Rules of Networking




These Directives will apply to firms/ practices opting to form a network or to become part of the existing network and will be called as ‘Procedures for Network amongst the firms/ practices registered with the Institute of Chartered Accountants of Pakistan’.
Bye Laws means The Chartered Accountants Bye-Laws, 1983 as amended or added to from time to time.
Code of Ethics – Code of Ethics means the Code of Ethics issued by the Institute and decisions of the Council in this regard.
Council – Council means the Council of the Institute
A sole practitioner, partnership or Corporation of professional accountants;
An entity that controls such parties; and
An entity controlled by such parties.
Formal Network – Formal network means a network amongst two or more firms/ practices registered with the Institute, where the object of network is to use the collective resources of the affiliates for execution of professional services of one or more types at one and/or at multi-locational points. The resources would include human, financial, technical and other logistic support required to execute the professional assignments. In such type of network, the common resources may be pooled and exhibited together before the service user as those belonging to one particular set of professionals.
Institute – Institute means the Institute of Chartered Accountants of Pakistan.
Member in Practice:
A member of the Institute shall be deemed “to be in practice” when individually or in partnership with chartered accountants in practice, he, in consideration received or to be received-
engages himself in the practice of accountancy, or
offers to perform services involving the auditing, or verification of financial transactions, books, accounts, or records or the preparation, verification or certification of financial accounting and related statements or holds himself, out to the public as an accountant; or
renders professional services or assistance in or about matters of principle or detail relating to accounting procedure or the recording, presentation or certification of financial facts or data; or



render such other services as, in the opinion of the Council, are or may be rendered by a chartered accountants in practice; and



the words “to be in practice” with their grammatical variations and cognate expressions shall be construed accordingly.

Explanation – An associate or a fellow of the Institute who is salaried employee of a chartered accountant in practice or a firm of such chartered accountants shall, notwithstanding such employment, be deemed to be in practice for the limited purpose of the training of (students).
Ordinance – Ordinance means The Chartered Accountants Ordinance, 1961. (X of 1961).
Network –
“Network amongst two or more firms/ practices means an arrangement to facilitate the better functioning of the affiliate member firms/practices in the common economic interest of the profession and not for acquisition of any gain for the network. Such Network shall include the formal Network to use the collective resources such as turnover, infrastructures, manpower and location for execution of Professional services of one or more type. [Explanation]
An affiliation as referred to above shall also include: –
having an association with an accounting entity such that it results directly or indirectly in a common professional economic or beneficial interest.
one or more of the entities holding out that it is so affiliated or networked.
An entity shall not be treated as an affiliate of another merely for the reason that they
share professional knowledge and data base;

refer certain professional assignments or authorize the other to represent certain specific matters.

A sole practitioner, a partnership or a corporation of Professional accountants which offers professional services to the public.
Referral Practice – Referral Practice means a practice to refer professional work by a firm to one of its associate/affiliate either situated at a different place or rendering professional services not provided by it, to the user of the services. The pre-dominant objective of such an arrangement is not to pool in their collective resources and exhibits them as those belonging to one particular set of professionals
All other terms and expressions used but not defined in these rules shall have the same meaning as assigned to them in the Chartered Accountants Ordinance, 1961, Bye-Laws and Council Directives issued and amended from time to time.
Name of Network:
The Network may have distinct name from its constituent’s and from other networks. To distinguish a “Network” from a “firm” of Chartered Accountants, standards provided in Directive 4.06 shall be applicable to the name of the network. The prescribed format of application for approval of Name for Network is at Form NWA-1 (enclosed).
If the name is subsequently found to be undesirable then the Institute may require withdrawal of such name, which directions of the Institute shall be complied with forthwith.
The Council Directive 6.04 ‘Code of Ethics for Chartered Accountants’ permitting advertisement and use of logo will be applicable on networks.
The firms/ practices constituting the network are permitted to print network name on their professional stationery.
A Formal Network is required to be registered with the Institute in a prescribed Form NWA-2
Referral Practice requires no registration.
It is for each firm/ practice to decide whether its affairs and relations with another firm results in creation of a Formal Network. The firms shall evaluate for themselves whether or not a formal relationship exists among them which warrants registration of network with the Institute.
If different firms/ practices are networked with a common Multinational Entity (MNE) then irrespective of the presence/absence of any ‘network’ relationship between the firms/ practices inter-se, they shall be considered as part of a network. As such, for these firms/ practices the registration with the Institute is not mandatory. It is only if these firms/ practices decide to constitute a Formal Network, then the registration with the Institute is mandatory.
Ethical Compliance:
Once the network is registered with the Institute, it will be necessary for such a network to comply with all applicable ethical requirements prescribed by the Institute from time to time in general and the following requirements in particular: –
If one firm of the network is the statutory auditor of a listed entity then the constituent firms directly/indirectly should not accept the internal audit or book-keeping or such other professional assignments which are prohibited for the statutory auditor firm as per clause (xl) of Code of Corporate Governance.
Clause (xli) of the Code of Corporate Governance relating to rotation of firm would be equally applicable on net work.
The Constituent member firms/ practices of a Network and the Network shall comply with all the Ethical Standards prescribed by the Council from time to time.
Quality Control:
It is the responsibility of Individual firms/ practices constituting the network to obtain satisfactory ‘Quality Control Review’ rating from the Institute. Firms/ practices not having satisfactory QCR rating but are part of any network of firms/ practices in which other firm(s) would have satisfactory QCR rating(s) are not allowed to accept and conduct audit of listed companies in strict compliance of the requirements of clause (xxxvii) of the Code of Corporate Governance.
Consent of Client:
The network firm shall obtain consent of the client to engage other network firms in discharging the professional assignments.
Constitution of Network:
Proprietory/partnership firm(s) are permitted to form a Network.
Proprietory/partnership firms are allowed to join only one Formal network.
A Firm/ practice will be allowed to join only one formal network.
Object of Network:
The Network itself will not carry on any business for acquisition of gain for itself and only act as a facilitator for its members/constituent Member firms/ practices to pursue their professional jobs.
Responding to Enquiries:
Only one firm can apply on behalf of the network showing the collective strength of all the constituent firms/ practices of the network, when responding to any enquiry.
Issuing Reports:
Only the constituent member firm(s)/ practice(s) which is/are part of the network, and originally undertaken the assignment in its/ their own name is/ are eligible to issue/sign/attest any certificate/Report/professional document/assignment irrespective of the fact that resources from other constituent firms have also been engaged on the assignment.
Violation of Ordinance:
In case of alleged violation of the provisions of the Ordinance, Bye-laws, Directives/ guidelines laid down by the Council from time to time and Code of Ethics by the Network firm, the proprietary/partnership firm(s) constituting the Network which originally undertakes the assignment as per paragraph 11 would be answerable.Thus,the responsibility would rest with the Engagement Partner who signs the report.
Exit From Network:
A constituent Member firm of a Network may after clearing dues of network, if any, exit from the network by sending the declaration in Form NWA-3 at the registered office of the network and to the Institute. The concurrence/acceptance of the same by other firms/ practices forming part of the network firm shall not be required.
Framework of Internal Byelaws of Network requiring Registration:
To streamline the networking, a network shall formulate operational byelaws. Byelaws may contain the following clauses on which the member firms/ practices of the network may enter into a written agreement among themselves (a copy whereof should be sent to the Institute):
Appointment of a Managing Committee, from among the managing partners of the member firms/ practices of the network and the terms and conditions under which it should function. The minimum and maximum number of members of the Managing Committee shall also be agreed upon.
Administration of the network.
Contribution of membership fees to meet the cost of the administration of the network
Dispute settlement procedures through arbitration, Alternate Dispute Resolution (ADR) and mediation.
Development of training materials for members of the network.
Issue of News-letters for staff and clients.
Development of software’s for different types of assignments.
Development and maintenance of data bases relevant for different types of assignments.
Setting up Library.
Appointment of a Chief Executive/ Technical Director to whom references can be made.
Determining the methodology for drawing resources from each member firm.
Determining compensation to member firms/ practices for resources to be drawn from them.
Peer review of the member firms/ practices.
Development of a disclaimer statement such that the member firms of the network are independent firms and are only associated/ affiliated with the network and the network itself provides no client services. No member firm has any authority to obligate or bind any other network member firm vis-à-vis third parties, nor does network itself have any such authority to obligate or bind any of its member / constituent firm.
These clauses are illustrative
* Rule 12 was amended by the Council in its 200th Meeting held on October 16,2008
(ICAP 193rd Council Meeting – November 7, 2007)
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