1. If an entity is registered under section 42 of Companies Ordinance as a not for profit organization, which framework would be referred in the statement of compliance of the financial statements of that entity? Would we use the MSE/SSE Standards issued by ICAP in which the applicability comes from 5th schedule OR NGO/NPO guidelines issued by ICAP. The matter is due to the constitution of the entity under the Companies Ordinance, 1984.
2. MSE standards issued by ICAP uses the word “entity” like Medium Sized Entity, but the 5th schedule uses the word Medium Sized Company. So, if they are applied on entities then can we use these standards for NGOs/NPOs? Further, would you also clarify whether the SSE and MSE standards are applicable to Companies only or can they be used as a framework for other entities as well?
3. If the NGO/NPO is registered under section 42 of Companies Ordinance and is managing different projects having a material funding from one or more than one donors, and donors have not mentioned any framework for the preparation of financial statements but mentioned that the accounts should be prepared and be audited by a reputed firm, then which framework to use MSE/SSE or NPO/NGO guidelines issued by ICAP?
4. If an entity is formed through its own statute through notification by the Prime Minister of Pakistan or President of Pakistan and nothing is mentioned about the applicable framework to use for the preparation of the financial statements, then what to do in that case with respect to the applicable financial reporting framework. Please remember that the entity is not registered as NGO/NPO or a Company under the Companies Ordinance 1984.
5. If an entity/NGO has a further Project whose accounts are prepared separately for example a factory, housing scheme, or manufacturing concern not registered as a separate COMPANY!! Which framework would we use in this case?? Can we use the MSE and SSE standards as it is an entity although not a Company!!
For 1, 3 and 4 above, which audit report should be used in all the cases above?? i.e. Report as per Companies Ordinance Form 35A or ATR 17?
The Committee views on the above enquiries are as follows:
1. All NGOs/NPOs registered under section 42 of the Companies Ordinance, 1984 are required to comply with the requirements of section 234 of the Companies Ordinance, 1984 while preparing their financial statements.
Auditor’s report format – Form 35A should be used.
2. MSE and SSE standards can be used as a framework for other entities as well.
3. Please refer response to enquiry (1) above.
4. Other than NGO/NPO registered under section 42 of the Companies Ordinance, 1984, NGOs registered under Societies Act are required to comply with ATR 17.
The applicable framework of the entities other than above mentioned entities, the guidance may be obtained from NGOs/NPOs Guidelines issued by ICAP while preparing financial statements.
Auditor’s report format –Reference may be taken from ISAs/ ATR-17.
5. MSE/SSE standard can be used.
(May 20, 2011)