Audit Requirements for Private Companies in Pakistan

Core Clarification: Audit Exemption Thresholds Under the Companies Act, 2017

In Pakistani corporate law, the threshold for a statutory audit exemption is based primarily on paid-up capital, under Section 223 of the Companies Act, 2017.

Breakdown of Legal Categories

1. Small Companies Exempt from Statutory Audit

A private limited company or Single Member Company (SMC) is completely exempt from having its annual financial statements audited if:

• Its paid-up capital does not exceed PKR 1,000,000 (1 Million).
• It is not a subsidiary of a public company.

📝 Filing Obligation: These companies file unaudited financial statements with the SECP, accompanied by a Board-approved affidavit executed by the Chief Executive or signing Directors confirming approval.

2. Companies Subject to Audit (Mid-Tier Exemption)

Private companies with a paid-up capital exceeding PKR 1 Million but up to PKR 10 Million must conduct a statutory audit annually:

• Audit Obligation: An annual audit is mandatory.
• SECP Filing Waiver: While the accounts must be audited and presented to shareholders at the AGM, the company is not required to file the audited report with the SECP. It only submits unaudited statements to the Registrar.

3. Medium & Large Private Companies

For private companies with a paid-up capital exceeding PKR 10 Million:

• Full statutory audit is mandatory.
• Audited financial statements must be filed directly with the SECP via the eZfile corporate portal within 30 days of the AGM.
• Financial reporting must strictly comply with International Financial Reporting Standards (IFRS) as adopted in Pakistan.

Auditor Qualification Requirements

The eligibility criteria for who can act as a company's statutory auditor depends on capital structure under Section 247 of the Act:

Statutory Statutory Timelines & Appointments

• First Auditor Appointment: The Board of Directors must appoint the company's first statutory auditor within 90 days of incorporation.
• Subsequent Appointments: Confirmation or reappointment takes place at each Annual General Meeting (AGM) by shareholder resolution.
• Reporting Changes: Any removal or change of auditor must be reported to the SECP Registrar using Form 29 within 15 days of the change.

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