ISLAMABAD, Dec 18: An appellate bench of the Competition Commission of Pakistan (CCP) granted interim relief to the Institute of Chartered Accountants of Pakistan (ICAP) on Thursday in a case relating to increase announced by the institute in minimum wages of professional auditors.

Earlier, a single member of the CCP had declared the institute’s circular of Aug 13, announcing increase in minimum fee, void.

The ICAP council in its 197th meeting on July 25 had approved the recommendations of a technical advisory committee relating to revision of ATR-14 -- minimum hourly charge out rates and minimum fee for audit engagements. But the CCP proceeded suo moto against the institute by issuing a show-cause notice for violation of Section 4(1) of the Competition Ordinance, 2007.

An opportunity of hearing was provided to the ICAP and on Dec four, a single member passed an order, declaring the ATR-14 void.

The CCP member had directed ICAP to withdraw the ATR-14 from the ICAP Member’s Handbook, Volume II, Part-II, Section C, and to publish a notice of such a withdrawal in two newspapers on or before Dec 19 failing which the ICAP shall be liable to pay a penalty of Rs300,000 for per day of infringement.

Being aggrieved by the said order, the institute preferred an appeal before the appellate bench under Section 41 of the Ordinance.

The appellate bench comprises CCP chairman Khalid A Mirza, and CCP’s member legal Rahat Kaunain Hassan.

Giving reasons for the increase in wages of professional auditors, the institute had observed that audit engagements carry immense responsibility which have further increased manifold in recent years.

“To meet the expectations of various stakeholders, stringent regulatory requirements and ever-increasing demand to increase the level of due care, the members needed to perform the audit exercising a very high degree of “professional competence,” it observed.

Such work was also required to be properly documented to support the opinion expressed by the auditors.

The ICAP was of the view that its own council had recently issued a notification making it mandatory for the firms doing audit of listed and public sector entities to observe from July 1, 2009 ISQC 1 – quality control for firms that perform audits and reviews of historical financial information and other assurance and related services engagements issued by the IFAC, the global organisation for accountancy profession.

The ICAP council had also notified ISA 220 that is the quality control for audits of historical financial information and ISA 230 which is related to audit documentation, etc.

While announcing the increase in audit charges, the ICAP had said that the above standards required extensive documentation of audit procedures and recruitment of qualified staff. Furthermore, the minimum stipend rate for audit trainees had also significantly increased. Hence, the cost to perform audit by the firms has significantly increased to ensure that quality control procedures were adequately complied with by the

firms.

According to the increased charges, Rs7,500 per man-hour to be paid to a partner accountant. For the qualified staff having above eight years of experience per hour wage is Rs5,000.

An auditor with four to eight years of experience will charge Rs4,000 per hour, while the ones below four years Rs3,000. Supervisor has to be paid Rs2,000 per hour, senior Rs1,000, semi-senior Rs750 and junior Rs500.

The new schedule of minimum audit fee shows that listed companies with turnover up to Rs500million will pay Rs250,000 audit fee; those with turn up to Rs1billion will pay Rs300,000; listed companies with turn over up to Rs5billion will be charged Rs500,000; while listed companies of above Rs5billion turn over will pay Rs1million to its auditors.

For the economically significant entities (ESE), the charges are: those with turn over up to Rs1billion will be charged Rs250,000; entities with turn over of up to Rs5billion will pay Rs400,000 audit charges; while those with turn over of above Rs5billion have to pay Rs800,000.

Medium-sized entities will be charged Rs125,000 and small sized entities Rs75,000.

The new schedule also carries further details of the increased auditing fee in certain other circumstances.

During the course of hearing, the ICAP counsel apologised for using unwarranted language in the appeal/pleadings and assured that no offence was intended against the learned member who passed the impugned order.

Also, the counsel for the ICAP agreed to delete irrelevant and unnecessary section. It was also directed to submit arguments and amended appeal with documents by Jan 1. The matter shall now come up for hearing in January.