The Securities and Exchange Commission of Pakistan (SECP) has launched an inquiry into major discrepancies in the financial statements of SE Fruits, raising questions about the audit and due diligence processes behind its planned initial public offering (IPO).

The inquiry covers SE Fruits, its external auditor, Ilyas Saeed and Co, and IPO consultant Topline Securities.

SE Fruits has withdrawn its IPO, and subscription money has been refunded to investors. However, the move has left questions about how significant discrepancies in the company’s financial statements went undetected during the audit and IPO preparation process.

The case has also drawn attention to the role of the Audit Oversight Board (AOB), which is responsible for overseeing audit quality in Pakistan. Sources say the government’s consideration of the legal framework governing the AOB has continued for around a decade, raising concerns about the effectiveness of the country’s audit oversight system.

The inquiry will put the focus on whether the discrepancies resulted from inadequate checks, failures in due diligence, or other shortcomings, and whether those responsible will face accountability.

The issue extends beyond SE Fruits. Audited financial statements are used by investors to assess companies, by banks to determine financing limits, and by tax authorities to evaluate tax liabilities. Significant discrepancies can therefore affect investment decisions, lending and tax assessments.

The SE Fruits case raises a broader question about whether Pakistan’s existing audit and regulatory safeguards are strong enough to identify major financial reporting problems before companies reach the capital market.