' IJAZ UL AHSAN, J.---The petitioner is a firm of Chartered Accountants registered with the Institute of Chartered Accountants of Pakistan ("ICAP"). The respondent No,1 (ICAP) is a Statutory Body established under the Chartered Accountants Ordinance (X of 1961). Respondent No,1 is charged with the responsibility of regulating the profession of Accountants. ICAP is also Member of the International Federation of Accountants (IFAC). Professional bodies all over the world are putting in place quality control programmes to assist their members in maintaining the highest levels of professionalism. Respondent No,1 being a member of IFAC has put in place Quality Control Reviews
(QCR) to evaluate the performance of its members. It also maintains a list of its members having satisfactory QCR ratings. Such list is relied upon by persons, entities and organizations requiring services of Accountants for purposes of professional audit. The firms whose names appear in the list maintained by ICAP are required to possess the requisite professional skills and the capacity and knowhow to conduct audit of their clients in accordance with the international standards of auditing as adopted in Pakistan.
2. The Council of ICAP formed the QCR Committee in 1997 with the primary objective of setting up a quality control review framework in respect of audit of financial statements conducted by its member firms. The ICAP works through a Council which lays down its policy, issue directives and puts regulations in place. ICAP has a Quality Assurance Board which consists of members from a cross section of firms of Chartered Accountants. It also includes the nominees of the Securities and Exchange Commission of Pakistan and the State Bank of Pakistan.
3. The aforesaid Board approved a framework of Quality Control Review Programme (QCR) in 2006.
The said framework was accordingly put in place and is being followed by all members. Clause 5.1 of the aforesaid document provides as follows:-- "Every firm conducting audits of financial statements is required to undergo a QCR organized by the Board after every two and a half years. However, an earlier review may be required under special circumstances. These circumstances may include cases where a member is found guilty of professional misconduct by SECP or the Institute, or when a Financial Statements Review (FSR) of the Institute indicates need for such review in accordance with the FSR framework, or any other circumstances, that in the opinion of the Board warrants earlier review, in the public interest."
4. The main grievance of the petitioner is that its Quality Control Review (QCR) Report was finalized on 10th November, 2008. Despite the fact that the work done and audit reports issued were found to be supported by sufficient audit evidence, respondent No,1 issued a letter dated 10th November, 2008 informing the petitioner that the next QCR of his firm will be carried out after one year from the date of last QCR instead of two and a half years as provided in clause 5.1 above.
5. Although this petition is not formally admitted to regular hearing. However, since both the parties are represented and the case has been heard at considerable length, therefore, with the consent of both the learned counsel this case is treated as an admitted case and is being disposed of as such.
6. The learned counsel for the petitioner submits that the petitioner wrote to the respondent on 18th November, 2008 calling upon respondent No,1 to re-consider its decision. However, the decision was not re-considered. He points out that vide letter dated 16th October, 2009, the petitioner was called upon to arrange QCR of its firm right upto 10th October, 2009, failing which it was threatened that the name of the petitioner's firm from the list of firms with satisfactory QCR ratings will-be removed. The said action on the part of respondent No,1 is assailed through this petition. The learned counsel for the petitioner argues that the Quality Control Review Reports prepared at the behest of respondent relating to Pakistan Slag Cement Industry Limited and Zeal Pak Cement Factory Limited stated that the work done and audit report issued was supported by sufficient and appropriate audit evidence. In view of the fact that the respondent had expressed satisfaction with the audit report issued by the petitioner, there was no lawful reason or justification for carrying out Quality Control Review of the petitioner's firm after a period of one year instead of two and a half years. He therefore submits that the respondent is violating its own policy and rules; the impugned notice dated 4-9-2009 is unlawful and violative of the principles of natural justice.
7. The learned counsel for the respondent has supported the notice. He submits that a large number of discrepancies and deficiencies were pointed out in the audits conducted by the petitioner. As such there were valid grounds for seeking quality control review after one year.
8. I have heard the learned counsel for the parties at length and have also gone through the record with their assistance.
9. The provisions of Quality Control Review Programme are quite clear and unambiguous. They provide that an earlier review may be required under special circumstances. These circumstances, inter alia, include circumstances which, in the opinion of the Board warrant earlier review, in the public interest.
10. I have also examined the Quality Control Review Report which was sent to the petitioner on behalf of respondent No,1 relating to audit of the aforesaid two companies carried out by the petitioner. At various places in the said report deficiencies in the audit conducted by the petitioner were pointed out under the heading "matter arising". Some of the deficiencies pointed out are as follows:--
(1) It was noted that complete audit opinion as recommended by ISA 570 was not expressed by the Auditor in his report.
(2) Proper evidence and documentation was not available for long term financing of Rs,92.3 million from Sardar Muhammad Ashraf D. Baluch (Pvt.) Limited. No agreement is available in the file and also no proof found that direct circularization was carried out. Only confirmation certificate is on file and this is also not addressed to the Auditor.
(3) No sufficient evidence is available in the working paper files for advance to customers. The sale transaction of Rs,4.6 million as mentioned in note 33 has not been specified in terms of name of related party with whom sale transaction took place, the amount of transaction, the amount of outstanding balance and pricing method used.
(4) Proper disclosure was not made as it did not contain the identification of related parties and also no documentation found with the auditor-performed procedures for identification of all related parties.
10-A. On the basis of the aforesaid Quality Control Review Report of the petitioner/Firm, the Quality Assurance Board decided that the next Quality Control Review of the petitioner/Firm will be carried out after one year from the date of last QCR instead of two and a half years. The said decision was taken in exercise of powers available to the Board under clause 5.1 of the Quality Control Review Programme.
11. I have been informed that the name of the petitioner's firm which appears at serial No,32 of the Review Ratings maintained by respondent No,1 has not been removed so far.
' The learned counsel for respondent No,1 submits that in case the petitioner submits its records for Quality Control Review, and subject to satisfactory report of such review, the name of the petitioner shall not be removed.
12. The respondent No,1 is a Professional Body constituting members and office-bearers elected by their peers. The steps taken by them are for collective benefit, for interest of the general public and to increase professional standards and competency. Further, periodical reviews conducted under the supervision and control of the ICAP are meant to ensure that international standards of audit are maintained by local firms. If a Board of Experts and Professionals has thought it appropriate to undertake Quality Control Review of the petitioner after one year, this court is not inclined to override such decision unless malice, ill-will or mala fide is apparent on the face of the record. If the petitioner is meeting and following the requisite standards, it should not be shy of getting its work scrutinized by a professional body of experts charged with the responsibility to ensure maintenance of high professional standards. This, in my opinion, is in public interest and necessary to maintain the credibility of the respondent. No malice or mala fide has been alleged in the petition nor any mala fides or malice is apparent from the record. I find that the impugned notice is neither violative of principles of natural justice nor contrary to the policy or rules of the Institute. In these circumstances and for the aforesaid reasons, I do not consider this to be a fit case for interference in exercise of extraordinary Constitutional Jurisdiction of this court. The petition is without merit. It is accordingly dismissed.