ISLAMABAD, June 5: The Securities and Exchange Commission of Pakistan (SECP) on Wednesday penalized a chartered accountants firm and issued warnings to two others for alleged irregularities under Section 254 of the Companies Ordinance, 1984.

The action against M/s Ford, Rhodes, Robson, Morrow, Chartered Accountants (FRRM), according to an official source, arose out of their failure to report the misappropriation of Rs37.092 million in their audit report about M/s Pakistan Industrial and Commercial Leasing Limited.

FRRM, it may be noted, have been the statutory auditor of the latter leasing firm since its incorporation in 1987.

During a special audit initiated by the Specialized Companies Division (SCD) of the SECP, it was revealed that the said amount had been siphoned out of the company through fake leases. No mention, however, was found regarding the fake leases in the audit report prepared by FRRM in contravention of the relevant rules.

Upon critical examination of the facts of the case, it was apparent that FRRM failed to bring out material facts about the affairs of the company in their audit report.

The Executive Director of SCD, after finding the explanation given by FRRM for the lapse to be unsatisfactory, therefore, imposed a fine of Rs2,000 on all 10 partners of the firm.

The other firms against whom the SECP has taken action are: M/s Taseer Hadi Khalid and Company and M/s Biwani and Company. They have been warned to be careful in future and desist from entering into transactions, which could lead to a potential conflict of interest casting doubt about their fairness and impartiality as auditors.