The Council of the Institute in its 261st meeting held on January 24, 2015, has accepted the Professional Standards and Technical Advisory Committee’s recommendation to revise/reformat ATR 17 ‘Auditors’ Report to the Trustees/Board of Governors/Management Committee’ in order to align it with the requirements of the clarified International Standards on Auditing (ISAs).
Other than in very rare instances, financial statements are usually prepared under the ‘General Purpose Framework’ in Pakistan. The glossary of terms available in the ISAs defines it as follows:
General Purpose Framework: A financial reporting framework designed to meet the common financial information needs of a wide range of users. The financial reporting framework may be a ‘fair presentation framework’ or a ‘compliance framework’.
The term ‘fair presentation framework’ is used to refer to a financial reporting framework that requires compliance with the requirements of the framework and:
(a) Acknowledges explicitly or implicitly that, to achieve fair presentation of the financial statements, it may be necessary for management to provide disclosures beyond those specifically required by the framework; or
(b) Acknowledges explicitly that it may be necessary for management to depart from a requirement of the framework to achieve fair presentation of the financial statements. Such departures are expected to be necessary only in extremely rare circumstances.
The term ‘compliance framework’ is used to refer to a financial reporting framework that requires compliance with the requirements of the framework, but does not contain the acknowledgements in (a) or (b) above.
Entities preparing a complete set of financial statements may use either of the following accounting frameworks:
• IFRSs as notified by the Securities and Exchange Commission of Pakistan (SECP) under the Companies Ordinance, 1984; or
• Accounting and Financial Reporting Standards for Medium-Sized Companies and Small-Sized Companies issued by the Institute of Chartered Accountants of Pakistan (the AFRS).
Both, the notified IFRSs and the AFRS, along with the other requirements of the Companies Ordinance, 1984 and the applicable pronouncements of the SECP respectively constitute the ‘approved accounting standards as applicable in Pakistan’ for entities which are required to prepare their financial statements in accordance with one of those accounting frameworks.
Further, entities preparing their financial statements on another comprehensive basis of accounting may use one of the following:
a) Receipts and Disbursements Basis of Accounting:
Under the ‘Receipts and Disbursements Basis of Accounting’, revenue is recognised when received rather than when earned and expenses are recognised when payments are made rather than when incurred.
b) Receipts and Expenditure Basis of Accounting:
Under the ‘Receipts and Expenditure Basis of Accounting’, revenue is recognised when received rather than when earned and expenses are recognised when incurred.
However, such entities should, to the extent possible, prepare their financial statements in accordance with the Guideline for Accounting and Financial Reporting by Non-Government Organisations (NGOs)/ Non-Profit Organisations (NPOs) issued by the Institute of Chartered Accountants of Pakistan.
FORMAT OF THE AUDITORS’ REPORT
ATR 17 ‘Auditors’ Report to the Trustees/Board of Governors/Management Committee (Revised 2015)’prescribes the format of the auditors’ report to be issued to the Trustees/Board of Governors/ Management Committee of a Non-Government Organisation (NGO) / Non-Profit Organisation (NPO)which is not registered under the Companies Ordinance, 1984. Audit reports to be issued on the financial statements of Companies registered under section 42 of the Companies Ordinance, 1984 shall be as prescribed under Form 35A of ‘The Companies (General Provisions and Forms) Rules, 1985’. Such section 42 Companies shall prepare their financial statements in accordance with the requirements contained in the fifth schedule to the Companies Ordinance, 1984.
ATR 17 is available in the ‘Member’s Handbook’ published by the Institute. The document can also be downloaded from the Institute’s website.