Audit Readiness Checklist for Pakistani Companies: A Comprehensive Guide

In today’s fast-evolving regulatory environment, companies in Pakistan must be thoroughly prepared for audits—whether they are statutory audits, tax assessments by the Federal Board of Revenue (FBR), or audits requested by international donors.

This comprehensive checklist is designed for business owners, CFOs, compliance heads, and audit managers to streamline the audit preparation process, reduce financial risks, and improve organizational transparency. With the right approach and documentation in place, audits can be conducted smoothly—without stress or last-minute panic.

1. Clarify the Type and Scope of Audit

Before preparing documentation, it’s critical to understand the type of audit your business is facing. Each type has different objectives, compliance requirements, and documentation expectations.

Types of audits in Pakistan include:

• Statutory Audit (Companies Act 2017 – mandatory for certain entities)
• Tax Audit (FBR – income tax, sales tax, and withholding audits)
• Internal Audit (to assess internal control effectiveness)
• Forensic Audit (usually due to fraud or financial irregularities)
• Donor or Program Audit (especially for NGOs, INGOs, and donor-funded entities)

Action Steps:

• Review the audit notice or TOR (Terms of Reference)
• Identify governing laws (e.g., Companies Act, Income Tax Ordinance)
• Engage your audit advisors early

2. Form an Internal Audit Coordination Team

An organized team is the backbone of a successful audit. This cross-functional group is responsible for collecting data, responding to queries, and coordinating with auditors.

The ideal audit team should include:

• Finance Manager or CFO (Team Lead)
• Internal Auditor (if available)
• HR & Payroll Officer
• Tax Advisor or Consultant
• Legal or Company Secretary
• Procurement/Inventory Officer
• IT Support Representative

Tips:

• Assign clear roles and responsibilities
• Set internal deadlines before the actual audit timeline
• Create a shared tracker for communication and deliverables

3. Review and Finalize Financial Documents

Your financial statements are the primary focus of any audit. Ensure they are accurate, complete, and up-to-date.

Checklist of essential financial documents:

• Audited or draft financial statements (last 1–3 years)
• Trial balance and general ledger for the audit period
• Cash and bank reconciliation statements (monthly)
• Fixed asset register with depreciation schedules
• Accounts receivable and payable aging reports
• Stock and inventory movement logs
• Chart of accounts and journal vouchers

Suggestions:

• Ensure all entries are properly posted and reconciled
• Remove any suspense accounts or unexplained balances
• Provide notes and schedules where necessary

4. Gather Corporate and Statutory Documentation

Auditors will verify your company’s legal structure and corporate compliance with SECP regulations.

Documents to prepare:

• Certificate of incorporation and Form A, Form 9
• Memorandum and Articles of Association (MoA/AoA)
• Shareholder register and changes in shareholding
• Board meeting minutes and resolutions
• Agreements with partners, investors, or subsidiaries
• SECP filings and acknowledgments

Best Practices:

• Cross-check records with SECP online system
• Ensure director/officer appointments are formally documented

5. Organize Tax Compliance Files

Tax documentation is often one of the most scrutinized areas during audits—especially from the FBR.

Required tax records include:

• National Tax Number (NTN) and Sales Tax Registration (STRN)
• Filed tax returns: Income Tax, Sales Tax, and Withholding
• CPRs (Computerized Payment Receipts) for tax payments
• Tax demand or refund notices, appeals, or orders (if any)
• Tax withholding records for employees and vendors
• Sales Tax Annexures (C, F, H) and WEBOC import/export records

Recommendations:

• Reconcile tax filings with accounting ledgers
• Address discrepancies proactively with your tax advisor

6. Review Payroll and HR Documentation

Auditors often test payroll to verify accurate salary payments, tax deductions, and employee benefits.

Make available:

• Payroll registers and pay slips
• EOBI and Social Security compliance receipts
• HR policies, contracts, and employee onboarding documents
• Gratuity, leave encashment, and bonus provisions
• Attendance, overtime, and leave records

7. Evaluate and Document Internal Controls

Strong internal controls protect your company from fraud, error, and reputational risk. Auditors will evaluate both process design and implementation.

Key areas to address:

• Segregation of duties (authorization, custody, recording)
• Expense approval hierarchy (Delegation of Authority)
• Inventory issuance and procurement policies
• Vendor onboarding and payment workflows
• Cash management and banking protocols

Documentation to prepare:

• SOP manuals for finance, procurement, HR
• Internal audit reports or control self-assessments
• Risk registers (if applicable)

8. Prepare for IT and Systems Review

Many audit firms include a basic IT review in their fieldwork to assess data integrity and access security.

Checklist:

• List of accounting software used (e.g., QuickBooks, SAP)
• User access logs and controls for sensitive data
• Backup schedules and cloud storage policies
• Cybersecurity protocols and password management

9. Perform Internal Reconciliations Before Audit

Reconciling accounts internally reduces the risk of audit adjustments and saves time.

Run reconciliations for:

• Cash and bank accounts
• Receivables and payables
• Inventory balances vs. stock registers
• Intercompany transactions
• Fixed assets vs. depreciation schedules
• Tax payable vs. tax filings

Action Step:
Document your working papers and maintain reconciliation sheets as support.

10. Create an Audit Binder or Virtual Data Room

Having all your documents in one place is essential for audit efficiency.

Organize documents under labeled sections:

• Financial Statements
• General Ledger & Trial Balance
• Tax Returns & CPRs
• Bank Statements & Reconciliations
• Payroll & HR Files
• Contracts & Legal Docs
• Fixed Assets & Inventory
• SECP & Corporate Compliance

Virtual Tip:
Use cloud-based tools (e.g., Google Drive, Dropbox, SharePoint) for remote access and version control.

11. Communicate Early with Auditors

Professional communication builds trust and alignment.

Schedule a pre-audit meeting to:

• Confirm audit start and end dates
• Share financials and trial balance
• Discuss significant estimates or accounting judgments
• Finalize contact points and documentation process
• Clarify documentation format and soft copy delivery

Advice:
Proactive communication leads to fewer surprises and smoother cooperation.

12. Track and Respond to Audit Queries Promptly

Audit queries often lead to delays if not managed well.

Maintain a live tracker with columns for:

• Query description
• Date received
• Assigned team member
• Date responded
• Status (Pending/Resolved)
• Comments or attachments

Best Practice:
Hold daily sync meetings during audit fieldwork to resolve issues quickly.

13. Review Past Audit Observations

Before starting, revisit last year’s management letter or audit report.

Checklist:

• Identify repeated weaknesses
• Validate if recommended changes were implemented
• Gather evidence of improvements made

Pro Tip:
Auditors appreciate when companies close past gaps—it shows maturity and governance.

14. Post-Audit Follow-up and Lessons Learned

Once the audit is complete:

• Hold a debrief with finance and audit teams
• Respond formally to management letter points
• Update internal policies where gaps were identified
• Train staff on key findings
• Archive all supporting documents for future reference

Final Thought:
Audit readiness is not an event—it’s an ongoing discipline.

Conclusion: Readiness Reflects Responsibility

Being audit-ready means more than just having your books in order. It means being a company that prioritizes accuracy, transparency, and compliance. Whether you’re preparing for your first statutory audit or managing annual donor reviews, this checklist empowers you to approach the process with confidence.

Need expert support for audit readiness in Pakistan?
Consult a trusted audit advisor with deep understanding of SECP, FBR, donor, and industry-specific requirements.