Law: Companies Ordinance, 1984

Section: 260

Companies Ordinance (XLVII of 1984)--S. 260---Securities and Exchange Commission of Pakistan Act (XLII of 1997), S.33---Making and submission of untrue and illegal audit report by the Auditors---Auditor audited the accounts and books of accounts of the company and made audit report---Examination of said audit report had revealed that Auditor had failed to appropriately modify his opinion on the account in spite of following serious going concern uncertainties confronted by the company as on the date of audit report---Company due to said uncertainty had to suspend its operations on account of unfavourable market conditions; the company defaulted in payments of its liabilities towards banks; all employees of the company were laid off; and power supply and other utilities were discontinued etc.---Director (Enforcement) of the Commission taking a lenient view imposed a penalty of Rs.70,000 on Auditor under S.260(1) of the Companies Ordinance, 1984---Validity---Auditor's responsibility was to consider the appropriateness of management's use of the going concern assumption in the preparation of the financial statements and consider whether there were material uncertainties about the entity's ability to continue as a going concern that needed to be disclosed in the financial statements---Auditor should consider whether there were events or conditions and related business risks which could cast significant doubt on the entity's ability to continue as a going concern---Audit report should include specific reference to the fact that there was a material uncertainty that could cast significant doubt about the entity's ability to continue as a going concern---Auditor's submission that the operations were subsequently restored, could not be substantiated as no result of operations was evident in the half yearly accounts---Mere submission of electricity bill for one month, did not support auditor's stance that the company re-commenced its operations---intentions and fruitless attempts by management of the company to commence operations, could not justify the use of going concern as the basis for preparing accounts---Going concern uncertainty confronted by the company at the…

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