Statutory Audit Requirements for Companies in Pakistan

The term statutory audit is often used as though it describes one uniform obligation applying equally to every company. It does not. What is genuinely fixed by statute is the requirement to have an audit unless a company qualifies for an exemption. The scope, applicable standards and process still depend on the company's classification.

What statutory audit means in the Pakistani context

A statutory audit is one required by law, specifically the Companies Act 2017, as distinct from a voluntary internal audit a company might commission for its own management purposes. Statutory audits must be performed by an independent Chartered Accountant in practice and result in a formal audit report expressing an opinion on whether the financial statements give a true and fair view.

Statutory audit compared with internal audit and tax audit

Which companies must have a statutory audit

As a general position, most companies incorporated under the Companies Act 2017 must have an annual audit. Companies meeting SECP's small company size criteria are an exception, and may substitute board approved financial statements and an affidavit instead. Listed companies and larger private or public companies do not have access to this exemption regardless of any other factor.

What the audit examines

The audit covers the accuracy and completeness of the financial statements, compliance with the applicable accounting standards under the Third Schedule to the Companies Act, the existence and valuation of assets and liabilities, related party transactions and disclosures, and going concern considerations relevant to the company's continued operation.

Misconceptions worth correcting

A statutory audit and a tax audit are sometimes treated as the same thing. They are not. One relates to company law compliance under SECP, the other to tax compliance under FBR, and the two can produce different outcomes for the same company in the same year.

The small company exemption is also sometimes treated as a permanent status once granted. It is not. Exemption depends on meeting specific criteria each financial year, and a company that qualified previously may no longer qualify as it grows.

There is also a common assumption that any accountant can sign a statutory audit report. Only a Chartered Accountant in practice, registered with ICAP and holding a valid certificate of practice, is authorised to do so.

For related matters, you may also want to read our guides on corporate law in Pakistan, company audit requirements, and private limited company audit.