Introduction
Appointing an auditor is a critical step in upholding financial transparency and regulatory compliance in any company. In Pakistan, the Companies Act, 2017 and related regulations make it mandatory for certain companies to appoint statutory auditors to examine their financial statements and provide independent assurance on their accuracy and compliance with applicable laws.
Whether you’re a private limited company, public company, or non-profit organization, this comprehensive guide provides everything you need to know about appointing an auditor in Pakistan, including eligibility criteria, legal timelines, SECP requirements, reappointment procedures, and the consequences of non-compliance.
1. Why Is Auditor Appointment Important?
An auditor provides independent verification of a company’s financial records. Their primary role is to ensure:
✅ Accuracy of financial statements
✅ Compliance with International Financial Reporting Standards (IFRS)
✅ Detection of fraud or material misstatement
✅ Confidence to shareholders, regulators, and investors
2. Legal Framework for Auditor Appointment in Pakistan
Auditor appointment is governed by:
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Companies Act, 2017
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Companies (Audit of Cost Accounts) Rules, 1998
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Listed Companies (Code of Corporate Governance) Regulations, 2019
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SECP Guidelines and Circulars
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International Standards on Auditing (ISA)
3. Which Companies Must Appoint Auditors?
| Company Type | Statutory Auditor Required? |
|---|---|
| Public Company | ✅ Yes |
| Private Company (Turnover > Rs. 3m) | ✅ Yes |
| Private Company (Turnover < Rs. 3m) | ❌ No (Optional) |
| Section 42 Non-Profit Company | ✅ Yes |
| Single Member Company (SMC) | ✅ Yes if turnover > Rs. 3m |
| Listed Company | ✅ Yes (Must be QCR-rated firm) |
4. Eligibility Criteria for Auditors
A. Who Can Be Appointed as an Auditor?
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Must be a Chartered Accountant (CA) or firm of Chartered Accountants
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Must be registered with the Institute of Chartered Accountants of Pakistan (ICAP)
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In case of public interest or listed companies, the auditor must have a valid Quality Control Review (QCR) rating
B. Disqualifications
Under Section 247 of the Companies Act, 2017, the following cannot be appointed as auditors:
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Directors or officers of the company
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Business partners or relatives of directors
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A person indebted to the company (loan > Rs. 500,000)
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Auditors serving more than the allowed term (for listed companies)
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Any person barred by SECP or ICAP
5. When to Appoint an Auditor?
| Scenario | Deadline for Appointment |
|---|---|
| Newly Incorporated Company | Within 90 days of incorporation |
| Annual Auditor Appointment (existing company) | At every Annual General Meeting (AGM) |
| Vacancy due to resignation/removal | Within 30 days of vacancy |
| Listed Company | Must rotate auditor every 5 years |
6. Procedure for Appointing an Auditor
Step 1: Board Resolution (Initial Appointment)
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For the first auditor, the Board of Directors appoints the auditor within 90 days of incorporation.
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Pass a board resolution and document the appointment.
Step 2: Shareholder Approval at AGM
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From the second year onward, the auditor must be appointed in the AGM
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Issue notice of AGM to shareholders with auditor agenda
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Hold the meeting, approve the appointment by ordinary resolution
Step 3: Filing with SECP
| Form | Description | Timeline |
|---|---|---|
| Form 29 | Appointment of auditor as “officer” | Within 15 days |
| Form A | Annual return (must include auditor info) | Annually |
| Form C | For special resolution (if required) | Within 15 days |
7. Reappointment and Rotation of Auditors
A. Reappointment
An auditor may be reappointed annually by ordinary resolution unless:
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He is not willing to continue
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A new auditor is being appointed
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Shareholders vote against the reappointment
B. Mandatory Auditor Rotation (Listed Companies)
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Rotation is mandatory every 5 years under the Code of Corporate Governance
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Cooling-off period: The same auditor or firm cannot be reappointed for 2 years after rotation
8. Removal or Resignation of Auditor
A. Removal
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Requires special resolution at a general meeting
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Prior approval of SECP may be required (for public or listed companies)
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Must state reasons in writing
B. Resignation
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Auditor must file a written resignation
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Company must inform SECP and appoint a new auditor within 30 days
9. Auditor’s Report and Responsibilities
Key Deliverables from Auditor:
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Auditor’s Report on Financial Statements
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Independent Assurance Opinion
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Management Letter highlighting internal control weaknesses
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Compliance with IFRS, Companies Act, and SECP regulations
In case of listed companies, the auditor must also:
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Report on compliance with Code of Corporate Governance
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Review quarterly and half-yearly financials
10. Filing and Compliance Requirements
| Document | Submission Timeline |
|---|---|
| Auditor’s report with financials | Attached with annual audited accounts |
| Form 29 (auditor appointment) | Within 15 days of appointment |
| Form A (Annual Return) | Within 30 days of AGM |
| Special resolutions (if any) | Within 15 days of passing |
Non-compliance can lead to penalties, SECP inquiries, or rejection of accounts.
11. SECP Requirements for Listed Companies
Listed companies must follow strict audit oversight, including:
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Appointment of auditors from the QCR-rated panel
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Mandatory audit committee review
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Rotation and cooling-off enforcement
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Auditor’s attendance in AGMs
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Submission of management letter to SECP and audit committee
12. Role of Audit Committee
In public interest or listed companies, the audit committee must:
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Recommend auditors to the board
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Oversee audit planning and execution
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Review auditor’s findings and management responses
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Ensure auditor independence and objectivity
13. Penalties for Non-Compliance
| Violation | Penalty |
|---|---|
| Failure to appoint auditor | Fine up to Rs. 500,000 on the company and officers |
| Appointing a disqualified auditor | Auditor’s report deemed invalid |
| Not filing Form 29 or Form A | Daily fine of Rs. 500 (per form) |
| Listed company failing rotation | SECP action; may impact stock listing |
| Tampering or fraud in audit reports | Criminal prosecution and ICAP sanctions |
14. Best Practices for Auditor Appointment
✅ Choose an experienced, independent CA firm
✅ Verify QCR rating if you’re a listed or Section 42 company
✅ Maintain proper AGM documentation
✅ Communicate with auditors well in advance
✅ File all forms through SECP eServices on time
✅ Ensure rotation and independence policies are enforced
15. Frequently Asked Questions (FAQs)
Q1: Is audit mandatory for all private limited companies?
Only if turnover exceeds Rs. 3 million. Below that, audit is optional.
Q2: Can an auditor be reappointed automatically?
Yes, unless the company expressly resolves not to reappoint or appoints someone else.
Q3: What is a QCR rating?
Quality Control Review (QCR) is an ICAP-based rating system ensuring quality audit practices.
Q4: Who appoints the first auditor in a new company?
The Board of Directors, within 90 days of incorporation.
Q5: Can a director’s relative be appointed as auditor?
No. It violates Section 247 of the Companies Act and renders the appointment void.
16. How Sterling.pk Can Help
At Sterling.pk, we help companies:
✅ Appoint qualified and QCR-rated audit firms
✅ Draft and file board/AGM resolutions
✅ Submit Form 29, A, and other filings on SECP portal
✅ Assist with audit planning and documentation
✅ Ensure compliance with Companies Act and SECP rules
Let us manage your compliance while you focus on growth.
Conclusion
Appointing an auditor is more than just a regulatory formality—it’s a foundational element of financial integrity and corporate transparency. Failing to appoint a qualified auditor, missing SECP deadlines, or appointing an ineligible firm can expose your business to legal penalties and reputational damage.
By following the right procedures, maintaining proper documentation, and working with a trusted advisor like Sterling.pk, your company can stay compliant, credible, and audit-ready—year after year.
