Probe finds flaws in AGP’s audit of public companies

LAHORE: The audit of public companies in Punjab by the Auditor General of Pakistan’s (AGP’s) provincial office may not be qualitative as most of the auditors do not qualify to perform the job under the law.

On the request of the Punjab government, AGP’s teams have been auditing the companies for the last one and a half months after media reports about alleged corruption in over 50 public sector companies.

Official sources say that a majority of officials conducting the audit are either MBAs or have 16-years of education that are not qualified to audit a company under the law. Under section 247 (Qualification and Disqualification of Auditors) of the Company Act of 2017, an auditor must be a chartered accountant (CA).

“When section 15 (1) of the AGP Ordinance of 2001 is read with clause 247 of the Companies Act of 2017, an auditor must be a CA to conduct the audit of public sector companies whereas, officers of the AGP office are not ACs at all,” an official working in a public sector company told Dawn.

When asked about the downside of getting the audit done by unqualified people, the official said: “It would be devastating and as they are just wasting time and nothing more. They are doing this job under the old Financial Audit Manual & Guidelines of 2005 to conduct audit of companies,” he said.

Official said AGP’s Lahore office had violated the companies act before the start of the audit. First, the AGP directorate general of commercial audit and evaluation wrote letters to the companies to get their affairs audited under section 14 of the Auditor General Ordinance of 2001. This section, however, is for the audit of the federation, the province and the district.

According to one of the audit notices, the office states: “We look forward to full cooperation from your staff and trust that they will make available to the audit team any accounts, books, papers and other documents that deal with, or form the basis of, or are otherwise relevant to the audit, as required under section 14 of the auditor general ordinance.”

The official said the AGP office was told that only section 15 (1), and not the section 14, allowed the auditors to carry out statutory audit, the directorate general withdrew its earlier notices and issued new ones mentioning performance of the audit under section 15.

He said the AGP office always stated that conducting audit of companies was their constitutional obligation, which was not true as section 11 (2) of the AGP Ordinance of 2001 prohibited the AGP from accessing accounts record of authorities & bodies which are made under the law that provides an audit mechanism.

The official claimed that under section 14 or 15 of the ordinance and Article-169 of the Constitution of Pakistan empowered the AGP office to carry out audit of the accounts of the departments, authorities and bodies of the federation, provinces and the districts.

“They (the auditors) are conducting four types of audits – performance, accounts, compliance and certification of the public sector companies – that they cannot do under the law,” he added. Instead of conducting audit in accordance with the relevant audit clauses of companies’ laws, the AGP office was using its age old Financial Audit Manual & Guidelines to conduct the audit of the companies.

He said the article 169(b) of the Constitution of Pakistan limits the powers and functions of the AGP to conduct Audit of the “accounts” only.

“But the officials concerned have been conducting performance audits since 2001 exceeding their constitutional functions and powers. By doing so the auditors spent resources and manpower worth millions of rupees unlawfully over the span of more than 16 years,” he said.

He said the Companies Act of 2017 also required an auditor to conduct audit as per the International Standards on Auditing, whereas, the AGP office still used Financial Audit Manual of April of 2005 that is based on age old INTOSAI Auditing Standards developed by INTOSAI to conduct audit of public sector companies.

“INTOSAI has also adopted ISA standards in 2013, whereas the AGP has yet to do so,” he said.

He said the office of the AGP has recently proposed an amendment to the ordinance-2001 which was under consideration in the Senate Standing Committee on Finance. “They have recommended changes like ‘audit definition’ that totally changed the section 15 to hide their inferior HR strength that do not qualify the requirements of auditor required under clause 247 of the Companies Act 2017, and outdated Audit Manuals & Guidelines that do not conform to Audit standards required under clause 249 of the Companies Act 2017. This amendment was passed by the National Assembly in October 2017 while the Senate committee under the chairmanship of Senator Saleem Mandiwala is currently reviewing it,” he explained.