SALIENT FEATURES OF THE STATEMENT ON PEER REVIEW by dfhdhdhdhjr

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									PEER REVIEW- AN
OVERVIEW



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PEER REVIEW:
GENERAL MEANING
The term “Peer” means a person of
similar standing. The term “review”
means a general survey or assessment
of a subject or thing. The term “Peer
Review” would mean “review of work
done by a professional, by another
professional of similar standing”.

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Definition of Peer Review
(Para 3.4)
   Peer Review deals with examination and
    review of systems and procedures to
    determine whether the systems and
    procedures are in:
     – Existence
     – Effective
     – Operating continuously during the
       period under review
     – Put in place by the practice Unit (PU).


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NEED FOR PEER REVIEW
   Expectation of service Receiver to receive quality
    service
   Gap between minimum quality of service and
    actual service rendered.
   Reassuring the stake holders and the society at
    large that the profession is conscious of its
    responsibilities and strives its best to ensure that
    the highest standards are observed by all
    practising members rendering audit and
    attestation services to the society. The Peer
    Review process is an endevour to enhance the
    quality of services rendered by members of ICAI
    in public practice.
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Global Scenario in Peer Review
   Independent Regulator in certain countries
   In some countries disciplinary action if deficiency in
    services of Auditor is found.
   In the US, public accountancy firms are required to enrol in
    an approved Practice Monitoring Programme in order to be
    admitted to or retain membership in the AICPA (the
    professional body in the US). Furthermore, under Sec 104
    of the Sarbanes-Oxley Act, 2002 they are additionally liable
    to be inspected by the PCAOB (Public Companies
    Accounting Oversight Board), to assess the degree to
    which each firm and its associated persons comply with the
    Act, the PCAOB and SEC rules, the professional and
    reporting standards, etc.
   Existence in Most of the developed Countries-50
   Started 1930 in France.

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                      U.K. Position

The Audit Inspection Unit (AIU), part of the Professional Oversight Board, is
responsible for the monitoring of the audits of all listed and other major public
interest entities. The AIU was set up following the Government’s post-Enron
review of the regulation of the UK accountancy profession which reported in
January 2003. The review team’s report recommended enhancing the
monitoring of the audits of listed and other major public interest entities through
a new independent inspection unit (the AIU) reporting to a professional oversight
board (the POB) within an integrated independent regulator (the FRC).
The professional accountancy bodies continue to register firms to conduct audit
work with their regulatory activities being overseen by the POB. The audit
registration committees of the accountancy bodies receive formal reports from
the AIU on our monitoring work, with the POB overseeing the action taken by
them in response to our recommendations. The Companies (Audit,
Investigations and Community Enterprises) Act 2004 implemented the statutory
changes necessary to give effect to these arrangements.




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Present Peer Review System In India


  Supervisor Within Institute of Chartered
   Accountants of India
  Chinese Wall between Peer Review process
   and Disciplinary Mechanism ( No disciplinary
   action even if there is deficiency in service of
   Auditor)
  Audit of accounts after 1st April’ 2002 only
   covered
  Peer Reviewers are Individual Members of the
   Institute (possessing 15 years’ or more
   experience of audit)
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Present Peer Review System In India

Three Stages of Peer Review In India
 Stage I-Mandatory Peer Review once in three
  years
 Stage II-No Time limit, Proposed Once in 5 years
 Stage III- No Time Limit, Proposed Once in 7
  years
(Only Attestation services Covered)




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The Regulatory Framework to bring
the light of the day
 The Chartered Accountants (Amendment)
  Act, 2005
 Bill Introduces new Chapter VIIA in
  Chartered Accountants Act 1949.
 Chapter VII A consists of Sections 28A to
  28D.
 Central Government will constitute Quality
  review board (QRB) consisting of 11
  persons.

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The Regulatory Framework to bring
the light of the day contd….
 Council of ICAI will nominate 5 members
  on QRB
 Chairman and other 5 members will be
  appointed by Central Government
 All services provided by members (Both
  attestation and non attestation will be
  subject to Quality Review)
 Disciplinary action if there is a deficiency
  in service.

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Composition of Peer Review
Board at Institute of Chartered
Accountants of India
The Board consists of 10 members appointed by the Council
Of whom atleast six are from amongst the members of the
Council.
Representatives from the Department of Company Affairs,
Comptroller and Auditor General of India and Industry (FICCI/ CII)
as members
In addition, persons of eminence from legal, banking and
education sectors (a retired High Court Judge, CMD, Bank of
Maharashtra, CE, Indian Banks’ Association, Chairman, UGC)
and a former President of the Institute assist the Board in its
deliberations as Special Invitees.


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Salient Features of the
Statement on Peer
Review




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Some features of the Statement.
 Statement on peer review was passed by Council in March 2002
 First meeting of Peer Review board took place in July 2002
 Statement on Peer Review serves as a mechanism as is intended
  to further enhance the quality of professional work of practising
  chartered accountants over a period of time. Thereby ensuring
  that the profession of chartered accountants continue to serve the
  society in the manner envisaged.
 Statement issued under Section 15 of the Institute of Chartered
  Accountants Act 1949 which provides that the duties of carrying
  out the provisions of the Act shall be vested in the Council. The
  section enumerates various duties of the Council. With a view to
  regulate the profession and in terms of powers vested, this
  statement has been issued.




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Statement on Peer review
1.   Introduction                 7. Scope of peer review
2.   Objectives                   8. Powers of Board
3.   Definition of Terms          9. Compliance with this
     (Attestation Services           statement of Peer review
     Member, PU, Peer             10. Qualifications of the
     Review, Peer Review             reviewer
     Board, Review of             11. Members/ Firms subject
     Technical Standards)            to review
4.   Authority of the
     statement on Peer review
5.   Powers of the Council
6.   Peer review Board


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Statement on Peer review contd….

12. Obligation of the practice17. Referral of Disputes and
   Unit                            Appeals
13. Periodicity of Peer Review (Reference to Peer Review
                                   Board over the powers of the
14. Cost of Peer Review
                                   Reviewer or to conclusions
15. Training and Development reached by Reviewer or any
16. Review Framework               other matter related to
                                   Review)
                               18. Immunity
                                   (No liability of PU under
                                   Code of Ethics)
                               19. Confidentiality
                               20. Procedural departures
                               21. Budget and Finance
                               22. Secretariat.
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      Objective of Peer Review
      (Para 2.1 )
   Assessing the maintenance of Quality of
    Attestation Service Engagements performed by
    Practice Units through:
    - Compliance with Technical Standards; and
    - Existence of proper system (including
    documentation systems)
   Not to find out deficiencies but to improve the
    quality of services rendered by the members
   Not to identify isolated cases of engagement
    failure, but to identify weaknesses that are
    pervasive and chronic in nature

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     Scope of Peer Review
     (Para 7.0)
• Attestation Services
   • Attestation Engagement Records for
     immediately preceding three completed
     financial years (Records prior to accounting
     year beginning 1.04.2002 shall not be
     subjected to review)
• Focus
   – Technical Standards compliance
   – Quality of Reporting
   – Office Systems and Procedures (attestation
     services only)
   – Staff training Programmes (attestation
     services only) www.SafeeCollege.com            17
    Attestation Services
    (Para 3.1)
•   Include:
     • Auditing or verification of financial
       transactions/ books/ accounts/ records
     • Verification/    certification   of   financial
       accounting & related statements defined
       under Section 2(2)(ii) of the Chartered
       Accountants Act, 1949
     • Internal Audit/Concurrent Audit

•   Does not include:
     • Management Consulting Engagements
     • Representing a client before the Authorities

                                            Continued…
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Attestation Services (Para
3.1)
Continued…
• Engagements to prepare tax returns or
  advising clients in taxation matters
• Engagements for the compilation of FSs
• Engagements solely to assist the client in
  preparing, compiling or collating information
  other than FSs
• Testifying as expert witness
• Providing expert opinion on points of principle
  (ASs or the applicability of certain laws) on the
  basis of facts provided by the client


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Technical Standards
(Para 3.7)
• Accounting Standards “AS”
• Auditing and Assurance Standards “AAS”
• Framework for the Accounting, Auditing &
  Related Services
• Statements
• Guidance Notes
• Notifications/Directions/Announcements
  including those of self-regulatory nature
• Relevant Statutes/ Regulations
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Reviewer: Para 10
 An individual who is
  a member
  possess at least 15 years cumulative
   experience of audit
    – Need not be continuous
    – Audit experience of less than 2 years not
      counted
  currently active in practice of accounting
   and auditing
  Reviewer can also take assistance of a CA
   working with him atleast for one year.

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    Allotment of Review


    Work
    Receipt of Empanelment Form
    Issue of Empanelment Letter
   Filing of Declaration which is to the following effect:

   (i.) that no disciplinary action was pending
   (ii) have not been convicted by a competent court whether
    within or without India, of an offence involving moral turpitude
    and punishable with transportation or imprisonment or of an
    offence, not of a technical nature, committed by you in your
    professional capacity unless in respect of the offence
    committed you have either been granted a pardon or, on an
    application made by you in this behalf, the central government
    has, by an order in writing , removed the disability (the
    conviction here means conviction at the first court)
   Undergoing training
   Intimation of 3 names of reviewers to the PU
                             by the PU
    Selection of a reviewerwww.SafeeCollege.com                  22
       Firms covered under
       Peer Review : Para 11
   Stage I
    PUs conducting:
     – Central Statutory Audit of Public Sector Banks/
       Private Sector Banks/ Foreign Banks/ Public
       Financial Institutions
     – Central Statutory Audit of Central & State Public
       Sector Undertakings and Central Cooperative
       Societies having paid up capital of over Rs. 5
       crores and an annual turnover of more than Rs. 50
       crores

                                              Continued…

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Firms covered under
Peer Review contd……
– Central Statutory Audit of Insurance
  Companies
– Audit of Companies having paid up capital of
  over Rs. 5 crores and an annual turnover of
  more than Rs. 50 crores
– Audits or rendering attestation functions for
  asset management companies and mutual
  funds schemes
(Implementation commenced from 1st April
  2003)

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     Firms covered under
    Peer Review contd……
   Stage II
    PUs conducting statutory audit:
    – Branches of Public Sector Banks
    – Branches of Private Sector and Foreign
      Banks
    – Regional Rural Banks/Co-operative Banks
    – Non-Banking      Financial    Companies
      (NBFCs) listed on the Stock Exchanges
      and not covered under Stage I

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Firms covered under
Peer Review contd……
     – Companies having paid-up capital of Rs.
     2 to 5 crores and turnover above Rs. 20
     crores
     (Implementation commenced from 1st April
       2004)
    Stage III
    PUs not covered under Stage I or Stage II
    (Implementation to commence from 1st April
    2005)

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        Selection of PU
   Random sample basis
    – Stage I PUs, mandatory review once
      in a block of three years or at
      shorter intervals on request of the
      PU or decision of the Board
    – Stages II/ III PUs - may not be
      subjected to review every three
      years


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Selection of PU contd….
 during Board decides the proportion
  of PUs to be reviewed each phase
 A PU may also, suo motu, apply to
  the Board for the getting reviewed
 An auditee concern may request the
  Board for the conduct of peer review
  of its auditor (PU)

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Confidentiality: Para 19
  Reviewer’s access only to working
   papers of the PU
  Reviewer cannot carry extracts of
   client’s working papers & records
   acquired by him while conducting peer
   review, as part of his working papers
  Reviewer bound by a Code of Ethics
  Reviewer bound by “secrecy provision”
   enshrined in the Statement on Peer
   Review


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                                                     Format
                                                         of
                                            Statement of Confidentiality
To,
The Chairman,
Peer Review Board,
The Institute of Chartered Accountants of India.
New Delhi

Sir,
I hereby declare that my attention has been drawn to the need for confidentiality in the conduct of peer reviews. I therefore
undertake and assure that in so far as any or all of the following relate to me or are brought to my knowledge/attention, in
any manner whatsoever, when so ever, I will ensure that on my part
Working papers shall always be kept securely so that unauthorized access is not gained by anyone.
The practice unit's attestation services procedures shall not be disclosed to third parties.
Any information with regard to any matter coming to my knowledge in the performance or in assisting in the performance of
any function during the conduct of peer reviews shall not be disclosed to any person.

Access to any record, document or any other material, in any form which is in my possession, or under my control, by
virtue of my being or having been so appointed or my having performed or having assisted any other person in the
performance of such a function, shall not at any time be permitted to any other person.

I understand that any breach of the provisions regarding confidential information contained in the Statement on Peer Review
will be considered as gross negligence and, subject to investigation, will result in appropriate action.

Signature :
Name :
Designation :
Date :
Place :

Taken on record on (date)
By
Signature :
Name :
Designation :




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    FAQs
   What is the time period for which records of
    attestation services are subjected to peer
    review?
    Answer : While attestation engagements for
    the Three immediately completed financial
    years are subjected to Peer Review, the
    records of audit Reports/ attestation services
    relating to years prior to the accounting year
    beginning 1st April’2002 shall not be
    subjected to review.

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FAQs
 How will a PU be selected for review?
Answer : At each stage of Peer review ,
  certain PUs , satisfying the criteria laid
  down in the statement would be selected
  for peer review on a random sample basis.
  The board is empowered to decide the
  proportion of Pus to be included in the
  selection    during    each     phase   of
  Implementation.
A PU can also suo –motu apply.
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FAQs
     Can a reviewer visit clients of the PU?
  Answer: No, he cannot , under any
  circumstances , communicate with or visit
  the clients’ of the PU
     Can a reviewer visit branches of a PU?
  Answer: Yes, he may visit a branch if the
  turnover of attestation functions of that
  branch is more than one million Rupees.


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    Preliminary Report
   After on-site review, reviewer may communicate with
    PU and seek clarifications and consider sending a
    preliminary report if replies not found satisfactory
   After on-site review, in case of deficiencies in systems
    and procedures or non-compliances the reviewer to
    issue preliminary report to PU immediately
   Reviewer to take care not to mention any names
   Scope of review performed and scope limitations, if
    any, to be mentioned
                                                   Continued…
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                    Contd….
   Prepare report on letterhead of reviewer
    (individual)
   Dated/    signed      (Membership      no.   and
    Reviewer code no.)
   PU to reply in writing within 21 days of receipt
    of preliminary report on areas mentioned in it


                                           Continued…
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Interim Report
 Reviewer to issue interim report if not satisfied with
  reply of the PU and deficiencies are of such serious
  nature that they do not ensure quality of attestation
  services performed by the PU -weakness in
  compliance with technical standards and/ or in
  internal quality control systems
 Report to clearly indicate "Interim Report"
 On receipt of interim report by the Board or receipt of
  response from the PU, the Board may instruct the
  reviewer to carry out a follow up review after a period
  ranging from 6 months to 12 months at the discretion
  of the Board



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Final Report
 Reviewer to submit Final Report to the
  Board with a copy to the PU
 Final Report should incorporate the
  findings as discussed with the PU
 Final report to be submitted to the
  Board should also contain an annexure
  forming part of it w.e.f 1st July, 2005,
  notified on the Institute’s website (See
  Page 43-45 of this presentation)
                                       Continued…
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Contd….
 Reviewer may issue
  – a clean report, if of the opinion that PU is
    conducting its affairs in a manner that
     ensures quality of services rendered by it
  – a qualified report
 A qualified report may be issued:
  – Non-compliance with technical standards
  – QC system design deficiency
  – Non-compliance with QC policies and
    procedures
                                        Continued…
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Contd….
   – Non-existence of adequate staff training
     programmes
     The deficiencies are not of such serious
     nature to vitiate the efficacy of the key
     control objectives
 The Board shall consider the report and if
  satisfied, will issue Peer Review Certificate
 If not satisfied, the Board may issue
  recommendations to the PU and direct the
  reviewer for further review
                                           Continued…

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Annexure to the Final Report of M/s___________________

General instructions: Tick ‘Yes’ / ‘No’, wherever applicable.

          Sl.                    Particulars                                       Observations
          No.

           1        Date on which questionnaire is received

           2        Number of initial samples selected for review

          3 (a)     Was there any change made in initial sample selected by the
                    Reviewer?
           (b)      If ‘Yes’, specify the number selected, after change

           4        Name of the person (if any) who helped in the conduct of
                    review
          5 (a)     Whether general controls are in existence and operating       Yes      No
                    effectively during the period under review?
          (b)       If ‘No’, please specify areas:

                    (i) Independence

                    (ii) Professional Skills and Standards

                    (iii) Outside Consultation

                    (iv) Staff Supervision and Development

                    (v)       Office Administration



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  6      Whether audit records administration is satisfactory?

  7      Whether working papers are properly maintained?                    Yes   No

  8      Whether review of internal control systems was carried             Yes   No
         out properly in performing attestation engagement?
9 (a)    Whether proper systems and procedures exist within                 Yes   No
         the PU to ensure compliance with technical standards?
  (b)    If ‘No’, specify areas:

         (i) Accounting Standards including Interpretations thereof

         (ii) Auditing and Assurance Standards including General
         Clarifications thereof
         (iii) Statements

         (iv) Guidance Notes

         (v) Institute’s Notifications/ Directions

         (vi) Self Regulatory Measures

 10      Whether overall presentation of financial statements conforms to   Yes   No
         statutory requirements of presentation under various Statutes?
 11      Whether audit conclusions drawn are duly supported by audit        Yes   No
         queries/observations?
 12      Whether the quality of audit reports in respect of format and      Yes   No
         content found proper?
13 (a)   Whether the Reviewer has issued preliminary report?                Yes   No


   (b)   Whether the preliminary report issued by the Reviewer contained    Yes   No
         any deficiencies?
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 (c)   If ‘Yes’, please specify the areas of deficiencies


       …………………………………………………….



 14    Whether PU has responded to the preliminary report?                  Yes       No
(a)
 (b)   Whether the Reviewer is satisfied with the response received         Yes       No
       from the PU?
 15    If the Reviewer is not satisfied with the response of the PU,        Yes       No
(a)    whether interim report or qualified report has been issued?
 (b)   Is the Final Report qualified?                                       Yes       No


 (c)   If ‘Yes’, specify the reasons

       ……………………………………………………………………………………
       ……………….



16     Whether the Reviewer received full co-operation from the PU?         Yes       No
       during review
17     Is there any point which the Reviewer wants to bring to the notice of the Board? If
       yes,Please elaborate separately.

       ………………………………………………………………………………………………………………
       ………………


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Basic Elements of
Reviewer's Report
     Title
     Scope Paragraph
     Opinion Paragraph
     Limitations
     Suggestions
     Reference to preliminary report
     Date of the report

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Guidelines for Qualifying
Review Report

     Compliance with technical standards
     Compliance with quality control policies
     Compliance with documentation
     Compliance with relevant regulations



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THANK YOU!




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