Karachi, June 29, 2025 – In a landmark move, the Federal Board of Revenue (FBR) will now subject audit firms to official inspection in cases involving questionable tax certifications. This significant development comes through the Finance Act, 2025, which aims to hold not just taxpayers, but also their auditors, accountable for misrepresentations in sales tax matters.
A new Section 58C has been added to the Sales Tax Act, 1990, empowering the FBR to initiate inspection proceedings against audit firms that issue misleading or inaccurate audit reports. This legislative change is particularly relevant where a registered taxpayer’s accounts are required to be audited under the Companies Act, 2017.
According to the new section, if a Chief Commissioner of Inland Revenue has reasonable grounds to believe that the audited financial statements of a registered person do not present a true and fair view of their sales, purchases, and corresponding sales tax liability, the matter may be escalated. With prior approval from the Board, the audit firm responsible for certifying such accounts can be referred to the Audit Oversight Board for formal inspection.
This measure is intended to strengthen transparency, promote compliance, and deter both taxpayers and audit professionals from engaging in malpractice. The inclusion of audit firms in the inspection process is a direct response to concerns about collusion or negligence in certifying inaccurate accounts that understate sales tax obligations.
FBR officials state that this provision under the Finance Act, 2025 reflects a shift toward comprehensive tax enforcement, where those facilitating tax evasion—knowingly or unknowingly—will also face consequences. The inspection by the Audit Oversight Board will evaluate whether the audit firm maintained professional standards and ethical practices while certifying tax-related financial statements.
This move is expected to enhance the credibility of the audit process and ensure greater accuracy in financial disclosures submitted for tax purposes. By expanding the scope of accountability to include the audit fraternity, the FBR aims to reinforce trust and integrity in Pakistan’s tax administration system.