In its proactive pursuit to upgrade and maintain audit quality standards, the Council of the Institute of Chartered Accountants of India took initiative as far back as 1998 to introduce a system of review of the work of professionals and subsequently the Indian accountancy profession took a giant leap forward with the establishment of Peer Review Board in April 2002. Such an endeavour of the Council of the Institute of Chartered Accountants of India (ICAI) aims to maintain and enhance the quality of attestation services and to guide its members in improving their performance and ensuring adherence to various technical standards issued by it from time to time. It is the Institute’s endeavour to meet the demands of high quality assurance, consistency and greater transparency. The Statement on Peer Review was released in early 2002 which lays down the framework for conduct of peer reviews by setting up the Peer Review Board (the Board). The objective of the Review is to enhance quality of professional work and has no relationship whatsoever with any disciplinary or any other regulatory mechanism. The review begins with the assumption that professionals work professionally, and ends with an enhancement of those attributes of professionalism that serve to keep the profession of Chartered Accountancy in India in the forefront of the accounting and auditing profession in the world.

As far as possible, in order that the reviewers carry out review assignment(s) as per globally accepted standards, the Board has brought out a comprehensive Peer Review Manual providing an insight into various aspects of peer review process and modalities and another important publication of the Board in this regard is the Training Modules for Peer Reviewers. The Board has also come out with a publication on Frequently Asked Questions ( FAQs) to facilitate the reviewers in Peer Review process. The Peer review process can be spelt out, in a nutshell, under the following sub-headings:

Peer Review is being introduced in three stages with different types of practice units being included at each such stage. At each stage, certain practice units, satisfying the criteria laid down in the Statement, are selected for peer review on a random basis. The Board is empowered to decide the proportion of practice units to be included in this selection during each phase of implementation. Practice units falling under Stage I would be subjected to peer review at least once in three years. However, if the Board so decides or otherwise at the request of practice unit, the peer review of a practice unit can be conducted at shorter intervals in respect of practice units falling under Stage I. Practice units falling under Stages II & III may not be subjected to review every three years. Therefore, the Statement provides that a provision has been included in the Statement to ensure that all practice units may like to undergo periodic review in view of the benefit accruing out of such a process. Similarly, an auditee may also request the Board for the conduct of peer review of its auditor; i.e., practice unit. The random sample selection of Practice Units is done by office through computer-generated system, based on software specially developed for the purpose.

Once a practice unit has been selected for peer review, an intimation in writing is sent by the Board to the practice unit informing of its selection for peer review. Along with the intimation, the following documents are sent to the practice unit:

1. A panel of three reviewers

2. A copy of the questionnaire.

3. Circular for notification costs

The reviewer, on the basis of the information given in the questionnaire or after seeking such other information as he thinks necessary, selects a sample of attestation services engagements on random basis for review. The selection of a sample for review, out of the complete list of attestation service clients, is at the discretion of the reviewer.

However, the reviewer is required to select a sample that is representative of the practice unit’s client portfolio.

After the selection of sample of attestation service engagements for review, the reviewer sends a written intimation to the practice unit about the sample selected by the reviewer, two weeks in advance, from the date the reviewer intends to begin the review. The intimation also contains a request for ready availability of the relevant records relating to the attestation service engagements selected for the review.

Reviewer may adopt either compliance approach or substantive approach or a combination of both.

Cost of Peer Reviewer, laid down by the Board is borne by Practice Unit.

Reviewer is not supposed to keep any paper(s) — original or photocopy, of practice unit. He can retain only his working papers. The Reviewer, his assistant/s, if any, have to sign statement of confidentiality, before commencing the review. All Board Members, Officers and Staff assisting the Board are also subject to similar Statement of Confidentiality signed by them.

On the basis of the report submitted by the Reviewer, the Board shall decide and issue a Certificate to the Practice Unit.

Preliminary Report

If the Peer Reviewer finds deficiencies in systems and procedures or non-compliances, he will have to issue preliminary report to practice unit immediately. He may consider issuing such report also in case the clarifications given by the practice unit are not found satisfactory. Practice unit has to send reply in writing within 10 days of the receipt of such report.

The reviewer should submit final report to the Board with a copy to the Practising Unit incorporating the findings as discussed with the P.U. The reviewer will issue a clean report if he is of the opinion that practice unit is conducting its affairs in the manner that ensures quality of services rendered by it. The reviewer will issue a qualified report in case of non-compliance with technical standards, quality control system design deficiencies, non­compliance with quality control policies and procedures and non­existence of adequate staff training programmes.

The Board shall consider the report and if satisfied, will issue Peer Review Certificate. If not satisfied, it may issue recommendations to practice unit and direct the reviewer for further review.

Further, consequent upon the request of the Securities and Exchange Board of India (SEBI), the Council of Institute of Chartered Accountants of India (ICAI) has in principle, accepted the recommendation of SEBI that for appointment as an auditor of listed companies for accounting periods commencing on or after April 1, 2009, the auditor Firms/Practice Units must have a certificate from the Peer Review Board of the Institute. Further, the Council also accepted the recommendation of SEBI that the financial statement of an unlisted company coming out with an initial public offer (IPO) should also be certified by the Audit Firms/Practice Units who have been issued a Certificate from the Peer Review Board.

The Peer Review Board is continuously striving towards organizing training programmes for Peer Reviewers in various parts of the country. The response for the training programmes has been very impressive. More and more Reviewers are actively participating in the said programmes. The Board has successfully conducted almost 100 training programmes for Peer Reviewers. Refresher courses for the trained Reviewers are also organized to enable them to update and upgrade their knowledge and skills. These training programmes create awareness among members and firms about the Peer Review Mechanism.