Brexit & EconomyPoliticsDealing with disaster

Dealing with disaster

Pakistan’s accountants are dealing with the damage caused by last summer’s floods

THE FLOODS THAT devastated Pakistan in summer last year did not just destroy farmland and housing – they ruined many financial records and legal documents, making life that much harder for accountants in Pakistan.

“We don’t know how to deal with the aftermath of the floods because there is still no mechanism on the part of the government or the private sector to cope with the challenges and difficulties that our accounting community is facing,” says senior chartered accountant Rafaqat Ullah Babar.

Based in the northwestern city of Peshawar, about 55km from the border with Afghanistan, he says the natural disaster not only caused losses to life and property, but caused chaos in company and public sector management.

“The biggest challenge is surely the lack of direction to tackle the problems caused by the floods. But there are other issues also, such as the destruction of documents – including records of government offices, courts, businesses, lands and educational certificates in the flood-hit areas. The government needs to put in place a mechanism to provide duplicate copies to the rightful owners to minimise the risk of fraud,” he adds.

According to Babar, there was no proper system in Pakistan to quantify the financial losses to crops and industrial goods due to the floods. “As we are unable to accurately find out how much damage a business or person has suffered, we carry out counter checks against his previous business performance. We look at his account statements with banks, and import or export organisations,” he says.


The floods that hit Pakistan, following unprecedented monsoon rains in late July 2010, created one of the largest humanitarian crises in the world. Nearly 2,000 people were killed, many more were injured, 1.9 million houses were damaged and around 21 million others were left homeless.

But Shaikh Saqib Masood, president of the Institute of Chartered Accountants of Pakistan (ICAP), said credible data about the impact of the floods on businesses, agriculture and other sectors wasn’t available.

“In Pakistan we have no proper system to collect the data. We have estimates only,” he says. He points out that the problem was compounded by the fact that Pakistan’s non-documented economy was probably bigger than the one that is regulated.

Muhammad Waqas Khalid, who is head of the chartered accountancy firm Waqas & Company in Multan, Punjab province, explained that practicing accountants faced great difficulty in recovering their receivables receipts and records. “The auditors faced problems in carrying out audit of small and medium enterprises, which showed their inability to produce records destroyed by the floods,” he says.

Mr Khalid says that about 30 accountants listed as members with the ICAP were working in southern Punjab, where the floods caused severe losses.

“Crops were destroyed in this area, cotton-ginning and rice-husking factories, textile mills and other industries faced serious problems obtaining raw material following the floods. Closure of banks at the time caused lack of cash for businessmen and accountants,” he recalls. The floods also physically displaced accountants, so they were unable to reach their offices or their clients, he adds.

Mr Khalid said he hoped flood-affected businesses would recover their financial organisation in time, given government and aid donor assistance.

“Tax incentives for the business community would be a great help,” he argued.

Pakistan floods SukkurBouncing back

Meanwhile, Masood, who has been working as a chartered accountant for 25 years and is now a senior partner at KPMG Taseer Hadi & Company (part of KPMG’s international network), said many in the accounting community in Pakistan were helping small businesses, retailers and others in the undocumented economic sector to maintain their books – a job often made much worse by the floods.

Indeed, Pakistani chartered accountants in many instances worked together to face the challenges posed by the floods. They also provided direct help to flood victims. Some of the firms set up flood relief funds. And they collected donations from their affiliated partners in other countries for relief work.

“…KPMG [International] donated half a million US dollars to our [Pakistan practice] fund. We used the money for rebuilding educational institutions and houses destroyed by the floods. For this purpose, we gave our funds to credible non-governmental organisations such as Pakistan-based The Citizens Foundation working for promotion of education,” says Masood.

But Masood notes that many accountants working in the formal and documented sector, especially those having multinationals as their clients, did not really suffer due to the floods. “In fact, they would benefit from the reconstruction and development work that is being created as a result of foreign assistance for the flood affectees. This would create an opportunity for accountants to get work,” he says.

He adds that donors, such as USAID, were shortlisting accounting firms to audit and monitor the funds that they were providing to government and non-governmental organisations for rehabilitation and reconstruction work in areas affected by the floods.

It is not the first time that trouble has created work for accountants in the region. A young, Peshawar-based chartered accountant, Shuja ul Mulk, said a number of his colleagues have moved to Afghanistan where jobs were created due to reconstruction activities fuelled by international assistance. However, other colleagues have gone further afield. “Insecurity in northwestern Pakistan and better opportunities had also prompted chartered accountants to go to the United Arab Emirates, other Gulf states and also the United Kingdom,” he said.

Even before the devastating floods, Pakistani accountants were working in a difficult situation. As a number of accountants told Accountancy Age, the industry was facing tough times due to the recession: the ability of clients to pay was decreasing, corruption in government institutions was on the rise and Pakistan’s powerful bureaucracy is still creating red-tape that stifles business and makes accounting and auditing more difficult.

“There is also a lack of technocrats in the legislative bodies who understood the tax and accounting issues. Then there is the issue of our business community avoiding documentation,” said the Multan-based chartered accountant Khalid.

Whether the hard work Pakistan’s accountants are putting into rectifying the damage caused by the flood will lead to longer term improvements is still open to debate.

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