the
Institute.

The members should note that the words "shall be permitted" used in the proviso
to Section 23 of the Chartered Accountants Ordinance, 1961 (as amended) do not
ipso facto permit formation of a limited company by the Chartered Accountants
for the practices of Management Consultancy. The members are required to
obtain permission from the Council in this regard which is granted immediately
on fulfilling the following requirements:

(i) The application should be on prescribed From "Z" (specimen
enclosed).

(ii) Compliance with the requirements of Part 2 of Schedules I and II
of the C.A. Ordinance, 1961.

(iii) The name of the Company is in accordance with Council's
Directive 4.06.

(iv) Proposed Memorandum and Articles of Association.

The above requirements are aimed at ensuring that the Institute has complete
record of the members practicing as Management Consultants and that the
practice is in accordance with the Ordinance, Bye- laws and the Directive 5.01 of
the Council.

(121
st
meeting of the Council - May 29, 1997)


5.03
(Revised – 2005)

USE OF FOREIGN NAMES FOR MANAGEMENT CONSULTANCY

The Council of the Institute has decided to give permission to the members who
wish to practice as Management Consultants by forming a limited liability
company (the "Company") using a foreign name attached to a local name. Use of
abbreviation of local and/or foreign names is also permitted for this purpose.

The term foreign name, as used in this directive, means a known name of an
international firm / company of Management Consultants ("Foreign Firm")
recognized by a foreign professional body, approved by the Council for this
purpose.

The Foreign Firm shall have given a formal permission for the sole use of its
name by the Company in Pakistan.

The Institute of Chartered Accountants of Pakistan (ICAP) itself, before granting
the requisite permission, shall obtain confirmation from the Foreign Firm that it
has given permission for the sole use of its name by the Company.

Company/ies which will have been granted permission by ICAP to use a foreign
name on the terms stated above shall comply with other requirements prescribed
by the Institute from time to time.

For Further guidance on the issue of foreign names, members are advised to refer
to Directive 4.06 (Revised-2005)

(171
st
meeting of the Council - April 29, 2005)
MEMBERS' HANDBOOK
PART IV
6. ETHICS
THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN




SECTIONAL INDEX

6. ETHICS

CONTENTS

6.01 Non payment of annual fee to be an act of misconduct
6.02 Withdrawn
6.03 Institute’s Elections (Revised)
6.04 Code of Ethics for Chartered Accountants

NON-PAYMENT OF ANNUAL FEE
TO BE AN ACT OF MISCONDUCT
“Members of the Insitute not Paying annual fees despite reminders and requests
can be termed as guilty of breach of discipline.”
(49
th
meeting of Council-December 26,1975)
6.01
6.03
(Revised 2013)

INSTITUTE'S ELECTIONS

1.0 Pursuant to the complaints received by the Council for unhealthy
practices adopted by the members contesting elections to the Council
and Regional Committees, the Council caused an in-depth review of
the statutory obligations under the Chartered Accountants Ordinance
1961, Bye-laws made there under and practices prevalent elsewhere
in this regard. After a good deal of deliberation, the Council has
decided to issue the following Statement as a directive, the breach of
which shall be considered an act of misconduct liable for
disciplinary action.
2.0 The Council considers that bye-law 47 of the CA Ordinance
comprehensively reflects the requirements for a free and fair election
to ensure that:
i. the members contesting for the Council and Regional Committees
are elected purely on the basis of merit;
ii. the election for the Institute of a learned profession is not reduced to
the level of political wranglings as it would deprive the profession of
its distinctive image of being "a little different"; and a good taste and
good sense befitting an enviable conduct by the candidates and the
voters remain manifest throughout the election process.
3.0 In order to achieve the above objectives the Council directs the
candidates and voters to refrain from:
i. canvassing in any form or shape directly or indirectly through any
person including friends, relations, supporters, patrons or agents;
ii. forming groups or panels of two or more persons overtly or covertly
on any basis;
iii. influencing any member to vote or not to vote for any candidate(s)
through pamphlets, brochures, cards or by any other means of
communication which tends to prevent a free exercise of the voting
right; except in a manner allowed in paragraph 4 and 5 of the
Directive;




6.03
(Revised 2013)


iv. gathering in or around polling stations by candidates or any other
members or persons on the day of elections to avoid influence on the
voters. Members should immediately leave the premises after casting
their votes; and
v. arranging or causing to arrange for members any party or gathering,
with or without meals, refreshments, etc. on or before election day.
4.0 To assist the candidates in disseminating information about them the
Council has decided to:
i. issue an introductory expose of all the candidates with their
photographs stating their particulars, positions in their organization
and other fields of service, their achievements, their previous service
to the Institute, or its Council, Regional Committee or any other
Committee(s);
ii. the introductory expose of the candidates, shall be included in the
Institute's Newsletter and the Pakistan Accountant; and
iii. organize a get-together of the members and candidates of the
Council and Regional Committees to enable an introduction of
candidates at such place(s) and at such time as the Election
Committee may decide.
5.0 A candidate may, if he so wishes, circularize or canvass electors
provided that he observes good taste and good sense. The decision of
the Election Committee as to the acceptability or otherwise of such a
circular or canvassing shall be final and not open to challenge. Any
such circularization or canvassing shall be at the candidate’s
personal expense.
6.0 The Council has also decided that the member choosing to cast
his/her vote in the election to the Council or the Regional
Committees shall have to cast as many votes as there are vacancies.
Ballot papers showing more or less votes than the vacancies shall be
deemed invalid.





6.03
(Revised 2013)

7.0 To ensure healthy practices for ICAP Elections, the Council expects
members to report any breach of the CA Ordinance and Bye laws
there under and the foregoing directive if such breach impairs the
letter and spirit of free and fair election. In doing so the reporting
members are expected to be truthful. A report which is found to be
untrue or is calculated to prejudice any candidate or is made out of
malice shall be adequate ground for disciplinary action against the
reporting member.
8.0 This directive shall be read with relevant provisions of the CA
Ordinance and the Bye laws there under.
(Revised 242nd meeting of the Council – January 23-24, 2013)
Before above revision read as under:
6.03
INSTITUTE'S ELECTIONS
1.0 Pursuant to the complaints received by the Council for unhealthy practices adopted by the members contesting
elections to the Council and Regional Committees, the Council caused an in-depth review of the statutory
obligations under the Chartered Accountants Ordinance 1961, Bye-laws made there under and practices
prevalent elsewhere in this regard after a good deal of deliberation, the Council has decided to issue the
following Statement as a directive, the breach of which shall be considered an act of misconduct liable for
disciplinary action

2.0 The Council considers that bye-law 47 of the CA Ordinance comprehensively reflects the requirements for a
free and fair election to ensure that:

i) the members contesting for the Council and Regional Committees are elected purely on the basis of merit:

ii) the election for the Institute of a learned profession is not reduced to the level of political wranglings as it
would deprive the profession of its distinctive image of being "a little different"; and a good taste and good
sense befitting an enviable conduct by the candidates and the voters remain manifest throughout the election
process.

3.0 In order to achieve the above objectives the Council directs the candidates and voters to refrain from:

i) canvassing in any formor shape directly or indirectly through any person including friends, relations,
supporters, patrons or agents;

ii) fonning groups or panels of two or more persons overtly or covertly on any basis;

iii) influencing any member to vote or not to vote for any candidate(s) through pamphlets, brochures, cards. *or
by any other means of communication which tends to prevent a" free exercise of the voting right;

iv) gathering in or around polling stations by candidates or any other members or persons on the day of
elections to avoid influence on the voters. Members should immediately leave the premises after casting their
votes; and
____________________________________________________________________
*Deleted vide bye-law47 -Anotified vide SRO 1(KE)/2005 dt 24.12.2004 dated 4 J anuary 2005 Published in the
Extraordinary gazeettee of Pakistan dt. 4.1.2005
6.03



v) arranging or causing to arrange for members any party or gathering, with or without meals, refreshments, etc.
on or before election day.

4.0 To assist the candidates in disseminating information about themthe Council has decided to:

i) issue an introductory expose of all the candidates with their photographs stating their particulars, positions in
their organization and other fields of service, their achievements, their previous service to the Institute, or its
Council, Regional Committee or any other Committee(s);

ii) the introductory expose of the candidates, shall be included in the Institute's Newsletter and the Pakistan
Accountant; and

iii) organize a get-together of the members and candidates of the Council and Regional Committees to enable an
introduction of candidates at such place(s) and at such time as the Election Committee may decide.

5.0 The Council has also decided that the member choosing to cast his/her vote in the election to the Council or the
Regional Committees shall have to cast as many votes as there are vacancies. Ballot papers showing more or
less votes than the vacancies shall be deemed invalid.

6.0 To ensure healthy practices for ICAP Elections, the Council expects members to report any breach of the CA
Ordinance and Bye laws there under and the foregoing directive if such breach impairs the letter and spirit of
free and fair election. In doing so the reporting members are expected to be truthful. A report which is found to
be untrue or is calculated to prejudice any candidate or is made out of malice shall be adequate ground for
disciplinary action against the reporting member.

7.0 This directive shall be read with relevant provisions of the CA Ordinance and the Bye laws there under.


(Council Directive -18 March 1997)
(Revised 142nd meeting of the Council-April 07, 2001)

Code of Ethics
For
Chartered Accountants
(Revised - May 2008)
The Institute of Chartered
Accountants of Pakistant
6.04
CONTENTS
FOREWORD
PREFACE
PART A: GENERA APPLICATION OF THE CODE
100 Introduction and Fundamental Principles
110 Integrity
120 Objectivity
130 Professional competence and Due Care
140 Confidentiality
150 Professional Behavior
PART B: CHARTERED ACCOUNT ANTS IN PRACTICE
200 Introduction
210 Professional Appointment
211 Other Occupations in which Chartered Accountants
can Engage without Counils Permission
220 Conflicts of Interest
230 Second Opinions
240 Fees and Other Types of Remuneration
250 Public Notices, Announcements and Communications
260 Gifts and Hospitality
270 Custody of Client Assets
Page
iii
v
2
9
10
11
13
16
18
25
31
33
35
36
39
47
48
CONTENTS
280 Objectivity-All Services
290 Independence-Assurance Engagements
PART C: CHARTERED ACCOUNTANTS IN BUSINESS
300 INTRODUCTION
310 Potential Confilicts
320 Preparation and Reporting of Information
330 Acting with Sufficient Expertise
340 Financial Interests
350 Inducements
DEFINITIONS
EFFECTIVE DATE
Page
49
51
116
121
123
125
127
129
132
140
FOREWORD
The adoption and promulgation of the revised Code of Ethics is a matter of great satisfaction
for the Council.
In order to spot intolerable business practices and to exercise good judgment when conflicts
arise, professional and ethical practice is essential. The revised Code of Ethics would serve
as a reminder to chartered accountants to sift right from wrong in any given situation. As
you are aware, most ethical problems hinge on integrity and objectivity and it is in
these°`areas, particularly, that we must demonstrate the highest degree of ethical behaviour.
Chartered Accountants are expected to demonstrate the highest standards of ethical conduct
to serve public interest. The ethical behavior of Chartered Accountants has a vital role in
ensuring public trust in financial reporting and business practices and upholding the reputation
of the accountancy profession.
The Code of Ethics expresses the members' recognition of their responsibilities to the public,
to clients, to government and to colleagues. The Code guides members in the performance
of their professional responsibilities and expresses the basic tenets of ethical and professional
conduct. The Principles call for an unswerving commitment to honorable behavior, even
at the sacrifice of personal advantage.
I hope that the members of the Institute would try their best endeavors to implement the
Code in both letter and spirit.
Karachi, May 26, 2008
Imran Afzal
President
iii
Adoption by the Council
Pursuant to clause (i) of sub-section (2) of Section 15 of the Chartered Accountants Ordinance,
1961 the Council in its 196th meeting held on May 06, 2008 has adopted the following
Code of Ethics to be effective from January 01, 2009. Section 290 is applicable to assurance
engagements when the assurance report is dated on or after January 1, 2009.
About the Code
The revised Code establishes a conceptual framework for all chartered accountants to ensure
compliance with the five fundamental principles of professional ethics. These principles
are integrity, objectivity, professional competence and due care, confidentiality and professional
behaviour. Under the framework, all chartered accountants will be required to identify
threats to these fundamental principles and take all possible measures to ensure that the
principles are not compromised. The framework applies to all chartered accountants, whether
in practice or not.
Chartered Accountants are expected to demonstrate the highest standards of professional
conduct and to take into consideration the public interest. Ethical behaviour by Chartered
Accountants plays a vital role in ensuring public trust in financial reporting and business
practices and upholding the reputation of the accountancy profession.
The Code of Ethics helps the members of the Institute meet these obligations by providing
them with ethical guidance. The Code applies to all members, students, affiliates, employees
of member firms and, where applicable, member firms, in all of their professional and
business activities, whether remunerated or voluntary.
This Code of Ethics is being issued as a Directive of the Council and any violation of the
provisions of the Code will fall under Part 4 of Schedule 1 of the Chartered Accountants
Ordinance, 1961.
vi
PREFACE
Historical Background
It was in 1969-70 that the Institute of Chartered Accountants of Pakistan published a Manual
which basically explained in detail the objects and implications of various provisions of
Schedule 'C' and 'D' of the Chartered Accountants Bye-Laws, 1961 (now superseded) relating
to professional misconduct. This Manual also known, as the "Green Book" was issued to
new members as part of Members' Handbook.
In 1983 new Bye-Laws were issued and Chartered Accountants Ordinance, 1961 was
amended in the same year. Schedules relating to misconduct now form part of the Ordinance
instead of the Bye-laws.
Professional ethics is not all about misconduct. It is, to quote from the Green Book; "basically
the moral fabric for a profession and its practice is largely a matter of conscience. The
stricter its self-imposed discipline, the nobler is the image.
It is not uncommon to be confronted with some act or the other which strictly may not fall
under any clause of the Schedules and yet it may be improper by ethical standards. Such
occasions are the true tests of professional integrity, and if members then rise to the occasion,
the public image emerges not only unscathed but retains a lasting lustre of probity. In the
case of an individual, one's character finally shapes one's destiny; in the case of a profession
scrupulous observance of its ethics or the lack of it must determine its future. Where edicts
fail precepts succeed. This is universally true".
The Institute, as a member body of the International Federation of Accountants (IFAC), is
committed to the IFAC's broad objective of developing and enhancing a coordinated
worldwide accountancy profession with common standards. In working towards this
objective, IFAC develops guidance on ethics for professional accountants. IFAC believes
that issuing such guidance will improve the degree of uniformity of professional ethics
throughout the world.
As an obligation of its membership, the Institute is obliged to support the work of IFAC
by (a) informing its members of every pronouncement developed by IFAC and (b)
implementing to the extent possible under local circumstances.
The Institute in July 1990 initially adopted the IFAC Code of Ethics for Professional
Accountants. This has been revised several times since then. In June 2005 the IFAC Code
was again revised and in order to adopt the same the Technical Advisory Committee of the
Institute took up the review of this Code and after an exhaustive study the IFAC Code has
been adopted subject to few minor changes. It may be noted that the changes are not in
conflict with the requirements of IFAC Code rather some of the requirements of ICAP Code
are more stringent than those of IFAC Code.
v

1

PART A GENERAL APPLICATION OF THE CODE

Contents

Section 100 Introduction and Fundamental Principles
Section 110 Integrity
Section 120 Objectivity
Section 130 Professional Competence and Due Care
Section 140 Confidentiality
Section 150 Professional Behavior




REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS




2
Section 100

Introduction and Fundamental Principles

100.1 A distinguishing mark of the accountancy profession is its acceptance
of the responsibility to act in the public interest. Therefore, a chartered
accountant’s* responsibility is not exclusively to satisfy the needs of
an individual client or employer. In acting in the public interest a
chartered accountant should observe and comply with the ethical
requirements of this Code.

100.2 This Code is in three parts. Part A establishes the fundamental
principles of professional ethics for chartered accountants and provides
a conceptual framework for applying those principles. The conceptual
framework provides guidance on fundamental ethical principles.
Chartered accountants are required to apply this conceptual framework
to identify threats to compliance with the fundamental principles, to
evaluate their significance and, if such threats are other than clearly
insignificant* to apply safeguards to eliminate them or reduce them to
an acceptable level such that compliance with the fundamental
principles is not compromised.

100.3 Parts B and C illustrate how the conceptual framework is to be applied
in specific situations. It provides examples of safeguards that may be
appropriate to address threats to compliance with the fundamental
principles and also provides examples of situations where safeguards
are not available to address the threats and consequently the activity or
relationship creating the threats should be avoided. Part B applies to
chartered accountants in practice
*
*. Part C applies to chartered
accountants in business*. Chartered accountants in practice may also
find the guidance in Part C relevant to their particular circumstances.

*
See Definitions

REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
3

Fundamental Principles

100.4 A chartered accountant is required to comply with the following
fundamental principles:

(a) Integrity

A chartered accountant should be straightforward and honest in
all professional and business relationships.

(b) Objectivity

A chartered accountant should not allow bias, conflict of interest
or undue influence of others to override professional or business
judgments.

(c) Professional Competence and Due Care

A chartered accountant has a continuing duty to maintain
professional knowledge and skill at the level required to ensure
that a client or employer receives competent professional service
based on current developments in practice, legislation and
techniques. A chartered accountant should act diligently and in
accordance with applicable technical and professional standards
when providing professional services
*
.

(d) Confidentiality

A chartered accountant should respect the confidentiality of
information acquired as a result of professional and business
relationships and should not disclose any such information to
third parties without proper and specific authority unless there is
a legal or professional right or duty to disclose. Confidential
information acquired as a result of professional and business
relationships should not be used for the personal advantage of the
chartered accountant or third parties.

*
See Definitions
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS




4

(e) Professional Behavior

A chartered accountant should comply with relevant laws and
regulations and should avoid any action that discredits the
profession.

Each of these fundamental principles is discussed in more detail in
Sections 110 – 150.

Conceptual Framework Approach

100.5 The circumstances in which chartered accountants operate may give
rise to specific threats to compliance with the fundamental principles. It
is impossible to define every situation that creates such threats and
specify the appropriate mitigating action. In addition, the nature of
engagements and work assignments may differ and consequently
different threats may exist, requiring the application of different
safeguards. A conceptual framework that requires a chartered
accountant to identify, evaluate and address threats to compliance with
the fundamental principles, rather than merely comply with a set of
specific rules which may be arbitrary, is, therefore, in the public
interest. This Code provides a framework to assist a chartered
accountant to identify, evaluate and respond to threats to compliance
with the fundamental principles. If identified threats are other than
clearly insignificant, a chartered accountant should, where appropriate,
apply safeguards to eliminate th333e threats or reduce them to an
acceptable level, such that compliance with the fundamental principles
is not compromised

100.6 A chartered accountant has an obligation to evaluate any threats to
compliance with the fundamental principles when the chartered
accountant knows, or could reasonably be expected to know, of
circumstances or relationships that may compromise compliance with
the fundamental principles.

REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
5
100.7 A chartered accountant should take qualitative as well as quantitative
factors into account when considering the significance of a threat. If a
chartered accountant cannot implement appropriate safeguards, the
chartered accountant should decline or discontinue the specific
professional service involved, or where necessary resign from the client
(in the case of a chartered accountant in practice) or the employing
organization (in the case of a chartered accountant in business).

100.8 A chartered accountant may inadvertently violate a provision of this
Code. Such an inadvertent violation, depending on the nature and
significance of the matter, may not compromise compliance with the
fundamental principles provided, once the violation is discovered, the
violation is corrected promptly and any necessary safeguards are
applied.

100.9 Parts B and C of this Code include examples that are intended to
illustrate how the conceptual framework is to be applied. The examples
are not intended to be, nor should they be interpreted as, an exhaustive
list of all circumstances experienced by a chartered accountant that may
create threats to compliance with the fundamental principles.
Consequently, it is not sufficient for a chartered accountant merely to
comply with the examples presented; rather, the framework should be
applied to the particular circumstances encountered by the chartered
accountant.

Threats and Safeguards

100.10 Compliance with the fundamental principles may potentially be
threatened by a broad range of circumstances. Many threats fall into the
following categories:

(a) Self- interest threats, which may occur as a result of the financial
or other interests of a chartered accountant or of an immediate or
close family
*
member;


*
See Definitions
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS




6
(b) Self-review threats, which may occur when a previous judgment
needs to be re-evaluated by the chartered accountant responsible
for that judgment;

(c) Advocacy threats, which may occur when a chartered accountant
promotes a position or opinion to the point that subsequent
objectivity may be compromised;

(d) Familiarity threats, which may occur when, because of a close
relationship, a chartered accountant becomes too sympathetic to
the interests of others; and

(e) Intimidation threats, which may occur when a chartered
accountant may be deterred from acting objectively by threats,
actual or perceived.

Parts B and C of this Code, respectively, provide examples of
circumstances that may create these categories of threats for chartered
accountants in practice and chartered accountants in business. Chartered
accountants in practice may also find the guidance in Part C relevant to
their particular circumstances.

100.11 Safeguards that may eliminate or reduce such threats to an acceptable
level fall into two broad categories:

(a) Safeguards created by the profession, legislation or regulation;
and

(b) Safeguards in the work environment.

100.12 Safeguards created by the profession, legislation or regulation include,
but are not restricted to:

• Educational, training and experience requirements for entry into
the profession.
• Continuing professional development requirements.
• Corporate governance regulations.
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
7
• Professional standards.
• Professional or regulatory monitoring and disciplinary procedures.
• External review by a legally empowered third party of the reports,
returns, communications or information produced by a chartered
accountant.

100.13 Parts B and C of this Code, respectively, discuss safeguards in the work
environment for chartered accountants in practice and those in
business.

100.14 Certain safeguards may increase the likelihood of identifying or
deterring unethical behavior. Such safeguards, which may be created by
the accounting profession, legislation, regulation or an employing
organization, include, but are not restricted to:

• Effective, well publicized complaints systems operated by the
employing organization, the profession or a regulator, which
enable colleagues, employers and members of the public to draw
attention to unprofessional or unethical behavior.

• An explicitly stated duty to report breaches of ethical requirements.

100.15 The nature of the safeguards to be applied will vary depending on the
circumstances. In exercising professional judgment, a chartered
accountant should consider what a reasonable and informed third party,
having knowledge of all relevant information, including the
significance of the threat and the safeguards applied, would conclude to
be unacceptable.

Ethical Conflict Resolution

100.16 In evaluating compliance with the fundamental principles, a chartered
accountant may be required to resolve a conflict in the application of
fundamental principles.

100.17 When initiating either a formal or informal conflict resolution process,
a chartered accountant should consider the following, either
individually or together with others, as part of the resolution process:

REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS




8
(a) Relevant facts;
(b) Ethical issues involved;
(c) Fundamental principles related to the matter in question;

(d) Established internal procedures; and

(e) Alternative courses of action.
Having considered these issues, a chartered accountant should
determine the appropriate course of action that is consistent with the
fundamental principles identified. The chartered accountant should also
weigh the consequences of each possible course of action. If the matter
remains unresolved, the chartered accountant should consult with other
appropriate persons within the firm
*
or employing organization for
help in obtaining resolution.
100.18 Where a matter involves a conflict with, or within, an organization, a
chartered accountant should also consider consulting with those
charged with governance of the organization, such as the board of
directors or the audit committee.
100.19 It may be in the best interests of the chartered accountant to document
the substance of the issue and details of any discussions held or
decisions taken, concerning that issue.
100.20 If a significant conflict cannot be resolved, a chartered accountant may
wish to obtain professional advice from the appropriate committee of
the Institute or legal advisors, and thereby obtain guidance on ethical
issues without breaching confidentiality. For example, a chartered
accountant may have encountered a fraud, the reporting of which could
breach the chartered accountant’s responsibility to respect
confidentiality. The chartered accountant should consider obtaining
legal advice to determine whether there is a requirement to report.
100.21 If, after exhausting all relevant possibilities, the ethical conflict
remains unresolved, a chartered accountant should, where possible,
refuse to remain associated with the matter creating the conflict. The
chartered accountant may determine that, in the circumstances, it is
appropriate to withdraw from the engagement team
*
or pecific


*
See Definitions
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
9
assignment, or to resign altogether from the engagement, the firm or
the employing organization.
Section 110

Integrity

110.1 The principle of integrity imposes an obligation on all chartered
accountants to be straightforward and honest in professional and business
relationships. Integrity also implies fair dealing and truthfulness.

110.2 A chartered accountant should not be associated with reports, returns,
communications or other information where they believe that the
information:

(a) Contains a materially false or misleading statement;

(b) Contains statements or information furnished recklessly; or

(c) Omits or obscures information required to be included where such
omission or obscurity would be misleading.

110.3 A chartered accountant will not be considered to be in breach of paragraph
110.2 if the chartered accountant provides a modified report in respect of a
matter contained in paragraph 110.2.

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Section 120

Objectivity

120.1 The principle of objectivity imposes an obligation on all chartered
accountants not to compromise their professional or business judgment
because of bias, conflict of interest or the undue influence of others.

120.2 A chartered accountant may be exposed to situations that may impair
objectivity. It is impracticable to define and prescribe all such
situations. Relationships that bias or unduly influence the professional
judgment of the chartered accountant should be avoided.

REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
11

Section 130

Professional Competence and Due Care

130.1 The principle of professional competence and due care imposes the
following obligations on chartered accountants:

(a) To maintain professional knowledge and skill at the level
required to ensure that clients or employers receive competent
professional service; and

(b) To act diligently in accordance with applicable technical and
professional standards when providing professional services.

130.2 Competent professional service requires the exercise of sound
judgment in applying professional knowledge and skill in the
performance of such service. Professional competence may be divided
into two separate phases:

(a) Attainment of professional competence; and

(b) Maintenance of professional competence.

130.3 The maintenance of professional competence requires a continuing
awareness and an understanding of relevant technical professional and
business developments. Continuing professional development develops
and maintains the capabilities that enable a chartered accountant to
perform competently within the professional environments.

130.4 Diligence encompasses the responsibility to act in accordance with the
requirements of an assignment, carefully, thoroughly and on a timely
basis.

130.5 A chartered accountant should take steps to ensure that those working
under the chartered accountant’s authority in a professional capacity
have appropriate training and supervision.

REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS




12
130.6 Where appropriate, a chartered accountant should make clients,
employers or other users of the professional services aware of
limitations inherent in the services to avoid the misinterpretation of an
expression of opinion as an assertion of fact.


REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
13
Section 140

Confidentiality

140.1 The principle of confidentiality imposes an obligation on chartered
accountants to refrain from:

(a) Disclosing outside the firm or employing organization
confidential information acquired as a result of professional and
business relationships without proper and specific authority or
unless there is a legal or professional right or duty to disclose;
and

(b) Using confidential information acquired as a result of
professional and business relationships to their personal
advantage or the advantage of third parties.

140.2 A chartered accountant should maintain confidentiality even in a social
environment. The chartered accountant should be alert to the possibility
of inadvertent disclosure, particularly in circumstances involving long
association with a business associate or a close or immediate family
*

member.

140.3 A chartered accountant should also maintain confidentiality of
information disclosed by a prospective client or employer.

140.4 A chartered accountant should also consider the need to maintain
confidentiality of information within the firm or employing
organization.

140.5 A chartered accountant should take all reasonable steps to ensure that
staff under the chartered accountant’s control and persons from whom
advice and assistance is obtained respect the chartered accountant’s
duty of confidentiality.

140.6 The need to comply with the principle of confidentiality continues even
after the end of relationships between a chartered accountant and a

*
See Definitions
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS




14
client or employer. When a chartered accountant changes employment
or acquires a new client, the chartered accountant is entitled to use prior
experience. The chartered accountant should not, however, use or
disclose any confidential information either acquired or received as a
result of a professional or business relationship.

140.7 The following are circumstances where chartered accountants are or
may be required to disclose confidential information or when such
disclosure may be appropriate:

(a) Disclosure is permitted by law and is authorized by the client or
the employer;

(b) Disclosure is required by law, for example:

(i) Production of documents or other provision of evidence in
the course of legal proceedings; or

(ii) Disclosure to the appropriate public authorities of
infringements of the law that come to light; and

(c) There is a professional duty or right to disclose, when not
prohibited by law:

(i) To comply with the Quality Control Review (QCR)
program of the Institute;

(ii) To respond to an inquiry or investigation by the Institute or
other regulatory body;

(iii) To protect the professional interests of a chartered
accountant in legal proceedings; or

(iv) To comply with technical standards and ethics
requirements.

REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
15
140.8 In deciding whether to disclose confidential information, chartered
accountants should consider the following points:

(a) Whether the interests of all parties, including third parties whose
interests may be affected, could be harmed if the client or
employer consents to the disclosure of information by the
chartered accountant;

(b) Whether all the relevant information is known and substantiated,
to the extent it is practicable; when the situation involves
unsubstantiated facts, incomplete information or unsubstantiated
conclusions, professional judgment should be used in
determining the type of disclosure to be made, if any; and

(c) The type of communication that is expected and to whom it is
addressed; in particular, chartered accountants should be
satisfied that the parties to whom the communication is
addressed are appropriate recipients.

REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS




16

Section 150

Professional Behavior

150.1 The principle of professional behavior imposes an obligation on
chartered accountants to comply with relevant laws and regulations and
avoid any action that may bring discredit to the profession. This
includes actions which a reasonable and informed third party, having
knowledge of all relevant information, would conclude negatively
affects the good reputation of the profession.

REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
17
PART B: CHARTERED ACCOUNTANTS IN PRACTICE

Section 200 Introduction
Section 210 Professional Appointment
Section 211
Other Occupations in which Chartered
Accountants can Engage without Council’s
Permission
Section 220 Conflicts of Interest
Section 230 Second Opinions
Section 240 Fees and Other Types of Remuneration
Section 250
Public Notices, Announcements and
Communications
Section 260 Gifts and Hospitality
Section 270 Custody of Client Assets
Section 280 Objectivity–All Services
Section 290 Independence–Assurance Engagements
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS




18
Section 200

Introduction

200.1 This Part of the Code illustrates how the conceptual framework
contained in Part A is to be applied by chartered accountants in
practice. The examples in the following sections are not intended to be,
nor should they be interpreted as, an exhaustive list of all circumstances
experienced by a chartered accountant in practice that may create
threats to compliance with the principles. Consequently, it is not
sufficient for a chartered accountant in practice merely to comply with
the examples presented; rather, the framework should be applied to the
particular circumstances faced.

200.2 A chartered accountant in practice should not engage in any business,
occupation or activity that impairs or might impair integrity, objectivity
or the good reputation of the profession and as a result would be
incompatible with the rendering of professional services.

Threats and Safeguards

200.3 Compliance with the fundamental principles may potentially be
threatened by a broad range of circumstances. Many threats fall into the
following categories:

(a) Self- interest;

(b) Self-review;

(c) Advocacy;

(d) Familiarity; and

(e) Intimidation.

These threats are discussed further in Part A of this Code.

REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
19
The nature and significance of the threats may differ depending on
whether they arise in relation to the provision of services to a financial
statement audit client
*
, a non- financial statement audit assurance client*
or a non-assurance client.


200.4 Examples of circumstances that may create self- interest threats for a
chartered accountant in practice include, but are not limited to:

• A financial interest* in a client or jointly holding a financial
interest with a client.

• Undue dependence on total fees from a client.

• Having a close business relationship with a client.

• Concern about the possibility of losing a client.

• Potential employment with a client.

• Contingent fees* relating to an assurance engagement*.

• A loan to or from an assurance client or any of its directors or
officers.

200.5 Examples of circumstances that may create self-review threats include,
but are not limited to:

• The discovery of a significant error during a re-evaluation of the
work of the chartered accountant in practice.

• Reporting on the operation of financial systems after being
involved in their design or implementation.

• Having prepared the original data used to generate records that are
the subject matter of the engagement.


*
See Definitions
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS




20
• A member of the assurance team* being, or having recently been, a
director or officer
*
of that client.

• A member of the assurance team being, or having recently been,
employed by the client in a position to exert direct and significant
influence over the subject matter of the engagement.

• Performing a service for a client that directly affects the subject
matter of the assurance engagement.


200.6 Examples of circumstances that may create advocacy threats include,
but are not limited to:

• Promoting shares in a listed entity* when that entity is a financial
statement audit client.

• Acting as an advocate on behalf of an assurance client in litigation
or disputes with third parties.

200.7 Examples of circumstances that may create familiarity threats include,
but are not limited to:

• A member of the engagement team having a close or immediate
family relationship with a director or officer of the client.

• A member of the engagement team having a close or immediate
family relationship with an employee of the client who is in a
position to exert direct and significant influence over the subject
matter of the engagement.

• A former partner of the firm being a director or officer of the client
or an employee in a position to exert direct and significant
influence over the subject matter of the engagement.


*
See Definitions
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
21
• Accepting gifts or preferential treatment from a client, unless the
value is clearly insignificant.

• Long association of senior personnel with the assurance client.

200.8 Examples of circumstances that may create intimidation threats include,
but are not limited to:

• Being threatened with dismissal or replacement in relation to a
client engagement.

• Being threatened with litigation.

• Being pressured to reduce inappropriately the extent of work
performed in order to reduce fees.


200.9 A chartered accountant in practice may also find that specific
circumstances give rise to unique threats to compliance with one or
more of the fundamental principles. Such unique threats obviously
cannot be categorized. In either professional or business relationships, a
chartered accountant in practice should always be on the alert for such
circumstances and threats.

200.10 Safeguards that may eliminate or reduce threats to an acceptable level
fall into two broad categories:

(a) Safeguards created by the profession, legislation or regulation;
and

(b) Safeguards in the work environment.

Examples of safeguards created by the profession, legislation or
regulation are described in paragraph 100.12 of Part A of this Code.

200.11 In the work environment, the relevant safeguards will vary depending
on the circumstances. Work environment safeguards comprise firm-
wide safeguards and engagement specific safeguards. A chartered
accountant in practice should exercise judgment to determine how to
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS




22
best deal with an identified threat. In exercising this judgment a
chartered accountant in practice should consider what a reasonable and
informed third party, having knowledge of all relevant information,
including the significance of the threat and the safeguards applied,
would reasonably conclude to be acceptable. This consideration will be
affected by matters such as the significance of the threat, the nature of
the engagement and the structure of the firm.

200.12 Firm-wide safeguards in the work environment may include:

• Leadership of the firm that stresses the importance of compliance
with the fundamental principles.

• Leadership of the firm that establishes the expectation that
members of an assurance team will act in the public interest.

• Policies and procedures to implement and monitor quality control
of engagements.

• Documented policies regarding the identification of threats to
compliance with the fundamental principles, the evaluation of the
significance of these threats and the identification and the
application of safeguards to eliminate or reduce the threats, other
than those that are clearly insignificant, to an acceptable level.

• For firms that perform assurance engagements, documented
independence
*
policies regarding the identification of threats to
independence, the evaluation of the significance of these threats
and the evaluation and application of safeguards to eliminate or
reduce the threats, other than those that are clearly insignificant, to
an acceptable level.

• Documented internal policies and procedures requiring compliance
with the fundamental principles.


*
See Definitions
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
23
• Policies and procedures that will enable the identification of
interests or relationships between the firm or members of
engagement teams and clients.

• Policies and procedures to monitor and, if necessary, manage the
reliance on revenue received from a single client.

• Using different partners and engagement teams with separate
reporting lines for the provision of non-assurance services to an
assurance client.

• Policies and procedures to prohibit individuals who are not
members of an engagement team from inappropriately influencing
the outcome of the engagement.

• Timely communication of a firm’s policies and procedures,
including any changes to them, to all partners and Professional
staff, and appropriate training and education on such policies and
procedures.

• Designating a member of senior management to be responsible for
overseeing the adequate functioning of the firm’s quality control
system.

• Advising partners and professional staff of those assurance clients
and related entities from which they must be independent.

• A disciplinary mechanism to promote compliance with policies
and procedures.

• Published policies and procedures to encourage and empower staff
to communicate to senior levels within the firm any issue relating
to compliance with the fundamental principles that concerns them.

200.13 Engagement-specific safeguards in the work environment may include:

• Involving an additional chartered accountant to review the work
done or otherwise advise as necessary.

REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS




24
• Consulting an independent third party, such as a committee of
independent directors, a professional regulatory body or another
chartered accountant.

• Discussing ethical issues with those charged with governance of
the client.

• Disclosing to those charged with governance of the client the
nature of services provided and extent of fees charged.

• Involving another firm to perform or re-perform part of the
engagement.

• Rotating senior assurance team personnel.

200.14 Depending on the nature of the engagement, a chartered accountant in
practice may also be able to rely on safeguards that the client has
implemented. However it is not possible to rely solely on such
safeguards to reduce threats to an acceptable level.

200.15 Safeguards within the client’s systems and procedures may include:

• When a client appoints a firm in practice to perform an
engagement, persons other than management ratify or approve the
appointment.

• The client has competent employees with experience and seniority
to make managerial decisions.


• The client has implemented internal procedures that ensure
objective choices in commissioning non-assurance engagements.

• The client has a corporate governance structure that provides
appropriate oversight and communications regarding the firm’s
services.

REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
25
Section 210

Professional Appointment

Client Acceptance

210.1 Before accepting a new client relationship, a chartered accountant in
practice should consider whether acceptance would create any threats
to compliance with the fundamental principles. Potential threats to
integrity or professional behavior may be created from, for example,
questionable issues associated with the client (its owners, management
and activities).

210.2 Client issues that, if known, could threaten compliance with the
fundamental principles include, for example, client involvement in
illegal activities (such as money laundering), dishonesty or
questionable financial reporting practices.

210.3 The significance of any threats should be evaluated. If identified threats
are other than clearly insignificant, safeguards should be considered
and applied as necessary to eliminate them or reduce them to an
acceptable level.

210.4 Appropriate safeguards may include obtaining knowledge and
understanding of the client, its owners, managers and those responsible
for its governance and business activities, or securing the client’s
commitment to improve corporate governance practices or internal
controls.

210.5 Where it is not possible to reduce the threats to an acceptable level, a
chartered accountant in practice should decline to enter into the client
relationship.

210.6 Acceptance decisions should be periodically reviewed for recurring
client engagements.




REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS




26
Engagement Acceptance

210.7 A chartered accountant in practice should agree to provide only those
services that the chartered accountant in practice is competent to
perform. Before accepting a specific client engagement, a chartered
accountant in practice should consider whether acceptance would
create any threats to compliance with the fundamental principles. For
example, a self- interest threat to professional competence and due care
is created if the engagement team does not possess, or cannot acquire,
the competencies necessary to properly carry out the engagement.

210.8 A chartered accountant in practice should evaluate the significance of
identified threats and, if they are other than clearly insignificant,
safeguards should be applied as necessary to eliminate them or reduce
them to an acceptable level. Such safeguards may include:

• Acquiring an appropriate understanding of the nature of the
client’s business, the complexity of its operations, the specific
requirements of the engagement and the purpose, nature and scope
of the work to be performed.

• Acquiring knowledge of relevant industries or subject matters.

• Possessing or obtaining experience with relevant regulatory or
reporting requirements.

• Assigning sufficient staff with the necessary competencies.

• Using experts where necessary.

• Agreeing on a realistic time frame for the performance of the
engagement.

• Complying with quality control policies and procedures designed
to provide reasonable assurance that specific engagements are
accepted only when they can be performed competently.

REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
27
210.9 When a chartered accountant in practice intends to rely on the advice or
work of an expert, the chartered accountant in practice should evaluate
whether such reliance is warranted. The chartered accountant in
practice should consider factors such as reputation, expertise, resources
available and applicable Professional and ethical standards. Such
information may be gained from prior association with the expert or
from consulting others.

Changes in a Professional Appointment

210.10 A chartered accountant in practice who is asked to replace another
chartered accountant in practice, or who is considering tendering for an
engagement currently held by another chartered accountant in practice,
should determine whether there are any reasons, professional or other,
for not accepting the engagement, such as circumstances that threaten
compliance with the fundamental principles. For example, there may be
a threat to professional competence and due care if a chartered
accountant in practice accepts the engagement before knowing all the
pertinent facts.

210.11 The significance of the threats should be evaluated. Depending on the
nature of the engagement, this may require direct communication with
the existing accountant
*
to establish the facts and circumstances
behind the proposed change so that the chartered accountant in practice
can decide whether it would be appropriate to accept the engagement.
For example, the apparent reasons for the change in appointment may
not fully reflect the facts and may indicate disagreements with the
existing accountant that may influence the decision as to whether to
accept the appointment.

210.12 An existing accountant is bound by confidentiality. The extent to which
the chartered accountant in practice can and should discuss the affairs
of a client with a proposed accountant will depend on the nature of the
engagement and on:

(a) Whether the client’s permission to do so has been obtained; or


*
See Definitions
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS




28
(b) The legal or ethical requirements relating to such
communications and disclosure, which may vary by jurisdiction.

210.13 In the absence of specific instructions by the client, an existing
accountant should not ordinarily volunteer information about the
client’s affairs. Circumstances where it may be appropriate to disclose
confidential information are set out in Section 140 of Part A of this
Code.

210.14 If identified threats are other than clearly insignificant, safeguards
should be considered and applied as necessary to eliminate them or
reduce them to an acceptable level.

210.15 Such safeguards may include:

• Discussing the client’s affairs fully and freely with the existing
accountant;

• Asking the existing accountant to provide known information on any
facts or circumstances, that, in the existing accountant’s opinion, the
proposed accountant should be aware of before deciding whether to
accept the engagement;

• When replying to requests to submit tenders, stating in the tender that,
before accepting the engagement, contact with the existing accountant
will be requested so that inquiries may be made as to whether there
are any Professional or other reasons why the appointment should not
be accepted.

210.16 A chartered accountant in practice will ordinarily need to obtain the
client’s permission, preferably in writing, to initiate discussion with an
existing accountant. Once that permission is obtained, the existing
accountant should comply with relevant legal and other regulations
governing such requests. The existing accountant should promptly
transfer to the new chartered accountant in practice all books and
papers of the client, which are or may be held after the change in
appointment has been effected and should advise the client accordingly,
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
29
unless he has a legal right to withhold them. Where the existing
accountant provides information, it should be provided honestly and
unambiguously. If the proposed accountant is unable to communicate
with the existing accountant, the proposed accountant should try to
obtain information about any possible threats by other means such as
through inquiries of third parties or background investigations on
senior management or those charged with governance of the client.

210.17 Where the threats cannot be eliminated or reduced to an acceptable
level through the application of safeguards, a chartered accountant in
practice should, unless there is satisfaction as to necessary facts by
other means, decline the engagement.

210.18 A chartered accountant in practice may be asked to undertake work that
is complementary or additional to the work of the existing accountant.
Such circumstances may give rise to potential threats to professional
competence and due care resulting from, for example, a lack of or
incomplete information. Safeguards against such threats include
notifying the existing accountant of the proposed work, which would
give the existing accountant the opportunity to provide any relevant
information needed for the proper conduct of the work.

210.19 Where an existing chartered accountant is removed by the proprietors
of the business before he has completed the audit and submitted his
report, the existing chartered accountant must immediately inform the
Institute with relevant facts about his removal.

210.20 The proposed chartered accountant in practice should not only follow
the procedure detailed in the preceding paragraphs of this Section, he
should also inform the Institute about the offer of appointment.

210.21 The proposed chartered accountant in practice should not accept the
offer without prior clearance from the Institute, which clearance shall
not be unreasonably withheld. Provided however, in case the Institute
refuses to give its clearance, it shall communicate its decision within 15
(fifteen) days with reasons therefore.

210.22 Where an existing chartered accountant, though willing for re-
appointment has not been re-appointed, he shall file with the Institute a
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS




30
copy of the statement which he may have sent to the proprietors/Board
of Directors of the Company for circulation among the shareholders
under section 253 of the Companies Ordinance, 1984. It shall be
obligatory on the proposed chartered accountant before accepting the
appointment, to obtain a copy of such a communication and follow the
procedure detailed in preceding paragraphs of this Section.

210.23 In case the proprietors of the business decide to remove the existing
chartered accountant before the completion of their term for whatever
reasons, they may, if they consider necessary, refer the matter to the
Institute for appropriate action in accordance with the Chartered
Accountants Ordinance, 1961 and its rules, regulations and bye- laws
for the time being in force.
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
31
Section 211

Other Occupations in which Chartered Accountants can Engage without
Council's Permission

211.1 A chartered accountant in practice shall not concurrently engage in any
business, occupation or activity which is inconsistent and incompatible
with the provision of professional services to clients.

211.2 The simultaneous engagement in another business, occupation or
activity unrelated to the provision of professional services to clients,
which has the effect of not allowing the chartered accountant to
properly conduct his practice in accordance with the fundamental
ethical principles of the Institute is inconsistent and incompatible with
practice.

211.3 A business, occupation or activity is inconsistent and incompatible with
the provision of professional services to client when it:-

(a) creates or would create conflict of interest with existing clients;

(b) impairs or would impair integrity, objectivity or independence.
in providing professional services to clients;

(c) impairs or would impair to material extent the ability to provide
professional services to clients;

(d) impairs or would impair the good reputation of the profession.

211.4 A chartered accountant in practice may engage in the following
occupations without obtaining the prior approval of the Council:-

(a) Employment under chartered accountants in practice or firms of
such chartered accountants.

(b) Private tutorship.

(c) Attending classes and appearing for any examination, either
academic or accountancy or any examination relating to the
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS




32
other professions and obtaining membership of such
bodies/associations.

(d) Authorship of books

(e) Appearing before any Court of Law for representing clients etc.,
in respect of the "other functions" as stated in the Bye-Laws of
the Institute, if so eligible.

(f) Proprietorship, partnership or directorship of educational and
training institutions extending professional or business education
and training.

(g) Part-time lecturer-ship in Universities or other institutions
including those relating to or accredited by the Institute or those
run under the auspices of the Institute or the Regional
Committees.

(h) Acting as examiner/paper-setter for educational and professional
institutions and to be a member of Universities/Colleges,
Committees, Board etc.

(i) Honorary editorship of professional journals.

j) Holding membership/office in any charitable, religious, social or
educational organization without remuneration.

(k) Engaging in research and report writing and assisting national
and international organizations in the preparation of their
research reports.

(I) Accepting directorship of any company as non-executive
director.

(m) Holding public elected offices such as Member Provincial
Assembly, Member National Assembly, Senator etc.; or offices
such as Special Assistant or Advisor to a Minister or Prime
Minister etc.
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
33
Section 220

Conflicts of Interest

220.1 A chartered accountant in practice should take reasonable steps to
identify circumstances that could pose a conflict of interest. Such
circumstances may give rise to threats to compliance with the
fundamental principles. For example, a threat to objectivity may be
created when a chartered accountant in practice competes directly with
a client or has a joint venture or similar arrangement with a major
competitor of a client. A threat to objectivity or confidentiality may
also be created when a chartered accountant in practice performs
services for clients whose interests are in conflict or the clients are in
dispute with each other in relation to the matter or transaction in
question.

220.2 A chartered accountant in practice should evaluate the significance of
any threats. Evaluation includes considering, before accepting or
continuing a client relationship or specific engagement, whether the
chartered accountant in practice has any business interests, or
relationships with the client or a third party that could give rise to
threats. If threats are other than clearly insignificant, safeguards should
be considered and applied as necessary to eliminate them or reduce
them to an acceptable level.

220.3 Depending upon the circumstances giving rise to the conflict,
safeguards should ordinarily include the chartered accountant in
practice:

(a) Notifying the client of the firm’s business interest or activities
that may represent a conflict of interest, and obtaining their
consent to act in such circumstances; or

(b) Notifying all known relevant parties that the chartered
accountant in practice is acting for two or more parties in respect
of a matter where their respective interests are in conflict, and
obtaining their consent to so act; or

REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS




34
(c) Notifying the client that the chartered accountant in practice
does not act exclusively for any one client in the provision of
proposed services (for example, in a particular market sector or
with respect to a specific service) and obtaining their consent to
so act.

220.4 The following additional safeguards should also be considered:

(a) The use of separate engagement teams; and

(b) Procedures to prevent access to information (e.g., strict physical
separation of such teams, confidential and secure data filing);
and

(c) Clear guidelines for members of the engagement team on issues
of security and confidentiality; and

(d) The use of confidentiality agreements signed by employees and
partners of the firm; and

(e) Regular review of the application of safeguards by a senior
individual not involved with relevant client engagements.

220.5 Where a conflict of interest poses a threat to one or more of the
fundamental principles, including objectivity, confidentiality or
professional behavior, that cannot be eliminated or reduced to an
acceptable level through the application of safeguards, the chartered
accountant in practice should conclude that it is not appropriate to
accept a specific engagement or that resignation from one or more
conflicting engagements is required.

220.6 Where a chartered accountant in practice has requested consent from a
client to act for another party (which may or may not be an existing
client) in respect of a matter where the respective interests are in
conflict and that consent has been refused by the client, then they must
not continue to act for one of the parties in the matter giving rise to the
conflict of interest.
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35
Section 230

Second Opinions

230.1 Situations where a chartered accountant in practice is asked to provide
a second opinion on the application of accounting, auditing, reporting
or other standards or principles to specific circumstances or
transactions by or on behalf of a company or an entity that is not an
existing client may give rise to threats to compliance with the
fundamental principles. For example, there may be a threat to
professional competence and due care in circumstances where the
second opinion is not based on the same set of facts that were made
available to the existing accountant, or is based on inadequate evidence.
The significance of the threat will depend on the circumstances of the
request and all the other available facts and assumptions relevant to the
expression of a professional judgment.

230.2 When asked to provide such an opinion, a chartered accountant in
practice should evaluate the significance of the threats and, if they are
other than clearly insignificant, safeguards should be considered and
applied as necessary to eliminate them or reduce them to an acceptable
level. Such safeguards may include seeking client permission to contact
the existing accountant, describing the limitations surrounding any
opinion in communications with the client and providing the existing
accountant with a copy of the opinion.

230.3 If the company or entity seeking the opinion will not permit
communication with the existing accountant, a chartered accountant in
practice should consider whether, taking all the circumstances into
account, it is appropriate to provide the opinion sought.

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36
Section 240

Fees and Other Types of Remuneration

240.1 When entering into negotiations regarding professional services, a
chartered accountant in practice may quote whatever fee deemed to be
appropriate commensurate with the nature and service to be rendered.
However, in such cases, chartered accountants in practice should be
careful not to quote fee lower than that charged by the chartered
accountants in practice previously carrying out the audit unless scope
and quantum of work materially differs from the scope and quantum of
work carried out by the previous auditor, as it could then be regarded as
undercutting.

240.2 Chartered accountants in practice shall comply with ATR-14,
Minimum Hourly Charge Out Rates and Minimum Fee for Audit
Engagements.

240.3 The significance of such threats will depend on factors such as the level
of fee quoted and the services to which it applies. In view of these
potential threats, safeguards should be considered and applied as
necessary to eliminate them or reduce them to an acceptable level.
Safeguards which may be adopted include:

• Making the client aware of the terms of the engagement and, in
particular, the basis on which fees are charged and which services
are covered by the quoted fee.

• Assigning appropriate time and qualified staff to the task.

240.4 Professional services should not be offered or rendered to a client under
an arrangement otherwise whereby no fee will be charged unless a
specific finding or result is obtained or when the fee is otherwise
contingent upon the findings or results of such services.

Fees should not be regarded as being cont ingent if fixed by a court or
other public authority. Fees charged on a percentage or similar basis,
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
37
except when authorized by statute or approved by the Institute as
generally accepted practice for certain professional services, should be
regarded as contingent fees.

240.5 In certain circumstances, a chartered accountant in practice may receive
a referral fee or commission relating to a client. For example, where the
chartered accountant in practice does not provide the specific service
required, a fee may be received for referring a continuing client to
another chartered accountant in practice or other expert. A chartered
accountant in practice may receive a commission from a third party
(e.g., a software vendor) in connection with the sale of goods or
services to a client. Accepting such a referral fee or commission may
give rise to self- interest threats to objectivity and chartered competence
and due care.

240.6 A chartered accountant in practice may also pay a referral fee to obtain
a client, for example, where the client continues as a client of another
chartered accountant in practice but requires specialist services not
offered by the existing accountant. The payment of such a referral fee
may also create a self- interest threat to objectivity and professional
competence and due care.

240.7 A chartered accountant in practice should not pay or receive a referral
fee or commission, unless the chartered accountant in practice has
established safeguards to eliminate the threats or reduce them to an
acceptable level. Such safeguards may include:

• Disclosing to the client any arrangements to pay a referral fee to
another chartered accountant for the work referred.

• Disclosing to the client any arrangements to receive a referral fee for
referring the client to another chartered accountant in practice.

• Obtaining advance agreement from the client for commission
arrangements in connection with the sale by a third party of goods or
services to the client.

240.8 A chartered accountant in practice may purchase all or part of another
firm on the basis that payments will be made to individuals formerly
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38
owning the firm or to their heirs or estates. Such payments are not
regarded as commissions or referral fees for the purpose of paragraph
240.5 – 240.7 above.

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39
Section 250

Public Notices, Announcements and Communications

Undue publicity be avoided

250.1 In any communications, announcements and public notices, chartered
accountants should not:

(a) use means, which bring the profession into disrepute;

(b) make exaggerated claims for the services they are able to offer,
the qualifications they possess, or experience they have gained;
and

(c) denigrate the work of other accountants.

A Chartered Accountant preparing or authorizing the i ssue of matter
falling within this Section should do so with a due sense of
responsibility to the profession and to the public as a whole. In
particular such material should be in good taste both as to content and
presentation and should not belittle services offered by others, whether
members or not, either by claiming superiority for the services of a
particular Chartered Accountant or otherwise. The same attitude should
be adopted towards activities mentioned in subsequent paragraphs.

Advertising for solicitation be avoided

250.2 All communications, announcements and public notices be issued in
such manner and within the limits prescribed in the following
paragraphs so that the provisions of Clauses (5) and (6) of Part 1 and
Clauses (1) and (2) of Part 2 of Schedule-I of the Chartered
Accountants Ordinance, 1961, are not violated:-

(a) All announcements, communications and public notices should:-

(i) be aimed at informing the recipients or the public in an
objective manner;

(ii) conform to the basic principles of legality, decency, clarity,
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40
honesty and truthfulness; and

(iii) not project an image, which is inconsistent with that of a
professional person bound to high ethical and technical
standards.

(b) Activities which may expressly be considered not to meet the
above criteria and are therefore prohibited include those that:

(i) create false, deceptive or unjustified expectations of
favourable results;

(ii) imply the ability to influence any court, tribunal, regulatory
agency or similar body or official;

(iii) consist of self- laudatory statements that are not based on
verifiable facts;

(iv) make comparisons with other professional accountants in
practice;

(v) contain testimonials or endorsements;

(vi) contain any other representations that would be likely to
cause a reasonable person to misunderstand or be deceived;
and

(vii) make unjustified claims to be an expert or specialist in a
particular field of accountancy.

(c) The examples which follow are illustrative of circumstances in
which communications, announcements, public notices, etc., are
acceptable and the matters to be considered in connection
therewith subject always to the overriding requirements
mentioned in the preceding paragraphs:-



REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
41
(i) Appointments and Awards

It is in the interests of the public and the profession that any
appointment or other activity of a Chartered Accountant in
a matter of national or local importance, or the award of
any distinction to a member, should receive publicity and
that membership of the Institute should be mentioned.
However, the Chartered Accountant should not make use of
any of the aforementioned appointments or activities for
personal professional advantage.


(ii) Chartered Accountants Seeking Employment or
Professional Business

A chartered accountant may inform interested parties
through any medium that a partnership or salaried
employment of an accountancy nature is being sought. The
chartered accountants should not, however, publicize for
subcontract work in a manner, which could be interpreted
as seeking to procure professional business. Public
announcements or public notices seeking subcontract work
may be acceptable if placed only in the professional press
and provided that neither the chartered accountant’s name,
address or telephone number appears in the public
announcements or public notices
.
A chartered accountant
may write a letter or make a direct approach to another
chartered accountant when seeking employment or
professional business.

(iii) Directories & Internet

A Chartered Accountant and his firm may be listed in the
directories both alphabetically and in lead type and in
classified list under "Chartered Accountants" in the
directories He can however, use the classification
"Accountants and Auditors" when the directories do not
have specific classification for “Chartered Accountants",
Entries should be limited to name, address, telephone
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42
numbers, internet address, e- mail address, professional
description and any other information necessary to enable
the users of the directories to make contact with the
Chartered Accountant and his firm may also develop and
maintain a web site on the Internet provided the contents
comply with the requirements of paragraphs 250.1, (a) and
(b) of 250.2 and (ix) of 250.2(c).

(iv) Books, Articles, Interviews, Lectures, and Electronic Media

A member who is author of a book or articles on a
professional subject, may state his name and professional
qualifications and give the name of his firm but shall not
give any information as to the services that the firm
provides.

Similar provisions are applicable to participation by a
Chartered Accountant in practice in a lecture, interview or a
radio or television program on a professional subject. What
practicing member write or say, however, should not be
promotional of themselves or their firm but should be an
objective professional view of the topic under
consideration. Practicing members are responsible for using
their best endeavors to ensure that what ultimately goes
before the public complies with these requirements.

When interviewed by a writer or reporter, the Chartered
Accountant should observe the limitations imposed on him
by this Section. The Chartered Accountant may not provide
the press with any information for publication that he could
not publish himself.

(v) Training Courses, Seminars, etc.

A chartered accountant may invite clients, their staff and
the general public to attend training courses or seminars
conducted for imparting professional education. However,
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
43
undue prominence should not be given to the name of a
chartered accountant in any booklets or documents issued
in connection therewith.

(vi) Professional Literature and Publications

Any professional literature bearing the name of a Chartered
Accountant or his firm giving technical information for the
assistance of staff and clients may be issued to any other
firm or persons.

A publication developed / authored by a firm may be
published in the firm’s name but it shall not give any
information as to the services that the firm provides.

Such professional literature and publications can also be
placed on the website of the firm.

(vii) Staff Recruitment

Genuine vacancies for staff may be communicated to the
public through any medium in which comparable staff
vacancies normally appear. The fact that a job specification
necessarily gives some detail as to one or more of the
services provided by the Chartered Accountant or his firm
is acceptable but it should not contain any promotional
element. There should not be any suggestion that the
services offered are superior to those offered by other
Chartered Accountants as a consequence of size,
associations, or for any other reason.

In publications such as those specifically directed to
schools and other places of education to inform students
and graduates of career opportunities in the profession,
services offered to the public may be described in a
businesslike way.

More latitude may also be permissible in a section of a
newspaper devoted to staff vacancies than would be
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44
allowed if the vacancy appears in a prominent position
elsewhere in a newspaper on the grounds that it would be
most unlikely that a potential client would use such media
to select his professional adviser.

(viii) Recruitment on Behalf of Clients

A member may advertise on behalf of clients. However, he
should ensure that the emphasis in the advertisement is
directed towards the objectives to be achieved for the
client. The designation of any services provided by the
practice as being of specialist nature is not permitted.

(ix) Brochures and Firm Directories

A Chartered Accountant in practice may issue:-

(a) A factual and objectively worded account of the
services provided, the firm’s resources (human and
other, specifying qualifications and experience of
personnel where appropriate), existing clients (unless
this breaches client confidentiality) and of
professional assignments undertaken and;

(b) A directory setting out names of partners, office
addresses and names and addresses of associated
firms and correspondents.

(x) Stationery and Nameplates

Stationery of chartered accountants in practice should be of
an acceptable professional standard and comply with the
requirements of the directives issued by the Council of the
Institute from time to time as to names of partners,
principals and others who participate in the practice, use of
professional descriptions and designatory letters, cities or
countries where the practice is represented, logotypes, etc.
The designation of any services provided by the practice as
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
45
being of specialist nature is not permitted. Similar
provisions apply to nameplates.

(xi) Newspaper Announcements

Appropriate newspapers or magazines may be used to
inform the public of the establishment of a new practice, of
changes in the composition of a partnership, or of any
alteration in the address and telephone number of a
practice.

Such announcements should be limited to a bare statement
of facts and consideration given to the appropriateness of
the area of distribution of the newspaper or magazine and
number of insertions.

(xii) Inclusion of the Name of a Chartered Accountant in
practice in a Document Issued by a Client

When a client proposes to publish a report by a practicing
member dealing with the client’s existing business affairs
or in connection with the establishment of a new business
venture, Chartered Accountant in practice should take steps
to ensure that the context in which the report is
published is not such as might result in the public being
misled as to the nature and meaning of the report. In these
circumstances, practicing member should advise the client
that permission should first be obtained before publication
of the document.

Similar consideration should be given to other documents
proposed to be issued by a client containing the name of a
Chartered Accountant in practice acting in an independent
professional capacity.

This does not preclude the inclusion of the name of a
Chartered Accountant in practice in the annual report of a
client.

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46
When Chartered Accountant in practice in their private
capacity are associated with, or hold office in, an
organization, the organization may use their name and
professional status on stationery and other documents. The
Chartered Accountant in practice should ensure that this
information is not used in such a way as might lead the
public to believe that there is a connection with the
organization in an independent professional capacity.

(xiii) Advertising Material Used to Promote a Course, Which He
Has Been Asked to Conduct

It is of value to prospective students and course participants
to know the instructor’s background - such as degrees he
holds, professional body affiliations, and the name of his
firm. The Chartered Accountant has the responsibility to
ascertain that all promotional efforts are within the bounds
of this Section.

(xiv) The Use of the CA title on an Employer's Stationery

The use of the CA title on an employer's stationery by a
Chartered Accountant not in practice is proper. It would
also be proper for the CA title of the member to appear in
paid advertisements of the employer that list the officers
and directors.

(xv) Greeting and Invitation Cards

Greeting and invitation cards may be sent in the name of a
Chartered Accountant or his firm. Professional
qualifications may be indicated but no information shall be
given regarding the services that the Chartered Accountant
or the firm provides.


REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
47

Section 260

Gifts and Hospitality

260.1 A chartered accountant in practice, or an immediate or close family
member, may be offered gifts and hospitality from a client. Such an
offer ordinarily gives rise to threats to compliance with the fundamental
principles. For example, self- interest threats to objectivity may be
created if a gift from a client is accepted; intimidation threats to
objectivity may result from the possibility of such offers being made
public.

260.2 The significance of such threats will depend on the nature, value and
intent behind the offer. Where gifts or hospitality which a reasonable
and informed third party, having knowledge of all relevant information,
would consider clearly insignificant are made a chartered accountant in
practice may conclude that the offer is made in the normal course of
business without the specific intent to influence decision making or to
obtain information. In such cases, the chartered accountant in practice
may generally conclude that there is no significant threat to compliance
with the fundamental principles.

260.3 If evaluated threats are other than clearly insignificant, safeguards
should be considered and applied as necessary to eliminate them or
reduce them to an acceptable level. When the threats cannot be
eliminated or reduced to an acceptable level through the application of
safeguards, a chartered accountant in practice should not accept such an
offer.




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48
Section 270

Custody of Client Assets

270.1 A chartered accountant in practice should not assume custody of client
monies or other assets unless permitted to do so by law and, if so, in
compliance with any additional legal duties imposed on a chartered
accountant in practice holding such assets.

270.2 The holding of client assets creates threats to compliance with the
fundamental principles; for example, there is self- interest threat to
professional behavior and may be a self interest threat to objectivity
arising from holding client assets. To safeguard against such threats, a
chartered accountant in practice entrusted with money (or other assets)
belonging to others should:

(a) Keep such assets separately from personal or firm assets; and

(b) Use such assets only for the purpose for which they are intended;
and

(c) At all times, be ready to account for those assets, and any
income, dividends or gains generated, to any persons entitled to
such accounting; and

(d) Comply with all relevant laws and regulations relevant to the
holding of and accounting for such assets.

270.3 In addition, chartered accountants in practice should be aware of threats
to compliance with the fundamental principles through association with
such assets, for example, if the assets were found to derive from illegal
activities, such as money laundering. As part of client and engagement
acceptance procedures for such services, chartered accountants in
practice should make appropriate inquiries about the source of such
assets and should consider their legal and regulatory obligations. They
may also consider seeking legal advice.

REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
49

Section 280

Objectivity–All Services

280.1 A chartered accountant in practice should consider when providing any
professional service whether there are threats to compliance with the
fundamental principle of objectivity resulting from having interests in,
or relationships with, a client or directors, officers or employees. For
example, a familiarity threat to objectivity may be created from a
family or close personal or business relationship.

280.2 A chartered accountant in practice who provides an assurance service is
required to be independent of the assurance client. Independence of
mind and in appearance is necessary to enable the chartered accountant
in practice to express a conclusion, and be seen to express a conclusion,
without bias, conflict of interest or undue influence of others. Section
290 provides specific guidance on independence requirements for
chartered accountants in practice when performing an assurance
engagement.

280.3 The existence of threats to objectivity when providing any professional
service will depend upon the particular circumstances of the
engagement and the nature of the work that the chartered accountant in
practice is performing.

280.4 A chartered accountant in practice should evaluate the significance of
identified threats and, if they are other than clearly insignificant,
safeguards should be considered and applied as necessary to eliminate
them or reduce them to an acceptable level. Such safeguards may
include:

• Withdrawing from the engagement team.

• Supervisory procedures.

• Terminating the financial or business relationship giving rise to the
threat.

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50
• Discussing the issue with higher levels of management within the
firm.

• Discussing the issue with those charged with governance of the
client.

REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
51
SECTION 290

Independence—Assurance Engagements

290.1 In the case of an assurance engagement it is in the public interest and,
therefore, required by this Code of Ethics, that members of assurance
teams,* firms and, when applicable, network firms be independent of
assurance clients.

290.2 Assurance engagements are designed to enhance intended users’ degree
of confidence about the outcome of the evaluation or measurement of a
subject matter against criteria. The International Framework for
Assurance Engagements (the Assurance Framework) issued by the
International Auditing and Assurance Standards Board describes the
elements and objectives of an assurance engagement, and identifies
engagements to which International Standards on Auditing (ISAs),
International Standards on Review Engagements (ISREs) and
International Standards on Assurance Engagements (ISAEs) apply. For
a description of the elements and objectives of an assurance
engagement reference should be made to the Assurance Framework.

290.3 As further explained in the Assurance Framework, in an assurance
engagement the chartered accountant in practice expresses a conclusion
designed to enhance the degree of confidence of the intended users
other than the responsible party about the outcome of the evaluation or
measurement of a subject matter against criteria.

290.4 The outcome of the evaluation or measurement of a subject matter is
the information that results from applying the criteria to the subject
matter. The term “subject matter information” is used to mean the
outcome of the evaluation or measurement of subject matter. For
example:

• The recognition, measurement, presentation and disclosure
represented in the financial statements
*
(subject matter
information) result from applying a financial reporting framework
for recognition, measurement, presentation and disclosure, such as

*
See Definitions
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52
International Financial Reporting Standards, (criteria) to an entity’s
financial position, financial performance and cash flows (subject
matter).
• An assertion about the effectiveness of internal control (subject
matter information) results from applying a framework for
evaluating the effectiveness of internal control, such as COSO or
CoCo, (criteria) to internal control, a process (subject matter).

290.5 Assurance engagements may be assertion-based or direct reporting. In
either case they involve three separate parties: a public accountant in
public practice, a responsible party and intended users.

290.6 In an assertion-based assurance engagement, which includes a
financial statement audit engagement
*
, the evaluation or
measurement of the subject matter is performed by the responsible
party, and the subject matter information is in the form of an assertion
by the responsible party that is made available to the intended users.

290.7 In a direct reporting assurance engagement the chartered accountant in
practice either directly performs the evaluation or measurement of the
subject matter, or obtains a representation from the responsible party
that has performed the evaluation or measurement that is not available
to the intended users. The subject matter information is provided to the
intended users in the assurance report.

290.8 Independence requires:

Independence of Mind

The state of mind that permits the expression of a conclusion without
being affected by influences that compromise professional judgment,
allowing an individual to act with integrity, and exercise objectivity and
professional skepticism

*
See Definitions
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
53

Independence in appearance

The avoidance of facts and circumstances that are so significant that a
reasonable and informed third party, having knowledge of all relevant
information, including safeguards applied, would reasonably conclude
a firm’s, or a member of the assurance team’s, integrity, objectivity or
professional skepticism had been compromised.

290.9 The use of the word “independence” on its own may create
misunderstandings. Standing alone, the word may lead observers to
suppose that a person exercising professional judgment ought to be free
from all economic, financial and other relationships. This is impossible,
as every member of society has relationships with others. Therefore,
the significance of economic, financial and other relationships should
also be evaluated in the light of what a reasonable and informed third
party having knowledge of all relevant information would reasonably
conclude to be unacceptable.

290.10 Many different circumstances, or combination of circumstances, may
be relevant and accordingly it is impossible to define every situation
that creates threats to independence and specify the appropriate
mitigating action that should be taken. In addition, the nature of
assurance engagements may differ and consequently different threats
may exist, requiring the application of different safeguards. A
conceptual framework that requires firms and members of assurance
teams to identify, evaluate and address threats to independence, rather
than merely comply with a set of specific rules which may be arbitrary,
is, therefore, in the public interest.

A Conceptual Approach to Independence

290.11 Members of assurance teams, firms and network firms are required to
apply the conceptual framework contained in Section 100 to the
particular circumstances under consideration. In addition to identifying
relationships between the firm, network firms, members of the
assurance team and the assurance client, consideration should be given
to whether relationships between individuals outside of the assurance
team and the assurance client create threats to independence.
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54

290.12 The examples presented in this section are intended to illustrate the
application of the conceptual framework and are not intended to be, nor
should they be interpreted as, an exhaustive list of all circumstances
that may create threats to independence. Consequently, it is not
sufficient for a member of an assurance team, a firm or a network firm
merely to comply with the examples presented, rather they should
apply the framework to the particular circumstances they face.

290.13 The nature of the threats to independence and the applicable safeguards
necessary to eliminate the threats or reduce them to an acceptable level
differ depending on the characteristics of the individual assurance
engagement: whether it is a financial statement audit engagement or
another type of assurance engagement; and in the latter case, the
purpose, subject matter information and intended users of the report. A
firm should, therefore, evaluate the relevant circumstances, the nature
of the assurance engagement and the threats to independence in
deciding whether it is appropriate to accept or continue an engagement,
as well as the nature of the safeguards required and whether a particular
individual should be a member of the assurance team.

Assertion-Based Assurance Engagements

Financial Statement Audit Engagements

290.14 Financial statement audit engagements are relevant to a wide range of
potential users; consequently, in addition to independence of mind,
independence in appearance is of particular significance. Accordingly,
for financial statement audit clients, the members of the assurance
team, the firm and network firms are required to be independent of the
financial statement audit client. Such independence requirements
include prohibitions regarding certain relationships between members
of the assurance team and directors, officers and employees of the
client in a position to exert direct and significant influence over the
subject matter information (the financial statements). Also,
consideration should be given to whether threats to independence are
created by relationships with employees of the client in a position to
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
55
exert direct and significant influence over the subject matter (the
financial position, financial performance and cash flows).

Other Assertion-Based Assurance Engagements

290.15 In an assertion-based assurance engagement where the client is not a
financial statement audit client, the members of the assurance team and
the firm are required to be independent of the assurance client (the
responsible party, which is responsible for the subject matter
information and may be responsible for the subject matter). Such
independence requirements include prohibitions regarding certain
relationships between members of the assurance team and directors,
officers and employees of the client in a position to exert direct and
significant influence over the subject matter information. Also,
consideration should be given to whether threats to independence are
created by relationships with employees of the client in a position to
exert direct and significant influence over the subject matter of the
engagement. Consideration should also be given to any threats that the
firm has reason to believe may be created by network firm interests and
relationships.

290.16 In the majority of assertion-based assurance engagements, that are not
financial statement audit engagements, the responsible party is
responsible for the subject matter information and the subject matter.
However, in some engagements the responsible party may not be
responsible for the subject matter. For example, when a chartered
accountant in practice is engaged to perform an assurance engagement
regarding a report that an environmental consultant has prepared about
a company’s sustainability practices, for distribution to intended users,
the environmental consultant is the responsible party for the subject
matter information but the company is responsible for the subject
matter (the sustainability practices).

290.17 In those assertion-based assurance engagements that are not financial
statement audit engagements, where the responsible party is responsible
for the subject matter information but not the subject matter the
members of the assurance team and the firm are required to be
independent of the party responsible for the subject matter information
(the assurance client). In addition, consideration should be given to any
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56
threats the firm has reason to believe may be created by interests and
relationships between a member of the assurance team, the firm, a
network firm and the party responsible for the subject matter.

Direct Reporting Assurance Engagements

290.18 In a direct reporting assurance engagement the members of the
assurance team and the firm are required to be independent of the
assurance client (the party responsible for the subject matter).

Restricted Use Reports

290.19 In the case of an assurance report in respect of a non-financial
statement audit client expressly restricted for use by identified users,
the users of the report are considered to be knowledgeable as to the
purpose, subject matter information and limitations of the report
through their participation in establishing the nature and scope of the
firm’s instructions to deliver the services, including the criteria against
which the subject matter are to be evaluated or measured. This
knowledge and the enhanced ability of the firm to communicate about
safeguards with all users of the report increase the effectiveness of
safeguards to independence in appearance. These circumstances may be
taken into account by the firm in evaluating the threats to independence
and considering the applicable safeguards necessary to eliminate the
threats or reduce them to an acceptable level. At a minimum, it will be
necessary to apply the provisions of this section in evaluating the
independence of members of the assurance team and their immediate
and close family. Further, if the firm had a material financial interest,
whether direct or indirect, in the assurance client, the self- interest threat
created would be so significant no safeguard could reduce the threat to
an acceptable level. Limited consideration of any threats created by
network firm interests and relationships may be sufficient.

Multiple Responsible Parties

290.20 In some assurance engagements, whether assertion-based or direct
reporting, that are not financial statement audit engagements, there
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
57
might be several responsible parties. In such engagements, in
determining whether it is necessary to apply the provisions in this
section to each responsible party, the firm may take into account
whether an interest or relationship between the firm, or a member of the
assurance team, and a particular responsible party would create a threat
to independence that is other than clearly insignificant in the context of
the subject matter information. This will take into account factors such
as:

• The materiality of the subject matter information (or the subject
matter) for which the particular responsible party is responsible;
and

• The degree of public interest associated with the engagement.

If the firm determines that the threat to independence created by any
such interest or relationship with a particular responsible party would
be clearly insignificant it may not be necessary to apply all of the
provisions of this section to that responsible party.

Other Considerations

290.21 The threats and safeguards identified in this section are generally
discussed in the context of interests or relationships between the firm,
network firms, members of the assurance team and the assurance client.
In the case of a financial statement audit client that is a listed entity, the
firm and any network firms are required to consider the interests and
relationships that involve that client’s related entities. Ideally those
entities and the interests and relationships should be identified in
advance. For all other assurance clients, when the assurance team has
reason to believe that a related entity
*
of such an assurance client is
relevant to the evaluation of the firm’s independence of the client, the
assurance team should consider that related entity when evaluating
independence and applying appropriate safeguards.

290.22 The evaluation of threats to independence and subsequent action should
be supported by evidence obtained before accepting the engagement
and while it is being performed. The obligation to make such an
evaluation and take action arises when a firm, a network firm or a

*
See Definitions
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58
member of the ssurance team knows, or could reasonably be expected
to know, of circumstances or relationships that might compromise
independence. There may be occasions when the firm, a network firm
or an individual inadvertently violates this section. If such an
inadvertent violation occurs, it would generally not compromise
independence with respect to an assurance client provided the firm has
appropriate quality control policies and procedures in place to promote
independence and, once discovered, the violation is corrected promptly
and any necessary safeguards are applied.

290.23 Throughout this section, reference is made to significant and clearly
insignificant threats in the evaluation of independence. In considering
the significance of any particular matter, qualitative as well as
quantitative factors should be taken into account. A matter should be
considered clearly insignificant only if it is deemed to be both trivial
and inconsequential.

Objective and Structure of this Section

290.24 The objective of this section is to assist firms and members of
assurance teams in:

(a) Identifying threats to independence;

(b) Evaluating whether these threats are clearly insignificant; and

(c) In cases when the threats are not clearly insignificant,
identifying and applying appropriate safeguards to eliminate or
reduce the threats to an acceptable level.

Consideration should always be given to what a reasonable and
informed third party having knowledge of all relevant information,
including safeguards applied, would reasonably conclude to be
unacceptable. In situations when no safeguards are available to reduce
the threat to an acceptable level, the only possible actions are to
eliminate the activities or interest creating the threat, or to refuse to
accept or continue the assurance engagement.
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
59

290.25 This section concludes with some examples of how this conceptual
approach to independence is to be applied to specific circumstances and
relationships. The examples discuss threats to independence that may
be created by specific circumstances and relationships (paragraphs
290.100 onwards). Professional judgment is used to determine the
appropriate safeguards to eliminate threats to independence or to reduce
them to an acceptable level. In certain examples, the threats to
independence are so significant the only possible actions are to
eliminate the activities or interest creating the threat, or to refuse to
accept or continue the assurance engagement. In other examples, the
threat can be eliminated or reduced to an acceptable level by the
application of safeguards. The examples are not intended to be all-
inclusive.

290.26 Certain examples in this section indicate how the framework is to be
applied to a financial statements audit engagement for a listed entity.

290.27 When threats to independence that are not clearly insignificant are
identified, and the firm decides to accept or continue the assurance
engagement, the decision should be documented. The documentation
should include a description of the threats identified and the safeguards
applied to eliminate or reduce the threats to an acceptable level.

290.28 The evaluation of the significance of any threats to independence and
the safeguards necessary to reduce any threats to an acceptable level,
takes into account the public interest. Certain entities may be of
significant public interest because, as a result of their business, their
size or their corporate status they have a wide range of stakeholders.
Examples of such entities may include listed companies, credit
institutions, insurance companies, and pension funds. Because of the
strong public interest in the financial statements of listed entities,
certain paragraphs in this section deal with additional matters that are
relevant to the financial statement audit of listed entities. Consideration
should be given to the application of the framework in relation to the
financial statement audit of listed entities to other financial statement
audit clients that may be of significant public interest.

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60
290.29 Audit committees can have an important corporate governance role
when they are independent of client management and can assist the
Board of Directors in satisfying themselves that a firm is independent
in carrying out its audit role. There should be regular communications
between the firm and the audit committee (or other governance body if
there is no audit committee) of listed entities regarding relationships
and other matters that might, in the firm’s opinion, reasonably be
thought to bear on independence.

290.30 Firms should establish policies and procedures relating to independence
communications with audit committees, or others charged with
governance of the client. In the case of financial statement audit of
listed entities, the firm should communicate orally and in writing at
least annually, all relationships and other matters between the firm,
network firms and the financial statement audit client that in the firm’s
professional judgment may reasonably be thought to bear on
independence. Matters to be communicated will vary in each
circumstance and should be decided by the firm, but should generally
address the relevant matters set out in this section.
290.31 In case of a listed company, the chartered accountants in practice shall
take cognizance of the following clause (xlii) of the Code of Corporate
Governance:

(xlii) No listed company shall appoint a person as the CEO, the
CFO, an internal auditor or a director of the listed company
who was a partner of the firm of its external auditors (or an
employee involved in the audit of the listed company) at any
time during the two years preceding such appointment or is a
close relative, i.e. spouse, parents, dependents and non-
dependent children, of such partner (or employee).

Engagement Period

290.32 The members of the assurance team and the firm should be independent
of the assurance client during the period of the assurance engagement.
The period of the engagement starts when the assurance team begins to
perform assurance services and ends when the assurance report is
issued, except when the assurance engagement is of a recurring nature.
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
61
If the assurance engagement is expected to recur, the period of the
assurance engagement ends with the notification by either party that the
professional relationship has terminated or the issuance of the final
assurance report, whichever is later.

290.33 In the case of a financial statement audit engagement, the engagement
period includes the period covered by the financial statements reported
on by the firm. When an entity becomes a financial statement audit
client during or after the period covered by the financial statements that
the firm will report on, the firm should consider whether any threats to
independence may be created by:

• Financial or business relationships with the audit client during or
after the period covered by the financial statements, but prior to the
acceptance of the financial statement audit engagement; or

• Previous services provided to the audit client.

Similarly, in the case of an assurance engagement that is not a
financial statement audit engagement, the firm should consider
whether any financial or business relationships or previous services
may create threats to independence.


290.34 If a non-assurance service was provided to the financial statement audit
client during or after the period covered by the financial statements but
before the commencement of professional services in connection with
the financial statement audit and the service would be prohibited during
the period of the audit engagement, consideration should be given to
the threats to independence, if any, arising from the service. If the
threat is other than clearly insignificant, safeguards should be
considered and applied as necessary to reduce the threat to an
acceptable level. Such safeguards may include:

• Discussing independence issues related to the provision of the non-
assurance service with those charged with governance of the client,
such as the audit committee;

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62
• Obtaining the client’s acknowledgement of responsibility for the
results of the non-assurance service;

• Precluding personnel who provided the non-assurance service from
participating in the financial statement audit engagement; and

• Engaging another firm to review the results of the non-assurance
service or having another firm re-perform the non-assurance
service to the extent necessary to enable it to take responsibility for
the service.

290.35 A non-assurance service provided to a non- listed financial statement
audit client will not impair the firm’s independence when the client
becomes a listed entity provided:

(a) The previous non-assurance service was permissible under this
section for non- listed financial statement audit clients;

(b) The service will be terminated within a reasonable period of
time of the client becoming a listed entity, if they are
impermissible under this section for financial statement audit
clients that are listed entities; and

(c) The firm has implemented appropriate safeguards to eliminate
any threats to independence arising from the previous service or
reduce them to an acceptable level.
(For further guidance regarding provision of non-assurance services
to listed financial statement audit client , refer to list of prohibited
services given in the Listing Regulations of Karachi, Lahore and
Islamabad Stock Exchanges)

REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
63
Application of Framework to Specific Situations

Contents Paragraph

Introduction………………………………… 290.100

Financial Interests……. 290.104

Provisions Applicable to all Assurance Clients 290.106

Provisions Applicable to Financial Statement
Audit Clients 290.113

Provisions Applicable to Non-Financial Statement
Audit Assurance Clients 290.123

Loans and Guarantees………………………... 290.127

Close Business Relationships with Assurance Clients 290.133

Family and Personal Relationships 290.136

Employment with Assurance Clients 290.144

Recent Service with Assurance Clients 290.148

Serving as an Officer or Director on the Board
of Assurance Clients 290.151

Long Association of Senior Personnel with
Assurance Clients

General Provisions 290.155

Financial Statement Audit Clients that are
Listed Ent ities 290.156

Provision of Non-Assurance Services to Assurance
Clients 290.157
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64


Preparing Accounting Records and Financial
Statements 290.165

General Provisions……….. 290.168

Financial Statement Audit Clients that are not
Listed Entities…… 290.169

Valuation Services ................................. 290.170

Provision of Taxation Services to Financial Statement
Audit Clients ….. \290.176

Provision of Internal Audit Services to Financial
Statement Audit Clients…… 290.177

Provision of IT Systems Services to Financial
Statement Audit Clients 290.183

Temporary Staff Assignments to Financial Statement
Audit Clients 290.188

Provision of Litigation Support Services to Financial
Statement Audit Clients......... 290.189

Provision of Legal Services to Financial Statement
Audit Clients ...... 290.192

Recruiting Senior Management 290.199

Corporate Finance and Similar Activities 290.200

Fees and Pricing

Fees – Relative Size… 290.202
Fees – Overdue……… 290.204
Pricing………………… 290.205
Contingent Fees 290.206

Gifts and Hospitality 290.208

Actual or Threatened Litigation 290.209
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
65
Introduction

290.100 The following examples describe specific circumstances and
relationships that may create threats to independence. The examples
describe the potential threats created and the safeguards that may be
appropriate to eliminate the threats or reduce them to an acceptable
level in each circumstance. The examples are not all inclusive. In
practice, the firm, network firms and the members of the assurance
team will be required to assess the implications of similar, but different,
circumstances and relationships and to determine whether safeguards,
including the safeguards in paragraphs 200.12-200.15 can be applied to
satisfactorily address the threats to independence.

290.101 Some of the examples deal with financial statement audit clients while
others deal with assurance engagements for clients that are not financial
statement audit clients. The examples illustrate how safeguards should
be applied to fulfill the requirement for the members of the assurance
team, the firm and network firms to be independent of a financial
statement audit client, and for the members of the assurance team and
the firm to be independent of an assurance client that is not a financial
statement audit client. The examples do not include assurance reports to
a non- financial statement audit client expressly restricted for use by
identified users. As stated in paragraph 290.19 for such engagements,
members of the assurance team and their immediate and close family
are required to be independent of the assurance client. Further, the firm
should not have a material financial interest, direct or indirect, in the
assurance client.

290.102 The examples illustrate how the framework applies to financial
statement audit clients and other assurance clients. The examples
should be read in conjunction with paragraphs 290.20 which explain
that, in the majority of assurance engagements, there is one responsible
party and that responsible party comprises the assurance client.
However, in some assurance engagements there are two responsible
parties. In such circumstances, consideration should be given to any
threats the firm has reason to believe may be created by interests and
relationships between a member of the assurance team, the firm, a
network firm and the party responsible for the subject matter.

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66
290.103 Interpretation 2005-01 to this section provides further guidance on the
application of the independence requirements contained in this section
to assurance engagements that are not financial statement audit
engagements.

Financial Interests

290.104 A financial interest in an assurance client may create a self- interest
threat. In evaluating the significance of the threat, and the appropriate
safeguards to be applied to eliminate the threat or reduce it to an
acceptable level, it is necessary to examine the nature of the financial
interest. This includes an evaluation of the role of the person holding
the financial interest, the materiality of the financial interest and the
type of financial interest (direct or indirect).

290.105 When evaluating the type of financial interest, consideration should be
given to the fact that financial interests range from those where the
individual has no control over the investment vehicle or the financial
interest held (e.g., a mutual fund, unit trust or similar intermediary
vehicle) to those where the individual has control over the financial
interest (e.g., as a trustee) or is able to influence investment decisions.
In evaluating the significance of any threat to independence, it is
important to consider the degree of control or influence that can be
exercised over the intermediary, the financial interest held, or its
investment strategy. When control exists, the financial interest should
be considered direct. Conversely, when the holder of the financial
interest has no ability to exercise such control the financial interest
should be considered indirect.

Provisions Applicable to all Assurance Clients

290.106 If a member of the assurance team, or their immediate family member,
has a direct financial interest
*
, or a material indirect financial
interest,* in the assurance client, the self- interest threat created would

*
See Definitions

REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
67
be so significant the only safeguards available to eliminate the threat or
reduce it to an acceptable level would be to:

(a) Dispose of the direct financial interest prior to the individual
becoming a member of the assurance team;

(b) Dispose of the indirect financial interest in total or dispose of a
sufficient amount of it so that the remaining interest is no longer
material prior to the individual becoming a member of the
assurance team; or

(c) Remove the member of the assurance team from the assurance
engagement.

290.107 If a member of the assurance team, or their immediate family member
receives, by way of, for example, an inheritance, gift or, as a result of a
merger, a direct financial interest or a material indirect financial interest
in the assurance client, a self- interest threat would be created. The
following safeguards should be applied to eliminate the threat or reduce
it to an acceptable level:

(a) Disposing of the financial interest at the earliest practical date;
or

(b) Removing the member of the assurance team from the assurance
engagement.

During the period prior to disposal of the financial interest or the
removal of the individual from the assurance team, consideration should
be given to whether additional safeguards are necessary to reduce the
threat to an acceptable level. Such safeguards might include:

• Discussing the matter with those charged with governance, such
as the audit committee; or

• Involving an additional chartered accountant to review the work
done, or otherwise advise as necessary.

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68
290.108 When a member of the assurance team knows that his or her close
family member has a direct financial interest or a material indirect
financial interest in the assurance client, a self- interest threat may be
created. In evaluating the significance of any threat, consideration
should be given to the nature of the relationship between the member of
the assurance team and the close family member and the materiality of
the financial interest. Once the significance of the threat has been
evaluated, safeguards should be considered and applied as necessary.
Such safeguards might include:

• The close family member disposing of all or a sufficient portion
of the financial interest

• Discussing the matter with those charged with governance, such
as the audit committee;

• Involving an additional chartered accountant who did not take
part in the assurance engagement to review the work done by the
member of the assurance team with the close family relationship
or otherwise advise as necessary; or

• Removing the individual from the assurance engagement.

290.109 When a firm or a member of the assurance team holds a direct financial
interest or a material indirect financial interest in the assurance client as
a trustee, a self- interest threat may be created by the possible influence
of the trust over the assurance client. Accordingly, such an interest
should only be held when:

(a) The member of the assurance team, an immediate family
member of the member of the assurance team, and the firm are
not beneficiaries of the trust;

(b) The interest held by the trust in the assurance client is not
material to the trust;

REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
69
(c) The trust is not able to exercise significant influence over the
assurance client; and

(d) The member of the assurance team or the firm does not have
significant influence over any investment decision involving a
financial interest in the assurance client.

290.110 Consideration should be given to whether a self- interest threat may be
created by the financial interests of individuals outside of the assurance
team and their immediate and close family members. Such individuals
would include:

• Partners, and their immediate family members, who are not
members of the assurance team;

• Partners and managerial employees who provide non-assurance
services to the assurance client; and

• Individuals who have a close personal relationship with a
member of the assurance team.

Whether the interests held by such individuals may create a self- interest
threat will depend upon factors such as:

• The firm’s organizational, operating and reporting structure; and

• The nature of the relationship between the individual and the
member of the assurance team.

The significance of the threat should be evaluated and, if the threat is
other than clearly insignificant, safeguards should be considered and
applied as necessary to reduce the threat to an acceptable level. Such
safeguards might include:

• Where appropriate, policies to restrict people from holding such
interests;

• Discussing the matter with those charged with governance, such
as the audit committee; or
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70

• Involving an additional chartered accountant who did not take
part in the assurance engagement to review the work done or
otherwise advise as necessary.

290.111 An inadvertent violation of this section as it relates to a financial
interest in an assurance client would not impair the independence of the
firm, the network firm or a member of the assurance team when:

(a) The firm, and the network firm, have established policies and
procedures that require all professionals to report promptly to the
firm any breaches resulting from the purchase, inheritance or
other acquisition of a financial interest in the assurance client;

(b) The firm, and the network firm, promptly notify the professional
that the financial interest should be disposed of; and

(c) The disposal occurs at the earliest practical date after
identification of the issue, or the professional is removed from
the assurance team.

290.112 When an inadvertent violation of this section relating to a financial
interest in an assurance client has occurred, the firm should consider
whether any safeguards should be applied. Such safeguards might
include:

• Involving an additional chartered accountant who did not take
part in the assurance engagement to review the work done by the
member of the assurance team; or

• Excluding the individual from any substantive decision- making
concerning the assurance engagement.

Provisions Applicable to Financial Statement Audit Clients

290.113 If a firm, or a network firm, has a direct financial interest in a financial
statement audit client of the firm the self- interest threat created would
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
71
be so significant no safeguard could reduce the threat to an acceptable
level. Consequently, disposal of the financial interest would be the only
action appropriate to permit the firm to perform the engagement.

290.114 If a firm, or a network firm, has a material indirect financial interest in
a financial statement audit client of the firm a self- interest threat is also
created. The only actions appropriate to permit the firm to perform the
engagement would be for the firm, or the network firm, either to
dispose of the indirect interest in total or to dispose of a sufficient
amount of it so that the remaining interest is no longer material.

290.115 If a firm, or a network firm, has a material financial interest in an entity
that has a controlling interest in a financial statement audit client, the
self- interest threat created would be so significant no safeguard could
reduce the threat to an acceptable level. The only actions appropriate to
permit the firm to perform the engagement would be for the firm, or the
network firm, either to dispose of the financial interest in total or to
dispose of a sufficient amount of it so that the remaining interest is no
longer material.

290.116 If the retirement benefit plan of a firm, or network firm, has a financial
interest in a financial statement audit client a self- interest threat may be
created. Accordingly, the significance of any such threat created should
be evaluated and, if the threat is other than clearly insignificant,
safeguards should be considered and applied as necessary to eliminate
the threat or reduce it to an acceptable level.

290.117 If other partners, including partners who do not perform assurance
engagements, or their immediate family, in the office
*
in which the
engagement partner* practices in connection with the financial
statement audit hold a direct financial interest or a material indirect
financial interest in that audit client, the self- interest threat created
would be so significant no safeguard could reduce the threat to an
acceptable level. Accordingly, such partners or their immediate family
should not hold any such financial interests in such an audit client.


*
See Definitions

See Definitions
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS




72
290.118 The office in which the engagement partner practices in connection
with the financial statement audit is not necessarily the office to which
that partner is assigned. Accordingly, when the engagement partner is
located in a different office from that of the other members of the
assurance team, judgment should be used to determine in which office
the partner practices in connection with that audit.

290.119 If other partners and managerial employees who provide non-assurance
services to the financial statement audit client, except those whose
involvement is clearly insignificant, or their immediate family, hold a
direct financial interest or a material indirect financial interest in the
audit client, the self- interest threat created would be so significant no
safeguard could reduce the threat to an acceptable level. Accordingly,
such personnel or their immediate family should not hold any such
financial interests in such an audit client.

290.120 A financial interest in a financial statement audit client that is held by
an immediate family member of (a) a partner located in the office in
which the engagement partner practices in connection with the audit, or
(b) a partner or managerial employee who provides non-assurance
services to the audit client is not considered to create an unacceptable
threat provided it is received as a result of their employment rights
(e.g., pension rights or share options) and, where necessary, appropriate
safeguards are applied to reduce any threat to independence to an
acceptable level.

290.121 A self- interest threat may be created if the firm, or the network firm, or
a member of the assurance team has an interest in an entity and a
financial statement audit client, or a director, officer or controlling
owner thereof also has an investment in that entity. Independence is not
compromised with respect to the audit client if the respective interests
of the firm, the network firm, or member of the assurance team, and the
audit client, or director, officer or controlling owner thereof are both
immaterial and the audit client cannot exercise significant influence
over the entity. If an interest is material, to either the firm, the network
firm or the audit client, and the audit client can exercise significant
influence over the entity, no safeguards are available to reduce the
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
73
threat to an acceptable level and the firm, or the network firm, should
either dispose of the interest or decline the audit engagement. Any
member of the assurance team with such a material interest should
either:

(a) Dispose of the interest;

(b) Dispose of a sufficient amount of the interest so that the
remaining interest is no longer material; or

(c) Withdraw from the audit.

290.122 Chartered Accountants in practice should also keep in mind the
requirements of clause (d) of sub-section (3) of section 254 of the
Companies Ordinance, 1984 regarding their indebtedness to the financial
statement audit client.

Provisions Applicable to Non-Financial Statement Audit Assurance Clients

290.123 If a firm has a direct financial interest in an assurance client that is not a
financial statement audit client the self- interest threat created would be
so significant no safeguard could reduce the threat to an acceptable
level. Consequently, disposal of the financial interest would be the only
action appropriate to permit the firm to perform the engagement.

290.124 If a firm has a material indirect financial interest in an assurance client
that is not a financial statement audit client a self- interest threat is also
created. The only action appropriate to permit the firm to perform the
engagement would be for the firm to either dispose of the indirect
interest in total or to dispose of a sufficient amount of it so that the
remaining interest is no longer material.

290.125 If a firm has a material financial interest in an entity that has a
controlling interest in an assurance client that is not a financial
statement audit client, the self- interest threat created would be so
significant no safeguard could reduce the threat to an acceptable level.
The only action appropriate to permit the firm to perform the
engagement would be for the firm either to dispose of the financial
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS




74
interest in total or to dispose of a sufficient amount of it so that the
remaining interest is no longer material.

290.126 When a restricted use report for an assurance engagement that is not a
financial statement audit engagement is issued, exceptions to the
provisions in paragraphs 290.106-290.110 and 290.123-290.125 are set
out in 290.19.

Loans and Guarantees

290.127 A loan, or a guarantee of a loan, to the firm from an assurance client
that is a bank or a similar institution, would not create a threat to
independence provided the loan, or guarantee, is made under normal
lending procedures, terms and requirements and the loan is immaterial
to both the firm and the assurance client. If the loan is material to the
assurance client or the firm it may be possible, through the application
of safeguards, to reduce the self- interest threat created to an acceptable
level. Such safeguards might include involving an additional chartered
accountant from outside the firm, or network firm, to review the work
performed.

290.128 A loan, or a guarantee of a loan, from an assurance client that is a bank
or a similar institution, to a member of the assurance team or their
immediate family would not create a threat to independence provided
the loan, or guarantee, is made under normal lending procedures, terms
and requirements. Examples of such loans include home mortgages,
bank overdrafts, car loans and credit card balances.



290.129 Similarly, deposits made by, or brokerage accounts of, a firm or a
member of the assurance team with an assurance client that is a bank,
broker or similar institution would not create a threat to independence
provided the deposit or account is held under normal commercial terms.

290.130 If the firm, or a member of the assurance team, makes a loan to an
assurance client, that is not a bank or similar institution, or guarantees
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
75
such an assurance client’s borrowing, the self- interest threat created
would be so significant no safeguard could reduce the threat to an
acceptable level, unless the loan or guarantee is immaterial to both the
firm or the member of the assurance team and the assurance client.

290.131 Similarly, if the firm or a member of the assurance team accepts a loan
from, or has borrowing guaranteed by, an assurance client that is not a
bank or similar institution, the self- interest threat created would be so
significant no safeguard could reduce the threat to an acceptable level,
unless the loan or guarantee is immaterial to both the firm or the
member of the assurance team and the assurance client.

290.132 The examples in paragraphs 290.127-290.131 relate to loans and
guarantees between the firm and an assurance client. In the case of a
financial statement audit engagement, the provisions should be applied
to the firm, all network firms and the audit client.

Close Business Relationships with Assurance Clients

290.133 A close business relationship between a firm or a member of the
assurance team and the assurance client or its management, or between
the firm, a network firm and a financial statement audit client, will
involve a commercial or common financial interest and may create self-
interest and intimidation threats. The following are examples of such
relationships:

• Having a material financial interest in a joint venture with the
assurance client or a controlling owner, director, officer or other
individual who performs senior managerial functions for that
client.

• Arrangements to combine one or more services or products of
the firm with one or more services or products of the assurance
client and to market the package with reference to both parties.

• Distribution or marketing arrangements under which the firm
acts as a distributor or marketer of the assurance client’s
products or services, or the assurance client acts as the
distributor or marketer of the products or services of the firm.
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In the case of a financial statement audit client, unless the financial
interest is immaterial and the relationship is clearly insignificant to the
firm, the network firm and the audit client, no safeguards could reduce
the threat to an acceptable level. In the case of an assurance client that is
not a financial statement audit client, unless the financial interest is
immaterial and the relationship is clearly insignificant to the firm and the
assurance client, no safeguards could reduce the threat to an acceptable
level. Consequently, in both these circumstances the only possible
courses of action are to:

(a) Terminate the business relationship;

(b) Reduce the magnitude of the relationship so that the financial
interest is immaterial and the relationship is clearly insignificant;
or

(c) Refuse to perform the assurance engagement.

Unless any such financial interest is immaterial and the relationship is
clearly insignificant to the member of the assurance team, the only
appropriate safeguard would be to remove the individual from the
assurance team.

290.134 In the case of a financial statement audit client, business relationships
involving an interest held by the firm, a network firm or a member of
the assurance team or their immediate family in a closely held entity
when the audit client or a director or officer of the audit client, or any
group thereof, also has an interest in that entity, do not create threats to
independence provided:

(a) The relationship is clearly insignificant to the firm, the network
firm and the audit client;

(b) The interest held is immaterial to the investor, or group of
investors; and

(c) The interest does not give the investor, or group of investors, the
ability to control the closely held entity.

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290.135 The purchase of goods and services from an assurance client by the firm
(or from a financial statement audit client by a network firm) or a
member of the assurance team would not generally create a threat to
independence providing the transaction is in the normal course of
business and on an arm’s length basis. However, such transactions may
be of a nature or magnitude so as to create a self- interest threat. If the
threat created is other than clearly insignificant, safeguards should be
considered and applied as necessary to reduce the threat to an acceptable
level. Such safeguards might include:

• Eliminating or reducing the magnitude of the transaction;

• Removing the individual from the assurance team; or

• Discussing the issue with those charged with governance, such
as the audit committee.

Family and Personal Relationships

290.136 Family and personal relationships between a member of the assurance
team and a director, an officer or certain employees, depending on their
role, of the assurance client, may create self- interest, familiarity or
intimidation threats. It is impracticable to attempt to describe in detail
the significance of the threats that such relationships may create. The
significance will depend upon a number of factors including the
individual’s responsibilities on the assurance engagement, the closeness
of the relationship and the role of the family member or other
individual within the assurance client. Consequently, there is a wide
spectrum of circumstances that will need to be evaluated and
safeguards to be applied to reduce the threat to an acceptable level.

290.137 When an immediate family member of a member of the assurance team
is a director, an officer or an employee of the assurance client in a
position to exert direct and significant influence over the subject matter
information of the assurance engagement, or was in such a position
during any period covered by the engagement, the threats to
independence can only be reduced to an acceptable level by removing
the individual from the assurance team. The closeness of the
relationship is such that no other safeguard could reduce the threat to
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78
independence to an acceptable level. If application of this safeguard is
not used, the only course of action is to withdraw from the assurance
engagement. For example, in the case of an audit of financial
statements, if the spouse of a member of the assurance team is an
employee in a position to exert direct and significant influence over the
preparation of the audit client’s accounting records or financial
statements, the threat to independence could only be reduced to an
acceptable level by removing the individual from the assurance team.

290.138 When an immediate family member of a member the assurance team is
an employee in a position to exert direct and significant influence over
the subject matter of the engagement, threats to independence may be
created. The significance of the threats will depend on factors such as:

• The position the immediate family member holds with the client;
and

• The role of the professional on the assurance team.

The significance of the threat should be evaluated and, if the threat is
other than clearly insignificant, safeguards should be considered and
applied as necessary to reduce the threat to an acceptable level. Such
safeguards might include:

• Removing the individual from the assurance team;

• Where possible, structuring the responsibilities of the assurance
team so that the professional does not deal with matters that are
within the responsibility of the immediate family member; or

• Policies and procedures to empower staff to communicate to
senior levels within the firm any issue of independence and
objectivity that concerns them.

290.139 When a close family member of a member of the assurance team is a
director, an officer, or an employee of the assurance client in a position
to exert direct and significant influence over the subject matter
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79
information of the assurance engagement, threats to independence may
be created. The significance of the threats will depend on factors such
as:

• The position the close family member holds with the client; and

• The role of the professional on the assurance team.


The significance of the threat should be evaluated and, if the threat is
other than clearly insignificant, safeguards should be considered and
applied as necessary to reduce the threat to an acceptable level. Such
safeguards might include:

• Removing the individual from the assurance team;

• Where possible, structuring the responsibilities of the assurance
team so that the professional does not deal with matters that are
within the responsibility of the close family member; or

• Policies and procedures to empower staff to communicate to
senior levels within the firm any issue of independence and
objectivity that concerns them.

290.140 In addition, self- interest, familiarity or intimidation threats may be
created when a person who is other than an immediate or close family
member of a member of the assurance team has a close relationship
with the member of the assurance team and is a director, an officer or
an employee of the assurance client in a position to exert direct and
significant influence over the subject matter information of the
assurance engagement. Therefore, members of the assurance team are
responsible for identifying any such persons and for consulting in
accordance with firm procedures. The evaluation of the significance of
any threat created and the safeguards appropriate to eliminate the threat
or reduce it to an acceptable level will include considering matters such
as the closeness of the relationship and the role of the individual within
the assurance client.

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290.141 Consideration should be given to whether self- interest, familiarity or
intimidation threats may be created by a personal or family relationship
between a partner or employee of the firm who is not a member of the
assurance team and a director, an officer or an employee of the
assurance client in a position to exert direct and significant influence
over the subject matter information of the assurance engagement.
Therefore partners and employees of the firm are responsible for
identifying any such relationships and for consulting in accordance
with firm procedures. The evaluation of the significance of any threat
created and the safeguards appropriate to eliminate the threat or reduce
it to an acceptable level will include considering matters such as the
closeness of the relationship, the interaction of the firm professional
with the assurance team, the position held within the firm, and the role
of the individual within the assurance client.

290.142 An inadvertent violation of this section as it relates to family and
personal relationships would not impair the independence of a firm or a
member of the assurance team when:

(a) The firm has established policies and procedures that require all
professionals to report promptly to the firm any breaches
resulting from changes in the employment status of their
immediate or close family members or other personal
relationships that create threats to independence;

(b) Either the responsibilities of the assurance team are re-structured
so that the professional does not deal with matters that are
within the responsibility of the person with whom he or she is
related or has a personal relationship, or, if this is not possible,
the firm promptly removes the professional from the assurance
engagement; and

(c) Additional care is given to reviewing the work of the
professional.

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290.143 When an inadvertent violation of this section relating to family and
personal relationships has occurred, the firm should consider whether
any safeguards should be applied. Such safeguards might include:

• Involving an additional chartered accountant who did not take
part in the assurance engagement to review the work done by the
member of the assurance team; or

• Excluding the individual from any substantive decision- making
concerning the assurance engagement.

Employment with Assurance Clients

290.144 A firm or a member of the assurance team’s independence may be
threatened if a director, an officer or an employee of the assurance
client in a position to exert direct and significant influence over the
subject matter information of the assurance engagement has been a
member of the assurance team or partner of the firm. Such
circumstances may create self- interest, familiarity and intimidation
threats particularly when significant connections remain between the
individual and his or her former firm. Similarly, a member of the
assurance team’s independence may be threatened when an individual
participates in the assurance engagement knowing, or having reason to
believe, that he or she is to, or may, join the assurance client some time
in the future.

290.145 If a member of the assurance team, partner or former partner of the firm
has joined the assurance client, the significance of the self- interest,
familiarity or intimidation threats created will depend upon the
following factors:

(a) The position the individual has taken at the assurance client.

(b) The amount of any involvement the individual will have with the
assurance team.

(c) The length of time that has passed since the individual was a
member of the assurance team or firm.

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(d) The former position of the individual within the assurance team
or firm.

The significance of the threat should be evaluated and, if the threat is
other than clearly insignificant, safeguards should be considered and
applied as necessary to reduce the threat to an acceptable level. Such
safeguards might include:

• Considering the appropriateness or necessity of modifying the
assurance plan for the assurance engagement;

• Assigning an assurance team to the subsequent assurance
engagement that is of sufficient experience in relation to the
individual who has joined the assurance client;

• Involving an additional chartered accountant who was not a
member of the assurance team to review the work done or
otherwise advise as necessary; or

• Quality control review of the assurance engagement.

In all cases, all of the following safeguards are necessary to reduce the
threat to an acceptable level:

(a) The individual concerned is not entitled to any benefits or
payments from the firm unless these are made in accordance
with fixed pre-determined arrangements. In addition, any
amount owed to the individual should not be of such
significance to threaten the firm’s independence.

(b) The individual does not continue to participate or appear to
participate in the firm’s business or professional activities.

290.146 A self- interest threat is created when a member of the assurance team
participates in the assurance engagement while knowing, or having
reason to believe, that he or she is to, or may, join the assurance client
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83
some time in the future. This threat can be reduced to an acceptable
level by the application of all of the following safeguards:

(a) Policies and procedures to require the individual to notify the
firm when entering serious employment negotiations with the
assurance client.

(b) Removal of the individual from the assurance engagement.

In addition, consideration should be given to performing an independent
review of any significant judgments made by that individual while on
the engagement.

290.147 In case of audit of listed companies, a chartered accountant in practice
should bear in mind the requirements of following clause (xlii) of the
Code of Corporate Governance:-

(xiii) No listed company shall appoint a person as the CEO, the CFO,
an internal auditor or a director of the listed company who was a
partner of the firm of its external auditors (or an employee
involved in the audit of the listed company) at any time during
the two years preceding such appointment or is a close relative,
i.e. spouse, parents, dependents and non-dependent children, of
such partner (or employee).

Recent Service with Assurance Clients

290.148 To have a former officer, director or employee of the assurance client
serve as a member of the assurance team may create self- interest,
selfreview and familiarity threats. This would be particularly true when
a member of the assurance team has to report on, for example, subject
matter information he or she had prepared or elements of the financial
statements he or she had valued while with the assurance client.

290.149 If, during the period covered by the assurance report, a member of the
assurance team had served as an officer or director of the assurance
client, or had been an employee in a position to exert direct and
significant influence over the subject matter information of the
assurance engagement, the threat created would be so significant no
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84
safeguard could reduce the threat to an acceptable level. Consequently,
such individuals should not be assigned to the assurance team.

290.150 If, prior to the period covered by the assurance report, a member of the
assurance team had served as an officer or director of the assurance
client, or had been an employee in a position to exert direct and
significant influence over the subject matter information of the
assurance engagement, this may create self- interest, self-review and
familiarity threats. For example, such threats would be created if a
decision made or work performed by the individual in the prior period,
while employed by the assurance client, is to be evaluated in the current
period as part of the current assurance engagement. The significance of
the threats will depend upon factors such as:

• The position the individual held with the assurance client;

• The length of time that has passed since the individual left the
assurance client; and

• The role the individual plays on the assurance team.

The significance of the threat should be evaluated and, if the threat is
other than clearly insignificant, safeguards should be considered and
applied as necessary to reduce the threat to an acceptable level. Such
safeguards might include:

• Involving an additional chartered accountant to review the work
done by the individual as part of the assurance team or otherwise
advise as necessary; or

• Discussing the issue with those charged with governance, such as
the audit committee.

Serving as an Officer or Director on the Board of Assurance Clients

290.151 If a partner or employee of the firm serves as an officer or as a director
on the board of an assurance client the self- review and self- interest
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85
threats created would be so significant no safeguard could reduce the
threats to an acceptable level. Consequently, if such an individual were
to accept such a position the only course of action is to refuse to
perform, or to withdraw from the assurance engagement.

290.152 The position of Company Secretary has different implications in
different jurisdictions. The duties may range from administrative duties
such as personnel management and the maintenance of company
records and registers, to duties as diverse as ensuring that the company
complies with regulations or providing advice on corporate governance
matters. Generally this position is seen to imply a close degree of
association with the entity and may create self- review and advocacy
threats.

290.153 If a partner or employee of the firm or a network firm serves as
Company Secretary for a financial statement audit client the self- review
and advocacy threats created would generally be so significant, no
safeguard could reduce the threat to an acceptable level.

290.154 Routine administrative services to support a company secretarial
function or advisory work in relation to company secretarial
administration matters is generally not perceived to impair
independence, provided client management makes all relevant
decisions.

Long Association of Senior Personnel with Assurance Clients

General Provisions

290.155 Using the same senior personnel on an assurance engagement over a
long period of time may create a familiarity threat. The significance of
the threat will depend upon factors such as:

• The length of time that the individual has been a member of the
assurance team;

• The role of the individual on the assurance team;

• The structure of the firm; and
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86

• The nature of the assurance engagement.

The significance of the threat should be evaluated and, if the threat is
other than clearly insignificant, safeguards should be considered and
applied to reduce the threat to an acceptable level. Such safeguards
might include:

• Rotating the senior personnel off the assurance team;

• Involving an additional chartered accountant who was not a
member of the assurance team to review the work done by the
senior personnel or otherwise advise as necessary; or

• Independent internal quality reviews.

Financial Statement Audit Clients that are Listed Entities

290.156 Using the same engagement partner or the same individual responsible
for the engagement quality control review

on a financial statement
audit over a prolonged period may create a familiarity threat. This
threat is particularly relevant in the context of the financial statement
audit of a listed entity and safeguards should be applied in such
situations to reduce such threat to an acceptable level. Accordingly in
respect of the financial statement audit of listed entities the chartered
accountants in practice shall take cognizance of the following
requirement s of the Code of Corporate Governance:

(a) All banks DFIs are required to ensure that the external auditors
are rotated on expiration of five years. In case of banks / DFIs
having two audit firms jointly auditing their accounts and both of
them complete their five years period at the same time, one of
them will be rotated on completion of five years and the other
one in the next year.


(b) All listed companies in the financial sector shall change their
auditors every five years. Financial sector for this purpose means
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87
Non-Banking Finance Companies (NBFCs), Modarabas and
Insurance Companies.

(c ) All listed companies other than those mentioned at (a) and (b)
shall at a minimum rotate the engagement partner after every
five years.

(d) A partner rotating after five years should not resume the lead
engagement partner role until a further period of time, normally
two years has elapsed.

Provision of Non-Assurance Services to Assurance Clients

290.157 Firms have traditionally provided to their assurance clients a range of
non-assurance services that are consistent with their skills and
expertise. Assurance clients value the benefits that derive from having
these firms, which have a good understanding of the business, bring
their knowledge and skill to bear in other areas. Furthermore, the
provision of such nonassurance services will often result in the
assurance team obtaining information regarding the assurance client’s
business and operations that is helpful in relation to the assurance
engagement. The greater the knowledge of the assurance client’s
business, the better the assurance team will understand the assurance
client’s procedures and controls, and the business and financial risks
that it faces. The provision of nonassurance services may, however,
create threats to the independence of the firm, a network firm or the
members of the assurance team, particularly with respect to perceived
threats to independence. Consequently, it is necessary to evaluate the
significance of any threat created by the provision of such services. In
some cases it may be possible to eliminate or reduce the threat created
by application of safeguards. In other cases no safeguards are available
to reduce the threat to an acceptable level.

290.158 The following activities would generally create self- interest or self
review threats that are so significant that only avoidance of the activity
or refusal to perform the assurance engagement would reduce the
threats to an acceptable level:

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• Authorizing, executing or consummating a transaction, or
otherwise exercising authority on behalf of the assurance client,
or having the authority to do so.

• Determining which recommendation of the firm should be
implemented.

• Reporting, in a management role, to those charged with
governance.

290.159 The examples set out in paragraphs 290.170-290.209 are addressed in
the context of the provision of non-assurance services to an assurance
client. The potential threats to independence will most frequently arise
when a non-assurance service is provided to a financial statement audit
client. The financial statements of an entity provide financial
information about a broad range of transactions and events that have
affected the entity. The subject matter information of other assurance
services, however, may be limited in nature. Threats to independence,
however, may also arise when a firm provides a non-assurance service
related to the subject matter information, of a non- financial statement
audit assurance engagement. In such cases, consideration should be
given to the significance of the firm’s involvement with the subject
matter information, of the engagement, whether any self- review threats
are created and whether any threats to independence could be reduced
to an acceptable level by application of safeguards, or whether the
engagement should be declined. When the non-assurance service is not
related to the subject matter information, of the non- financial statement
audit assurance engagement, the threats to independence will generally
be clearly insignificant.

290.160 The following activities may also create self-review or self- interest
threats:

• Having custody of an assurance client’s assets.

• Supervising assurance client employees in the performance of
their normal recurring activities.

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• Preparing source documents or originating data, in electronic or
other form, evidencing the occurrence of a transaction (for
example, purchase orders, payroll time records, and customer
orders).

The significance of any threat created should be evaluated and, if the
threat is other than clearly insignificant, safeguards should be considered
and applied as necessary to eliminate the threat or reduce it to an
acceptable level. Such safeguards might include:

• Making arrangements so that personnel providing such services
do not participate in the assurance engagement;

• Involving an additional chartered accountant to advise on the
potential impact of the activities on the independence of the firm
and the assurance team; or

• Other relevant safeguards set out in national regulations.

290.161 New developments in business, the evolution of financial markets,
rapid changes in information technology, and the consequences for
management and control, make it impossible to draw up an all-
inclusive list of all situations when providing non-assurance services to
an assurance client might create threats to independence and of the
different safeguards that might eliminate these threats or reduce them to
an acceptable level. In general, however, a firm may provide services
beyond the assurance engagement provided any threats to
independence have been reduced to an acceptable level.

290.162 The following safeguards may be particularly relevant in reducing to an
acceptable level threats created by the provision of non-assurance
services to assurance clients:

• Policies and procedures to prohibit professional staff from
making management decisions for the assurance client, or
assuming responsibility for such decisions.

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• Discussing independence issues related to the provision of
nonassurance services with those charged with governance, such
as the audit committee.

• Policies within the assurance client regarding the oversight
responsibility for provision of non-assurance services by the
firm.

• Involving an additional chartered accountant to advise on the
potential impact of the non-assurance engagement on the
independence of the member of the assurance team and the firm.

• Involving an additional chartered accountant outside of the firm
to provide assurance on a discrete aspect of the assurance
engagement.

• Obtaining the assurance client’s acknowledgement of
responsibility for the results of the work performed by the firm.

• Disclosing to those charged with governance, such as the audit
committee, the nature and extent of fees charged.

• Making arrangements so that personnel providing non-assurance
services do not participate in the assurance engagement.

290.163 Before the firm accepts an engagement to provide a non-assurance
service to an assurance client, consideration should be given to whether
the provision of such a service would create a threat to independence.
In situations when a threat created is other than clearly insignificant,
the non-assurance engagement should be declined unless appropriate
safeguards can be applied to eliminate the threat or reduce it to an
acceptable level.

290.164 The provision of certain non-assurance services to financial statement
audit clients may create threats to independence so significant that no
safeguard could eliminate the threat or reduce it to an acceptable level.
However, the provision of such services to a related entity, division or
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discrete financial statement item of such clients may be permissible
when any threats to the firm’s independence have been reduced to an
acceptable level by arrangements for that related entity, division or
discrete financial statement item to be audited by another firm or when
another firm reperforms the non-assurance service to the extent
necessary to enable it to take responsibility for that service.

Preparing Accounting Records and Financial Statements

290.165 Assisting a financial statement audit client in matters such as preparing
accounting records or financial statements may create a self- review
threat when the financial statements are subsequently audited by the
firm.

290.166 It is the responsibility of financial statement audit client management to
ensure that accounting records are kept and financial statements are
prepared, although they may request the firm to provide assistance. If
firm, or network firm, personnel providing such assistance make
management decisions, the self-review threat created could not be
reduced to an acceptable level by any safeguards. Consequently,
personnel should not make such decisions. Examples of such
managerial decisions include:

• Determining or changing journal entries, or the classifications for
accounts or transaction or other accounting records without
obtaining the approval of the financial statement audit client;

• Authorizing or approving transactions; and

• Preparing source documents or originating data (including
decisions on valuation assumptions), or making changes to such
documents or data.

290.167 The audit process involves extensive dialogue between the firm and
management of the financial statement audit client. During this process,
management requests and receives significant input regarding such
matters as accounting principles and financial statement disclosure, the
appropriateness of controls and the methods used in determining the
stated amounts of assets and liabilities. Technical assistance of this
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nature and advice on accounting principles for financial statement audit
clients are an appropriate means to promote the fair presentation of the
financial statements. The provision of such advice does not generally
threaten the firm’s independence. Similarly, the financial statement
audit process may involve assisting an audit client in resolving account
reconciliation problems, analyzing and accumulating information for
regulatory reporting, assisting in the preparation of consolidated
financial statements (including the translation of local statutory
accounts to comply with group accounting policies and the transition to
a different reporting framework such as International Financial
Reporting Standards), drafting disclosure items, proposing adjusting
journal entries and providing assistance and advice in the preparation of
local statutory accounts of subsidiary entities. These services are
considered to be a normal part of the audit process and do not, under
normal circumstances, threaten independence.

General Provisions

290.168 The examples in paragraphs 290.174-290.177 indicate that self- review
threats may be created if the firm is involved in the preparation of
accounting records or financial statements and those financial
statements are subsequently the subject matter information of an audit
engagement of the firm. This notion may be equally applicable in
situations when the subject matter information of the assurance
engagement is not financial statements. For example, a self- review
threat would be created if the firm developed and prepared prospective
financial information and subsequently provided assurance on this
prospective financial information. Consequently, the firm should
evaluate the significance of any self-review threat created by the
provision of such services. If the self-review threat is other than clearly
insignificant safeguards should be considered and applied as necessary
to reduce the threat to an acceptable level.

Financial Statements Audit Clients that are Not Listed Entities

290.169 The firm, or a network firm, may provide a financial statement audit
client that is not a listed entity with accounting and bookkeeping
services, including payroll services, of a routine or mechanical nature,
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93
provided any self-review threat created is reduced to an acceptable
level. Examples of such services include:

• Recording transactions for which the audit client has determined
or approved the appropriate account classification;

• Posting coded transactions to the audit client’s general ledger;

• Preparing financial statements based on information in the trial
balance; and

• Posting the audit client approved entries to the trial balance.

The significance of any threat created should be evaluated and, if the
threat is other than clearly insignificant, safeguards should be considered
and applied as necessary to reduce the threat to an acceptable level. Such
safeguards might include:

• Making arrangements so such services are not performed by a
member of the assurance team;

• Implementing policies and procedures to prohibit the individual
providing such services from making any managerial decisions
on behalf of the audit client;

• Requiring the source data for the accounting entries to be
originated by the audit client;

• Requiring the underlying assumptions to be originated and
approved by the audit client; or

• Obtaining audit client approval for any proposed journal entries
or other changes affecting the financial statements.

Valuation Services

290.170 A valuation comprises the making of assumptions with regard to future
developments, the application of certain methodologies and techniques,
and the combination of both in order to compute a certain value, or
range of values, for an asset, a liability or for a business as a whole.
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290.171 A self-review threat may be created when a firm or network firm
performs a valuation for a financial statement audit client that is to be
incorporated into the client’s financial statements.

290.172 If the valuation service involves the valuation of matters material to the
financial statements and the valuation involves a significant degree of
subjectivity, the self- review threat created could not be reduced to an
acceptable level by the application of any safeguard. Accordingly, such
valuation services should not be provided or, alternatively, the only
course of action would be to withdraw from the financial statement
audit engagement.

290.173 Performing valuation services for a financial statement audit client that
are neither separately, nor in the aggregate, material to the financial
statements, or that do not involve a significant degree of subjectivity,
may create a self- review threat that could be reduced to an acceptable
level by the application of safeguards. Such safeguards might include:

• Involving an additional chartered accountant who was not a
member of the assurance team to review the work done or
otherwise advise as necessary;

• Confirming with the audit client their understanding of the
underlying assumptions of the valuation and the methodology to
be used and obtaining approval for their use;

• Obtaining the audit client’s acknowledgement of responsibility
for the results of the work performed by the firm; and

• Making arrangements so that personnel providing such services
do not participate in the audit engagement.

In determining whether the above safeguards would be effective,
consideration should be given to the following matters:

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(a) The extent of the audit client’s knowledge, experience and
ability to evaluate the issues concerned, and the extent of their
involvement in determining and approving significant matters of
judgment.

(b) The degree to which established methodologies and professional
guidelines are applied when performing a particular valuation
service.

(c) For valuations involving standard or established methodologies,
the degree of subjectivity inherent in the item concerned.

(d) The reliability and extent of the underlying data.

(e) The degree of dependence on future events of a nature which
could create significant volatility inherent in the amounts
involved.

(f) The extent and clarity of the disclosures in the financial
statements.

290.174 When a firm, or a network firm, performs a valuation service for a
financial statement audit client for the purposes of making a filing or
return to a tax authority, computing an amount of tax due by the client,
or for the purpose of tax planning, this would not create a significant
threat to independence because such valuations are generally subject to
external review, for example by a tax authority.

290.175 When the firm performs a valuation that forms part of the subject
matter information of an assurance engagement that is not a financial
statement audit engagement, the firm should consider any self- review
threats. If the threat is other than clearly insignificant, safeguards
should be considered and applied as necessary to eliminate the threat or
reduce it to an acceptable level.

Provision of Taxation Services to Financial Statement Audit Clients

290.176 The firm may be asked to provide taxation services to a financial
statement audit client. Taxation services comprise a broad range of
services, including compliance, planning, provision of formal taxation
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opinions and assistance in the resolution of tax disputes. Such
assignments are generally not seen to create threats to independence.

Provision of Internal Audit Services to Financial Statement Audit Clients

290.177 A self- review threat may be created when a firm, or network firm,
provides internal audit services to a financial statement audit client.
Internal audit services may comprise an extension of the firm’s audit
service beyond requirements of generally accepted auditing standards,
assistance in the performance of a client’s internal audit activities or
outsourcing of the activities. In evaluating any threats to independence,
the nature of the service will need to be considered. For this purpose,
internal audit services do not include operational internal audit services
unrelated to the internal accounting controls, financial systems or
financial statements.

290.178 Services involving an extension of the procedures required to conduct a
financial statement audit in accordance with International Standards on
Auditing would not be considered to impair independence with respect
to the audit client provided that the firm’s or network firm’s personnel
do not act or appear to act in a capacity equivalent to a member of audit
client management.

290.179 When the firm, or a network firm, provides assistance in the
performance of a financial statement audit client’s internal audit
activities or undertakes the outsourcing of some of the activities, any
self-review threat created may be reduced to an acceptable level by
ensuring that there is a clear separation between the management and
control of the internal audit by client management and the internal audit
activities themselves.

290.180 Performing a significant portion of the financial statement audit client’s
internal audit activities may create a self-review threat and a firm, or
network firm, should consider the threats and proceed with caution
before taking on such activities. Appropriate safeguards should be put
in place and the firm, or network firm, should, in particular, ensure that
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the audit client acknowledges its responsibilities for establishing,
maintaining and monitoring the system of internal controls.

290.181 Safeguards that should be applied in all circumstances to reduce any
threats created to an acceptable level include ensuring that:

(a) The audit client is responsible for internal audit activities and
acknowledges its responsibility for establishing, maintaining and
monitoring the system of internal controls;

(b) The audit client designates a competent employee, preferably
within senior management, to be responsible for internal audit
activities;

(c) The audit client, the audit committee or supervisory body
approves the scope, risk and frequency of internal audit work;

(d) The audit client is responsible for evaluating and determining
which recommendations of the firm should be implemented;

(e) The audit client evaluates the adequacy of the internal audit
procedures performed and the findings resulting from the
performance of those procedures by, among other things,
obtaining and acting on reports from the firm; and

(f) The findings and recommendations resulting from the internal
audit activities are reported appropriately to the audit committee
or supervisory body.

290.182 Consideration should also be given to whether such non-assurance
services should be provided only by personnel not involved in the
financial statement audit engagement and with different reporting lines
within the firm.

Provision of IT Systems Services to Financial Statement Audit Clients

290.183 The provision of services by a firm or network firm to a financial
statement audit client that involve the design and implementation of
financial information technology systems that are used to generate
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information forming part of a client’s financial statements may create a
self-review threat.

290.184 The self- review threat is likely to be too significant to allow the
provision of such services to a financial statement audit client unless
appropriate safeguards are put in place ensuring that:

(a) The audit client acknowledges its responsibility for establishing
and monitoring a system of internal controls;

(b) The audit client designates a competent employee, preferably
within senior management, with the responsibility to make all
management decisions with respect to the design and
implementation of the hardware or software system;

(c) The audit client makes all management decisions with respect to
the design and implementation process;

(d) The audit client evaluates the adequacy and results of the design
and implementation of the system; and

(e) The audit client is responsible for the operation of the system
(hardware or software) and the data used or generated by the
system.

290.185 Consideration should also be given to whether such non-assurance
services should be provided only by personnel not involved in the
financial statement audit engagement and with different reporting lines
within the firm.

290.186 The provision of services by a firm, or network firm, to a financial
statement audit client which involve either the design or the
implementation of financial information technology systems that are
used to generate information forming part of a client’s financial
statements may also create a self- review threat. The significance of the
threat, if any, should be evaluated and, if the threat is other than clearly
insignificant, safeguards should be considered and applied as necessary
to eliminate the threat or reduce it to an acceptable level.

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290.187 The provision of services in connection with the assessment, design and
implementation of internal accounting controls and risk management
controls are not considered to create a threat to independence provided
that firm or network firm personnel do not perform management
functions.

Temporary Staff Assignments to Financial Statement Audit Clients

290.188 The lending of staff by a firm, or network firm, to a financial statement
audit client may create a self-review threat when the individual is in a
position to influence the preparation of a client’s accounts or financial
statements. In practice, such assistance may be given (particularly in
emergency situations) but only on the understanding that the firm’s or
network firm’s personnel will not be involved in:

(a) Making management decisions;

(b) Approving or signing agreements or other similar documents; or

(c) Exercising discretionary authority to commit the client.

Each situation should be carefully analyzed to identify whether any
threats are created and whether appropriate safeguards should be
implemented. Safeguards that should be applied in all circumstances to
reduce any threats to an acceptable level include:

• The staff providing the assistance should not be given audit
responsibility for any function or activity that they performed or
supervised during their temporary staff assignment; and

• The audit client should acknowledge its responsibility for
directing and supervising the activities of firm, or network firm,
personnel.

Provision of Litigation Support Services to Financial Statement Audit Clients

290.189 Litigation support services may include activities such as acting as an
expert witness, calculating estimated damages or other amounts that
might become receivable or payable as the result of litigation or other
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legal dispute, and assistance with document management and retrieval
in relation to a dispute or litigation.

290.190 A self-review threat may be created when the litigation support services
provided to a financial statement audit client include the estimation of
the possible outcome and thereby affects the amounts or disclosures to
be reflected in the financial statements. The significance of any threat
created will depend upon factors such as:

• The materiality of the amounts involved;

• The degree of subjectivity inherent in the matter concerned; and

• The nature of the engagement.

The firm, or network firm, should evaluate the significance of any threat
created and, if the threat is other than clearly insignificant, safeguards
should be considered and applied as necessary to eliminate the threat or
reduce it to an acceptable level. Such safeguards might include:

• Policies and procedures to prohibit individuals assisting the audit
client from making managerial decisions on behalf of the client;

• Using professionals who are not members of the assurance team
to perform the service; or

• The involvement of others, such as independent experts.

290.191 If the role undertaken by the firm or network firm involved making
managerial decisions on behalf of the financial statement audit client,
the threats created could not be reduced to an acceptable level by the
application of any safeguard. Therefore, the firm or network firm
should not perform this type of service for an audit client.

Provision of Legal Services to Financial Statement Audit Clients

290.192 Legal services are defined as any services for which the person
providing the services must either be admitted to practice before the
Courts of the jurisdiction in which such services are to be provided, or
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have the required legal training to practice law. Legal services
encompass a wide and diversified range of areas including both
corporate and commercial services to clients, such as contract support,
litigation, mergers and acquisition advice and support and the provision
of assistance to clients’ internal legal departments. The provision of
legal services by a firm, or network firm, to an entity that is a financial
statement audit client may create both self- review and advocacy
threats.

290.193 Threats to independence need to be considered depending on the nature
of the service to be provided, whether the service provider is separate
from the assurance team and the materiality of any matter in relation to
the entities’ financial statements. The safeguards set out in paragraph
290.162 may be appropriate in reducing any threats to independence to
an acceptable level. In circumstances when the threat to independence
cannot be reduced to an acceptable level the only available action is to
decline to provide such services or withdraw from the financial
statement audit engagement.

290.194 The provision of legal services to a financial statement audit client
which involve matters that would not be expected to have a material
effect on the financial statements are not considered to create an
unacceptable threat to independence.

290.195 There is a distinction between advocacy and advice. Legal services to
support a financial statement audit client in the execution of a
transaction (e.g., contract support, legal advice, legal due diligence and
restructuring) may create self-review threats; however, safeguards may
be available to reduce these threats to an acceptable level. Such a
service would not generally impair independence, provided that:

(a) Members of the assurance team are not involved in providing the
service; and

(b) In relation to the advice provided, the audit client makes the
ultimate decision or, in relation to the transactions, the service
involves the execution of what has been decided by the audit
client.

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290.196 Acting for a financial statement audit client in the resolution of a
dispute or litigation in such circumstances when the amounts involved
are material in relation to the financial statements of the audit client
would create advocacy and self-review threats so significant no
safeguard could reduce the threat to an acceptable level. Therefore, the
firm should not perform this type of service for a financial statement
audit client.

290.197 When a firm is asked to act in an advocacy role for a financial
statement audit client in the resolution of a dispute or litigation in
circumstances when the amounts involved are not material to the
financial statements of the audit client, the firm should evaluate the
significance of any advocacy and self-review threats created and, if the
threat is other than clearly insignificant, safeguards should be
considered and applied as necessary to eliminate the threat or reduce it
to an acceptable level. Such safeguards might include:

• Policies and procedures to prohibit individuals assisting the audit
client from making managerial decisions on behalf of the client;
or

• Using professionals who are not members of the assurance team
to perform the service.

290.198 The appointment of a partner or an employee of the firm or network
firm as General Counsel for legal affairs to a financial statement audit
client would create self-review and advocacy threats that are so
significant no safeguards could reduce the threats to an acceptable
level. The position of General Counsel is generally a senior
management position with broad responsibility for the legal affairs of a
company and consequently, no member of the firm or network firm
should accept such an appointment for a financial statement audit
client.

Recruiting Senior Management

290.199 The recruitment of senior management for an assurance client, such as
those in a position to affect the subject matter information of the
assurance engagement, may create current or future self- interest,
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familiarity and intimidation threats. The significance of the threat will
depend upon factors such as:

• The role of the person to be recruited; and

• The nature of the assistance sought.

The firm could generally provide such services as reviewing the
professional qualifications of a number of applicants and provide advice
on their suitability for the post. In addition, the firm could generally
produce a short- list of candidates for interview, provided it has been
drawn up using criteria specified by the assurance client.

The significance of the threat created should be evaluated and, if the
threat is other than clearly insignificant, safeguards should be considered
and applied as necessary to reduce the threat to an acceptable level. In
all cases, the firm should not make management decisions and the
decision as to whom to hire should be left to the client.

Corporate Finance and Similar Activities

290.200 The provision of corporate finance services, advice or assistance to an
assurance client may create advocacy and self-review threats. In the
case of certain corporate finance services, the independence threats
created would be so significant no safeguards could be applied to
reduce the threats to an acceptable level. For example, promoting,
dealing in, or underwriting of an assurance client’s shares is not
compatible with providing assurance services. Moreover, committing
the assurance client to the terms of a transaction or consummating a
transaction on behalf of the client would create a threat to independence
so significant no safeguard could reduce the threat to an acceptable
level. In the case of a financial statement audit client the provision of
those corporate finance services referred to above by a firm or a
network firm would create a threat to independence so significant no
safeguard could reduce the threat to an acceptable level.

290.201 Other corporate finance services may create advocacy or self- review
threats; however, safeguards may be available to reduce these threats to
an acceptable level. Examples of such services include assisting a client
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in developing corporate strategies, assisting in identifying or
introducing a client to possible sources of capital that meet the client
specifications or criteria, and providing structuring advice and assisting
a client in analyzing the accounting effects of proposed transactions.
Safeguards that should be considered include:

• Policies and procedures to prohibit individuals assisting the
assurance client from making managerial decisions on behalf of
the client;

• Using professionals who are not members of the assurance team
to provide the services; and

• Ensuring the firm does not commit the assurance client to the
terms of any transaction or consummate a transaction on behalf
of the client.

(For further guidance regarding provision of non-assurance services to listed
financial statement audit client refer to list of prohibited services given in the
Listing Regulations of Karachi, Lahore Islamabad Stock Exchanges)

Fees and Pricing

Fees—Relative Size

290.202 When the total fees generated by an assurance client represent a large
proportion of a firm’s total fees, the dependence on that client or client
group and concern about the possibility of losing the client may create
a self- interest threat. The significance of the threat will depend upon
factors such as:

• The structure of the firm; and

• Whether the firm is well established or newly created.

The significance of the threat should be evaluated and, if the threat is
other than clearly insignificant, safeguards should be considered and
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applied as necessary to reduce the threat to an acceptable level. Such
safeguards might include:

• Discussing the extent and nature of fees charged with the audit
committee, or others charged with governance;

• Taking steps to reduce dependency on the client;

• External quality control reviews; and

• Consulting a third party, such as a professional regulatory body
or another chartered accountant.

290.203 A self- interest threat may also be created when the fees generated by
the assurance client represent a large proportion of the revenue of an
individual partner. The significance of the threat should be evaluated
and, if the threat is other than clearly insignificant, safeguards should
be considered and applied as necessary to reduce the threat to an
acceptable level. Such safeguards might include:

• Policies and procedures to monitor and implement quality
control of assurance engagements; and

• Involving an additional chartered accountant who was not a
member of the assurance team to review the work done or
otherwise advise as necessary.

Fees—Overdue

290.204 A self- interest threat may be created if fees due from an assurance
client for professional services remain unpaid for a long time,
especially if a significant part is not paid before the issue of the
assurance report for the following year. Generally the payment of such
fees should be required before the report is issued. The following
safeguards may be applicable:

• Discussing the level of outstanding fees with the audit
committee, or others charged with governance.

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• Involving an additional chartered accountant who did not take
part in the assurance engagement to provide advice or review the
work performed.

The firm should also consider whether the overdue fees might be
regarded as being equivalent to a loan to the client and whether, because
of the significance of the overdue fees, it is appropriate for the firm to be
re-appointed.
Pricing
290.205 When a firm obtains an assurance engagement at lower fee level than
that charged by the predecessor firm, or quoted by other firms, the self-
interest threat created will not be reduced to an acceptable level:
(a) The firm is able to demonstrate that appropriate time and
qualified staff are assigned to the task; and

(b) All applicable assurance standards, guidelines and quality
control procedures are being complied with.
Contingent Fees

290.206 Contingent fees are fees calculated on a predetermined basis relating to
the outcome or result of a transaction or the result of the work
performed. For the purposes of this section, fees are not regarded as
being contingent if a court or other public authority has established
them.

290.207 A contingent fee charged by a firm in respect of both assurance and
non-assurance engagements creates self- interest and advocacy threats
that cannot be reduced to an acceptable level by the application of any
safeguard. Accordingly, a firm should not enter into any fee
arrangement for either assurance or non-assurance engagement under
which the amount of the fee is contingent on the result of the assurance
or non-assurance work or on items that are the subject matter
information of the assurance or non-assurance engagement.
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Gifts and Hospitality

290.208 Accepting gifts or hospitality from an assurance client may create
selfinterest and familiarity threats. When a firm or a member of the
assurance team accepts gifts or hospitality, unless the value is clearly
insignificant, the threats to independence cannot be reduced to an
acceptable level by the application of any safeguard. Consequently, a
firm or a member of the assurance team should not accept such gifts or
hospitality.

Actual or Threatened Litigation

290.209 When litigation takes place, or appears likely, between the firm or a
member of the assurance team and the assurance client, a self- interest
or intimidation threat may be created. The relationship between client
management and the members of the assurance team must be
characterized by complete candor and full disclosure regarding all
aspects of a client’s business operations. The firm and the client’s
management may be placed in adversarial positions by litigation,
affecting management’s willingness to make complete disclosures and
the firm may face a self- interest threat. The significance of the threat
created will depend upon such factors as:

• The materiality of the litigation;

• The nature of the assurance engagement; and

• Whether the litigation relates to a prior assurance engagement.

Once the significance of the threat has been evaluated the following
safeguards should be applied, if necessary, to reduce the threats to an
acceptable level:

(a) Disclosing to the audit committee, or others charged with
governance, the extent and nature of the litigation;

(b) If the litigation involves a member of the assurance team,
removing that individual from the assurance team; or
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(c) Involving an additional chartered accountant in the firm who
was not a member of the assurance team to review the work
done or otherwise advise as necessary.

If such safeguards do not reduce the threat to an appropriate
level, the only appropriate action is to withdraw from, or refuse
to accept, the assurance engagement.
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Section 290

Interpretation

The interpretation is directed towards the application of the Code of Ethics for
Chartered Accountants to the topics of the specific queries received.

Interpretation 2005-01

Application of Section 290 to Assurance Engagements that are Not Financial
Statement Audit Engagements

This interpretation provides guidance on the application of the independence
requirements contained in Section 290 to assurance engagements that are not
financial statement audit engagements.

This interpretation focuses on the application issues that are particular to
assurance engagements that are not financial statement audit engagements. There
are other matters noted in Section 290 that are relevant in the consideration of
independence requirements for all assurance engagements. For example,
paragraph 290.15 states that consideration should be given to any threats the firm
has reason to believe may be created by network firms’ interests and
relationships. Similarly, paragraph 290.21 states that for assurance clients, that are
other than listed entity financial statement audit clients, when the assurance team
has reason to believe that a related entity of such an assurance client is relevant to
the evaluation of the firm’s independence of the client, the assurance team should
consider that related entity when evaluating independence and applying
appropriate safeguards. These matters are not specifically addressed in this
interpretation.

As explained in the International Framework for Assurance Engagements issued
by the International Auditing and Assurance Standards Board, in an assurance
engagement, the professional accountant in public practice expresses a conclusion
designed to enhance the degree of confidence of the intended users other than the
responsible party about the outcome of the evaluation or measurement of a subject
matter against criteria.
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Assertion-Based Assurance Engagements

In an assertion-based assurance engagement, the evaluation or measurement of
the subject matter is performed by the responsible party, and the subject matter
information is in the form of an assertion by the responsible party that is made
available to the intended users.

In an assertion-based assurance engagement independence is required from the
responsible party, which is responsible for the subject matter information and may
be responsible for the subject matter.

In those assertion-based assurance engagements where the responsible party is
responsible for the subject matter information but not the subject matter,
independence is required from the responsible party. In addition, consideration
should be given to any threats the firm has reason to believe may be created by
interests and relationships between a member of the assurance team, the firm, a
network firm and the party responsible for the subject matter.

Direct Reporting Assurance Engagements

In a direct reporting assurance engagement, the professional accountant in public
practice either directly performs the evaluation or measurement of the subject
matter, or obtains a representation from the responsible party that has performed
the evaluation or measurement that is not available to the intended users. The
subject matter information is provided to the intended users in the assurance
report.

In a direct reporting assurance engagement independence is required from the
responsible party, which is responsible for the subject matter.

Multiple Responsible Parties

In both assertion-based assurance engagements and direct reporting assurance
engagements there may be several responsible parties. For example, a public
accountant in public practice may be asked to provide assurance on the monthly
circulation statistics of a number of independently owned newspapers. The
assignment could be an assertion based assurance engagement where each
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newspaper measures its circulation and the statistics are presented in an assertion
that is available to the intended users. Alternatively, the assignment could be a
direct reporting assurance engagement, where there is no assertion and there may
or may not be a written representation from the newspapers.

In such engagements, when determining whether it is necessary to apply the
provisions in Section 290 to each responsible party, the firm may take into
account whether an interest or relationship between the firm, or a member of the
assurance team, and a particular responsible party would create a threat to
independence that is other than clearly insignificant in the context of the subject
matter information. This will take into account:

• The materiality of the subject matter information (or the subject matter)
for which the particular responsible party is responsible; and

• The degree of public interest that is associated with the engagement.

If the firm determines that the threat to independence created by any such
relationships with a particular responsible party would be clearly insignificant it
may not be necessary to apply all of the provisions of this section to that
responsible party.

Example

The following example has been developed to demonstrate the application of
Section 290. It is assumed that the client is not also a financial statement audit
client of the firm, or a network firm.

A firm is engaged to provide assurance on the total proven oil reserves of
10 independent companies. Each company has conducted geographical
and engineering surveys to determine their reserves (subject matter). There
are established criteria to determine when a reserve may be considered to
be proven which the professional accountant in public practice determines
to be suitable criteria for the engagement.
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The proven reserves for each company as at December 31, 20X0 were as follows:

Proven oil reserves
thousands barrels
Company 1 5,200
Company 2 725
Company 3 3,260
Company 4 15,000
Company 5 6,700
Company 6 39,126
Company 7 345
Company 8 175
Company 9 24,135
Company 10 9,635
Total 104,301

The engagement could be structured in differing ways:

Assertion-Based Engagements

A1 Each company measures its reserves and provides an assertion to the firm and
to intended users.

A2 An entity other than the companies measures the reserves and provides an
assertion to the firm and to intended users.

Direct Reporting Engagements

D1 Each company measures the reserves and provides the firm with a written
representation that measures its reserves against the established criteria for
measuring proven reserves. The representation is not available to the intended
users.

D2 The firm directly measures the reserves of some of the companies.

Application of Approach

A1 Each company measures its reserves and provides an assertion to the firm and
to intended users.
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There are several responsible parties in this engagement (companies 1-10). When
determining whether it is necessary to apply the independence provisions to all of
the companies, the firm may take into account whether an interest or relationship
with a particular company would create a threat to independence that is other than
clearly insignificant. This will take into account factors such as:

• The materiality of the company’s proven reserves in relation to the total
reserves to be reported on; and

• The degree of public interest associated with the engagement. (Paragraph
290.20.)

For example Company 8 accounts for 0.16% of the total reserves, therefore a
business relationship or interest with Company 8 would create less of a threat than
a similar relationship with Company 6, which accounts for approximately 37.5%
of the reserves.

Having determined those companies to which the independence requirements
apply, the assurance team and the firm are required to be independent of those
responsible parties which would be considered to be the assurance client
(paragraph 290.20).

A2 An entity other than the companies measures the reserves and provides an
assertion to the firm and to intended users.

The firm would be required to be independent of the entity that measures the
reserves and provides an assertion to the firm and to intended users (paragraph
290.17). That entity is not responsible for the subject matter and so consideration
should be given to any threats the firm has reason to believe may be created by
interests/relationships with the party responsible for the subject matter (paragraph
290.17). There are several parties responsible for subject matter in this
engagement (Companies 1-10) As discussed in example A1 above, the firm may
take into account whether an interest or relationship with a particular company
would create a threat to independence that is other than clearly insignificant.

D1 Each company provides the firm with a representation that measures its
reserves against the established criteria for measuring proven reserves. The
representation is not available to the intended users.
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There are several responsible parties in this engagement (Companies 1-10). When
determining whether it is necessary to apply the independence provisions to all of
the companies, the firm may take into account whether an interest or relationship
with a particular company would create a threat to independence that is other than
clearly insignificant. This will take into account factors such as:

• The materiality of the company’s proven reserves in relation to the total
reserves to be reported on; and

• The degree of public interest associated with the engagement. (paragraph
290.20).

For example Company 8 accounts for 0.16% of the reserves, therefore a business
relationship or interest with Company 8 would create less of a threat than a
similar relationship with Company 6 that accounts for approximately 37.5% of the
reserves.

Having determined those companies to which the independence requirements
apply, the assurance team and the firm are required to be independent of those
responsible parties which would be considered to be the assurance client
(paragraph 290.20).

D2 The firm directly measures the reserves of some of the companies.

The application is the same as in example D1.



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PART C: CHARTERED ACCOUNTANTS IN BUSINESS


Section 300 Introduction
Section 310 Potential Conflicts
Section 320 Preparation and Reporting of Information
Section 330 Acting with Sufficient Expertise
Section 340 Financial Interests
Section 350 Inducements

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Section 300

Introduction

300.1 This Part of the Code illustrates how the conceptual framework
contained in Part A is to be applied by chartered accountants in
business.

300.2 Investors, creditors, employers and other sectors of the business
community, as well as governments and the public at large, all may rely
on the work of chartered accountants in business. Chartered
accountants in business may be solely or jointly responsible for the
preparation and reporting of financial and other information, which
both their employing organizations and third parties may rely on. They
may also be responsible for providing effective financial management
and competent advice on a variety of business-related matters.

300.3 A chartered accountant in business may be a salaried employee, a
partner, director (whether executive or non-executive), an owner
manager, a volunteer or another working for one or more employing
organization. The legal form of the relationship with the employing
organization, if any, has no bearing on the ethical responsibilities
incumbent on the chartered accountant in business.

300.4 A chartered accountant in business has a responsibility to further the
legitimate aims of their employing organization. This Code does not
seek to hinder a chartered accountant in business from properly
fulfilling that responsibility, but considers circumstances in which
conflicts may be created with the absolute duty to comply with the
fundamental principles.

300.5 A chartered accountant in business often holds a senior position within
an organization. The more senior the position, the greater will be the
ability and opportunity to influence events, practices and attitudes. A
chartered accountant in business is expected, therefore, to encourage an
ethics-based culture in an employing organization that emphasizes the
importance that senior management places on ethical behavior.
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300.6 The examples presented in the following sections are intended to
illustrate how the conceptual framework is to be applied and are not
intended to be, nor should they be interpreted as, an exhaustive list of
all circumstances experienced by a chartered accountant in business
that may create threats to compliance with the principles.
Consequently, it is not sufficient for a chartered accountant in business
merely to comply with the examples; rather, the framework should be
applied to the particular circumstances faced.

Threats and Safeguards

300.7 Compliance with the fundamental principles may potentially be
threatened by a broad range of circumstances. Many threats fall into the
following categories:

(a) Self- interest;

(b) Self-review;

(c) Advocacy;

(d) Familiarity; and

(e) Intimidation.

These threats are discussed further in Part A of this Code.

300.8 Examples of circumstances that may create self- interest threats for a
chartered accountant in business include, but are not limited to:

• Financial interests, loans or guarantees.

• Incentive compensation arrangements.

• Inappropriate personal use of corporate assets.

• Concern over employment security.

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• Commercial pressure from outside the employing organization.

300.9 Circumstances that may create self-review threats include, but are not
limited to, business decisions or data being subject to review and
justification by the same chartered accountant in business responsible
for making those decisions or preparing that data.

300.10 When furthering the legitimate goals and objectives of their employing
organizations chartered accountants in business may promote the
organization’s position, provided any statements made are neither false
nor misleading. Such actions generally would not create an advocacy
threat.

300.11 Examples of circumstances that may create familiarity threats include,
but are not limited to:

• A chartered accountant in business in a position to influence
financial or non-financial reporting or business decisions having an
immediate or close family member who is in a position to benefit
from that influence.

• Long association with business contacts influencing business
decisions.

• Acceptance of a gift or preferential treatment, unless the value is
clearly insignificant.

300.12 Examples of circumstances that may create intimidation threats include,
but are not limited to:

• Threat of dismissal or replacement of the chartered accountant in
business or a close or immediate family member over a
disagreement about the application of an accounting principle or
the way in which financial information is to be reported.

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• A dominant personality attempting to influence the decision
making process, for example with regard to the awarding of
contracts or the application of an accounting principle.

300.13 Chartered accountants in business may also find that specific
circumstances give rise to unique threats to compliance with one or
more of the fundamental principles. Such unique threats obviously
cannot be categorized. In all professional and business relationships,
chartered accountants in business should always be on the alert for such
circumstances and threats.

300.14 Safeguards that may eliminate or reduce to an acceptable level the
threats faced by chartered accountants in business fall into two broad
categories:

(a) Safeguards created by the profession, legislation or regulation;
and

(b) Safeguards in the work environment.

300.15 Examples of safeguards created by the profession, legislation or
regulation are detailed in paragraph 100.12 of Part A of this Code.

300.16 Safeguards in the work environment include, but are not restricted to:

• The employing organization’s systems of corporate oversight or
other oversight structures.

• The employing organization’s ethics and conduct programs.

• Recruitment procedures in the employing organization
emphasizing the importance of employing high caliber competent
staff.

• Strong internal controls.

• Appropriate disciplinary processes.

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• Leadership that stresses the importance of ethical behavior and the
expectation that employees will act in an ethical manner.

• Policies and procedures to implement and monitor the quality of
employee performance.

• Timely communication of the employing organization’s policies
and procedures, including any changes to them, to all employees
and appropriate training and education on such policies and
procedures.

• Policies and procedures to empower and encourage employees to
communicate to senior levels within the employing organization
any ethical issues that concern them without fear of retribution.

• Consultation with another appropriate chartered accountant.

300.17 In circumstances where a chartered accountant in business believes that
unethical behavior or actions by others will continue to occur within the
employing organization, the chartered accountant in business should
consider seeking legal advice. In those extreme situations where all
available safeguards have been exhausted and it is not possible to
reduce the threat to an acceptable level, a chartered accountant in
business may conclude that it is appropriate to resign from the
employing organization.

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Section 310

Potential Conflicts

310.1 A chartered accountant in business has a professional obligation to
comply with the fundamental principles. There may be times, however,
when their responsibilities to an employing organization and the
professional obligations to comply with the fundamental principles are
in conflict. Ordinarily, a chartered accountant in business should
support the legitimate and ethical objectives established by the
employer and the rules and procedures drawn up in support of those
objectives. Nevertheless, where compliance with the fundamental
principles is threatened, a chartered accountant in business must
consider a response to the circumstances.

310.2 As a consequence of responsibilities to an employing organization, a
chartered accountant in business may be under pressure to act or
behave in ways that could directly or indirectly threaten compliance
with the fundamental principles. Such pressure may be explicit or
implicit; it may come from a supervisor, manager, director or another
individual within the employing organization. A chartered accountant
in business may face pressure to:

• Act contrary to law or regulation.

• Act contrary to technical or professional standards.

• Facilitate unethical or illegal earnings management strategies.

• Lie to, or otherwise intentionally mislead (including misleading by
remaining silent) others, in particular:

- The auditors of the employing organization; or

- Regulators.

• Issue, or otherwise be associated with, a financial or non- financial
report that materially misrepresents the facts, including statements
in connection with, for example:
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- The financial statements;

- Tax compliance;


- Legal compliance; or

- Reports required by securities regulators.

310.3. The significance of threats arising from such pressures, such as
intimidation threats, should be evaluated and, if they are other than
clearly insignificant, safeguards should be considered and applied as
necessary to eliminate them or reduce them to an acceptable level. Such
safeguards may include:

• Obtaining advice where appropriate from within the employing
organization, an independent professional advisor or a relevant
professional body.

• The existence of a formal dispute resolution process within the
employing organization.

• Seeking legal advice.

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Section 320

Preparation and Reporting of Information

320.1 Chartered accountants in business are often involved in the preparation
and reporting of information that may either be made public or used by
others inside or outside the employing organization. Such information
may include financial or management information, for example,
forecasts and budgets, financial statements, management discussion and
analysis, and the management letter of representation provided to the
auditors as part of an audit of financial statements. A chartered
accountant in business should prepare or present such information
fairly, honestly and in accordance with relevant professional standards
so that the information will be understood in its context.

320.2 A chartered accountant in business who has responsibility for the
preparation or approval of the general purpose financial statements of
an employing organization should ensure that those financial
statements are presented in accordance with the applicable financial
reporting standards.

320.3 A chartered accountant in business should maintain information for
which the chartered accountant in business is responsible in a manner
that:

(a) Describes clearly the true nature of business transactions, assets
or liabilities;

(b) Classifies and records information in a timely and proper
manner; and

(c) Represents the facts accurately and completely in all material
respects.

320.4 Threats to compliance with the fundamental principles, for example
self- interest or intimidation threats to objectivity or professional
competence and due care, may be created where a chartered accountant
in business may be pressured (either externally or by the possibility of
personal gain) to become associated with misleading information or to
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become associated with misleading information through the actions of
others.

320.5 The significance of such threats will depend on factors such as the
source of the pressure and the degree to which the information is, or
may be, misleading. The significance of the threats should be evaluated
and, if they are other than clearly insignificant, safeguards should be
considered and applied as necessary to eliminate them or reduce them
to an acceptable level. Such safeguards may include consultation with
superiors within the employing organization, for example, the audit
committee or other body responsible for governance, or with a relevant
professional body.

320.6 Where it is not possible to reduce the threat to an acceptable level, a
chartered accountant in business should refuse to remain associated
with information they consider is or may be misleading. Should the
chartered accountant in business be aware that the issuance of
misleading information is either significant or persistent, the chartered
accountant in business should consider informing appropriate
authorities in line with the guidance in Section 140. The chartered
accountant in business may also wish to seek legal advice or resign.

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Section 330

Acting with Sufficient Expertise

330.1 The fundamental principle of professional competence and due care
requires that a chartered accountant in business should only undertake
significant tasks for which the chartered accountant in business has, or
can obtain, sufficient specific training or experience. A chartered
accountant in business should not intentionally mislead an employer as
to the level of expertise or experience possessed, nor should a chartered
accountant in business fail to seek appropriate expert advice and
assistance when required.

330.2 Circumstances that threaten the ability of a chartered accountant in
business to perform duties with the appropriate degree of professional
competence and due care include:

• Insufficient time for properly performing or completing the
relevant duties.

• Incomplete, restricted or otherwise inadequate information for
performing the duties properly.

• Insufficient experience, training and/or education.

• Inadequate resources for the proper performance of the duties.

330.3 The significance of such threats will depend on factors such as the
extent to which the chartered accountant in business is working with
others, relative seniority in the business and the level of supervision
and review applied to the work. The significance of the threats should
be evaluated and, if they are other than clearly insignificant, safeguards
should be considered and applied as necessary to eliminate them or
reduce them to an acceptable level. Safeguards that may be considered
include:

• Obtaining additional advice or training.

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126
• Ensuring that there is adequate time available for performing the
relevant duties.

• Obtaining assistance from someone with the necessary expertise.

• Consulting, where appropriate, with:

§ Superiors within the employing organization;

§ Independent experts; or

§ A relevant professional body.

330.4 Where threats cannot be eliminated or reduced to an acceptable level,
chartered accountants in business should consider whether to refuse to
perform the duties in question. If the chartered accountant in business
determines that refusal is appropriate the reasons for doing so should be
clearly communicated.

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Section 340

Financial Interests

340.1 Chartered accountants in business may have financial interests, or may
know of financial interests of immediate or close family members, that
could, in certain circumstances, give rise to threats to compliance with
the fundamental principles. For example, self- interest threats to
objectivity or confidentiality may be created through the existence of
the motive and opportunity to manipulate price sensitive information in
order to gain financially. Examples of circumstances that may create
self- interest threats include, but are not limited to situations where the
chartered accountant in business or an immediate or close family
member:

• Holds a direct or indirect financial interest in the employing
organization and the value of that financial interest could be
directly affected by decisions made by the chartered accountant in
business;

• Is eligible for a profit related bonus and the value of that bonus
could be directly affected by decisions made by the chartered
accountant in business;

• Holds, directly or indirectly, share options in the employing
organization, the value of which could be directly affected by
decisions made by the chartered accountant in business;

• Holds, directly or indirectly, share options in the employing
organization which are, or will soon be, eligible for conversion; or

• May qualify for share options in the employing organization or
performance related bonuses if certain targets are achieved.

340.2 In evaluating the significance of such a threat, and the appropriate
safeguards to be applied to eliminate the threat or reduce it to an
acceptable level, chartered accountants in business must examine the
nature of the financial interest. This includes an evaluation of the
significance of the financial interest and whether it is direct or indirect.
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128
Clearly, what constitutes a significant or valuable stake in an
organization will vary from individual to individual, depending on
personal circumstances.

340.3 If threats are other than clearly insignificant, safeguards should be
considered and applied as necessary to eliminate or reduce them to an
acceptable level. Such safeguards may include:

• Policies and procedures for a committee independent of
management to determine the level of form of remuneration of
senior management.

• Disclosure of all relevant interests, and of any plans to trade in
relevant shares to those charged with the governance of the
employing organization, in accordance with any internal policies.

• Consultation, where appropriate, with superiors within the
employing organization.

• Consultation, where appropriate, with those charged with the
governance of the employing organization or relevant professional
bodies.

• Internal and external audit procedures.

• Up-to-date education on ethical issues and the legal restrictions
and other regulations around potential insider trading.

340.4 A chartered accountant in business should neither manipulate
information nor use confidential information for personal gain.
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Section 350

Inducements

Receiving Offers

350.1 A chartered accountant in business or an immediate or close family
member may be offered an inducement. Inducements may take various
forms, including gifts, hospitality, preferential treatment and
inappropriate appeals to friendship or loyalty.

350.2 Offers of inducements may create threats to compliance with the
fundamental principles. When a chartered accountant in business or an
immediate or close family member is offered an inducement, the
situation should be carefully considered. Self- interest threats to
objectivity or confidentiality are created where an inducement is made
in an attempt to unduly influence actions or decisions encourage illegal
or dishonest behavior or obtain confidential information. Intimidation
threats to objectivity or confidentiality are created if such an
inducement is accepted and it is followed by threats to make that offer
public and damage the reputation of either the chartered accountant in
business or an immediate or close family member.

350.3 The significance of such threats will depend on the nature, value and
intent behind the offer. If a reasonable and informed third party, having
knowledge of all relevant information, would consider the inducement
insignificant and not intended to encourage unethical behavior, then a
chartered accountant in business may conclude that the offer is made in
the normal course business and may generally conclude that there is no
significant threat to compliance with the fundamental principles.

350.4 If evaluated threats are other than clearly insignificant, safeguards
should be considered and applied as necessary to eliminate them or
reduce them to an acceptable level. When the threats cannot be
eliminated or reduced to an acceptable level through the application of
safeguards, a chartered accountant in business should not accept the
inducement. As the real or apparent threats to compliance with the
fundamental principles do not merely arise from acceptance of an
inducement but, sometimes, merely from the fact of the offer having
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130
been made, additional safeguards should be adopted. A chartered
accountant in business should assess the risk associated with all such
offers and consider whether the following actions should be taken:

(a) Where such offers have been made, immediately inform higher
levels of management or those charged with governance of the
employing organization;

(b) Inform third parties of the offer – for example, a professional
body or the employer of the individual who made the offer; a
chartered accountant in business should, however, consider
seeking legal advice before taking such a step; and

(c) Advise immediate or close family members of relevant threats
and safeguards where they are potentially in positions that might
result in offers of inducements, for example as a result of their
employment situation; and

(d) Inform higher levels of management or those charged with
governance of the employing organization where immediate or
close family members are employed by competitors or potential
suppliers of that organization.

Making Offers

350.5 A chartered accountant in business may be in a situation where the
chartered accountant in business is expected to, or is under other
pressure to, offer inducements to subordinate the judgment of another
individual or organization, influence a decision- making process or
obtain confidential information.

350.6 Such pressure may come from within the employing organization, for
example, from a colleague or superior. It may also come from an
external individual or organization suggesting actions or business
decisions that would be advantageous to the employing organization
possibly influencing the chartered accountant in business improperly.

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131
350.7 A chartered accountant in business should not offer an inducement to
improperly influence professional judgment of a third party.

350.8 Where the pressure to offer an unethical inducement comes from within
the employing organization, the chartered accountant should follow the
principles and guidance regarding ethical conflict resolution set out in
Part A of this Code.

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132
DEFINITIONS

In this Code of Ethics for Chartered Accountants the following expressions have
the following meanings assigned to them:

Advertising The communication to the public of information as
to the services or skills provided by Chartered
Accountants in practice with a view to procuring
professional business.

Assurance
client
The responsible party that is the person (or persons)
who:

(a) In a direct reporting engagement, is responsible
for the subject matter; or

(b) In an assertion-based engagement, is
responsible for the subject matter information
and may be responsible for the subject matter.

(For an assurance client that is a financial statement
audit client see the definition of financial statement
audit client.)

Assurance
engagement
An engagement in which a Chartered Accountant in
practice expresses a conclusion designed to
enhance the degree of confidence of the intended
users other than the responsible party about the
outcome of the evaluation or measurement of a
subject matter against criteria.

(For guidance on assurance engagements see the
International Framework for Assurance
Engagements issued by the International Auditing
and Assurance Standards Board which describes
the elements and objectives of an assurance
engagement and identifies engagements to which
International Standards on Auditing (ISAs),
International Standards on Review Engagements
(ISREs) and International Standards on Assurance
Engagements (ISAEs) apply.)
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133


Assurance
team
(a) All members of the engagement team for the
assurance engagement;

(b) All others within a firm who can directly
influence the outcome of the assurance
engagement, including:

(i) those who recommend the compensation
of, or who provide direct supervisory,
management or other oversight of the
assurance engagement partner in
connection with the performance of the
assurance engagement. For the purposes
of a financial statement audit engagement
this includes those at all successively
senior levels above the engagement
partner through the firm’s chief
executive;

(ii) those who provide consultation regarding
technical or industry specific issues,
transactions or events for the assurance
engagement; and

(iii) those who provide quality control for the
assurance engagement, including those
who perform the engagement quality
control review for the assurance
engagement; and

(c) For the purposes of a financial statement audit
client, all those within a network firm who can
directly influence the outcome of the financial
statement audit engagement.

Bye- Laws

The Chartered Accountants Bye-Laws, 1983 as
amended or added to from time to time.

Chartered
Accountant
A natural person who is a member.

Chartered
accountant in
A Chartered Accountant employed or engaged in
an executive or non-executive capacity in such
areas as commerce, industry, service, the public
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134
business
sector, education, the not for profit sector,
regulatory bodies or professional bodies, or a
Chartered Accountant contracted by such

Chartered
Accountant In
Practice
A member shall be deemed "to be in
practice" when he engages himself in practice
as Chartered Accountant or Management
Consultant as the case may be.
A member of the Institute shall be deemed "to be in
practice" when individually or in partnership with
Chartered Accountants in practice, he in
consideration received or to be received:-

i. engages himself in the practice of accountancy;
or

ii. offers to perform or performs services
involving the auditing, or verification of
financial transactions, books, accounts, or
records or the preparation, verification or
certification of financial accounting and related
statements or holds himself out to the public as
an accountant; or

iii. renders professional services or assistance in or
about matters of principle or detail relating to
accounting procedure or the recording,
presentation or certification of financial facts
or data; or

iv. renders such other services in the field of
management consultancy; or

v. renders such services as, in the opinion of the
Council, are or may be rendered by a chartered
accountant in practice and the words "to be in
practice" with their grammatical variations and
cognate expression shall be construed
accordingly.

Clearly
insignificant
A matter that is deemed to be both trivial and
inconsequential.

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135
Close family A parent, child or sibling, who is not an immediate
family member.

Code of
Corporate
Governance


As embodied in the Listing Regulations of the
Karachi, Lahore and Islamabad Stock Exchanges.
Company


Any entity or person(s), whether organized for
profit or not, including a parent company and all of
its subsidiaries.

Contingent
fee
A fee calculated on a predetermined basis relating
to the outcome or result of a transaction or the
result of the work performed. A fee that is
established by a court or other public authority is
not a contingent fee.

Direct
financial
interest
A financial interest:
• Owned directly by and under the control of an
individual or entity (including those managed
on a discretionary basis by others); or

• Beneficially owned through a collective
investment vehicle, estate, trust or other
intermediary over which the individual or entity
has control

Director or
officer
Those charged with the governance of an entity,
regardless of their title, which may vary from
country to country.

Engagement
partner
The partner or other person in the firm who is
responsible for the engagement and its
performance, and for the report that is issued on
behalf of the firm, and who, where required, has the
appropriate authority from a professional, legal or
regulatory body.

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136

Engagement
quality
control review
A process designed to provide an objective
evaluation, before the report is issued, of the
significant judgments the engagement team made
and the conclusions they reached in formulating the
report.
Engagement
team
All personnel performing an engagement, including
any experts contracted by the firm in connection
with that engagement.

Existing
accountant
A Chartered Accountant in practice currently
holding an audit appointment or carrying out
accounting, taxation, consulting or similar
professional services for a client.

Financial
interest
An interest in an equity or other security,
debenture, loan or other debt instrument of an
entity, including rights and obligations to acquire
such an interest and derivatives directly related to
such interest.

Financial
statements
The balance sheets, income statements or profit and
loss accounts, statements of changes in financial
position (which may be presented in a variety of
ways, for example, as a statement of cash flows or a
statement of fund flows), notes and other
statements and explanatory material which are
identified as being part of the financial statements.

Financial
statement
audit client
An entity in respect of which a firm conducts a
financial statement audit engagement. When the
client is a listed entity, financial statement audit
client will always include its related entities.

Financial
statement
audit
engagement
A reasonable assurance engagement in which a
Chartered Accountant in practice expresses an
opinion whether financial statements are prepared
in all material respects in accordance with an
identified financial reporting framework, such as an
engagement conducted in accordance with the
International Standards on Auditing. This includes
a statutory audit, which is a financial statement
audit required by legislation or other regulation.
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137

Firm (a) A sole practitioner, partnership or corporation of
Chartered Accountants;

(b) An entity that controls such parties; and

(c) An entity controlled by such parties.

Immediate
family
A spouse (or equivalent) or dependant.

Independence Independence is:

(a) Independence of mind – the states of mind that
permits the provision of an opinion without
being affected by influences that compromise
professional judgment, allowing an individual
to act with integrity, and exercise objectivity
and professional judgment.

(b) Independence in appearance – the avoidance of
facts and circumstances that are so significant a
reasonable and informed third party, having
knowledge of all relevant information,
including any safeguards applied, would
reasonably conclude a firm’s, or a member of
the assurance team’s, integrity, objectivity or
professional skepticism had been
compromised.

Indirect
financial
Interest
A financial interest beneficially owned through a
collective investment vehicle, estate, trust or other
intermediary over which the individual or entity has
no control.

Institute

The Institute of Chartered Accountants of Pakistan
constituted under the Chartered Accountants
Ordinance, 1961.

Listed entity An entity whose shares, stock or debt are quoted or
listed on a recognized stock exchange, or are
marketed under the regulations of a recognized
stock exchange or other equivalent body.
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138


Member A natural person whose name appears in the
Register for the time being.

Network firm An entity under common control, ownership or
management with the firm or any entity that a
reasonable and informed third party having
knowledge of all relevant information would
reasonably conclude as being part of the firm
nationally or internationally.

Ordinance

The Chartered Accountants Ordinance, 1961 as
amended or replaced from time to time

Office A distinct sub-group, whether organized on
geographical or practice lines.

Prescribed

Prescribed by the Bye- laws

Professional
services
Services requiring accountancy or related skills
performed by a Chartered Accountant including
accounting, auditing, taxation, management
consulting and financial management services.



Publicity

The communication to the public of facts about a
chartered accountant which are not designed for the
deliberate promotion of that chartered accountant

Register The Register of the Members of the Institute
maintained under the Chartered Accountants
Ordinance, 1961

Related entity An entity that has any of the following relationships
with the client:

(a) An entity that has direct or indirect control over
the client provided the client is material to such
entity;
REVISED CODE OF ETHICS FOR CHARTERED ACCOUNTANTS
139


(b) An entity with a direct financial interest in the
client provided that such entity has significant
influence over the client and the interest in the
client is material to such entity;

(c) An entity over which the client has direct or
indirect control;

(d) An entity in which the client, or an entity
related to the client under (c) above, has a
direct financial interest that gives it significant
influence over such entity and the interest is
material to the client and its related entity in
(c); and

(e) An entity which is under common control with
the client (hereinafter a “sister entity”)
provided the sister entity and the client are both
material to the entity that controls both the
client and sister entity.

Schedule

The Schedules annexed to the Chartered
Accountants Ordinance, 1961.


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140
EFFECTIVE DATE

The Code is effective on January 1, 2009. Section 290 is applicable to assurance
engagements when the assurance report is dated on or after January 1, 2009.
Earlier application is encouraged.


MEMBERS' HANDBOOK
PART IV
7. MEMBER’S CONDUCT-GENERALLY
THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN

7.0 Members’ Conduct Generally
CONTENTS
7.01 Use of designations and designatory letters
7.02 Communicate change in address promptly
7.03 Compulsory admission as fellow members
7.04
Members permitted to mark Tick or Cross in Election Ballot
Papers

7.01
USE OF DESIGNATIONS AND DESIGNATORY LETTERS
"It was decided that there should be no objection to use any qualification and
designatory letters against the names of members provided these denoted the
qualifications of Universities and Institutes duly recognized by the
*
Central
Government or the Council of the Institute. The members were, however, advised to
use only highest degree in a particular time awarded by a University or an
Institute".
(1
st
meeting of Council - August 17, 1961)
Only designation 'Chartered Accountants' to be used, “in accordance with Section
5 of the Ordinance, members of the Institute could put the words 'ACA' or 'FCA'
against their names. Section 7 of the Ordinance, however, provided that every
member of the Institute in practice shall and any other member may use the
designation of 'CHARTERED ACCOUNTANT' and no member using such
designation shall use any other designation, whether in addition thereto or in
substitution therefore, except as laid down in the proviso to that section by which
any such person was not prohibited from adding any other description or
designatory letters to his name, if entitled thereto the indicate membership of such
other Institute of Accountancy, whether in Pakistan or elsewhere, as may be
recognized in this behalf by the Council, or any other qualification that he may
possess. There is also nothing to prohibit a firm, all the partners of which are
members of the Institute and in practice, from being known by its firm name as
Chartered Accountants. Cases were brought to the notice of the Council where
members of firms of Chartered Accountants were styling themselves as Chartered
Accountants (England & Wales) and Chartered Accountants, (Pakistan). The use
of the words 'CHARTERED ACCOUNTANTS'(ENGLAND & WALES) with the
name of a firm was not considered desirable. The Council resolved that a general
directive may be issued to members that:


*
Now Federal Government
7.01
(a) a firm practicing in Pakistan may use the designation
'CHARTERED ACCOUNTANTS' but without any explanatory
words or letters.

(b) A member may add after his own name any description or
designatory letters to which he is entitled provided that his Pakistani
professional qualification shall appear first without any explanatory
word.

The Council reconsidered the question of allowing the use of designatory letters
against members' names and decided to issue the following revised directive to the
members:-

(a) only the designation 'Chartered Accountants' should be used
against the name of practicing firm in Pakistan. No explanatory
words or letters should be used after this designation.

(b) a member may add after this own name any description or
designatory letter to which he is entitled provided that his Pakistani
qualifications shall appear first 'without any explanatory words.

(c) Where a partner signs in his individual name on behalf of a firm
there would be no objection to his adding recognized foreign
qualifications or designatory letters to his personal name (not the
name of the firm) but such qualifications or designatory letters may
be added after Pakistani qualifications which will appear first
without the use of the word "Pakistan".

(4th meeting of Council August 25, 1962.
Re-affirmed in 7th meeting - August 30, 1963)

''The Council approved the qualification of the following organizations for
the purpose of Section 7 of the Chartered Accountants Ordinance, 1961 (X
of 1961):

7.01
(i) The Institute of Chartered Accountants in England &
Wales;
(ii) The Institute of Chartered Accountants in Ireland;
(iii) The Institute of Chartered Accountants in Scotland;
(iv) The Institute of Chartered Accountants in Australia; and
(v) The Canadian Institute of Chartered Accountants.
This means that only the qualifications of the above accountancy bodies can
be used against the names of the members in the manner as specified on
preceding page.
(7th meeting of Council - August 30, 1963)
Use of designatory letters ACMA, ACIS (UK), ACCA: "The Council allowed the
members to use designatory letters of their professional qualifications like
ACMA, ACIS (UK),' ACCA with their names. "
(64th meeting of Council - December 24, 1981)
7.02

COMMUNICATE CHANGE IN ADDRESS PROMPTLY
"Recently, there have been growing complaints about postal mishap and mis-
communication of Institute's circulars and notifications to members. In order to
serve better the members' interest by making available promptly all
communications dispatched from the Institute, the Secretariat will appreciate if the
members would keep the Institute informed in writing about any change in
addresses. Attention of the members is also invited to Bye-Law 7 of Chartered
Accountants Bye-Laws, 1961 which requires the members to inform the Institute of
any change of address of place or places of business or employment".
(Newsletter - December 1981)
7.03

COMPULSORY ADMISSION AS FELLOW MEMBERS
"The Institute wishes to draw the attention of the members to sub-section 3 of
Section 5 of the Chartered Accountants Ordinance, 1961 as amended which
provides as under: -
"An associate member who has been in practice for at least five
years or an associate member of the Institute for a period of not
less than 10 years shall, on payment of prescribed fee, have his
name transferred to the Register of Fellows of the Institute,
and on having his name transferred to the Register of Fellow,
he shall be entitled to use the letter FCA after his name to
indicate that he is a fellow member of the Institute".
It may be noted that an associate member who has completed the stipulated
period and fulfilled other conditions as set out above is required to have his
name transferred to the Register of Fellows of the Institute".
(74th meeting of the Council - December 27, 1984)
(Newsletter - January 1985)
7.04
Members permitted to mark 'Tick' or 'Cross' on election ballot papers
"The Election Committee appointed for Council's election held in January 1985 had
recommended that for future elections both 'CROSS’ and 'TICK' marks on the
Ballot papers should be acceptable against the existing 'CROSS' marks only. The
Council accepted the suggestion".
(75th meeting of the Council - February 12, 1985)

MEMBERS' HANDBOOK
PART IV
8. CONTINUING PROFESSIONAL DEVELOPMENT (CPD)
THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN
Directive 8.01
(Revised 2012)




8. CONTINUING PROFESSIONAL DEVELOPMENT (CPD)

CONTENTS








8.01 Continuing Professional Development (CPD) Revised 2012
8.02
Compulsory Attendance of Practicing Members in Seminars
on International Accounting Standards, International Standards
on Auditing and Quality Control



















Directive 8.01
(Revised 2012)








CONTINUING PROFESSIONAL DEVELOPMENT (CPD)











CPD Committee
The Institute of Chartered Accountants of Pakistan











A Program of Continuing Development of Professional Competence and Lifelong Learning


Directive 8.01
(Revised 2012)




CONTINUING PROFESSIONAL DEVELOPMENT (CPD)




CONTENTS

Paragraphes


Preamble ………………………………………………………………… 2

Effective Date……………………………………………………………. 3

CPD Approach…………………………………………………………… 3

Organization……………………………………………………………… 4

Requirements………………………………………………………………4

Measurement of CPD Credit Hours………………………………………..5

Exemption to CPD ……………………………………………………….. 7

Verification……………………………………………………………….. 8

Non-compliance…………………………………………………………... 8

Recording and Monitoring………………………………………………...8

CPD Reporting Form (Annexure)








1
Directive 8.01
(Revised 2012)




CONTINUING PROFESSIONAL DEVELOPMENT

Preamble

1. The International Federation of Accountants (IFAC) has made it
mandatory for its member bodies to design and implement a Continuing
Professional Development (CPD) mechanism in such a way that it
becomes a component of continued membership for the professional
accountants. In order to facilitate the CPD implementation, IFAC has
issued International Educational Standard for Professional Accountants
(IES-7) which is in effect from J anuary 01, 2006.

2. Continuing professional development refers to learning activities that
develop and maintain capabilities to enable professional accountants to
perform competently within their professional environments.

3. It is to be appreciated that the knowledge needed to function effectively as
a professional accountant in public practice, industry, commerce,
education and the public sector continues to expand and change at a rapid
rate with the changes in regulatory environment, international standards
and technology.

4. CPD, on its own, does not provide assurance that all members will provide
high quality professional service all the time. Doing so involves more than
maintaining professional competence; it involves applying knowledge
with professional judgment and an objective attitude. Also, there cannot be
assurance that every person who participates in a CPD programme will
obtain the full benefits of that programme, because of variances in
individual commitment and capacity to learn. Nevertheless, it is certain
that members who are not upto-date on current technical and general
knowledge pertinent to their work will not be able to provide professional
services competently. Therefore, despite the inherent limitations of any
CPD programme, a CPD requirement is important in preserving the
standard of the profession and also in maintaining public confidence.

5. It is the responsibility of the individual member to develop and maintain
professional competence necessary to provide high quality services to
2
Directive 8.01
(Revised 2012)


clients, employers and other stakeholders. Members are free to choose
from the opportunities both locally and internationally available, as
approved by the CPD Committee, to fulfill their relevant CPD needs.

6. This Directive prescribes that members:

a. foster a commitment to lifelong learning;
b. establish benchmarks for developing and maintaining the
professional competence necessary to protect the public interest; and
c. monitor and enforce the continuing development and maintenance of
professional competence.
Effective date:

7. This directive is effective from July 01, 2012.
CPD Approach

8. The IES-7 states that CPD can be achieved by at least three different
approaches:

a. In-put based approaches – by establishing a set amount of learning
activity that is considered appropriate to develop and maintain
competence.
b. Out-put based approaches – by requiring professional accountants
to demonstrate, by way of outcomes, that they develop and
maintain professional competence.
c. Combination approaches – by effectively and efficiently
combining elements of the input and output based approaches,
setting the amount of learning activity required and measuring the
outcomes achieved.

9. The Institute has adopted a combination approach before moving towards
a comprehensive output-based system.





3
Directive 8.01
(Revised 2012)




Organization

10. The CPD Committee of the Institute has the responsibility for the
establishment of directive and overall coordination of CPD activities for
its members in Pakistan and abroad.

11. Regional Committees would coordinate with the CPD Committee in
constitution of the City CPD Sub-Committees and execution of CPD
activities.
Requirement

12. Every member is required to:

a. complete at least 120 hours or equivalent learning units of relevant
professional development activity in each rolling three-year period,
of which 60 hours or equivalent learning units should be verifiable;
b. complete at least 20 hours or equivalent learning units in each
year; and
c. track and measure learning activities to meet the above
requirements.
“Rolling Period”: Under this directive:
a. For those who are members as on J uly 1, 2012 the first rolling
period starts on J uly 1, 2012 and completes on J une 30, 2015.
b. On J uly 1, 2012 the
*
short fall in the CPD account maintained at
the Institute shall be deemed zero.
c. The excess hours as a J une 30, 2012 shall be carried forward to the
rolling period commencing on J uly 1, 2012.
**

d. For all other members, rolling period will commence on J uly 1 in
the year following the date of admission of a member. For any
incomplete first year of membership, member will be required to
complete 2 hours for each complete months.
e. The excess of CPD hours of one year may be carried forward to
the next year within a rolling period only. At the end of a rolling

* The words “excess were deleted the Council in its 234
th
meeting held on J une 15 & 16, 2012
**Paragraph (c) under the head “Rolling Period” inserted by Council in its 234
th
meeting held on J une 15 & 16, 2012.
4
Directive 8.01
(Revised 2012)


period the excess hours shall be nullified, however, the members
will be required to complete their shortfall hours to avoid any
sanctions, as prescribed by the Council.
Measurement of CPD Credit Hours

13. The CPD credit hours are to be measured as follows:
S.
No.
Activity Evidence to be kept CPD Credit Hours
a. Participation in short courses,
seminars, conferences, lectures
and trainings.
Certificates of
attendance/course contents
in case it is a non-ICAP
course.
Actual classroom time.
For a full day session a
credit of 8 hours and
for a half-day session
4 hours.
b. Completing degree courses and
studying relevant professional
certifications.
Degree/ certification Professional
Qualifications
(ICAP’s Diploma in
IFRS, ICAEW’s ACA,
CIMA, ACMA,
ACCA, CISA, CIA,
CFA etc):

5 times of the
examination hours or
40 hours, whichever is
lower, in a CPD year.

Degree Courses
As accredited by the
HEC approved or
Foreign Institute/
University. For
example 3 credit hours
course will be
measured 3 hours long
for relevant subjects
only. However, the
maximum CPD hours
that can be given
under this head shall
be 40 hours for a year.

Award of CPD hours
shall be decided by the
Committee on a case
5
Directive 8.01
(Revised 2012)



to case basis.
c. Relevant research paper
published in a peer reviewed
journal
Original copy of the journal 8 hours
d. Contributing article/review or
any other relevant material
including material in ICAP’s, or
other, local or international
publications
Original copy of the
publication
4 hours
e. Registered and evidence-based
E-learning courses from
recognized content providers.

Certification Actual time consumed
by the course/ training.
f. Presenter, participant or session
chairman in short courses,
seminars, conferences, trainings
and media including interviews
in print media.
To be declared on the
Reporting Form
Twice the actual time
of the presentation.

g. Teaching relevant professional
or degree courses
To be declared on the
Reporting Form
One and half the
actual time of the
session subject to
maximum of 20 hours
per annum.
h. Participation in council,
committees, working groups of
ICAP and other regulatory
bodies
To be declared on the
Reporting Form
Actual time of the
meeting
i. Writing of books on professional
interest, technical and reference
manuals including study pack
Copy of the publication 1 hour per page of
technical content.
Maximum 40 hours
per release.
6
Directive 8.01
(Revised 2012)


j. Watching videos/CDs of the
ICAP CPD programmes of the
Institute by a particular
geographical area(s) where there
is no CPD Committee of the
Institute. However, CPD hours
in respect of the above activity
are restricted to a maximum of
20 hours in a year. Further,
places where there are
established CPD Committees,
CPD hours in respect of the
above activity are restricted to a
maximum of 10 hours in a year
Members are encouraged to
obtain prior approval from
the CPD Committee.

Attendance/topic(s) to be
communicated to the CPD
Committee within 2 weeks
of watching such
programme.
Half of the actual
duration
k. General / self certified readings
(relevant to current or future
development needs) e.g. journal
articles, newspaper reports,
subscriptions etc
Details to be provided on
CPD Reporting Form:

Printed Material
 Date of reading
 Date of publication
 Title of the
publication
 Title of the specific
article

Web-based Material
in addition to above
information also include:
 Retrieved/accessed
from: the full web
address.
 Date/time of
retrieval/access
Actual reading time,
subject to maximum of
2 hours per article
subject to the
maximum of 10 hours
per annum
l. Visit to ICAP libraries The Librarian will provide
sign in and out time to the
CPD Directorate.
Actual time spent in
the library

Exemption to CPD
14. This directive does not apply to the members who fall in following
categories.
a. ill or incapacitated so that he/she cannot perform normal work
b. retired from whole time business.
c. career breaks.
7
Directive 8.01
(Revised 2012)



d. members holding public offices such as Federal Ministers,
Provincial Ministers, Advisors to Ministers, Senators, MNAs,
MPAs etc, during the currency of their offices.
Verification
15. A “Verifiable CPD Activity” undertaken by the member must be
supported by documentary evidences required to be maintained by the
member provided under paragraph 13(a) to 13(j) and 13(l) for one year
after the close of rolling period.

A” Non-verifiable CPD Activity” is an activity where a member is unable
to prove that the CPD learning activity has taken place. Ordinarily, non-
verifiable CPD does not have a defined learning outcome and is not
designed to address a specific learning need. General reading, as defined
in paragraph 13(k), is an example of non-verifiable CPD.
Non-compliance
16. For all members, non-compliance of this Directive will be reviewed by the
CPD Committee and if deemed appropriate the matter may be referred to
the Council.
Recording and Monitoring
17. Each member is responsible for maintaining and retaining his CPD
records. These records should demonstrate that the member understands
and complies with the Regulations. Additionally CPD records are to be
maintained by the CPD Directorate of the Institute as follows:

a. Where CPD activities are organized by the Institute or any of its
Regional or City – Sub-Committee:
i. The Regional or City CPD Sub-committee will maintain a
register of attendance ; and
ii. Within two weeks of holding the activity, will send the
attendance sheet, to the CPD Directorate

b. Where a member participates in other CPD credit programmes:
i. On a periodic basis (a member may choose to send CPD
record annually) the member will complete a CPD
reporting form (annexure) summarizing the details of the
8
Directive 8.01
(Revised 2012)


CPD activities in which he participated based on the credit
hours measurement prescribed in paragraph 13.
ii. The CPD reporting form should be sent to the attention of
the CPD Directorate.
iii. Any CPD reporting form for a year (ending on J une 30)
must be received by the CPD Directorate by August 31 of
that year.
iv. The member will maintain evidence of the CPD activity
e.g. attendance confirmation/details of article published etc.
v. The evidence of the CPD activity shall be produced before
the Institute if so required.

c. The CPD Directorate will summarize the declarations and send a
summary to the CPD Committee for information.

d. The CPD Directorate will be responsible for maintaining record in
respect of members participating in CPD activities and uploading
latest CPD data on the website for members to review.

e. The CPD Directorate should send an Email reminder to all
members within two weeks of the close of year for reporting of all
activity along-with form.


(232
nd
meeting of the Council held on March 6, 2012 and
234th meeting of the Council held on June 15 and 16, 2012)
9
Directive 8.01
(Revised 2012)




Annexure
CPD REPORTING FORM
Name of Member:___________________________
Membership Number: ________________________
Reporting Year: _____________________________
Date: _____________________________________

S.
No.
Description of CPD
activity attended
Date Details of CPD activity
attended
Credit
Hours










































Signature __________________________
10
________________________________
The Directive No. 8.01 before this revision reads as under:

Introduction


1. The International Federation of Accountants (IFAC) has made it mandatory for its member bodies to
design and implement a Continuing Professional Development (CPD) mechanism in such a way that
it becomes a component of continued membership for the professional accountants. In order to
facilitate the CPD implementation, IFAC has issued International Educational Standard for
Professional Accountants (IES-7) which is in effect from J anuary 01, 2006.

2. Continuing professional development refers to learning activities that develop and maintain
capabilities to enable professional accountants to perform competently within their professional
environments.

3. It is to be appreciated that the knowledge needed to function effectively as a professional accountant
in public practice, industry, commerce, education and the public sector continues to expand and
change at a rapid rate with the changes in regulatory environment, international standards and
technology.

4. CPD, on its own, does not provide assurance that all members will provide high quality professional
service all the time. Doing so involves more than maintaining professional competence; it involves
applying knowledge with professional judgment and an objective attitude. Also, there cannot be
assurance that every person who participates in a CPD programme will obtain the full benefits of
that programme, because of variances in individual commitment and capacity to learn. Nevertheless,
it is certain that members who are not upto-date on current technical and general knowledge
pertinent to their work will not be able to provide professional services competently. Therefore,
despite the inherent limitations of any CPD programme, a CPD requirement is important in
preserving the standard of the profession and also in maintaining public confidence.


5. It is the responsibility of the individual member to develop and maintain professional competence
necessary to provide high quality services to clients, employers and other stakeholders. Members are
free to choose from the opportunities both locally and internationally available, as approved by the
CPD Committee, to fulfill their relevant CPD needs.

6. This Directive prescribes that members:

a. foster a commitment to lifelong learning
b. establish benchmarks for developing and maintaining the
professional competence necessary to protect the public interest; and
c. monitor and enforce the continuing development and maintenance of
professional competence.

Effective date:

7. This directive is effective from July 01, 2007.









CPD Approach


8. The IES-7 states that CPD can be achieved by at least three different approaches:

(a) In-put based approaches – by establishing a set amount of learning activity that is
considered appropriate to develop and maintain competence.

(b) Out-put based approaches – by requiring professional accountants to demonstrate, by way
of outcomes, that they develop and maintain professional competence.

(c) Combination approaches – by effectively and efficiently combining elements of the input
and output based approaches, setting the amount of learning activity required and measuring
the outcomes achieved.


9. The Institute has adopted a combination approach before moving towards a comprehensive output-based
system.
Organization


10. The CPD Committee of the Institute has the responsibility for the establishment of directive and overall
coordination of CPD activities for its members in Pakistan & abroad.


11. Regional Committees would coordinate with the CPD Committee in constitution of the City CPD
Sub-Committees and execution of CPD activities.


CPD Requirements

12. Every member is required to complete 40 hours in one year or 120 hours in every 3 years period with
a minimum of 20 hours in a year.

Measurement of CPD Credit Hours
13. The CPD credit hours are to be measured as follows:

S.
No.
Activity Evidence to be
attached
CPD Credit Hours
a Participation in short courses,
seminars, conferences, lectures
and trainings.
Copies of
certificates of
attendance/course
contents in case it is
a non-ICAP course.
Actual classroom
time. For a full day
session a credit of 8
hours and for a half-
day session 4 hours.
b Completing degree courses and
studying relevant professional
certifications.
Copy of
degree/certification
As accredited by the
HEC approved
Institute/ University.
For example 3 credit
hours course will be
measured 3 hours
long.
c Relevant research paper
published in a peer reviewed
journal
Original copy of the
journal
8 hours
d Contributing article/review or
any other relevant material
including material in ICAP’s, or
other, local or international
publications
Original copy of the
publication
4 hours
e Registered and evidence-based
E-learning courses from
recognized content providers.
Copy of the
certification
Actual time consumed
by the course/
training.
f Presenter or Session Chairman
in short courses, seminars,
conferences and trainings.
To be declared on
the Reporting Form
Twice the actual time
of the presentation.

g Teaching relevant professional
or degree courses
To be declared on
the Reporting Form
One and half the
actual time of the
session subject to
maximum of 20 hours
per annum.
h Participation in council,
committees, working groups of
ICAP and other regulatory
bodies
To be declared on
the Reporting Form
Actual time of the
meeting
i Writing of books on
professional interest, technical
and reference manuals
including study pack
Copy of the
publication
1 hour per page of
technical content.
Maximum 20 hours
per release.
j Watching videos/CDs of the
ICAP CPD programmes of the
Institute by a particular
geographical area(s) where there
is no CPD Committee of the
Institute. However, CPD hours
in respect of the above activity
are restricted to a maximum of
20 hours in a year. Further,
Members are
encouraged to
obtain prior
approval from the
CPD Committee.
Attendance/topic(s)
to be communicated
to the CPD
Committee within 2
Half of the actual
duration



places where there are
established CPD Committees,
CPD hours in respect of the
above activity are restricted to a
maximum of 10 hours in a year
weeks of watching
such programme.


13.1 As a result of comments received from various stakeholders, the Institute has instituted an interim
arrangement with regards to the submission of self-certified readings which will count towards the
required number of CPD hours. For the first three year reporting cycle, members are permitted to
submit a maximum of 30 hours of self-certified readings over the three years, with a maximum of
10 hours in any one year. Self certified readings include, inter alia, relevant journal articles,
newspaper reports and subscriptions.

In order to self-certify, a member must maintain a schedule of all such reading material, specifying
the following:

 date,
 title of the publication,
 the title of the specific article and
 the number of CPD hours in respect of the reading.

The schedule must be self-certified on an annual basis and retained as part of their CPD records. It is also
recommended that the member make a copy of the relevant reading and certify that they have read it by
signing it off and retaining it with the annual reading schedule.

This interim arrangement will be reviewed at the end of the first three year cycle (2010).


Exemption to CPD

14. This directive does not apply to the members who fall in following categories.

a) ill or incapacitated so that he/she cannot perform normal work.

b) retired from whole time business.

c) career breaks.

d) members holding public offices such as Federal Ministers, Provincial
Ministers, Advisors to Ministers, Senators, MNAs, MPAs etc, during
the currency of their offices.

Verification

15. The measurement of learning activities prescribed be verifiable by documentary support duly
concurred by the CPD Committee.
Non-compliance

16. For all members, non-compliance of this Directive will be reviewed by the CPD Committee and if
deemed appropriate the matter may be referred to the Executive Committee.

Recording and Monitoring

17. CPD records are to be maintained by the CPD committee of the
Institute as follows:

a) Where CPD activities are organized by the Institute / CPD Sub-committees
i. The CPD Sub-committee will maintain a register of attendance at Institute
organized activities
ii. Within two weeks of holding the activity, the register details will be sent to the
CPD Committee

b) Where a member participates in other CPD credit programmes

i. On an annual basis the member will complete a CPD declaration form
(annexure) summarizing the details of the CPD activities in which they
participated based on the credit hours measurement prescribed in para 13

ii. The declaration should be sent to the attention of the CPD Committee.

iii. The above declaration along with supporting evidence must be received by the
CPD Committee annually by J uly 31

iv. The member will maintain evidence of the CPD activity e.g. attendance
confirmation / copy of article published

v. The evidence of the CPD activity will be attached to the declaration form
The CPD Committee will summarize the declarations and send a summary to
the CPD Directorate for updating of records

c) The CPD Directorate will be responsible for maintaining record in respect of
members participating in CPD activities and uploading latest CPD data on the
website for member’s to review.


(190th Council meeting, held on July 26, 2007)







THE INSTITUTE OF CHARTERED ACCOUNTANTS OF PAKISTAN
CPD REPORTING FORM

Name of Member:_____________________________
Membership Number: _____________
Reporting Year: ___________________
Date: _________________


____________________
Signature of member
Approved by:

_____________________
CPD Director
Date: ___/___/__






Serial No. Description of
Programme attended
Date Organized by Credit
Hours
































8.02
.


COMPULSORY ATTENDANCE OF A PRACTISING
MEMBER INSEMINARS ON INTERNATIONAL
ACCOUNTING STANDARDS, INTERNATIONAL
STANDARDS ON AUDITING AND QUALITY CONTROL

On the recommendation of the Professional Standards & Technical Advisory
Committee, the Council in its 127
th
meeting held on July 5, 1998, has decided to
issue the following directive:-

With immediate effect there would be compulsory attendance of at least one
partner of practising firm or the sole proprietor himself or an employee
member of such firms, as the case may be, in the seminars/workshops on
International Accounting Standards, International Standards on Auditing and
Quality Control arranged by the CPD Committees or Quality Control Review
Committees of the Institute.


(127the meeting of the Council-July 5,1998)


PART V
ACCOUNTING
MEMBERS' HANDBOOK
THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN



MEMBERS’ HANDBOOK





INDEX

PART V

ACCOUNTING

CONTENTS

SECTION A
STATEMENTS OF STANDARD
ACCOUNTING PARCTICES
SECTION B
STATEMENTS OF GUIDELINES
ON ACCOUNTING PRINCIPLES
AND PRACTICE
SECTION C TECHNICAL RELEASES









THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN
MEMBERS' HANDBOOK
PART V
SECTION A
STATEMENTS OF
STANDARD ACCOUNTING PRACTICES
THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN
SECTIONAL INDEX
PART V
SECTIONS A STATEMENTS OF STANDARD ACCOUNTING PRACTICE
SSAP-1 Withdrawn-(Classification of Stores and Spares
Financial Statements)
SSAP-2 Withdrawn-(Consolidated Financial Information)
MEMBERS' HANDBOOK
PART V
SECTION B
STATEMENTS OF GUIDELINES ON
ACCOUNTING PRINCIPLES AND PRACTICES
THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN
MEMBERS' HANDBOOK
PART V
SECTION C
TECHNICAL RELEASES
THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN

SECTIONAL INDEX


PART I
SECTION C TECHNICAL RELEASES

TR-1 Withdrawn -(Capitalization of Interest on Loan)
TR-2
Withdrawn-(Financial Statement Presentation - Credit
Cards)
TR-3
Withdrawn-(Depreciation Treatment in Tax Holiday
Companies)
TR-4
Withdrawn-(Gratuity - Provision in the Accounts of
Company)
TR-5
IASB Standards-Council's Statement on Applicability
(Revised - 2006)
TR-6 Fixed Assets Inventory and Records (Revised 2012)
TR-7 Withdrawn-(Revaluation of Fixed Assets)
TR-8
Clarification Regarding Basis of Calculation of Workers'
Profit Participation Fund (Reformatted 2004)
TR-9
Withdrawn-(Treatment of Post-dated Cheques or
Promissory Notes )
TR-10 Withdrawn-(Deferred Taxation)
TR-11
Withdrawn - (Depreciation on Idle Property, Plant and
Equipment -Reformatted 2004)
TR-12 Withdrawn-(Debt Extinguishment)
TR-13 Withdrawn-(Accounting for Compensated Absences)
TR-14 Withdrawn-(Revaluation of Fixed Assets-Accounting
TR-15
Withdrawn - (Bonus Shares-Accounting Treatment
Reformatted 2004)

SECTIONAL INDEX

PART I
SECTION C TECHNICAL RELEASES

TR-16
Withdrawn-(Pending Litigation Settled in Favour of Client
After the Balance Sheet date).
TR-17
Withdrawn-(Finished Pieces of Equipment held by
Manufacturer for Customers)
TR-18 Withdrawn-(Good Accounting Software)
TR-19
Withdrawn -Excise Duty-Accounting Treatment
(Reformatted2000)
TR-20
Withdrawn -Accounting for Expenditure During
Construction Period
TR-21
Withdrawn - (Date of Commencement of Commercial
Production -Reformatted-2000)
TR-22 Book Value per Share (Revised - 2002)
TR-23
Withdrawn-(Investments Valuation -Application of Lower
of Cost and Market Value)
TR-24
Withdrawn - (Exchange Risk Fee-Accounting Treatment
Reformatted 2000)
TR-25 Withdrawn-(Prudential Regulations for Banks)
TR-26 Withdrawn-(Export Quota -Accounting Treatment)
TR-27 IAS 12, Income Taxes (Revised 2012)
TR-28 Withdrawn-(Accounting of Golden Handshake)
TR-29 Carry-Over-Transactions (COT)
TR-30 Withdrawn -(Final Tax Accounting)
TR-31 Withdrawn - (Annuity Method of Depreciation)

ACCOUNTING TR-5 (Revised 2006)

IASB STANDARDS-COUNCIL’S STATEMENT ON APPLICABILITY

1. THE ISSUE
The Institute has been a member body of the International Federation of
Accountants (IFAC) ever since its establishment in 1973. In 2004 IFAC issued
seven Statements of Membership Obligations (SMOs) and subject matter of
one of them i.e. SMO 7 is ‘International Financial Reporting Standards
(IFRSs) issued by the International Accounting Standards Board (IASB). Being
a member body of IFAC it is the Institute’s obligation to comply with this
statement which requires that all member bodies should use their best
endeavors:

(a) To incorporate the requirements of IFRSs in their national accounting
requirements, or where the responsibility for the development of
national accounting standards lies with third parties, to persuade those
responsible for developing those requirements that general purpose
financial statements should comply with IFRSs, or with local accounting
standards that are converged with IFRSs, and disclose the fact of such
compliance; and

(b) To assist with the implementation of IFRSs, or national accounting
standards that incorporate IFRSs.

To date, the IASB (formerly IASC) has issued eight IFRSs (IFRS 1 to 8) and it
has made changes to various International Accounting Standards (IASs) that
were issued by its predecessor body International Accounting Standards
Committee. In Pakistan, almost all of the IASs (except for IAS-29 and IAS-
41) have been adopted and notified by the SECP on the recommendation of the
Institute, while the remaining standards are in the process of adoption. The
Council has also decided to gradually adopt all IFRSs for the use of public
interest entities.
ACCOUNTING TR-5 (Revised 2006)

While the Institute has been pursuing the objective of adoption and use of
international standards for the preparation of general purpose financial
statements over the years, it is also cognizant of the difficulties faced by small
and medium entities (SMEs) for complying with full set of IFRSs that have been
made applicable for listed companies. In order to address the needs of the
SMEs, the Council of the Institute had initiated a project to develop a separate
set of standards for such entities in line with similar efforts in various other
countries. Based on the work conducted and recommendations made by
various committees working on this project for last two years, the Council is
pleased to lay down this framework of accounting standards, including the two
SME standards that should be complied with by the members of the Institute
while expressing an opinion on the financial statements of SMEs.


2. COUNCIL’S DIRECTIVE

2.1 The Council wishes to draw the attention of all members to paragraphs 5,
8 and 9 of the revised Preface to International Financial Reporting
Standards which read as under: -

“5. All Standards and Interpretations issued under previous Constitutions
continue to be applicable unless and until they are amended or
withdrawn. The International Accounting Standards Board may amend
or withdraw International Accounting Standards and SIC
Interpretations issued under previous Constitutions of IASC as well as
issue new Standards and Interpretations.

When the term IFRSs is used in this Preface, it includes standards and
interpretations approved by the IASB, and International Accounting
Standards (IASs) and SIC Interpretations issued under previous
Constitutions.
ACCOUNTING TR-5 (Revised 2006)
8. IFRSs set out recognition, measurement, presentation and disclosure
requirements dealing with transactions and events that are important in
general purpose financial statements. They may also set out such
requirements for transactions and events that arise mainly in specific
industries. IFRSs are based on the Framework, which addresses the
concepts underlying the information presented in general purpose
financial statements. The objective of the Framework is to facilitate
the consistent and logical formulation of IFRSs. The Framework also
provides a basis for the use of judgement in resolving accounting
issues.

9. IFRSs are designed to apply to the general purpose financial
statements and other financial reporting of all profit-oriented entities.
Profit-oriented entities include those engaged in commercial, industrial,
financial and similar activities, whether organized in corporate or in
other forms. They include organizations such as mutual insurance
companies and other mutual cooperative entities that provide dividends
or other economic benefits directly and proportionately to their
owners, members or participants. Although IFRSs are not designed to
apply to not-for-profit activities in the private sector, public sector or
government, entities with such activities may find them appropriate.”

2.2 The Council desires to direct all members to ensure that in accordance
with the obligations undertaken by the Institute the auditor, while
expressing an opinion on financial statements, should satisfy himself that
they do comply with IASs/IFRSs in all material respects and that in the
event of any departure from or inconsistency with such standards, the
auditors’ report should contain suitable qualification. It should however
be emphasized that IASs/ IFRSs do not override the local statutory
provisions under Companies Ordinance, 1984 and the disclosure
requirements under the Fourth and Fifth Schedules. Compliance with
IASs/IFRSs shall be mandatory in so far as such standards are not
inconsistent with local regulations or standards, directives or
pronouncements issued by this Institute.
ACCOUNTING TR-5 (Revised 2006)

2.3 The Council is conscious of the present set of circumstances prevailing in
Pakistan, in relation to compliance with some of the IASs / IFRSs and in
view thereof has decided that for auditors of all companies while
expressing an opinion on financial statements the compliance with the
following standards shall, until notified otherwise, not be deemed to be
mandatory:

IAS 29
IAS 41
IFRS 1, 4, 7 and 8

2.4 Applicability of Accounting and Financial Reporting Standards for
Medium-Sized Entities and Small-Sized Entities

2.4.1 The Institute has developed and the Council in its meeting held
on July 28, 2006 has approved two separate sets of accounting
and financial reporting standards for Medium-Sized Entities
(MSEs) and Small-Sized Entities (SSEs). These standards will
be called as ‘Accounting and Financial Reporting Standards for
Medium-Sized Entities and Small Sized Entities’.

2.4.2 The Institute directs its members that while expressing an
opinion on financial statements of MSEs or / SSEs (whichever
is applicable) they shall ensure compliance with the Accounting
and Financial Reporting Standards for MSEs or / SSEs.

2.4.3 Entities qualifying as MSE or SSE are defined below:
ACCOUNTING TR-5 (Revised 2006)

QUALIFYING ENTITIES

Medium-Sized Entity (MSE)

A Medium-Sized Entity (MSE) is an entity that:

a) is not a listed company or a subsidiary of a listed company;
b) has not filed, or is not in the process of filing, its financial
statements with the Securities and Exchange Commission of
Pakistan or other regulatory organisation for the purpose of
issuing any class of instruments in a public market;

c) does not hold assets in a fiduciary capacity for a broad group
of outsiders, such as a bank, insurance company, securities
broker/dealer, pension fund, mutual fund or investment banking
entity;

d) is not a public utility or similar entity that provides an essential
public service;

e) is not a economically significant entity on the basis of criteria as
defined below; and

f) is not a Small-Sized Entity (SSE) as defined below.

Economically Significant Entity

An entity is considered to be economically significant if it has:

(i) turnover in excess of Rs. 1 billion, excluding other income;

(ii) number of employees in excess of 750;
ACCOUNTING TR-5 (Revised 2006)

(iii) total borrowings (excluding trade creditors and accrued
liabilities) in excess of Rs. 500 million.

In order to be treated as economically significant any two of the
criteria mentioned in (i), (ii) and (iii) above have to be met. The
criteria followed will be based on the previous year’s audited
financial statements. Entities can be delisted from this category
where they do not fall under the aforementioned criteria for two
consecutive years.
Small-Sized Entity (SSE)

A Small-Sized Entity (SSE) is an entity that:

(i) has paid up capital plus undistributed reserves (total equity
after taking into account any dividend proposed for the
year) not exceeding Rs.25 million; and

(ii) has annual turnover not exceeding Rs.200 million, excluding
other income.

In order to qualify as a Small-Sized Entity, both of the above
mentioned-conditions must be satisfied.

Effective Date

2.4.4 Medium-Sized and Small-Sized Entities in respect of their
annual financial statements shall apply the Accounting and
Financial Reporting Standards for accounting periods beginning
on or after July 1, 2006.

2.5 The Institute further directs its members that while expressing an opinion
on financial statements of entities that do not qualify to be treated as MSE
or SSE as per the definition given in paragraphs 2.4.3 above (except for
public utility entities or similar entities
ACCOUNTING TR-5 (Revised 2006)

that provide an essential public service or regulatory agencies that do not
fall under the jurisdiction of Securities and Exchange Commission of
Pakistan (SECP), they shall ensure compliance with the International
Accounting Standards (IASs)/ International Financial Reporting
Standards (IFRSs) as adopted by the Council and notified by the SECP
under section 234(3) of the Companies Ordinance, 1984.

2.6 Furthermore, while expressing an opinion on financial statements of public
utility entities or similar entities that provide an essential public service or
regulatory agencies that do not fall under the regulatory jurisdiction of
SECP, such entities shall ensure that accounting frameworks as
prescribed in their relevant statutes are complied with. However, where
the relevant statute is silent or does not prescribe any accounting and
financial reporting framework or treatment, the Institute recommends that
such entity shall comply with IASs/IFRSs as applicable.

2.7 This statement is and shall be deemed to be a directive of the Council and
shall be applicable to any International Accounting Standard /International
Financial Reporting Standard which may be issued in future unless
otherwise specified by the Council. Non-compliance with this directive
shall be deemed to be a professional misconduct in terms of clause (3) of
Part 4 of Schedule I to the Chartered Accountants Ordinance, 1961.

(186
th
meeting of the Council – November 8, 2006)

ACCOUNTING TR – 6 (Revised 2012)


FIXED ASSETS INVENTORY AND RECORDS

1. THE ISSUE

Section 230 of the Companies Ordinance, 1984 requires every company to
keep proper books of accounts with respect to all assets of the company.
Usually fixed assets comprise a significant portion of a company’s assets.
No guidance is available for companies as to how the fixed assets records
be maintained. Accordingly, it is felt that guidance may be given to our
members. Following are important aspects, which require maintenance of
proper records that help in preparation of Financial Statements:

(a) Periodic reconciliation of the underlying records of fixed assets with
the accounting records (General Ledger).
(b) Reconciliation of the periodic physical inventory of fixed assets with
fixed assets records.
(c) Determination of cost and accumulated depreciation of each item of
fixed assets at the time of retirement or disposal.

2. TECHNICAL COMMITTEE RECOMMENDATIONS

2.1 Fixed Assets records
Adequate itemized record of fixed assets should be maintained which at
minimum must indicate following particulars:

(a) detailed description of each item
(b) original cost of the item
(c) date of its acquisition
(d) classification of the item
(e) the location and/or the custodian of the item
(f) the rate of depreciation
(g) accumulated depreciation
(h) depreciation charge for the period
(i) the department / cost center / product to which the depreciation is
charged

ACCOUNTING TR – 6 (Revised 2012)


(j) date of revaluation (if any)
(k) revalued amount (if any) of the items
(l) depreciation on revalued amount
(m) accumulated depreciation on the revalued amount

2.2 Physical inventory of fixed assets

Physical verification of fixed assets should be carried out on at
regular interval and should be reconciled with the fixed assets
records and adjusted accordingly.

This revised TR – 6 (2012) supersedes the requirement as contained in TR –
6 of 2004.

(230
th
meeting of the Council – December 17, 2011)






















The TR-6 before this revision reads as under:

ACCOUNTING TR-6 (Reformatted 2004)

FIXED ASSETS INVENTORY AND RECORDS

1. THE ISSUE

Section 230 of the Companies Ordinance, 1984 requires every company to keep proper books of
accounts with respect to all assets of the company. Usually fixed assets comprise a significant
portion of a company’s assets. No guidance is available for companies as to how the fixed assets
records be maintained. Accordingly, it is felt that guidance may be given to our members.
Following are important aspects, which require maintenance of proper records that help in
preparation of Financial Statements:

(a) Periodic reconciliation of the underlying records of fixed assets with the accounting records
(General Ledger).

(b) Reconciliation of the periodic physical inventory of fixed assets with fixed assets records.

(c) Determination of cost and accumulated depreciation of each item of fixed assets at the time
of retirement or disposal.

2. TECHNICAL COMMITTEE RECOMMENDATIONS

1.1. Fixed Assets records

Adequate itemized record of fixed assets should be maintained which at minimum must
indicate following particulars:

(a) detailed description of each item
(b) original cost of the item
(c) date of its acquisition
(d) classification of the item
(e) the location and/or the custodian of the item
(f) the rate of depreciation
(g) accumulated depreciation
(h) depreciation charge for the period
(i) the department / cost center / product to which the depreciation is charged
(j) date of revaluation (if any)
(k) revalued amount (if any) of the items
(l) depreciation on revalued amount
(m) accumulated depreciation on the revalued amount

1.2. Physical inventory of fixed assets

Physical verification of fixed assets should be carried out on a cyclical basis (perpetual inventory)
according to a formal plan once in five year. The physical inventory should be reconciled with the
fixed assets records and adjusted accordingly.

(165
th
and 166
th
meeting of the Council – July 30-31 and September 17-18, 2004)
ACCOUNTING TR-8 (Reformatted 2004)

CLARIFICATION REGARDING BASIS OF CALCULATION OF
WORKERS’ PROFITS PARTICIPATION FUND

1. THE ISSUE

Opinion was sought whether Workers’ Profit Participation Fund is to be
calculated after or before charging it against the profits of the year. For
illustration purposes an example is given here under:

a) Profit of the Company : Rs.250.00
WPPF @ 5% of Rs.250.00 : Rs. 12.50

b) Profit of the Company : Rs.250.00
WPPF @ 5/105 of Rs.250.00 : Rs. 11.90

2. TECHNICAL COMMITTEE RECOMMENDATION

I. Contribution to Workers’ Profit Participation Fund is to be made on the
basis of provision contained in clause (b) of sub-section (1) of section 3 of
Companies Profits (W.P.) Act, 1968. This provides that the amount
should be 5% of its profits before charging such WPPF, as per audited
accounts. If there are no profits no contribution is payable. Hence, this is in
the nature of an appropriation of profits.

II. Accordingly, method indicated in example (a) is correct and should be
followed.


(165
th
and 166
th
meeting of the Council – J uly 30-31 and September 17-18, 2004)



ACCOUNTING TR-22 (Revised 2002)

BOOK VALUE PER SHARE

THE ISSUE

Different practices and policies are being used for computing book value (commonly
known as break-up value in Pakistan) of shares. For instance in some cases all the
assets including intangibles, deferred costs and fictitious assets are included in
considering the book value without regard to their recoverability. In some other cases,
intangibles are excluded from the shareholders’ equity. Practices also vary regarding
adjustment of contingent and other losses.

TECHNICAL COMMITTEE RECOMMENDATIONS

Book value per share in the equity capital of the company is the amount each share is
worth on the basis of carrying value per balance sheet, prepared in accordance with a
framework of recognized accounting standards. Such standards provide that:-

(a) An asset is a resource controlled by the enterprise as a result of past events and
from which future economic benefits are expected to flow to the enterprise.

(b) A liability is a present obligation of the enterprise arising from past events, the
settlement of which is expected to result in an outflow from the enterprise of
resources embodying economic benefits.

Computation of Book Value Per Share

Book value per share is computed by dividing shareholders’ equity with the number of
shares issued. Shareholders’ equity includes:-

a) Paid up capital

b) Revenue reserves and retained earnings, (less accumulated losses if any).
ACCOUNTING TR-22 (Revised 2002)

c) Capital reserves

Where the auditors have issued a qualified report and the qualification has been
quantified in monetary terms, that amount should be deducted from equity.

Where the qualification is not quantified then the members issuing a certificate
regarding book value should mention this fact in the certificate.

d) Surplus created as a result of revaluation of fixed assets.

If the balance sheet of an entity includes balance of surplus on revaluation, the
book value per share should be computed separately both, including and
excluding such surplus, to enable comparability with those entities where fixed
assets have not been revalued.

The book value for any specific purposes in accordance with any statute would have to
be computed per requirements or criteria laid down in that respect by the concerned
regulatory agency or as set out in the relevant law.


(151
st
meeting of the Council – April 26-27, 2002)




ACCOUNTING TR-27 (Revised 2012)


IAS-12, INCOME TAXES (REVISED 2000)

1.0 THE ISSUE

IAS-12, Income Taxes (Revised) issued by IASC has become effective for
the accounting periods beginning on or after J anuary 1, 2002. It is felt that
guidance is required on the applicability of deferred taxation where a
company has brought forward tax losses or its sources of income are
subject to deduction or collection of tax and the said deduction or
collection is treated as full and final tax liability for the purposes of
assessment under the Income Tax Ordinance 2001. It is therefore,
proposed to issue the following as a guidance to the members on the
applicability of IAS 12 (Revised) in Pakistan in relation to the afore-
mentioned situations.

TECHNICAL COMMITTEE RECOMMENDATIONS

2.0 DEFERRED TAXATION

2.1 The deferred tax accounting does not apply to those companies whose
entire income is subject to deduction of tax at source that is taken as a
final tax liability (under any provision of the Income Tax Ordinance,
2001), as there will be no temporary differences.

2.2 Difficulty arises in case of those companies that have a portion of income
subject to deduction or collection of tax and the said deduction or
collection is treated as full and final tax liability for the purposes of
assessment under the Income Tax Ordinance 2001 while the remaining
portion of the income attracts assessment under normal provisions of the
Income Tax Ordinance, 2001. For instance, temporary differences are
likely to arise on that portion of profit, which represents non-supplies. If
the ratio between supplies remains the same year after year, it would be
easy to calculate effect of temporary differences but since this ratio is not
expected to be the same year after year, effect of temporary differences
cannot be calculated with accuracy. In such instance, a reasonable
estimate for sales relating to non-supplies should be made for the future
years and the deferred tax liability provided accordingly.

ACCOUNTING TR-27 (Revised 2012)

2.3 However, if it is not practicable to develop a reasonable estimate for
calculation of deferred tax liability / asset then an entity should evaluate
the expectation of future turnover by taking into consideration the
turnover trend of at-least three years (including the current year) and
recognize and provide deferred tax liability accordingly. If the pattern of
supplies and non-supplies remains same in the future also then the
company should recognize and provide deferred tax for all temporary
differences that could be attributed to non-supplies

2.4 A practical example on the application of Deferred Tax is enclosed
assuming that the ratio between non-supplies and supplies is 4:6.

3.0 TAX LOSSES

3.1 In case in a particular year, current tax liability is calculated under
provisions of Section 113 due to taxable loss the effect of temporary
differences should be calculated and deferred tax liability/ asset should be
recognized.

3.2 In Pakistan, normally the tax losses are assessed months or even years
after the balance sheet date. While ascertaining the deferred tax asset on
the balance sheet date, the loss for the current year

3.3 A deferred tax asset should be recognized for the carry forward of unused
tax losses and unused tax credits (as allowed under the provisions of the
Income Tax Ordinance, 2001) to the extent that it is probable that future
taxable profit will be available against which the unused tax losses and
unused tax credits can be utilized.








ACCOUNTING TR-27 (Revised 2012)


4.0 EXAMPLE

Equipment costing Rs.2,000,000 was purchased during 20A. Capital
expenditure budget reflects following additions:

20B 700,000
20C 800,000
20D 900,000
20E 1,000,000

Entity's revenue includes 60% sales that are subject to collection/
deduction of tax.
Tax Rate 35%
Tax Depreciation 25%
WDV Life 10 Years
Depreciation Policy Straight Line

4.1 ACCOUNTING NBV


Year Cost Depreciation NBV
Beginning Additions End of Beginning For the End of
Of Year Year of Year Year Year

20A 2,000,000 2000,000 200,000 200,000 1,800,000
20B 2,000,000 700,000 2700,000 200,000 270,000 470,000 2,230,000
20C 2,700,000 800,000 3500,000 470,000 350,000 820,000 2680,000
20D 3,500,000 900,000 4400,000 820,000 440,000 1,260,000 3140,000
20E 4400,000 1000,000 5400,000 1260,000 540,000 1,800,000 3600,000









ACCOUNTING TR-27 (Revised 2012)

4.2 DEPRECIATION PER ACCOUNTS

Year
On
Original On On On On Total
Cost Additions Additions Additions Additions
20B 20C 20D 20E
2000,000 700,000 800,000 900,000 1000,000 5,400,000

20A 200,000 200,000
20B 200,000 70,000 270,000
20C 200,000 70,000 80,000 350,000
20D 200,000 70,000 80,000 90,000 440,000
20E 200,000 70,000 80,000 90,000 100,000 540,000

4.3 TAX WDV

Year Cost Depreciation
Beginning Addition End of BeginningFor the End of NBV
Of year Year Of year Year Year

20A 2,000,000 2,000,000- 500,000500,000 1,500,000
20B 2,000,000 700,000 2,700,000500,000 550,0001,050,000 1,650,000
20C 2,700,000 800,000 3,500,0001,050,000 612,5001,662,500 1,837,500
20D 3,500,000 900,000 4,400,0001,662,500 684,3752,346,875 2,053,125
20E 4,400,000 1,000,0005,400,0002,346,875 763,2813,110,156 2,289,844

4.4 TAX DEPRECIATION

Year
On
Original On On On On
Cost Additions Additions Additions Additions Total
20B 20C 20D 20E
2,000,000 700,000 800,000 900,000 1,000,000 5,400,000
20A 500,000 500,000
20B 375,000 175,000 550,000
20C 281,250 131,250 200,000 612,500
20D 210,938 98,437 150,000 225,000 684,375
20E 158,203 73,828 112,500 168,750 250,000 763,281
ACCOUNTING TR-27 (Revised 2012)

4.5 TEMPORARY DIFFERENCES


Year NBV per
Tax
WDV Cumulative Increase
Non-
Supplies Provision Cumulative
Accounts Temporary
In
Temporary Temporary @ 35% Provision
Difference Difference Difference
@ 40%
20A 1,800,000 1,500,000 300,000 300,000 120,000 42,000 42,000
20B 2,230,000 1,650,000 580,000 280,000 112,000 39,200 81,200
20C 2,680,000 1,837,500 842,500 262,500 105,000 36,750 117,950
20D 3,140,000 2,053,125 1,086,875 244,375 97,750 34,213 152,163
20E 3,600,000 2,289,844 1,310,156 223,281 89,312 31,259 183,422

4.6 As per the Revised IAS 12, deferred taxation should be recognized each
year using the balance sheet liability method i.e. a provision of Rs. 42,000
(being 35% of 40% Rs.300,000) would be required at the end of 20A and
so on. A total of Rs. 183,422 would be recognized as deferred tax liability
from year 20A to year 20E assuming that there would be no reversals
during this period.

(230
th
meeting of the Council held on December 17, 2011)

















The R-27 before this revision reads as under:

ACCOUNTING TR-27 (REVISED 2003)
IAS-12, INCOME TAXES
1.0 IAS-12, Income Taxes (Revised) issued by IASC has become effective for the accounting periods
beginning on or after J anuary 1, 2002. It is felt that guidance is required on the applicability of
deferred taxation where a company has brought forward tax losses or its sources of income are
subject to deduction or collection of tax and the said deduction or collection is treated as full and
final tax liability for the purposes of assessment under the Income Tax Ordinance 2001. It is
therefore, proposed to issue the following as a guidance to the members on the applicability of IAS
12 (Revised) in Pakistan in relation to the afore-mentioned situations.

2.0 APPLICATION OF DEFERRED TAXATION

2.1 The deferred tax accounting does not apply to those companies whose entire income is
subject to deduction of tax at source that is taken as a final tax liability (under any
provision of the Income Tax Ordinance, 2001), as there will be no temporary differences.

2.2 Difficulty arises in case of those companies that have a portion of income subject to
deduction or collection of tax and the said deduction or collection is treated as full and
final tax liability for the purposes of assessment under the Income Tax Ordinance 2001
while the remaining portion of the income attracts assessment under normal provisions of
the Income Tax Ordinance, 2001.

For instance, temporary differences are likely to arise on that portion of profit, which
represents non-supplies. If the ratio between supplies remains the same year after year, it
would be easy to calculate effect of temporary differences but since this ratio is not
expected to be the same year after year, effect of temporary differences cannot be
calculated with accuracy. In such instance, a reasonable estimate for sales relating to
non-supplies should be made for the future years and the deferred tax liability provided
accordingly.

2.3 However, if it is not practicable to develop a reasonable estimate for calculation of
deferred tax liability / asset then an entity should evaluate the expectation of future
turnover by taking into consideration the turnover trend of at-least three years (including
the current year) and recognize and provide deferred tax liability accordingly. If the
pattern of supplies and non-supplies remains same in the future also then the company
should recognize and provide deferred tax for all temporary differences that could be
attributed to non-supplies.

2.4 A practical example on the application of Deferred Tax is enclosed assuming that the
ratio between non-supplies and supplies is 4:6.



ACCOUNTING TR-27 (REVISED 2003)


3.0 TAX LOSSES

3.1 In case in a particular year, current tax liability is calculated under provisions of Section
113 due to taxable loss the effect of temporary differences should be calculated and
deferred tax liability/ asset should be recognized.

3.2 In Pakistan, normally the tax losses are assessed months or even years after the balance
sheet date. While ascertaining the deferred tax asset on the balance sheet date, the loss
for the current year should be based on the estimated amount of loss that is likely to be
assessed by the tax authorities.

3.3 A deferred tax asset should be recognized for the carry forward of unused tax losses and
unused tax credits (as allowed under the provisions of the Income Tax Ordinance, 2001)
to the extent that it is probable that future taxable profit will be available against which
the unused tax losses and unused tax credits can be utilized.

4.0 EXAMPLE

Equipment costing Rs.2,000,000 was purchased during 20A. Capital expenditure budget reflects
following additions:

20B 700,000
20C 800,000
20D 900,000
20E 1,000,000

Entity's revenue include 60% sales that are subject to collection/ deduction of tax.

Tax Rate 35%
Tax Depreciation 25% WDV
Life 10 Years
Depreciation Policy Straight Line

ACCOUNTING NBV

Year Cost Depreciation NBV
Beginning Additions End of Beginning For the End of
of Year Year of Year Year Year

20A 2,000,000 2000,000 200,000 200,000 1,800,000
20B 2,000,000 700,000 2700,000 200,000 270,000 470,000 2,230,000
20C 2,700,000 800,000 3500,000 470,000 350,000 820,000 2680,000
20D 3,500,000 900,000 4400,000 820,000 440,000 1,260,000 3140,000
20E 4400,000 1000,000 5400,000 1260,000 540,000 1,800,000 3600,000


ACCOUNTING TR-27 (REVISED 2003

DEPRECIATION PER ACCOUNTS
Year On Original On On On On Total
Cost Additions Additions Additions Additions
20B 20C 20D 20E
2000,000 700,000 800,000 900,000 1000,000 5,400,000

20A 200,000 200,000
20B 200,000 70,000 270,000
20C 200,000 70,000 80,000 350,000
20D 200,000 70,000 80,000 90,000 440,000
20E 200,000 70,000 80,000 90,000 100,000 540,000

X WDV
Year Cost Depreciation
Beginning Addition End of Beginning For the End of NBV
of year Year of year Year Year

20A 2,000,000 2,000,000 - 500,000 500,000 1,500,000
20B 2,000,000 700,000 2,700,000 500,000 550,000 1,050,000 1,650,000
20C 2,700,000 800,000 3,500,000 1,050,000 612,500 1,662,500 1,837,500
20D 3,500,000 900,000 4,400,000 1,662,500 684,375 2,346,875 2,053,125
20E 4,400,000 1,000,000 5,400,000 2,346,875 763,281 3,110,156 2,289,844

TAX DEPRECIATION

Year On Original On On On On
Cost Additions Additions Additions Additions Total
20B 20C 20D 20E
2,000,000 700,000 800,000 900,000 1,000,000 5,400,000
20A 500,000 500,000
20B 375,000 175,000 550,000
20C 281,250 131,250 200,000 612,500
20D 210,938 98,437 150,000 225,000 684,375
20E 158,203 73,828 112,500 168,750 250,000 763,281









ACCOUNTING TR-27 (REVISED 2003

TEMPORARY DIFFERENCES

Year NBV per Tax WDV Cumulative Increase
Non-
Supplies Provision Cumulative
Accounts Temporary In Temporary Temporary @ 35% Provision
Difference Difference Difference
@ 40%
20A 1,800,000 1,500,000 300,000 300,000 120,000 42,000 42,000
20B 2,230,000 1,650,000 580,000 280,000 112,000 39,200 81,200
20C 2,680,000 1,837,500 842,500 262,500 105,000 36,750 117,950
20D 3,140,000 2,053,125 1,086,875 244,375 97,750 34,213 152,163
20E 3,600,000 2,289,844 1,310,156 223,281 89,312 31,259 183,422

As per the Revised IAS 12, deferred taxation should be recognized each year using the balance
sheet liability method i.e. a provision of Rs. 42,000 (being 35% of 40% Rs.300,000) would be
required at the end of 20A and so on. A total of Rs. 183,422 would be recognized as deferred tax
liability from year 20A to year 20E assuming that there would be no reversals during this period.

5.0 DEFERRED TAX RELATING TO LEASING COMPANIES

Another issue relates to leasing companies only. SECP Circular No. 16 of 1999 required leasing
companies to transfer to a capital reserve, amounts equivalent to their deferred tax liability during
the period 1 J uly 1998 to 30 J une 2003. The circular was issued to ensure compliance with IAS 12
by the time it became applicable. However, the circular has not specified the treatment of this
capital reserve so created when IAS 12 becomes applicable.

Appropriate treatment would be to treat it as a change in accounting policy in accordance with IAS
8 Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies. In
preparation of financial statements beginning on or after 1 J uly 2003.

This would require:

 recognition of deferred tax liability as at J une 30, 2002 as an adjustment of opening
retained earnings;

 charge of deferred tax liability for 2002-2003 to 2003-2004 financial statements (i.e. to
restate comparative figures) presented for comparison purposes and charge deferred tax
liability for 2003-04 to profit and loss account ; and

 transfer capital reserve for deferred tax to retained earnings in 2003-2004 financial
statements.

ACCOUNTING TR-29

CARRY-OVER-TRANSACTIONS (COT)

THE ISSUE

The Karachi Stock Exchange (Guarantee) Limited (KSE) had enforced Carry-Over
Transactions Regulations (“the Regulations”) with effect from 11 January 1993. These
regulations were introduced to enhance the stock market liquidity and parallel
regulations were also enforced by the other stock exchanges of the country. Following
paragraphs summarise the mechanism of COT along with its accounting treatment
generally being followed.

1. Carry over transaction, as defined in section 2(e) of the Regulations, means the
combination of two transactions taking place simultaneously and settled in two
clearings in sequence. According to section 4(iii) of the Regulations, the buyer
of shares in current clearing period (“the first transaction”) would become seller
of the same shares in the immediate next clearing period (“the second
transaction”) and the seller of shares in current clearing period (“the first
transaction”) would become buyer of the same shares in the immediate next
clearing period (“the second transaction”).

2. Buyer / Seller enters into the first transaction on Friday after normal trading
hours and its settlement takes place on succeeding Wednesday through Clearing
House of KSE along with settlements of normal transactions. Simultaneously,
seller / buyer enters into the second transaction on the same Friday and its
settlement takes place through Clearing House but on succeeding second
Wednesday. However, the contract ticket of the second transaction (which is
prepared on Friday) bears the date of succeeding Monday, not of Friday.
Share Price of the second transaction is marked-up and generally does not
match with the prevailing market quotes of the succeeding Monday. The
marking-up of second transaction is dependent on demand and supply of funds
in the Carry-Over Market.
ACCOUNTING TR-29

3. Paragraph 10 of International Accounting Standard 39 “Financial Instruments:
Recognition and Measurement” defines “repurchase agreement (Repo) as an
agreement to transfer a financial asset to another party in exchange for
cash or other consideration and a concurrent obligation to reacquire the
financial asset at a future date for an amount equal to the cash or other
consideration exchanged plus interest”. If we consider the series of above
two Carry-Over-Transactions as a whole, its commercial effect takes form of a
Repo in which lending / borrowing of funds against pledge of shares takes place
for one week i.e. from Wednesday to Wednesday.

4. Paragraph 13 of the IAS 18 “Revenue” states that the “revenue recognition
criteria are applied to two or more transactions together when they are
linked in such a way that the commercial effect cannot be understood
without reference to the series of transactions as a whole”. Paragraph 13
further gives an example of an enterprise that may sell goods and at the
same time enter into a separate agreement to repurchase the goods at a
later date thus negating the substantive effect of the transaction; in such
a case the two transactions are dealt with together”. However, dealing with
first and second transactions separately, revenue / expense from COT is
generally accounted for as capital gain / loss and not as interest income /
expense.

5. Paragraph 27 of IAS 39 states that “an enterprise should recognise a
financial asset or financial liability on its balance sheet when, and only
when, it becomes a party to the contractual provisions of the instrument”.
In the case of first transaction COT, generally the buyer recognises purchase of
shares as investment in its balance sheet (and not recognise a lending) without
considering the second transaction. However, simultaneousness of the second
transaction of COT does not constitute the buyer in substance a party to the
contractual provisions of the equity instrument.





ACCOUNTING TR-29

6. Paragraph 35 of IAS 39 states that “an enterprise should derecognise a
financial asset or a portion of a financial asset when, and only when,
the enterprise loses control of the contractual rights that comprise the
financial asset (or a portion of the financial asset).” Further, paragraphs 38
& 39 state that a transferor has not lost control of a transferred financial asset
and, therefore the asset is not derecognised if the transferor has the right to
reacquire the transferred asset unless either (i) the asset is readily obtainable in
the market or (ii) the reacquisition price is fair value at the time of reacquisition.
In the case of first transaction of COT, generally the seller de-recognises the
investment in shares from its balance sheet (and not recognising a borrowing)
without considering the second transaction. However, simultaneousness of the
second transaction of COT gives the seller a right to repurchase the shares at a
fixed price. Further, the respective shares are not readily obtainable in the
market on succeeding Monday because their prices are fixed in advance i.e. on
Friday.

Keeping in view the above practice and the form as well as substance of COT a
question has arisen whether COT is a Repo or not?

TECHNICAL COMMITTEE RECOMMENDATIONS

The appropriate Committee of the Institute has examined all aspects of the query
regarding Carry-Over-Transactions (COT) and is of the opinion that a Carry-Over-
Transaction is a Repo transaction as the substance of the transaction and not its form
should be considered and accordingly it should be treated as a financing transaction. in
the books of accounts.

The aforesaid clarification provides the accounting treatment for Carry-Over-
Transactions under International Accounting Standards. However for the purposes of
other statutes, the transaction would have the effect according to the relevant provisions
of that law.

(152
nd
meeting of the Council – J uly 19-20, 2002)


PART VI
AUDITING
MEMBERS' HANDBOOK
THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN



MEMBERS’ HANDBOOK





INDEX

PART VI

AUDITING

CONTENTS

SECTION A
STATEMENTS OF STANDARD
AUDITING PARCTICES
SECTION B
STATEMENTS OF AUDITING
GUIDELINES
SECTION C TECHNICAL RELEASES









THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN
MEMBERS' HANDBOOK
PART VI
SECTION A
STATEMENTS OF
STANDARD AUDITING PRACTICES
THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN


SECTIONAL INDEX





PART VI

SECTION A STATEMENTS OF STANDARD ACCOUNTING PRACTICE

SAP-1
Withdrawn-(Bank Reports for Audit Purposes)
SAP-2 Withdrawn-(Auditors’ Report and Qualification)
SAP-3 Withdrawn-(Verification of Inventories)
SAP-4 Withdrawn-(Audit Working Papers)
SAP-5
Withdrawn-(Verification of Debtors Balances-
Confirmation by Direct Communication)










THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN
MEMBERS' HANDBOOK
PART VI
SECTION B
STATEMENTS OF AUDITING GUIDELINES
THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN
SECTIONAL INDEX
PART VI
SECTIONS B STATEMENTS OF AUDITING GULDELINES
Revised Statement of Auditing Guideline No. 1 (Withdrawn)
MEMBERS' HANDBOOK
PART VI
SECTION C
TECHNICAL RELEASES
THE INSTITUTE OF
CHARTERED ACCOUNTANTS OF PAKISTAN

SECTIONAL INDEX


PART VI
SECTION C TECHNICAL RELEASES

ATR-1 Withdrawn - Only Members to sign audit documents
ATR-2
Withdrawn - (Communication - Statement on the
explanation and its clarification of the word)
ATR-3
Withdrawn - (Incoming auditors to help in clearing the
professional dues of retiring member)
ATR-4 Withdrawn - (Audit of government corporations)
ATR-5 Withdrawn - (Replying to enquiries for audit jobs)
ATR-6 Withdrawn - (Audit by ex-employees)
ATR-7
Withdrawn - (Some glaring omissions by the auditors
pointed out by Corporate Law Authority)
ATR-8
Withdrawn - (Preparation of accounts from incomplete
records and report thereon as auditors - Reformatted
2002)
ATR-9
Withdrawn - (Signing of correspondence and financial
statements by Members)
ATR-10
Withdrawn - (Communication of consent by incoming
auditors)
ATR-11
Withdrawn - (Appointment of auditors-1- Reformatted
2002)
ATR-12 Withdrawn - (Appointment of auditors-II)
ATR-13
Lien or books of accounts due to non-payment of
professional dues
ATR-14
Minimum Hourly Charge Out Rates and Minimum Fee
for Audit Work by Practicing Members (Revised 2008)
ATR-15
Withdrawn - (Qualification in auditor's report - going
concern assumption for organization formed with a
limited life)

SECTIONAL INDEX


PART VI
SECTION C TECHNICAL RELEASES

ATR-16
Acceptance of Audit Assignments by New Auditor(s) when
audit fee of existing auditor(s) is outstanding
ATR-17
Auditors' Report to the Trustees/Board of Governors/
Management Committee (Revised 2012)
ATR-18 Bank Report for audit purposes (Revised 2012)
ATR-19
Identification of Audit Engagement Partner in the Auditors'
Report on Financial Statements (Revised 2012)
ATR-20
Auditor's Reporting Responsibilities in respect of Non
Compliances with Laws or Regulations (Revised 2012)





AUDITING ATR-13


LIEN ON BOOKS OF ACCOUNTS DUE TO NON-PAYMENT OF
PROFESSIONAL DUES

Opinion was sought on the proper course of action in the following
circumstances:-

“We were appointed auditors of M/s................. for the year ended 30th June,
1984. We conducted the audit for the year 30th June 1984. We also took up the
stock taking for the year ended 30-6-1984 & 1985.

In the meantime due to non cooperation of responsible staff of M/s................. we
have communicated our inability to carry on the audit. We have incurred self cost
of Rs. 5,500/- for the time consumed on this job. In the meantime due to
mismanagement, Government has appointed an Administrator to investigate
affairs of M/s......................................

We have in our possession some books of accounts of M/s......................... we
have asked the Administrator to reimburse our out of pocket expenses. According
to law we have no lien over the books of accounts of M/s................. Whereas we
fear that if the books are returned our outstanding amount will not be paid by
them.

We shall be obliged if you please advise us the proper course to be adopted.

The following opinion was given:

Since there is no lien on books, books should be returned. Legal remedies may be
tried for the recovery of the dues.

Dated: 18-9-1985
AUDITING ATR-14 (Revised-2008)

MINIMUM HOURLY CHARGE OUT RATES AND MINIMUM FEE FOR
AUDIT ENGAGEMENTS

1. The audit engagements carry immense responsibility and which has
increased manifold in recent years. To meet the expectations of various
stakeholders, stringent regulatory requirements and ever increasing
demand to increase the level of due care, the members need to perform the
audit exercising very high degree of “professional competence.” Such work
is also required to be properly documented to support the opinion
expressed by the auditors.

2. The Council of the Institute of Chartered Accountants of Pakistan (ICAP)
has recently issued a notification making it mandatory, for the firms doing
audit of listed and public sector entities, to observe from 1 July 2009 ISQC
1, Quality Control for Firms that Perform Audits and Reviews of
Historical Financial Information and Other Assurance and Related
Services Engagements, issued by IFAC and has also notified, ISA 220
Quality Control for Audits of Historical Financial Information, ISA 230
Audit Documentation etc. These standards require extensive
documentation of audit procedures and recruitment of qualified staff.
Furthermore the minimum stipend rate for audit trainees have also
significantly increased. Hence, the cost to perform audit by the firms has
significantly increased to ensure that quality control procedures are
adequately complied with by the firms.

3. The Council of the ICAP periodically reviews and prescribes minimum
hourly rates, which it considers reasonable and compatible with the
increase in the cost to complete the engagements and quality of
professional standards to be observed by the practicing members of the
Institute. The current minimum chargeable rates as prescribed by the
Council of the Institute are shown below:
AUDITING ATR-14 (Revised-2008)

Rupees
Per man-hour
Partner 7,500
Qualified Support Staff:
Above 8 years
4 to 8 years
Below 4 years

5,000
4,000
3,000
Supervisor 2,000
Senior 1,000
Semi-Senior 750
Junior 500

4. The level of fee is to be mutually agreed between the auditor and his
client, which largely depends upon the volume of work involved and
estimated time to be incurred on the audit engagement. The Council whilst
recognizing this principle is however, of the view that there has to be a
minimum threshold of audit fee. To achieve the desired objective, the
following minimum audit fee is prescribed (which may be increased by
consent having regard to specific circumstances of an audit engagement).
Schedule of Minimum Audit Fee:
Type of entity
Minimum
Fee Rupees
Listed companies
Turnover up to 500 million

250,000
Turnover over 500 million up to 1 billion 300,000
Turnover over 1 billion up to 5 billion 500,000
Turnover above 5 billion 1,000,000

Economically Significant Entities


Turnover up to 1 billion 250,000
Turnover over 1 billion up to 5 billion 400,000
Turnover above 5 billion 800,000
Medium Sized Entities 125,000
Small Sized Entities 75,000
AUDITING ATR-14 (Revised-2008)

Notes:

i) The terms “Economically Significant Entities” (ESE), “Medium Sized
Entities”(MSE) and “Small Sized Entities” (SSE) shall have the same
meaning as defined in S.R.O.859(I)/2007 dated 21 August 2007 issued
by the Securities and Exchange Commission of Pakistan pursuant to
Section 234 of the Companies Ordinance, 1984.

ii) Considering the practical difficulties being faced by various practicing
members in the determination of audit fee, the Council has decided
that the prescribed minimum audit fee shall be charged without any
exception. However, in case of an existing audit client, the present
audit fee shall be enhanced to the aforesaid prescribed level over a
period of two years with mutual consent provided it is not less than
75% of the prescribed minimum in the first year. Nevertheless, in case
of acceptance of an audit client by a practicing member for the first
time the prescribed fee levels shall be strictly observed.

5. Minimum Audit Fee in Certain Circumstances

For audit engagements of clients in the pre- incorporation / pre-operation
stages or in case of sickness of the project or closed operations or
discontinuation of business, the prescribed minimum audit fee chargeable
by the practicing members shall be as under:

Listed Companies/
ESEs
MSEs SSEs
Minimum audit fee:
Rs.75,000
Rs.50,000 Rs. 30,000

The exception in paragraph 4(ii) above shall apply mutatis mutandis to the above
paragraph 5.

6. The minimum audit fee prescribed in paragraph 4 and 5 above is exclusive of
the below mentioned additional services to be rendered by a statutory auditor
under the Code of Corporate Governance and for any other certifications and
the professional fee for such services shall be charged separately by mutual
consent.
AUDITING ATR-14 (Revised-2008)

• Attend the Audit Committee Meetings of clients

• Issue a Review Report on Statement of Compliance with Best Practices
of Corporate Governance

• Issue Review Report on half – yearly financial statements

• Special certification required by regulators over and above normal
scope of audit

7. The minimum audit fee determined in accordance with this ATR shall not
be less than the present audit fee of an existing client.

8. In case of joint audits, fee may be shared among the auditors as may be
mutually agreed between them.

9. The fee may be reviewed annually to cover inflationary effects in costs.

10. The hourly rates and fee are exclusive of traveling and hotel expenses, out
of pocket expenses and other incidental costs which would be
reimbursable to auditors at actual.

11. In case of a religious or charitable institution or a company “not for
profit”, the practicing members may undertake to do the audit on a token
fee or on an honorary basis.

12. At the time of quality control review, the reviewer will ensure the
compliance of this ATR.

This Directive supersedes ATR-14 (Revised) issued pursuant to the Council’s
decision of 30 March, 2007 and would apply to all audit appointments made after
August 31, 2008.


(197
th
meeting of the Council held on J uly 25, 2008)
AUDITING ATR-16

ACCEPTANCE OF AUDIT ASSIGNMENTS BY NEW AUDITOR(S)
WHEN AUDIT FEE OF EXISTING AUDITOR(S) IS OUTSTANDING

THE ISSUE

Whether new auditor should accept the assignments in case the statutory audit fee
of the retiring auditor is outstanding?

THE TECHNICAL ADVISORY COMMITTEE RECOMMENDATION

A member of the Institute in practice shall be deemed to be guilty of professional
misconduct, if he accepts the appointment as auditor of an entity in case the
undisputed audit fee of another Chartered Accountant for carrying out the
statutory audit under the Companies Ordinance, 1984 or under other statutes has
not been paid.

Undisputed audit fee means the amount which has been agreed to and provided
for in the financial statements.

Members are, therefore, advised to keep the above directive of the Council in
view while accepting new assignments of audit.

(145
th
meeting of the Council - July 30, 2001)

AUDITING ATR – 17(Revised-2012)


AUDITORS’ REPORT TO THE TRUSTEES/BOARD OF GOVERNORS/
MANAGEMENT COMMITTEE

The Issue

What should be the format of the auditors’ report regarding audits of Societies,
NGOs and charity organisations?

Recommendations of the Technical Advisory Committee

As a standard format for an auditors’ report relating to audits of Societies, NGOs
and charity organisations is not prescribed in any law and as there is no provision
for maintenance of accounts and the audit of such entities either in the Trust Act,
1882 or the Societies Registration Act, 1860 therefore the Council has approved
the enclosed formats of auditors’ reports as applicable, for use in this respect.

Members are advised to follow the following formats, whichever is relevant,
according to the applicable financial reporting framework, while reporting on the
financial statements of such entities. The commonly used financial reporting
frameworks are as follows:

a) preparation of financial statements in accordance with the requirements of
the approved accounting standards as applicable in Pakistan (i.e. the
International Financial Reporting Standards); and

b) preparation of statements in accordance with another comprehensive basis
of accounting such as:

i) Receipts and disbursements basis of accounting

under the ‘receipts and disbursements basis of accounting’, revenue is
recognised when received rather than when earned, and expenses are
recognised when payments are made rather than when incurred.

ii) Receipts and expenditure basis where a receipt and expenditure
account is prepared

AUDITING ATR – 17(Revised-2012)


under the ‘receipts and expenditure basis of accounting’, revenue is
recognised when received rather than when earned, and expenses are
recognised when incurred i.e. on an accrual basis.

iii) Receipts and expenditure basis where a balance sheet is prepared

under the ‘receipts and expenditure basis of accounting’, revenue is
recognised when received rather than when earned, and expenses are
recognised when incurred i.e. on an accrual basis.

Independent auditors’ report to the trustees / board of governors /
management committee (under the financial reporting framework as in (a)
above)
We have audited the annexed balance sheet of the ------------------- as at ------------
----and the related income and expenditure account and cash flow statement
together with the notes forming part thereof (here-in-after referred to as the
financial statements for the ------ months period ended ----------/ year then ended).

It is the responsibility of the trustees / board of governors / management
committee (or other as appropriate) to establish and maintain a system of internal
control, and prepare and present the financial statements in conformity with the
approved accounting standards as applicable in Pakistan. Our responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in
Pakistan. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting policies used and significant estimates made by the
management, as well as, evaluating the overall presentation of the financial
statements. We believe that our audit provides a reasonable basis for our opinion.
AUDITING ATR – 17(Revised-2012)


In our opinion the financial statements present fairly in all material respects the
financial position of the ------------------ as at ----------------------- and of its
surplus/deficit and cash flows for the year/--------- months period then ended in
accordance with the approved accounting standards as applicable in Pakistan.

Independent auditors’ report to the trustees / board of governors /
management committee (under the financial reporting framework as in (b)
(i) and (ii) above)

We have audited the annexed receipts and disbursements account / receipts and
expenditure account of the …………… as at ……………….. together with the
notes forming part thereof (here-in-after referred to as the statement for the -------
period ended -------- / year then ended). It is the responsibility of the trustees /
board of governors / management committee (or other as appropriate) to establish
and maintain a system of internal control, and prepare and present the statement in
conformity with the cash receipts and disbursements / cash receipts and
expenditure incurred basis as described in note X to the statement. Our
responsibility is to express an opinion on these statements based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in
Pakistan. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing the
accounting policies used and significant estimates made by the management, as
well as evaluating the overall presentation of the statement. We believe that our
audit provides a reasonable basis for our opinion.

As described in note X, the statement has been prepared on the (cash receipts and
disbursements basis / cash receipts and expenditure basis) of accounting, which is
a comprehensive basis of accounting other than the generally accepted accounting
principles.

In our opinion the statement presents fairly, in all material respects, the cash
receipts and disbursement/cash receipts and expenditure of the -----------------------
for the year ended ---------------------- on the basis of accounting as described in
note X to thestatement.
AUDITING ATR – 17(Revised-2012)


Independent auditors’ report to the trustees / board of governors /
management committee (under the financial reporting framework as in (b)
(iii) above)

We have audited the annexed balance sheet of the …………… as at
……………….. and the related income and expenditure account and cash flow
statement together with the notes forming part thereof (here-in-after referred to as
the financial statements), for the ------- period ended -------- / year then ended). It
is the responsibility of the trustees / board of governors / management committee
(or other as appropriate) to establish and maintain a system of internal control,
and prepare and present the financial statements in conformity with the cash
receipts and expenditure incurred basis of preparation as described in note X to
the annexed financial statements. Our responsibility is to express an opinion on
these financial statements based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in
Pakistan. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting policies used and significant estimates made by the
management, as well as evaluating the overall presentation of the financial
statements. We believe that our audit provides a reasonable basis for our opinion.

As described in note X, the financial statements have been prepared on the cash
receipts and expenditure basis of accounting, which is a comprehensive basis of
accounting other than the generally accepted accounting principles. In our opinion
the financial statements present fairly, in all material respects, the cash receipts
and expenditure of the ----------------------- for the year ended ----------------------
on the basis of accounting as described in note X to thestatements.

This revised ATR – 17 (2012) supersedes the requirements as contained in
revised ATR – 17 (2004) and is applicable for audits of financial
statement/statements for periods beginning on or after July 1, 2011.
However, earlier application is encouraged.

(230
th
Meeting of the Council – December 17, 2011)

The ATR-17 before this revision reads as under:

AUDITING ATR – 17(Revised-2004)

AUDITORS’ REPORT TO THE TRUSTEES / BOARD OF GOVERNORS / MANAGEMENT
COMMITTEE

The Issue

What should be the format of the auditors’ report in case of audit of Societies, NGOs & Charity
Organizations?

Technical Advisory Committee Recommendations

As there is no standard format of auditors’ report and also there is no provision for maintenance of accounts
and audit of these societies either in the Trust Act, 1882 or Societies Registration Act, 1860 the Council has
approved the enclosed format of auditors’ report.

Members are advised to follow the following formats whichever is applicable while reporting on the financial
statements of such organizations: -

AUDITORS’ REPORT TO THE
1
TRUSTEES / BOARD OF GOVERNORS / MANAGEMENT
COMMITTEE

(ACCRUAL BASIS OF ACCOUNTING)

We have audited the annexed balance sheet of the ------------------- as at ----------------and the related income
and expenditure account and cash flow statement together with the notes forming part thereof (here-in-after
referred to as the financial statements for the year then ended).

It is the responsibility of the trustees / board of governors / management committee to establish and maintain
a system of internal control, and prepare and present the financial statements in conformity with the approved
accounting standards as applicable in Pakistan. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting policies used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audit provides a reasonable basis for our opinion.

In our opinion the financial statements present fairly in all material respects the financial position of the ------
------------ as at ----------------------- and of its surplus/deficit and cash flow for the year then ended in
accordance with the approved accounting standards as applicable in Pakistan.

Date _____________ Signature
[Name(s) of Auditors]
Place _____________

Note: 1. Select wherever is appropriate.


AUDITING ATR-17 (Revised-2004)


AUDITORS’ REPORT TO THE
1
TRUSTEES / BOARD OF GOVERNORS / MANAGEMENT
COMMITTEE

(OTHER THAN ACCRUAL BASIS OF ACCOUNTING)

We have audited the annexed the receipt and disbursement account / receipt and expenditure account of the
…………… as at ……………….. together with the notes forming part thereof (here-in-after referred to as
the statement(s) for the year then ended).

It is the responsibility of the trustees / board of governors / management committee to establish and maintain
a system of internal control, and prepare and present the statement(s) in conformity with the cash receipt and
disbursement / cash receipt and expenditure incurred basis as described in Note X to the accounts. Our
responsibility is to express an opinion on these statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the statements are free of
material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and
disclosures in the statements. An audit also includes assessing the accounting policies used and
significant estimates made by management, as well as evaluating the overall presentation of the
statements. We believe that our audit provides a reasonable basis for our opinion.

As described in Note X, the statement(s) have been prepared on the (cash receipts and disbursements basis /
cash receipt and expenditure basis, etc.) of accounting, which is a comprehensive basis of accounting other
than generally accepted accounting principles.

In our opinion the statement(s) present(s) fairly, in all material respect(s), the cash receipt and disbursement
or cash receipt and expenditure, etc. of the ----------------------- for the year ended ---------------------- on the
basis of accounting described in Note X to the statement.


Date ______________
Signature
[Name(s) of Auditors]
Place .___________

Note: 1. Select wherever is appropriate.

(163
rd
meeting of the Council held on April 29-30 and May 14,2004)
AUDITING ATR – 18(Revised-2012)


BANK REPORTS FOR AUDIT PURPOSES

1.0 The Issue

1.1 To seek standardisation of auditing practice when approaching banks for
information required for audit purposes.

2.0 Explanation

2.1 This release deals with request by auditors to bankers’ of the client for
confirmation of balances and providing other information and prescribing
a standard letter of request.

2.2 The practice of obtaining independent confirmations or reports from banks
is essential for the proper discharge of auditors' responsibilities. Bank
reports assist auditors to verify existence of liabilities and the existence,
ownership and proper custody of assets; they also provide other
information relevant to the audit of financial statements.

3.0 Technical Committee Recommendation

3.1 The Committee recommends the following standard format for the letter
of request to be sent to banks and also the appropriate guidance in this
regard to be used by the auditors while verifying the bank balances.

Standard Letter of Request

3.2 The information which is usually required from banks and financial
institutions for audit purposes is substantially the same for most audits and
can be obtained in a standard letter of request which would facilitate a
prompt response from banks and financial institutions. The use of such a
letter, designed to cover all normal banking activities and to facilitate
extraction of information from banking records should enable prompt
response to these requests. It should also enable auditors to make further
enquiries from banks if the replies received require a clarification.


AUDITING ATR – 18(Revised-2012)

3.3 This technical release, therefore, requires auditors to adopt the practice of
requesting information from banks and financial institutions in the form of
a standard letter as set out in Appendix-I. It also requires that the standard
letter of request should be used in accordance with the procedures laid
down in paragraph 5 below. Appendix-II to this release sets out
explanations of items that are incorporated in, or specifically excluded
from, the standard letter. It is stressed that this standard letter is for audit
purposes only.

4.0 Authority to Disclose

Banks and financial institutions will require explicit written authority of
their customers to disclose information requested by auditors. For the sake
of convenience, it is proposed that the authority should be evidenced by
the customer's counter signature on the standard letter of request. In the
case of joint accounts, the authority must be given in the standard letter of
request by all parties to the account. In the case of security lodged by a
third party, its authority for disclosure will also have to be obtained and
produced to the bank.

5.0 Procedures

5.1 The following procedures should be adopted by the auditors in connection
with the standard letter of request for a bank report:

a) The standard letter as set out in Appendix-I to this release should be
sent on each occasion by the auditor on his own letterhead to the
Manager of each branch of a bank with which it is known that the
client holds an account or has dealt with since the end of the previous
accounting period.

b) The client's authority to permit disclosure should be obtained on the
standard letter of request itself before the letter is sent out.

c) The standard letter of request should preferably reach the branch
manager on or before the date of the client's financial year/period end.


AUDITING ATR – 18(Revised-2012)


d) The dates to be entered on the standard letter are normally the closing
dates of:

i) The client's accounting reference period for which the report is
requested; and
ii) the client's previous accounting reference period for which full
bank report was compiled. If, exceptionally, audited financial
statements are produced other than for an accounting reference
period, alternative dates should be substituted.

e) In reviewing the bank's reply, it is important for auditors to check that
the bank has answered all questions in full.

f) It will be necessary to obtain confirmation as to the authenticity of any
letter not received directly from the bank branch concerned and of any
letter received from a bank without a request having previously been
made. It is essential that in both cases, the auditors obtain confirmation
from the branch concerned that the report has been prepared in
compliance with the terms of the standard letter.

g) If no reply is received from a bank within two weeks after the original
request was made or two weeks after the closing of the year whichever
is earlier, the auditor should send a "First Reminder" so marked on the
standard letter of request.

h) After the expiry of a further period of one week from the date of
sending out the "First Reminder", if no reply is received, the auditor
may consider sending a "Second Reminder" so marked on the standard
letter of request if deemed appropriate by him.

5.2 The Standard letter should be used in its complete form for all audit
requests and in accordance with the above procedures in respect of
financial statements for the relevant period and should not be altered to
reduce the minimum contents prescribed. In certain circumstances,
supplementary requests for additional information may be required for
audit purposes. The letter containing such supplementary requests should
be submitted to the bank, as far as possible, at the same time as the
standard letter.

AUDITING ATR – 18(Revised-2012)


5.3 The auditor should require the banks to send responses to the
confirmations, directly to the auditor address.

5.4 If the responses by bank to the confirmations sent to them are received via
e-mail or facsimile, a telephone call shall be made to verify these
responses. Documentation of the telephone call should, depending on the
circumstances, ordinarily indicate:

 the name of the person spoken with;
 the name of the person who completed the confirmation;
 that such person was authorised and knowledgeable to respond;
 that there were no changes to the confirmations since the date they
were provided electronically/via facsimile;
 verification of certain key client-specific information contained in the
response; and
 conclusion that the source and contents of the response were verified
without exception and that the response was received from an
authorised individual.

This revised ATR – 18 (2012) supersedes the requirement as contained in
ATR – 18 and is applicable for audits of financial statement/statements for
periods beginning on or after J uly 1, 2011. However, earlier application is
encouraged.


(230
th
meeting of the Council held on December 17, 2011)











AUDITING ATR – 18(Revised-2012)


APPENDIX-I

The Manager
(Bank)
(Branch)
Dear Sir,

(Clients's Name)

STANDARD REQUEST FOR BANK REPORT FOR AUDIT PURPOSES

In accordance with your above-named customer's instructions given hereon,
please send DIRECT to us at the above address, as auditors of your customer, the
following information relating to their affairs at your branch as at the close of
business on and, in the case of items 2, 4 and 12 during the period since the end of
the previous accounting period.

Please state against each item any factors which may limit the completeness of
your reply; if there is nothing to report, state 'None'.

It is understood that any replies given are in strict confidence, for the purposes of
audit.

Information Requested

BANK ACCOUNTS

(1) Full titles of all accounts together with the account numbers and balances
therein, including NIL balances:

(a) where your customer's name is the sole name in the title;

(b) where your customer's name is joined with that of other parties;

(c) where the account is in a trade name.


AUDITING ATR – 18(Revised-2012)


NOTES

(i) Where the amount is subject to any restriction (e.g. a garnishee order or
arrestment) or exchange control considerations (e.g. 'blocked account')
information regarding nature and extent of the restriction should be stated.

(ii) where the authority upon which you are providing this information does
not cover any amounts held jointly with other parties, please refer to your
customer in order to obtain the requisite authority of the other parties with
a copy to us.

(2) Full titles and dates of closure of all accounts closed during the period.

(3) The separate amounts accrued but not charged or credited as at the above date,
of

(a) markup/interest; and
(b) provisional charges (including commitment fees)

(4) The amount of markup/interest charged during the period if not specified
separately in the customer's statement of account.

(5) Particulars (i.e. date, type of document and accounts covered) of any written
acknowledgement of set-off, either by specific letter of set-off, or incorporated
in some other document or security.

FACILITIES

(6) Details of leasing facilities, loans, overdrafts, cash credit facilities (including
standby facilities), and associated guarantees / indemnities specifying agreed
limits, unused facilities, markup/interest terms, overdue rentals / installments
and in the case of term loans, date for repayment or review.

SECURITIES

(7) (a) In respect of facilities, contingent liabilities and derivatives and
commodity trading, please give:
AUDITING ATR – 18(Revised-2012)


(i) Details of any security formally charged in favour of the bank,
including the date and type of charge, (e.g. pledge, hypothecation etc.)

(ii) Particulars of any undertaking to assign any assets to the bank. If a
security is limited to any borrowing, or if there is a prior, pari passu or
subordinate charge, please indicate.

(iii) Whether the security supports facilities granted by the bank to the
customer or to another party.

(iv) For any arrangements for set off of balances or compensating
balances e.g. back to back loans, give particulars of any
acknowledgement of set off (i.e. date, type of document and accounts
covered).

CUSTODIES

(b) Investments, bills of exchange, documents of title or other assets held but
not charged.

Please give details.

(8) Nature, currency, amount and extent of any facilities limits and details of
period of availability of agreed facility of all contingent liabilities, viz:-

(a) Total of bills discounted with recourse to the customer or any subsidiary
or related party of the customer;

(b) Details of any guarantees, comfort letters, letter of undertakings, bonds,
endorsements or indemnities given to you by the customer in favour of
third parties (separately specifying any such items in favour of any
subsidiary or related party of the customer);

(c) Details of any guarantees, bonds or indemnities given by you, on your
customer's behalf, stating where there is recourse to your customer and/or
to its holding, parent or any other company within the group;

AUDITING ATR – 18(Revised-2012)


(d) Total of acceptances;

(e) Total of outstanding liabilities under documentary credits;

(f) Others (please give details).

ASSETS

(9) Details specifying the nature, amount and maturity date of the assets
covered under Islamic mode of finance (e.g. morabaha, musharika,
modaraba etc.) or any other mode of finance including leasing:-

(a) Asset repurchase agreement;
(b) Asset resale agreement;
(c) Options outstanding at the relevant date.

DERIVATIVES AND COMMODITY TRADING

(10) Details of all outstanding contracts specifying the number, deal date,
maturity or value date, price at which the deal was transacted and currency
of the contract bought and sold for:-

(a) Total of foreign exchange contracts;
(b) Bullions;
(c) Securities;
(d) Others

(11) Information in respect of any letter of comfort obtained by the bank from the
parent or any other associated concern of the company.

ADDITIONAL BANKING RELATIONSHIPS

(12) A list of other banks, or branches of your bank, where you are aware that a
relationship has been established during the period.



AUDITING ATR – 18(Revised-2012)


(13) OTHER INFORMATION

Yours faithfully,

DISCLOSURE AUTHORISED

For and on behalf of

(CUSTOMER'S NAME)

Signed in accordance with the terms and conditions for the conduct of the
customer's bank account.

























AUDITING ATR – 18(Revised-2012)


APPENDIX-II

NOTES ON THE STANDARD LETTER
(This Appendix contains explanations of item numbers referred to in the Standard
letter)

(1) BANK ACCOUNTS:

The phrase 'all accounts' includes details of all current, deposit loan and
foreign currency accounts and other advances or facilities, money held on
deposit receipt and account numbers.

(4) ANALYSIS OF CHARGES:

The details of the rate of markup/interest applicable to any
markup/interest-bearing account shall be required.

(5) Auditors will need to have an understanding of the principles governing
set-off, but it should not normally be necessary to make enquiries beyond
the question as put in the standard letter. Details should be available from
the relevant documents. A right to set-off may exist even when there are
no written arrangements.

(7) CUSTOMER'S ASSETS:

a) Security includes details of charge, mortgage or other claims or
security or security registered (e.g. debenture, memorandum of
deposit); assets charged and where appropriate cross reference to
facility specifically secured.

b) Assets include bonds, stock and share certificates, investments, bearer
or other securities; title deeds relating to freehold, leasehold or other
property; bills of exchange or other negotiable instruments receivable
(other than cheques); deposit receipts (as distinct from any account
represented by the deposit receipt); the names of persons who are able
to obtain release of the assets should be ascertained from the customer
and are usually covered by the bank mandate.
AUDITING ATR – 18(Revised-2012)


c) Lien: Auditors should be aware that any assets held by the bank other
than those specifically charged, may be subject to some form of
banker's lien, although this may only operate under particular
conditions. It should be necessary to enquire only in exceptional
circumstances.

d) Bearer securities: detailed enquiries on bearer securities should be
made of the bank only when evidence cannot be obtained from the
customer or his banking records.

(8) CONTINGENT LIABILITIES:

The liabilities under indemnities/ guarantees given in respect of shipping
documents relating to imports do not have an expiry date. From time to
time the banks take a view on old liabilities and remove some of them
from their records. Certain of these old liabilities may not therefore be
shown in the figure quoted by the bank, but it cannot be guaranteed that no
claim will be incurred subsequently.

(13) OTHER INFORMATION:

Banks are often asked for introductions to other branches or banks for the
purpose of establishing new sources of finance. The provision of any
available information relating to introductions or new accounts will assist
auditors to satisfy themselves that they have information about all of their
client's banking relationship.










AUDITING ATR – 18(Revised-2012)


SUGGESTED FORMAT OF LETTER FOR DEBTOR'S
CONFIRMATION BY DIRECT COMMUNICATION

(TO BE TYPED ON CLIENT'S LETTERHEAD)
DEBTOR'S NAME AND ADDRESS
Dear Sir,

As part of their normal audit procedures, we have been requested by our auditors
______________ of _________________ to ask you to confirm direct to them
your indebtedness to us of Rs. ___________ as at ________________.

If the amount is in agreement with your records, please sign in the space provided
below and return this letter directly to our auditors.

If the amount is not in agreement with your records please notify our auditors
directly of the amount shown by your records and, if possible, send them full
particulars of the difference.

For your reply to be of assistance to our auditors please give this request your
early attention. *We enclose a prepaid envelope for your convenience.

Please do not send remittances to the auditors along with the confirmation.

Yours faithfully,

CLIENT'S AUTHORISED SIGNATORY

PLEASE DO NOT DETACH
(CLIENT'S NAME)
DEBTOR'S NAME:
NO:

The amount shown above of Rs. ___________ due from us *is/ [is not] in
agreement with our records at ___________________. *The details of
discrepancies are annexed.

Authorized Signature & Stamp
Title of Position

 Delete as appropriate (stamped self-addressed return envelope by the
auditor's should be enclosed)
AUDITING ATR – 18(Revised-2012)


SUGGESTIONS FOR IMPROVING THE RATE OF FEEDBACK FOR
DEBTORS' CONFIRMATIONS

The efficiency of the audit procedure of debtor's confirmation through direct
communication is influenced by both the willingness and ability of debtor to
respond accurately to the information presented on the letter of confirmation.
Improving confirmation feedback rate may reduce the extent of other audit
procedures that the auditor may have planned to undertake. Some suggestions for
improving the rate of feedback are as follows:-

(a) Preliminary notification

The use of a brief letter, post card, or telephone call by the client immediately
before posting the letter generally tends to increase responses as the debtor is less
likely to ignore the letter having been previously notified.

(b) Request for information that the debtor is able to confirm

The confirmation request should include all the relevant information required for
a response by the debtor.

(c) Use clear wording

The confirmation request should avoid technical jargon and should be written in
simple language to facilitate an early and effective reply (including Urdu or
vernacular, where considered necessary).

(d) Set deadlines

The confirmation should state deadlines e.g. REPLY REQUESTED WITHIN 5
DAYS.

(e) Provide return envelopes

Return envelopes that have the firm's name and address printed in bold are likely
to draw attention to confirmations and are likely to encourage debtors to respond
early.
AUDITING ATR – 18(Revised-2012)


(f) Provide prepaid postage

To facilitate responses, auditors normally include a stamped self-addressed return
envelope along with each confirmation.

(g) Send follow-up reminders/second requests

Sending reminders/second request soon after sending the initial letter are likely to
increase feedback rates.







































The ATR-18 before this revision reads as under:

AUDITING ATR – 18

BANK REPORTS FOR AUDIT PURPOSES


1.0 THE ISSUE

1.1 To seek standardization of auditing practice when approaching banks for audit information.

2.0 EXPLANATION

2.1 This release deals with request by auditors to client's bankers for confirmation of balances and
other information and prescribing a standard letter of request.

2.2 The practice of obtaining independent confirmations or reports from banks is essential to the proper
discharge of auditors’ responsibilities. Bank reports assist auditors to verify existence of liabilities
and the existence, ownership and proper custody of assets; they also provide other information
relevant to the audit of accounts.

3.0 TECHNICAL COMMITTEE RECOMMENDATION

3.1 The Committee suggests the following standard format for the letter of request for bank
confirmation and also the appropriate guidance in this regard to be used by the auditors while
verifying the bank balances.

STANDARD LETTER OF REQUEST

3.2 The information which is usually required from banks and financial institutions for audit purposes
is substantially the same for most audits and can be obtained in a standard letter of request which
would facilitate prompt response from banks and financial institutions. The use of such letter,
designed to cover all normal banking activities and to facilitate extraction of information from
banking records should enable prompt response to these requests. It should also enable auditors to
make further enquiries from banks if the replies received call for further clarification.

3.3 This technical release, therefore, requires auditors to adopt the practice of requesting information
from banks and financial institutions in the form of standard letter set out in Appendix-I. It also
requires that the standard letter of request should be used in accordance with the procedures laid
down in paragraph 5 below. Appendix-II to this release sets out explanations of items that are
incorporated in, or specifically excluded from, the standard letter. It is stressed that this standard
letter is for audit purposes only.

4.0 AUTHORITY TO DISCLOSE

Banks and financial institutions will require explicit written authority of their customers to disclose
information requested by auditors. For convenience sake, it has been decided that the authority
shall be evidenced by the customer's counter signature on the standard letter of request. In the case
of joint accounts, the authority must be given in the standard letter of request by all parties to the
account. In the case of security lodged by third party, its authority for disclosure will also have to
be obtained and produced to the bank.


AUDITING ATR – 18


5.0 PROCEDURES

5.1 The following procedures should be adopted by the auditors in connection with the standard letter
of request for bank report:

a) The standard letter set out in Appendix-I to this release should be sent on each occasion by the
auditor on his own letterhead to the Manager of each bank branch with which it is known that the
client holds an account or has dealt since the end of the previous accounting period.

b) The client's authority to permit disclosure should be obtained on the standard letter of request itself
before the letter is sent out.

c) The standard letter of request should preferably reach the branch manager on or before the date of
the client's financial year-end.

d) The dates to be entered on the standard letter are normally the closing dates of:

i) the client's accounting reference period for which the report is requested; and

ii) the client's previous accounting reference period for which full bank report was compiled.
If, exceptionally, audited financial statements are produced other than for an accounting
reference period, alternative dates should be substituted.

e) In reviewing the bank's reply, it is important for auditors to check that bank has answered all
questions in full.

f) It will be necessary to obtain confirmation as to the authenticity of any letter not received directly
from the bank branch concerned and of any letter received from a bank without a request having
previously been made. It is essential that in both cases, the auditors obtain confirmation from the
branch concerned that the report has been prepared in compliance with the terms of the standard
letter.

g) If no reply is received from the banks within two weeks after the original request was made or two
weeks after the closing of the year which ever is earlier, the auditor should send a "First Reminder"
so marked on the standard letter of request.

h) After the expiry of a further period of one week from the date of sending out the "First Reminder",
if no reply is received, the auditor may consider sending a "Second Reminder" so marked on the
standard letter of request if deemed appropriate by him.

5.2 The Standard letter should be used in its complete form for all audit requests and in accordance
with the above procedures in respect of financial statements for the relevant period and should not
be altered to reduce the minimum contents prescribed. In certain circumstances, supplementary
requests for additional information may be required for audit purposes. The letter containing such
supplementary requests should be submitted to the bank, as far as possible, at the same time as the
standard letter.

(179
th
meeting of the Council held on March 7, 2006)

AUDITING ATR – 18
APPENDIX-I


The Manager
(Bank)
(Branch)
Dear Sir,
(Clients's Name)

STANDARD REQUEST FOR BANK REPORT FOR AUDIT PURPOSES

In accordance with your above-named customer's instructions given hereon, please send DIRECT to us at the
above address, as auditors of your customer, the following information relating to their affairs at your branch
as at the close of business on and, in the case of items 2,4 and 12 during the period since the end of the
previous accounting period.

Please state against each item any factors which may limit the completeness of your reply; if there is nothing
to report, state 'None'.

It is understood that any replies given are in strict confidence, for the purposes of audit.

Information Requested Response

BANK ACCOUNTS

(1) Full titles of all accounts together with the account numbers
and balances therein, including NIL balances:

(a) where your customer's name is the sole name in
the title;

(b) where your customer's name is joined with that of
other parties;

(c) where the account is in a trade name.

NOTES

(i) Where the amount is subject to any restriction
(e.g. a garnishee order or arrestment) or exchange
control considerations (e.g. 'blocked account')
information regarding nature and extent of the
restriction should be stated.

(ii) where the authority upon which you are
providing this information does not cover any
amounts held jointly with other parties, please
refer to your customer in order to obtain the
requisite authority of the other parties with a copy
to us.

(2) Full titles and dates of closure of all accounts closed during
the period.
AUDITING ATR – 18

Information Requested Response

(3) The separate amounts accrued but not charged or credited
as at the above date, of

(a) markup/interest; and

(b) provisional charges (including commitment fees)

(4) The amount of markup/interest charged during the period if
not specified separately in the customer's statement of
account.

(5) Particulars (i.e. date, type of document and accounts
covered) of any written acknowledgement of set-off, either
by specific letter of set-off, or incorporated in some other
document or security.

FACILITIES

(6) Details of leasing facilities, loans, overdrafts, cash credit
facilities (including standby facilities), and associated
guarantees / indemnities specifying agreed limits, unused
facilities, markup/interest terms, over due rentals /
installments and in the case of term loans, date for
repayment or review.

SECURITIES

(7) (a) In respect of facilities, contingent liabilities and
derivatives and commodity trading, please give:

(i) details of any security formally charged in favour
of the bank, including the date and type of
charge, (e.g. pledge, hypothecation etc.)

Information Requested

(ii) particulars of any undertaking to assign any
assets to the bank.

If a security is limited to any borrowing, or if
there is a prior, pari passu or subordinate charge,
please indicate.

(iii) Whether the security supports facilities granted
by the bank to the customer or to another party.

(iv) For any arrangements for set off of balances or
compensating balances e.g. back to back loans,
give particulars of any acknowledgement of set
off (i.e. date, type of document and accounts
covered).

AUDITING ATR – 18

Information Requested Response

CUSTODIES

(b) Investments, bills of exchange, documents of title
or other assets held but not charged. Please give
details.

CONTINGENT LIABILITIES

(8) Nature, currency, amount and extent of any facilities limits
and details of period of availability of agreed facility of all
contingent liabilities, viz:-

(a) Total of bills discounted with recourse to the
customer or any subsidiary or related party of the
customer;

(b) Details of any guarantees, comfort letters, letter
of undertakings, bonds, endorsements or
indemnities given to you by the customer in
favour of third parties (separately specifying any
such items in favour of any subsidiary or related
party of the customer);

(c) Details of any guarantees, bonds or indemnities
given by you, on your customer's behalf, stating
where there is recourse to your customer and/or
to its holding, parent or any other company
within the group;

(d) Total of acceptances;

(e) Total of outstanding liabilities under
documentary credits;

(f) Others (please give details).

ASSETS

(9) Details specifying the nature, amount and maturity date of
the assets covered under Islamic mode of finance (e.g.
morabaha, musharika, modaraba etc.) or any other mode of
finance including leasing:-

(a) Asset repurchase agreement;
(b) Asset resale agreement;
(c) Options outstanding at the relevant date.




AUDITING ATR – 18

Information Requested Response

DERIVATIVES AND COMMODITY
TRADING

(10) Details of all outstanding contracts specifying the number,
deal date, maturity or value date, price at which the deal
was transacted and currency of the contract bought and sold
for:-

(a) Total of foreign exchange contracts;
(b) Bullions;
(c) Securities;
(d) Others

(11) Information in respect of any letter of comfort obtained by
the bank from the 7parent or any other associated concern
of the company.

ADDITIONAL BANKING
RELATIONSHIPS

(12) A list of other banks, or branches of your bank, where you
are aware that a relationship has been established during
the period.

(13) OTHER INFORMATION

Yours faithfully,

DISCLOSURE AUTHORISED

For and on behalf of

(CUSTOMER'S NAME)

Signed in accordance with the terms and conditions for the
conduct of the customer's bank account.
AUDITING ATR – 18

APPENDIX-II
NOTES ON THE STANDARD LETTER

(This Appendix contains explanations of item numbers referred to in the Standard letter)

(1) BANK ACCOUNTS:

The phrase 'all accounts' includes details of all current, deposit loan and foreign currency accounts
and other advances or facilities, money held on deposit receipt and account numbers.

(4) ANALYSIS OF CHARGES:

The details of the rate of markup/interest applicable to any markup/interest-bearing account shall be required.

(5) Auditors will need to have an understanding of the principles governing set-off, but it should not
normally be necessary to make enquiries beyond the question as put in the standard letter. Details should be
available from the relevant documents. A right to set-off may exist even when there are no written
arrangements.

(7) CUSTOMER'S ASSETS:

a) Security includes details of charge, mortgage or other claims or security or security registered (e.g.
debenture, memorandum of deposit); assets charged and where appropriate cross reference to facility
specifically secured.

b) Assets include bonds, stock and share certificates, investments, bearer or other securities; title
deeds relating to freehold, leasehold or other property; bills of exchange or other negotiable instruments
receivable (other than cheques); deposit receipts (as distinct from any account represented by the deposit
receipt); the names of persons who are able to obtain release of the assets should be ascertained from the
customer and are usually covered by the bank mandate.

c) Lien: Auditors should be aware that any assets held by the bank other than those specifically
charged, may be subject to some form of banker's lien, although this may only operate under particular
conditions. It should be necessary to enquire only in exceptional circumstances.

APPENDIX-II

d) Bearer securities: detailed enquiries on bearer securities should be made of the bank only when
evidence cannot be obtained from the customer or his banking records.

(8) CONTINGENT LIABILITIES:

The liabilities under indemnities/ guarantees given in respect of shipping documents relating to imports do
not have an expiry date. From time to time the banks take a view on old liabilities and remove some of them
from their records. Certain of these old liabilities may not therefore be shown in the figure quoted by the
bank, but it cannot be guaranteed that no claim will be incurred subsequently.





AUDITING ATR – 18

Information Requested Response


(13) OTHER INFORMATION:

Banks are often asked for introductions to other branches or banks for the purpose of establishing new
sources of finance. The provision of any available information relating to introductions or new accounts will
assist auditors to satisfy themselves that they have information about all of their client's banking relationship.

SUGGESTED FORMAT OF LETTER FOR DEBTOR’S
CONFIRMATION BY DIRECT COMMUNICATION

(TO BE TYPED ON CLIENT’S LETTERHEAD)

DEBTOR’S NAME AND ADDRESS

Dear Sir,

As part of their normal audit procedures, we have been requested by our auditors ______________ of
_________________ to ask you to confirm direct to them your indebtedness to us of Rs. ___________ as at
________________.

If the amount is in agreement with your records, please sign in the space provided below and return this letter
directly to our auditors.

If the amount is not in agreement with your records please notify our auditors directly of the amount shown
by your records and, if possible, send them full particulars of the difference.

For your reply to be of assistance to our auditors please give this request your early attention. *We enclose a
prepaid envelope for your convenience.

Please do not send remittances to the auditors along with the confirmation.

Yours faithfully,

CLIENT’S AUTHORISED SIGNATORY

PLEASE DO NOT DETACH

(CLIENT’S NAME)
DEBTOR’S NAME:
NO:

The amount shown above of Rs. ___________ due from us *is/ [is not] in agreement with our records at
___________________. *The details of discrepancies are annexed.


Authorized Signature & Stamp

Title of Position
* Delete as appropriate (stamped self-addressed return envelope by the auditor’s should be enclosed)
AUDITING ATR – 18


SUGGESTIONS FOR IMPROVING RATE OF FEEDBACK FOR DEBTORS’ CONFIRMATIONS

The efficiency of the audit procedure of debtor’s confirmation through direct communication is influenced by
both the willingness and ability of debtor to respond accurately to the information presented on the letter of
confirmation. Improving confirmation feedback rate may reduce the extent of other audit procedures that the
auditor may have planned to undertake. The following are some suggestions for improving feedback rates:-

(a) Use of preliminary notification

The use of a brief letter, post card, or telephone call by the client immediately before posting the letter
generally tends to increase responses as the debtor is less likely to ignore the letter having been previously
notified.

(b) Request information the debtor is able to confirm

The confirmation request should include all the relevant detailed information required for response by the
debtor.

(c) Use clear wording

The confirmation request should avoid technical jargon and should be written in simple language to facilitate
an early and effective reply. (including Urdu or vernacular).

(d) Set deadlines

The confirmation should state deadlines e.g. URGENT or REPLY REQUESTED WITHIN 5 DAYS.

(e) Provide return envelopes

Return envelopes that have the firm’s name and address printed in bold are likely to draw attention to
confirmations and are likely to encourage debtors to respond.

(f) Provide prepaid postage

To facilitate responses, auditors normally include a stamped self-addressed return envelope along with each
confirmation.

(g) Send follow-up reminders/second requests

Sending reminders/second request soon after sending the initial letter are likely to increase feedback rates.








AUDITING ATR-19(Revised 2012)


IDENTIFICATION OF THE ENGAGEMENT PARTNER IN THE
AUDITORS’ REPORT ON THE FINANCIAL STATEMENTS / INTERIM
FINANCIAL INFORMATION

The Council wishes to draw attention of all practicing members about the
prevalent practice of signing audit and review reports in the name and style of the
firm where the individual’s responsibility for signing the audit and review reports
is not identified for personal responsibility and accountability. This practice,
based on the decisions taken nearly half a century ago, required a reassessment
according to the current international practices prevalent in the profession.

Paragraph 8 of ISA 220 (re-drafted) ‘Quality Control for an audit of financial
statement’ states as follows:

“The engagement partner shall take responsibility for the overall quality on
each audit engagement to which that partner is assigned.”

In its paragraph 30, ISQC 1 (Re-drafted) ‘Quality control for firms that perform
audits and reviews of financial statements, and other assurance and related
services engagements’, states as follows:

“The firm shall assign responsibility for each engagement to an engagement
partner and shall establish policies and procedures requiring that:

(a) The identity and role of the engagement partner are
communicated to key members of client management and those
charged with governance;

(b) The engagement partner has the appropriate competence,
capabilities, and authority to perform the role; and

(c) The responsibilities of the engagement partner are clearly defined
and communicated to that partner.”

Further, attention is drawn to paragraph A 37 of ISA 700 (re-drafted) ‘Forming an
opinion and reporting on financial statements’ which states as follows:

AUDITING ATR-19(Revised 2012)


“The auditor's signature is either in the name of the audit firm, the personal
name of the auditor or both, as appropriate for the particular jurisdiction. In
addition to the auditor's signature, in certain jurisdictions, the auditor may be
required to declare in the auditor's report the auditor's professional
accountancy designation or the fact that the auditor or firm, as appropriate, has
been recognized by the appropriate licensing authority in that jurisdiction.”

ISA 220 (re-drafted) defines an ‘engagement partner’ as ‘the partner or other
person in the firm who is responsible for the audit engagement and its
performance, and for the auditor’s report that is issued on behalf of the firm, and
who, where required, has the appropriate authority from a professional, legal or
regulatory body.’

For purpose of clarity it may be noted that the opinion on each audit and review
engagement is the collective responsibility of the firm appointed as the
auditor/reviewer and the opinion is the result of consultation with other partners.

However, by signing in his/her own name alongwith the name of the firm the
engagement partner is properly identified who is the person responsible for the
audit or thereview engagement.

In view of the above it has been decided by the Council that where the auditors’
report on the financial statements or the interim financial information is signed in
the firm’s name, the name of the engagement partner shall be identified.

The above shall be applicable on all audit appointments made on or after J uly 1,
2011

However, with respect to audit appointments made prior to J uly 1, 2011, the
requirements as contained in ATR -19 (Revised 2008) shall prevail.

(230
th
Meeting of the Council – December 17, 2011)





AUDITING ATR-19(Revised 2012)


Correspondence with ICAP

All correspondence related to policy matters from a firm to the Institute should be
signed by a partner in the case of a partnership concerns and by the sole-
proprietor in the case of a sole-proprietary concern, in his/her name along with the
name of the firm. Routine correspondence may be signed by any other person
authorized in this behalf by the firm.

The statement is issued as a directive of the Council and supersedes ATR 1 and 9.
Any contravention thereof shall be deemed to be an act of misconduct liable to
punitive action in terms of clause 3 of Part 4 of Schedule I of the Chartered
Accountants Ordinance, 1961 and is required to be followed by all practicing
members of the Institute.


























The ATR-19 before this revision reads as under:

AUDITING ATR-19(Revised 2008)

IDENTIFICATION OF AUDIT ENGAGEMENT PARTNER IN THE AUDITORS’ REPORT ON
THE FINANCIAL STATEMENTS

The Council wishes to draw attention of all practicing members about the prevalent practice of signing audit
report in the name and style of the firm where the individual’s responsibility for signing the audit report is not
identified for personal responsibility and accountability. This practice, based on the decisions taken nearly
half a century ago, needed a change according to the current international practices and environment in the
profession.

Reference is made to Paragraph 6 of the ISA 220 ‘Quality Control for Audits of Historical Financial
Information’, according to which ‘The engagement partner should take responsibility for the overall quality
on each audit engagement to which that partner is assigned’.

ISQC 1 ‘Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and
Other Assurance and Related Services Engagements’, which is in the process of adoption by the Institute, in
its paragraph 42, states that ‘The firm should assign responsibility for each engagement to an engagement
partner. The firm should establish policies and procedures requiring that:

(a) The identity and role of the engagement partner are communicated to key members of
client management and those charged with governance;
(b) The engagement partner has the appropriate capabilities, competence, authority and time
to perform the role; and
(c) The responsibilities of the engagement partner are clearly defined and communicated to
that partner’.

Further attention is drawn to Paragraph 51 of ISA 700 (revised) according to which ‘The auditor’s signature
is either in the name of the audit firm, the personal name of the auditor or both, as appropriate for the
particular jurisdiction. In addition to the auditor’s s