Enquiry:

One of our clients (a private limited company) applied for financing from a bank and provided to the bank financial statements for last three years audited by its statutory auditors (which are not the “Category A” class Audit Firm on the panel of SBP of Auditors) along with other documents needed and as required by the bank for the financial accommodation. Later, the bank approved the financing facilities with the following condition in its approval letter:

“The company shall provide financial statements for the year 2008, 2009, 2010 and future years audited by “Category A” class Audit Firm as mentioned on SBP Panel of Auditors under BSD Circular letter No. 12 dated 16-9-2010.

Now, the company wants to get its financial statements audited by “Category A” class Audit Firm. Please provide us technical opinion, if the company can get its financial statements for last three years re-audited by “Category A” class Audit Firm on the specific request of the management of the company for exclusive use of the bank/financial institution, and if so, does the audit report may be addressed to board of directors using the format of Form 35-A, or should use any other format for auditors report i.e. format of Auditors report under IAS 700 “Forming an opinion and reporting on financial statements” (Paragraphs 20-45).

Opinion:

The Committee is of the view that the re-audit of the financial statements of the Company should be carried out in accordance with the specific terms of engagement and should not be considered as a statutory audit.

The Committee is also of the view that auditor’s report may be issued under IAS 700 ‘Forming an opinion and Reporting on Financial Statements’.

(April 15, 2011)