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AUDITORs AUDIT - A PEER REVIEW

CA. Rayan Sequeira 
Updated on 10 August 2020

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In the Parliament there is an opposition party to ensure that the government carries out its functions in concurrence with the guidelines of the constitution. The opposition examines the endeavors of the government to make certain that they are designed to best suit the nation’s interest.  Politics featuring in peer review article? For the reason that a relation can be drawn to the oppositions review of government’s function to the peer review mechanism introduced by the ICAI in Y2K2.

Peer” means a person of similar standing i.e., of the same profession and “review” means examination. It’s like Narayan Murthy of Infy reviewing business strategies and policies of Azim Premji of Wipro. Sounds Interesting. Same is in politics. Lets put on our thinking caps and know more about “Peer Review”.

Peer is an acronym for Joint Legislative Committee on Performance Evaluation and Expenditure Review.

The objective of peer review is to ensure that the CA’s comply with the technical standards laid down by the ICAI and have in place a proper system (including documentation systems) for maintaining the quality of the attestation services they perform. Accounting profession across the globe had come under spotlight following major accounting scams such as Enron and Xerox. The aftermath of Enron fiasco stirred the genesis of peer review mechanism in India. Peer review shall monitor the systems, procedures, filing & auditing practices, compliances, documents, files, and records maintained by the auditors while certifying auditing practices. It is a proactive measure towards better governance.   

“The peer review is like ISO 9000 for CAs. In India, scandals like Enron have not occured so far. It is a proactive measure taken by us. We want to ensure a security stamp with regards to competence and perfection of accountancy services,” said Sunil Talati, president, ICAI.

Peer review certification process

·    ICAI shall empanel auditors (reviewers) with atleast 15 years of experience.

·    The reviewers shall be imparted requisite training.

·    ICAI shall identify the CA’s/firms to be subjected to peer review or initiate the process on an application from a CA/firm for peer review.

·    ICAI shall recommend a probable list of 3 reviewers to the CA/firm.

·    The CA/firm shall be given an option to choose from the probable list.

·    On selection, the auditor shall review the CA/firm. The reviewer shall gather information on the systems and procedures through a questionnaire.

·    Based on the questionnaire, further analysis shall be made. If, satisfied, final report shall be sent to ICAI recommending issue of peer review certificate.

·    If not, interim report shall be given to the CA/firm with suggestions to further improvise the system. 6 months time shall be provided for the implementation of suggestions.

·    Post that, the peer review process will be repeated and on satisfaction of the reviewer, report shall be submitted to ICAI.

·    On receipt of the report from reviewer, peer review certificate shall be granted by the ICAI. 

ICAI, recognizing the need to be at par with developed countries with regard to the quality of attestation services, established the Peer Review Board in the year 2002. Since inception, the status of peer review certification is tabulated in the following table.

Even as SEBI and ICAI take steps to ensure the quality of auditors, there is little in law to punish those who do not maintain stipulated quality standards. In case of any default, the peer review board just informs the CA professional/firm about the anomaly and asks to make suitable amendments. In such scenario, certification is withheld.

The mechanism has just ushered. The peer review norm is a step towards boosting stakeholders’ confidence and a shield for the non-concurrence of Enron or Xerox fiasco




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