Peer Review

Originally posted by : dipali shinde
	ABC firm of chartered accountants is undergoing peer review. ABC is statutory auditor of XYZ a public listed company. ABC does not issue limited review report to be issued on unaudited financial results of a listed company as the peer review is going on. the review has been going on for 1 year. is this correct? and what should XYZ inform the stock exchange? Please answer urgently. Thanks in advance

Dear Dipali shinde,

the reviewer need to issue the preliminary report to the board in case systems and procedures of the company / unit / branch being reviewed have been found to be deficient or where non-compliance with reference to any other matter has been noticed by the reviewer during the course of review. It may go on for 6 moths to 1 year. (period may extend as required)

but

As heading suggests, your question is not on peer review but on the problem faced by XYZ ltd due to non receipt of limited review report on the unaudited financial statements. It does not matter that they carry on peer review for 6 months or 1 yr.  Considering above,  your question title shows the concern for ABC firm but the matter mentioned shows concern for the company. Assuming, you are concerned for the company, i am giving answer as below:

Limited Review Report to Stock exchange:

As per clause 41of  the listing agreement :

The Company has to disclose its quarterly and yearly results in the following manner:-

The Company has an option to submit audited or unaudited quarterly and year to date financial results within 45 days of the end of each quarter (other than the last quarter). If the Company opts to submit unaudited results it shall be subject to Limited Review by the Statutory Auditors of the Company and the Limited Review Report shall be furnished to the Stock Exchange within 45 days from the end of quarter. If the Company opts to submit audited results it shall be accompanied with audit report.

In respect of last quarter, the Company has an option to submit unaudited financial results for the quarter within 45 days of the end of quarter or to submit audited results for the entire financial year within 60 days of the end of financial year.

In case the Company opts to submit unaudited results for the last quarter it shall also be subject to limited review by Statutory Auditors and the copy of limited review report shall be submitted to Stock Exchange within 45 days form the end of quarter. Further, the Company will also submit audited results for the entire financial year as soon as they are approved by the Board.

If the Company opts to submit audited results for the entire financial results, it shall intimate to the Stock Exchange in advance within 45 days of the end of financial year.

As a part of audited or unaudited financial results for every half year the Company shall also submit by way of note a Statement of Assets and Liabilities

The results as above are to be submitted within 15 days of the Board Meeting to the Stock Exchange.

The Company shall give prior intimation about the Date and Time and Purpose of the meeting in which the financial results will be considered to the Stock Exchange at least 7 clear days prior to the meeting. The Company shall simultaneously issue a public notice in at least 2 daily news papers (one in English daily and one in regional language daily).

The Company shall within 48 hours of conclusion of the Board or Committee meeting at which the Financial Results were approved, publish a copy of the financial results which were submitted to the Stock Exchange in atleast one in English daily news paper and one in regional language daily news paper.

If the company is not able to get the limited review of its unaudited financial statements from its auditors:

If a company is not able to get the limited review of its unaudited financial statements from its auditors due to any reason (here in ur case peer review), then it has option to apply to stock exchange for the delay along with the letter from its auditors. Also need to inform ROC, a separate permission is required for AGM and Books of accounts late filing (sec. 210 of Companies Act)

On the part of ABC firm, its not correct not to issue review report on account of a peer review is undertaken at their end. But, in special circumstances, if ABC firm is genuinly not able to perform its duties you (i.e. XYZ Company limited) dont have any option. You cant blame them, its not a part of correct or incorrect. On the other hand, you can call Extra ordinary General Meeting and can remove the statutary auditor in compliance of other provisions of the act.

In short:   If the Company opts to submit audited results for the entire financial results, it shall intimate to the Stock Exchange in advance within 45 days of the end of financial year.

you can apply  to stock exchange that, you would be submitting the audited statements then you can wait till 45 days from the end of financial year.

I hope, the answer is as per your expectation.( I can help you but your question title and matter inside are contradictory. The user may not be able to find out whether you are pointing out the long duration of peer review in ABC firm or delay in audit of XYZ ltd. )

thanks and regards

karan joshi.

Thanks to Karan Joshi. Can u plz tell me What is  "Limited Review Report". If i Know this then only ican understand the whole concept.

 Waiting for ur REPLY.

Thanks Drushti for the appreciation,

Meaning:

Limited Review Report means a report submitted by the statutory auditor to the company based on the quartely results which provides some assurance to the interested parties as to the reliability of financial data.

Why needed?:

See, in case of a listed company (a company whose shares are listed on stock exchange) need to provide the financial results of each quarter within 45 days from end of the quarter. Filing these quearterly results to the stock exchange helps the probable investors (who are willing to purchase shares of the company) to decide whether or not to purchase the shares, based on its quarterly performance. Further it also helps to stock market experts to ananlyse the market situation, growth or decline of a particular industry. But the problem is that, the statutary auditor's report will be available at the year end, then how can company gets certify its quarterly results. Solution is limited review report by the statutory auditors.

While carrying out limited review report, the statutory auditors gives opinion in negative manner that it like, "Based on out review as aforesaid, nothing has come to out attention that causes us to believe that the accompanying financial statements do not give a true and fair view in accordance with acc. standards, other recognized accounting policies and relevant statutory requirements"

So in absence of full and complete statutory audit, (i.e. based on unaudited financial statements for the quarter) auditors just take overview (limited review) and gives opinion that, they did not found anything wrong  in these statements, they can be taken as true and fair view subject to year end statuary audit. But auditors are smart enough to include the statement at the end that "these financial statements are the responsibility of management".

Enhances the comfort level of the investor:

All that matter is for a limited review report on unaudited financial statements and the mere overviewing opinion of the auditor that, they did not foung anything incorrect in accounts enhances the comfort level of the investor, and investor feels that "yes my money invested will be safe in this company"

i hope the meaning and purpose would be clear from above. I tried to give it as far as i can, ask anything if not clear.

regards,

karan joshi.

@ Dipali shinde

Non-availability of the statutory auditors can not be the valid reason for non-filing limited review report. So,  I suggest to get the same from the auditors / his counterparts in India and file the same within 45 days from the end of the quarter. Otherwise it would result in non-compliance with the provisions of the SEBI Guidelines.

@ Drusti :

here is specimen draft / format of limited review report

Thanks a lot. I Understand.