Sub- Regulation (xiii) of Listing Regulations 37 notified by The Karachi Stock Exchange (Guarantee) Limited vide circular KSE/N-269 dated January 19, 2009 on verification of related party transactions by Auditors states that:
(1) All companies registered under the Companies Ordinance, 1984 shall place before the Board of Directors all the transactions with the related parties for review and approval.
(2) The detail of all related party transactions shall be placed before the Audit Committee of the company.
(3) The related party transactions which are not executed at arm’s length price will also be placed separately at each Board meeting along with necessary justification for consideration and approval of the Board and before the Audit Committee of the company.
(4) The Board of Directors of a company shall approve the pricing methods for related party transactions that were made on the terms equivalent to those that prevail in arm’s length transaction only if such terms can be substantiated.”
The Institute is of the view that the above requirement only requires the external auditors to review the process listed in the amendment and in order to clarify the role of the external auditors, an additional scope paragraph explaining the auditors’ responsibility in this regard has to be included in the external auditors’ Review Report. Accordingly, the revised external auditors’ Review Report on Statement of Compliance with Best Practices of Code of Corporate Governance is enclosed.
The Review Report has been superseded through ICAP circular No.2/2014 dated February 24, 2014.