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Should auditors report on clients tax obligations?

KARACHI: The matter regarding auditor’s report to include an opinion as to whether companies have strictly adhered to their withholding tax obligations under the Income Tax Ordinance-2001 is under discussion between the Institute of Chartered Accountants of Pakistan (ICAP) and the Central Board of Revenue (CBR).

ICAP in a press note issued Monday said that it recognizes in principle and appreciates the trust, which the CBR wishes to repose on the profession for relying on auditor’s opinion on application, implementation, collection and deposit of the withholding tax by various companies.

However, ICAP added, it needs to be examined whether such an opinion can form an integral part of the auditor’s report based on the statutory audit of the financial statements of such companies pursuant to the Companies Ordinance, 1984.

The institute maintained that it needs to be emphasized that auditors while giving opinion in the auditor’s report on the statutory financial statements rely significantly on internal controls, systems and procedures and sample tests carried out during audit of a company.

Forming an opinion on the subject of withholding tax on all transactions would not only be an extensive engagement but also complex in nature and expensive as it would require several additional steps that are not expected professionally to be carried out in the normal course of external audit, the representative body of chartered accountants said.

It is also significant to stress that in adhering to the scope of statutory audit and the contents of an audit report, the Institute is required to observe the principles laid down by the International Federation of Accountants (IFAC). Therefore, the matter needs to be considered from a comprehensive dimension before a consensus is reached on a professionally and practically acceptable solution to the issue.

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