ISLAMABAD: Federal Board of Revenue (FBR) has asked Securities and Exchange Company of Pakistan (SECP) to ensure quality of financial reporting of registered companies.
In this regard Chairman FBR Syed Muhammad Shabbar Zaidi, in his letter to Chairman SECP, has requested to ensure correct and transparent submission of financial statements by the companies.
In his letter the Chairman has stated that it has been observed that in many cases the quality of the accounts/financial statements prepared by the financial businesses specially in the cases of private limited companies is not in line with the quality standards and in many cases huge additions to income, are made, which are in many cases, are non-defensible, in taxation proceedings.
Chairman FBR further added that quality of ‘Audit’ by the taxation officer is not as per best practices. FBR is improving the system and shall seek Institute’s assistance or guidance on the matter, he added.
The extension in date of filing for return for companies also for Tax Year 2018 has only been given to provide an opportunity to the companies, especially private companies, to review their accounts and file improved position if required. In the past, FBR’s stance on the matter was different and as per information, no case was ever referred to for any disciplinary proceedings against Auditors by the institute or Management of the companies by SECP to FBR.
“Now we intend to act diligently in the matter,” Chairman FBR added.
The government has initiated an overall reform package for improving documentation and improving the quality of financial accounting which form the basis of taxation.
The accounts prepared under the Companies Ordinance, 2016 form the basis for the same. However, this objective can only be achieved once the quality of annual financial statements are in line with the international best practices. It is therefore suggested that special and concerted emphasis be laid down by both the addressee institutions for assuring that the financial statements furnished reflect correct financial position and there is no possibility of any understatement, including non-compliance with the laws of taxation as prevalent in Pakistan especially withholding provisions.
In order to achieve this task, it is advised that immediate actions be undertaken to start the reformed process. Chairman FBR stated that necessary instructions be issued for the same to the relevant field formations.
Furthermore, if allowed under the law, the investigations and disciplinary proceedings initiated against the Directors and the Auditors by SECP and the Institute respectively, if any, are shared with the Federal Board of Revenue, if possible, under the law, in order to ensure proper accounting of income and amount of taxes due.
Chairman FBR assured that such information will remain confidential. Chairman FBR also suggested an urgent meeting with Chairman SECP in this regard.