Law:

Section:

Securities and Exchange Ordinance (XVII of 1969)--- ----Ss. 6 & 22---Stock Exchange Members (Inspection of Books and Record) Rules, 2001, Rr.3 & 4---Securities and Exchange Rules, 1971, R.2(d) & Third Schedule---Regulations Governing Risk Management of the Exchange, Cl.2.1---Irregularity in calculation of 'Net Capital Balance (N.C.B.)'---Inspection report submitted by Inspection Team, duly constituted by the Commission, had revealed that Net Capital Balance (N.C.B.) of the company as verified and certified by respondent/Chartered Accountants/Auditors was not in accordance with the Third Schedule of the Securities and Exchange Rules, 1971; and was overstated---Responsibility of respondent/Chartered Accountants with regard to submission and ensuring accuracy of 'NCB' certificate was stipulated in Regln. 2.2(c) of the 'Regulations Governing Risk Management of Karachi Stock Exchange, which had stipulated that 'NCB' certificate would be duly verified/audited by the auditor---Auditors/Chartered Accountants were required to ensure that due verification/audit process had been carried out in certifying the 'NCB' calculated---'NCB' had been established to have been overstated by an amount of Rs.191.161 million---Chartered Accountants (Auditors) had admitted the stance of the Commission and requested to take a lenient view into the matter---Respondent, being auditors for certificate of 'NCB', was responsible to independently verify the figures provided by the company for 'NCB', rather than solely relying on a certificate issued by the Chief Executive Officer of the company---Chartered Accountants had failed to perform its duties as auditors for certificate of 'NCB'---Auditors were required to perform further necessary and appropriate assurance procedures, which were not performed---Respondent auditors did not apply necessary procedure while certifying the 'NCB' certificate, which resulted in misrepresentation and overstatement---Auditors seemed to be negligent in performing their professional duties with regard to audit and certification---Since that violation had been noted for the first time, while taking a lenient view, a penalty of Rs.10,000 was imposed on…

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