SECP formulates new mechanism for special audit of companies

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has chalked out a new mechanism for the special audit of companies to check issues including misuse of funds, inaccurate accounts or mismanagement/irregularities under the regulatory oversight of the Audit Oversight Board.

In this regard, the SECP has proposed a new Section 223A in the Companies Act.

The SECP stated that Section 223A has been inserted to give shareholders and the Commission a clear, practical mechanism to verify whether a company’s affairs are being managed properly. At present, if serious concerns arise regarding misuse of funds, inaccurate accounts, or mismanagement, there is no specific provision requiring an in-depth review of records. This amendment fills that gap by allowing members holding at least twenty percent voting rights to request a special audit, and also enabling the Commission to order one where irregularities are indicated. It strengthens accountability, improves financial transparency, protects shareholder interests, and ensures that company management remains answerable for the proper use of funds and maintenance of true records.

Under the proposed Section 223A (Special Audit), (1)The Commission may upon an application made by members holding not less than 10 percent voting rights in a company, order a special audit of the company and appoint an auditor to carry out detailed scrutiny of the affairs of the company.

Provided that the auditor appointed for the purposes of the special audit shall be subject to the regulatory oversight of the Audit Oversight Board under the applicable laws and regulations. Provided further that Commission may, on its own motion, may order special audit of the company on the receipt of a report under sub-section (5) of Section 221 or on the report by the registrar under sub-section (6) of Section 254.

(2) On receipt of the special audit report, the commission may issue such directions for immediate compliance to the company and its management as the Commission deems fit.

(3) In case where the special audit has been ordered by the Commission on an application made by the member of the company, one half of the expenses of the special audit shall be borne and paid in advance by such members, and the other half shall be borne by the company.

(4) In case where the special audit has been ordered by the Commission on its own motion, the expenses of the special audit shall be payable by the company.

(5) Where the expenses of the special audit are payable by the company, such expenses in the first instance may be defrayed by the Commission, and the company shall be liable to reimburse the Commission in respect of such expenses.

(6) The amount of expenses liable to be paid by the company, the members or any other persons, as the case may be, shall be recoverable as arrears of land revenue.

(7) The provisions of Section 255 shall apply mutatis mutandis to the auditor appointed to carry out the special audit of the company under sub-section (1), the SECP added.

Copyright Business Recorder, 2026