The Peer Review Board of ICAI was established in 2002, recognizing the need to ensure the quality of services provided by practicing Chartered Accountants.The term peer review means review of work done by a professional, review by another professional of similar standing. Peer review mostly covers the assurance service / assurance engagements which generally includes audit services, assurance functions and audit functions.
Scope of Peer review by ICAI includes the following:
a. Compliance with Technical, Professional and Ethical Standard
Framework for the Preparation and presentation of financial statements, framework of statements and Standard on Auditing, Standard on Assurance Engagements, Standards on Quality Control and Guidance Notes on related services issued, from time to time, by the Institute of Chartered Accountants of India and framework for assurance engagements;
b. Quality of reporting
c. System and procedures for carrying out assurance services.
d. Training program for staff
e. Compliance with directions given by council members including fees to be charged, number of audits undertaken, assurance services undertaken and related records (Admin & Accounts Records)
f. Compliance with guidelines given by council members relating to article assistants/ audit assistants including attendance register, work diaries, stipend payments and related records ( HR records)
OBLIGATIONS OF PRACTICE UNIT
Provide details
Practice unit should submit complete details of all assurance services for head office at and branches or offices at other locations, for the Peer Review period, separately, so that reviewer can examine the quality controls at all such locations.
Provide records
Produce to the Reviewer or allow access to, any record, document or prescribed register maintained by the Practice Unit or any other record or document which is of a class or description so specified, and which is in the possession or under the control of the Practice Unit.
Provide assistance
Where any information or matter relevant to a Practice Unit is recorded otherwise than in a legible form, the Practice Unit shall provide and present to the Reviewer a reproduction of any such information or matter, or of the relevant part of it in a legible form, with a translation in English or Hindi if the matter is in any other language, and if such translation is requested for by the Reviewer.
Declaration & Questionnaire
Declaration for level of Practice Unit is to be submitted mandatorily before the review can be initiated (Attach the declaration form and questionnaire)
Furnish questionnaire statements and other particulars
Queries and resolution of queries
Provide access to Reviewer. Provide explanation as sought by the Reviewer.If query has been raised by the reviewer, then the Practice Unit has to submit necessary documents to satisfy the query of the reviewer.
PEER REVIEW PROCEDURE
1. Peer review board selects practicing unit for review
2. Practice unit is required to submit filled up declaration form
3. Panel of 3 reviewer is sent to PU for selection
4. Reviewer is informed and Declaration of Confidentiality is filled by reviewer
5. Practice unit to submit filled up questionnaire to the reviewer along with list of clients
6. Reviewer selects the list of clients from the list
7. Practice unit is required to keep ready the files selected
8. On site review
9. Deficiencies communicated through preliminary report by reviewer immediately
10. Practice unit has to submit response to the recommendations and planned action within 5 days of preliminary report.
11. Based on the response of client, the reviewer submits a clean or qualified report to the Board.
HOW TO FILL THE QUESTIONNAIRE PROVIDED IN PART - B
1. Leadership Responsibilities for Quality within a firm (1a. To 1e.)
1a. Policies and procedure to promote culture of quality
The Managing Partner generally assumes the responsibility of QC and emphasize on the importance of quality. The articles and other staff are required to be educated by proper training and steps taken in case of failure to adherence to the laid down policy.
1b. Commercial consideration do not override quality of work
The Managing Partner / Quality partner emphasizing to all the personnel in the firm that fee considerations and scope of services should not infringe upon the quality of work, documentation and other quality requirements
1c. Responsibility of Quality Control
Generally the Managing Partner takes the responsibility or they may designate a Quality Partner who undertakes the responsibility.
1d. Performance evaluation, compensation & promotion in lieu with Quality
The PU should have performance evaluation and advancement system of personnel in the audit firm (articles and audit assistant & other staff) for quality of work and adherence to the professional standard.
1e. Development and communication of Quality Control
Providing the Quality policy / Manual documentation to the personnel when they are hired and reviewing the documentation with them & firm training session for communication and support.
2. Ethical Requirement (2a. To 2t.)
2a. Internal Policies to adhere to COE (Independence)
Independence Confirmation checklist can be designed in this regard and it may be reviewed by the Quality Partner. In case of any breaches disciplinary actions as warranted may be taken.
2b. Firm Website
Details of the website and address has to be provided. The website should ideally mention the contact details and nature of services provided. The name of clients are generally not provided in the website
2c. Compliance with Professional Ethics
Integrity - Before accepting engagement with new client, a questionnaire can be used to check the integrity of the client.
Objectivity - The behavior of the personnel in the PU has to be specified so that the objectivity is not compromised. Obligation on the professional has to be specified not to allow bias, conflict of interest or undue influence of others to override professional or business judgment.
Professional competence and due care - The firm or its personnel should not portray themselves as having expertise or experience unless they possess the necessary professional competence. The engagement partner should ensure that all those working under his authority have appropriate training and supervision
Confidentiality - Policy regarding the confidentiality of the working papers and to ensure that audit staff does not discuss regarding the client even in any social gathering.
Professional behavior - Dress code (formal dress) can be prescribed in the office. Information provided to the audit staff before commencement of audit
2d. Independence of Audit team
The Managing Partner / Quality Partner should evaluate the overall impact on the independence. Providing regarding what constitutes threat to independence.
2e. Mitigation of threat to Independence
Self Interest threat: In the Independence checklist, the personnel of the audit firm (specially the partner or the audit manager) should disclose the financial interest in any of the company.
Self-review threat: Policy regarding non-inclusion of member in the audit team where the person was previously director or senior employee of the client.
Advocacy threat: Disclosure of situation in Independence checklist where the auditor has rendered other functions than the assurance functions.
Familiarity threat: Rotation of audit is required and close relative of senior personnel of the client should not be in the audit team. Policy is required to be framed regarding the same.
Intimidation threat: The audit fees plays a major factor and the disagreements should be adequately documented and referred to the senior partner of the firm.
2f. Threat to Independence
Consulting within the firm, take legal counsel and other parties if necessary. Situations to be mentioned in the policy addressing the situations to withdraw from the engagement. Acceptance of gifts and hospitality can be restricted to the situations where the gifts were generically distributed like Dussera / Diwali gifts, calendar etc.
The same policy would be applicable where the intimidation threat was addressed. The firm may choose not to accept assurance functions and restrict to other non-assurance functions.
2g. & 2h. Are specific to the PU
2i Other firms performing the engagement
Annual independence confirmation (with few variations) has to be taken from other firms.
2j. & 2t. Are specific to the PU
3. Acceptance & Continuance of client relationships & Specific engagements (3a. To 3c.)
3a &3d. Accepting or deciding to continue with the client
Checklist can be used to evaluate the client before accepting the engagement which contains information regarding the owner, related parties, Key Managerial Personnel, nature of client operation and business practice etc
3b. Obtaining understanding regarding service to be performed
Through preliminary engagement activities like communication / discussion with TCWG to understand the risk and explaining the scope of work and setting overall objective of the work before acceptance and commencement of audit.
3c. Withdrawal of engagement
The acceptable risk of the PU has to be mentioned and how the withdrawal of engagement ideally by discussion with the Managing Partner should be mentioned. Effect of partner’s strature with respect to the engagement can also be mentioned.
4. Human Resource (4a. To 4f.)
4a. Capability, competence and commitment
Generic composition of team with roles and responsibilities can be mentioned. If the PU engages any expert in any of the relevant field, the same can also be addressed.
4b & 4e. Appropriateness and awareness of engagement team
Establishing understanding between the partners regarding qualifications, attributes, experiences and achievement desired in the entry level.
4c. Consideration for assigning responsibilities
The responsibility of various roles has to be clearly specified in the office Manual and same has to be adhered.
4d. Training & Development activities
Monitoring the attendance and using the same for performance evaluation.
4f. Issue of appointment letter to staff
For article assistant - Forms submitted to ICAI can be kept for record. For audit / other staff - Appointment letter has to be issued.
5. Engagement Performance (5a. To 5k.)
5a & 5b. Planning Process & Review
Planning checklist can be used covering all the possible areas & compliance
5c & 5d. Completion of work on timely basis
Audit timetable can be prepared in this regard covering all the areas in discussion with client regarding availability of information and the same can be reviewed on completion of audit assignment.
5e & 5f. Maintenance of Audit Documentation
Separate server and password protected and policy for retaining the documents including scanning of the original documents.
5g. Consultation for difficult / contentious matter
5h & 5k. Engagement Control Review
Policy for Cold review of the files has to be decided and the role of Engagement Quality Assurance Reviewer can be specified. The files are required to be reviewed by a partner who is different from the engagement partner.
Monitoring (6a. To 6f.)
6a. Responsibility for monitoring process
The managing partner has to assign a Quality Partner who would be responsible for designing, implementing and monitoring the Firm’s QC system
6b. Performing monitoring Procedure
By selection of file and doing Annual Inspection on basis of certain criteria like the high risk files, first time engagement, level of service performed etc.,
6c. Communication of deficiencies noted
It can be done by discussion with the engagement partner and the engagement team and documenting the discussion. Or following a CAPA procedure (Corrective and Preventive Actions)
6d. Complaints and Allegations
Documenting the complaints and allegation and providing appropriate responses to them.
The responses provided above are generic in nature. They are strictly for the guidance purpose of the practicing unit. The response of the practicing unit should be as per the current situation and the constitution of the practicing unit.
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