Senate panel clears new clause: Oversight Board to conduct audit firms’ inspection

ISLAMABAD: The Senate Standing Committee of Finance on Monday approved a new clause for inspection of audit firms referred by the Federal Board of Revenue (FBR) under the Finance Bill 2025-26.

The inspection of audit firms would be done by the Audit Oversight Board.

The FBR and the Securities and Exchange Commission of Pakistan (SECP) strongly pleaded their case for introducing a new section in the sales tax law for inspection of audit firms by Audit Oversight Board. While review of the Finance Bill 2025-26 at the Senate Standing Committee of Finance on Monday, the SECP Commissioner, Securities Market Division and FBR Member Inland Revenue (Policy) defended the proposed section (58C- Inspection of audit firm) under the Finance Bill 2025-26.

Both top officials of the SECP and the FBR clarified that the inspection would not be done by the tax officials, but the Audit Oversight Board would do the necessary job.

The new legislation will empower Audit Oversight Board to monitor audit firms, involving Chief Commissioners in referring cases to the Oversight Board and ensuring prior notice is issued before inspections.

Under proposed Section 58C in the Sales Tax Act, “Where in case of a registered person, whose accounts are subject to audit under the Companies Act, 2017, Chief Commissioner Inland Revenue has reason to believe that the audited accounts do not reflect the true and fair view of sales and purchases and related sales tax liability, he or she may with the approval of the Board, refer the audit firm, who has issued audit certificate to that registered person for inspection to Audit Oversight Board”, it added.

Chairman of the committee Senator Saleem Mandviwalla read the objections raised by Institute of Chartered Accountants of Pakistan (ICAP) on the proposed section in the Sales Tax Act.

Mandviwalla informed the committee that Auditor General of Pakistan (AGP) conducts audit of only 10 percent of the cases selected for audit.

Similarly, audit firms also conduct audit of selected number of companies to check whether these companies are doing anything wrong in their audited accounts/financial records.

Holding them responsible for all wrong doings by the companies would not be appropriate, he said.

Senator Mandviwalla remarked: Audit firms, conduct only 10 percent of audits—this is unacceptable.

The FBR officials explained that many audit firms are failing to meet international standards and merely “stamp papers.”

Copyright Business Recorder, 2025