Enquiry:

State Life Insurance Corporation of Pakistan (the corporation) is a state owned entity established and governed under Life Insurance (Nationalization) Order, 1972. The Board of Directors of the corporation was dissolved on 12 May 2013. The financial statements of the corporation for the year ended 31 December 2012 were initialed by two firms of Chartered Accountants. However, due to non-existence of Board of Directors, these financial statements remained un-approved and the Auditors’ Report thereon was not issued by the auditors. One of the auditors completed his term and the other one continued. For the subsequent year ended 31 December 2013, another firm of Chartered Accountants was appointed as auditors as a replacement of the auditors ceased to continue with the approval from Ministry of Finance. Section 28 of the Life Insurance (Nationalization) Order, 1972 deals with the appointment of auditors and audit of the financial statements of the corporation.

The Board of Directors of corporation has been re-constituted during the year and the financial statements of the corporation are being approved by the Board of Directors. The auditors for the relevant year who ceased to continue are reluctant in signing the Auditor’s Report as they believe that they are currently no more the auditors of the corporation as of the approval of the financial statements by the Board of Directors in current date. We write to seek your opinion as to the signing of the Auditor’s Report for the year ended 31 December 2012 by the predecessor auditors in the current date.

Opinion:

The Committee has examined your enquiry and understand that draft audited financial statements of the Corporation for the year ended 31 December 2012 (2012 Financials) were not approved in accordance with the provisions of Life Insurance Nationalization Ordinance, 1972 (LINO) due to non-constitution of the Board by the Federal Government. Accordingly, the auditors, one of whom having completed five years tenure and due to retire (retiring auditor), also could not sign the audit report on 2012 Financials. The Federal Government prior to approval and signing of these draft audited accounts appointed a new auditor in place of retiring auditor for the audit of financial statements for the subsequent years.

This has created an anomaly as traditionally the draft audited accounts are approved by the Board and retiring auditor sign the audit report prior to appointment of new auditors. Given the fact that LINO is silent on this specific issue, the Committee consider that the retiring auditor may sign the audit report on 2012 Financials after these have been approved by the Board, to avoid any undue hardship to the Corporation.

However, for extra caution, the Corporation is advised to act under legal advise.

(December 02, 2014)