Around the globe: Pakistan - internal auditing is promoted as a means to counter corruption

Internal Auditor, August, 2003 by Huma Pasha, M. Jamil Bhatti

WHEN PAKISTAN gained independence in 1947, the state-owned Pakistan Railways had a formal internal audit function. Other government and semi-government organizations at the time featured an inspection department, whose role resembled that of internal auditing.

After the promulgation of Pakistan's 1973 constitution, the Office of the Auditor General of Pakistan was formed. The auditor general had the authority to audit receipts, expenditures, and the use of any public funds at the federal and provincial level. Before long, an internal audit function was added to other mature public-sector organizations.

The political and social wave against corruption in the society as a whole led to a culture of public accountability and transparency in decision-making--an environment for which internal auditing was well-suited.

AUDITING LEGISLATION

During the past several years, internal auditing has been introduced gradually in the public sector. In 2001, a local-government ordinance was promulgated that requires all district-level bodies to have an internal audit function led by a chief audit executive.

Also in 2001, the federal government hired foreign and local consultants to help draft the Public Sector Internal Audit Act of 2003, which will make having an internal audit function mandatory for all local, provincial, and federal government institutions. When finalized, the act will be applicable to all institutions to which the government provides funds.

Pakistan's private sector is also subject to audit legislation. In March 2002, the Securities and Exchange Commission of Pakistan issued a code that required all companies listed on any of Pakistan's three stock exchanges to have an internal audit function.

RISING TO THE CHALLENGE

Issues such as transparency, accountability, and quality management are of top concern to Pakistan's internal audit professionals. Audit practitioners are also struggling to cope with recent legislative changes and to help management discharge its responsibilities to stakeholders.

Organizations such as the Institute of Chartered Accountants of Pakistan, the Auditor General of Pakistan, and The Institute of Internal Auditors are holding seminars and conferences to boost awareness of the profession and to share professional knowledge. The auditor general's office has even provided financial assistance for its staff to take the Certified Internal Auditor (CIA) exam.

HIGHER EDUCATION

The University of Punjab, one of the largest universities in the country, is introducing a master's degree program--M.Sc. in Auditing--specific to internal auditing. Internal auditing is also being introduced as a subject in the university's master's in commerce and bachelor's in commerce degree programs. These programs will help prepare students for taking the CIA exam, which many organizations in Pakistan are now stressing as an important requirement.

FUTURE OF THE PROFESSION

Recently, Pakistan has witnessed an awakening in the need for transparency and accountability. The push for improved quality management is creating a positive environment for expansion of the internal audit profession as well as ample opportunity for practitioners to broaden their scope and influence.

HUMA PASHA, CIA, FCA, chief internal auditor for The Hub Power Co. Ltd. in Karachi, Pakistan, and M. JAMIL BHATTI, PIPFA, treasurer for the University of the Punjab in Lahore, Pakistan, contributed to this article.

AT A GLANCE

GDP $299 billion

GDP PER CAPITA $2,100

CURRENCY Pakistani rupee (PKR)

ANNUAL INFLATION 4 percent

LAND AREA 778,720 sq km

POPULATION 147,663,429

LABOR FORCE 40.4 million

INDUSTRIES textiles, food processing, beverages, construction materials, clothing, paper products, shrimp

INDUSTRIAL PRODUCTION GROWTH RATE 7 percent

LANGUAGES Punjabi, Sindhi, Pashtu, Urdu (official), Balochi, Hindko, Brahui, English, Burushaski

SOURCE: CIA WORLD FACTBOOK 2002