1 AUDIT SAGA BY CA SANIDHYA SARAF

CHAPTER 6 - PEER REVIEW

1. What is
Peer Review?
It is a regulatory mechanism
for monitoring the
performances of
professionals for maintaining
quality of services expected Peer means a person of
by them for enhancing similar standing.
reliance placed by users of
F/S for economic decision
making.

In general, for a profession, the

term peer review would mean
review of work done by a Review means conduct
professional, by another of re-examination of
professional of similar standing. subject matter.

2. Objectives of Peer Review.

• Objective is to ensure compliance by Practise unit of Various

Technical, professional and ethical Standards Issued by ICAI,
Proper documentation, Quality Control Policies in respect of
Attestation services and Training Program for Staff.
• Technical Standards includes-FRF, AS, GN, Engagement
&Quality Control Standards, Code of Ethics, Standards on
Internal Audit, Notifications, Provisions of statutes etc.
• The primary objective of Peer Review is not to find out
deficiencies but to improve quality of services rendered by
members.
• Where a practise unit is not following technical standards,
reviewers are expected to recommend measures to improve
procedures.
• The key objective of Peer Review Exercise is not to identify
isolated cases of engagement failure, but to identify
weakness that are pervasive and chronic in nature.
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3. Eligibility for Peer Reviewers.

Continuous 10 years in Practise.

Should Not have been guilty of misconduct under CA ACT ,1949.

Should have obtained prescribed training organised by Peer Review Board.

Should have signed the declaration of Confidentiality as prescribed .

7 years of experience of Peer Review of Level 1 practice units.

Should not have any disciplinary action pending against him or convicted by
Court.

Should not have any conflict of interest.

A Reviewer shall not accept any professional assignment from Practise Unit for a
period of 2 years from date of appointment.

4. Methods of collecting Audit Evidence by Peer Reviewer.

1 2 3 4

• Inspection- • Observation- • Inquiry-Seeking • Observation &

Examination of Witnessing a appropriate Inquiry are
documents, procedure or information from considered as
working papers & performance concerned external sources
other records being performed partner/sole of review
maintained by by others. proprietor/other evidence.
the Practice Unit. knowledgeable
Considered as person within
most significant Practise Unit.
method of all 3.
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5. Focus/Scope of Peer Review.

Applies to all assurance/attestation services.
REVIEW SHALL COVER

Compliance with Quality of Compliance with System &

Technical, Proff, reporting. council guidelines. Procedures for
Ethical std carrying out audits.

6. Mandatory requirement for Peer Review.

Level 1 P.U. Level 2 P.U. Level 3 P.U.

Once in 3 yrs. Once in 4 yrs. Once in 5 yrs.
Central statutory auditors of Statutory auditors of Entities Others
Public/Pvt Sector Banks/Foreign  Net worth >5 cr.
Banks/PFI's/ Insurance Co's.  Annual Turnover >50 cr.
Statutory auditors of Asset Stat/I.A./Concurrent/Tax audit of others
Management Co’s/Mutual Funds. ins co/Bank/NBFC.
Entities raising > 50 Cr funds from
Loans/Donations/Subsidies.

7. Peer Review Process

Selection of P.U. & appt of reviewer

Planning

Execution

Reporting
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Planning Execution Reporting

P.U. shall send questionnaire to Peer review visit will be conducted Peer Review Report should state
Reviewer within 15 days (Off sight at P.U. Head office/Branches. that Assurance services provided
review. comply T, P, E std.
Reviewer shall select sample of Compliance Review of General The PEER Review Report shall
assurance service & intimate to Controls (IPO ke liye Staff address his report of Compliance
P.U. within 15 days. Recruitment & development & or otherwise on following areas of
office administration.) Controls
❖ I-Independence ❖ IPO ke liye Staff
❖ P-Maintenance of Recruitment &
Professional skills & development & office
standards. administration.
❖ O-Outside Consultation
❖ Staff Recruitment,
Supervision &
Development.
❖ Office Administration.
Reviewer shall plan for on-sight Review of Records After Submitting onsite review,
visit to review quality of technical ❖ Compliance approach- the reviewer shall submit his
standards adopted by P.U. whether proper control findings in Preliminary Report
procedures have been On his letter head along with his
established. signature, membership no & code
❖ Substantive Approach- no allocated to him.
assure T, P, E std carried Contents of Preliminary Report
out. ❖ Findings of Peer Reviewer.
❖ Deficiencies or non-
compliances noticed by
reviewer. (No preliminary
report needed if no
deficiencies)
❖ Paragraph that discusses
of Peer Review.
❖ Limitation of scope of
review, if any.
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Peer Review Report of Reviewer – Peer Reviewer should send copy of preliminary report to the P.U.
Reviewer is satisfied with reply received from P.U. Reviewer is not satisfied with reply received from
P.U.
Submit Peer Review Report to Peer Review IRR plus submit Modified Report
Board along with IRR (code to remember) incorporating reasons for same.
a) I-Initial findings Follow on Review within 1 year
b) R-Response by P.U. (Not before 6 months).
c) R-Manner in which Response has been
dealt with.
8. Areas excluded from Scope of Peer Reviewer
Management
Representation before
Consultancy
various authorities.
Engagements.
9. Peer Review Board
Engagements

To prepare tax Compilation of

returns F/S
Constituted Members Term of a Casual
by Council should be member Vacancies on
prominent should be 1 Board shall be
individuals of year. filled by To assist client
high integrity, council. in Compilation Due diligence.
reputation.
of F/S

Testifying as an
expert witness.

10. Step wise approach adopted by the Peer Reviewer:

•Obtain an understanding of assignment.
A

•Ascertain the number of assurance engagements to be reviewed bases on the

B evaluation of replies given in the questionnaire and the size of the practice unit.

•Examine that the policies and procedures for acceptance of audit

C have been complied with .

•Evaluate whether all significant matters have been properly

D documented.

•Ensure compliance with Technical, Professional and Ethical

E Standards.

•Conduct adequate Compliance Procedures and decide the NTE of

F substantive procedures.
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11. Areas to be reviewed in the assessment of Independence of the practicing

unit, while conducting peer review.

A B C D
• Does the PU have a • Does the PU • Does the PU • Does the PU
policy to ensure communicate these monitor periodically review
independence, policies and the compliance with its association with
objectivity and expected standards policies and clients to ensure
integrity, on the of professional procedures relating objectivity and
part of partners behaviour to all to independence? independence?
and staff? Who is staff?
responsible for this
policy?