Mandatory Peer Review For CA firms in India
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Mandatory Peer Review For Chartered Accountants firms in India
The ICAI’s mandatory peer review process is an essential move towards ensuring the quality and integrity of audit practices in India. For CA firms, obtaining a peer review certificate not only ensures compliance but also enhances their reputation. By focusing on these key areas, firms can successfully navigate the peer review process and demonstrate their commitment to quality and professional ethics. CA firms must ensure compliance with ICAI’s auditing and ethical standards, quality control, and documentation requirements. Practice units falling under upcoming phases should initiate peer review processes well in advance of the mandatory dates. CA firms auditing these entities must align operations with ICAI’s stringent independence and reporting requirements. Here’s a breakdown of the key details regarding the timeline and focus areas:
Trajectory of Mandatory Peer Review
By understanding and aligning with the Peer Review mandate, CA firms can ensure compliance, enhance audit quality, and uphold professional integrity. The phased implementation of the Peer Review mandate ensures a gradual but effective transition for audit firms to meet high-quality standards. With the inclusion of public sector bank branch audits and smaller firms in the final phase, The Institute of Chartered Accountants of India underscores its commitment to fostering uniform excellence across the auditing profession. The The Institute of Chartered Accountants of India has implemented the Peer Review mandate in four phases, covering various categories of practice units:
Phases of Peer Review Mandate
- Phase I (Effective April 1, 2022):
- Practice units undertaking statutory audits of listed entities.
- Pre-requisite: Peer Review Certificate required before accepting or signing the statutory audit.
- Phase II (Effective July 1, 2024):
- Unlisted public companies with:
- Paid-up capital ≥ ₹500 crore.
- Turnover ≥ ₹1,000 crore.
- Aggregate loans, debentures, or deposits ≥ ₹500 crore (as of the preceding financial year).
- Practice units with 5 or more partners undertaking attestation services.
- Unlisted public companies with:
- Phase III (Effective January 1, 2025):
- Entities raising public/bank/financial institution funds > ₹50 crore during the review period.
- All public interest entities, including trusts, without a threshold limit.
- Practice units with 4 or more partners undertaking attestation services.
- Phase IV (Effective April 1, 2025):
- Statutory branch audits of Public Sector Banks.
- Practice units with 3 or more partners undertaking attestation services.
Focus Areas for Peer Review Certification
- Compliance with Standards: Ensuring that the firm adheres to ICAI’s auditing, accounting, and assurance standards.
- Documentation Quality: Maintaining detailed documentation for each audit engagement.
- Internal Controls: Establishing strong internal controls to safeguard the audit process.
- Training and Development: Regular updates and training for the team on current auditing practices and standards.
- Ethical Standards: Upholding ethical guidelines and addressing conflicts of interest proactively.
- Client Acceptance and Continuance: Rigorous procedures for evaluating and retaining clients.
- Quality Control Policies: Developing robust internal quality control policies to maintain high standards.
Summary on Clarifications on Specific Issues related to Peer review
FAQs & clarifications from the The Institute of Chartered Accountants of India regarding the Peer Review Mandate provide detailed guidance on the scope, phases, and requirements for obtaining a Peer Review Certificate. Below are the summarized key takeaways:
- Timing of Peer Review Certificate: Peer review Valid at the time of accepting and signing a statutory audit report. Peer review form existing statutory audits must have a valid certificate at the signing stage.
- Definition of “Raised Funds”: Peer review Includes maximum outstanding in cash credit/working capital loans and term loan disbursements during the review period. Peer review Aggregated across all sources.
- Applicability to Public Interest Entities: Peer review Includes banks, insurance companies, and other entities defined under the ICAI Code of Ethics. and No threshold applies to public interest entities under Phase III.
Branch Audits of Public Sector Banks
- Branch Audits of Public Sector Banks: Statutory branch audits are covered under Phase IV. and excludes statutory audits of cooperative bank branches.
- Exclusion of Non-Attestation Services: Peer review is not required for firms not rendering attestation/assurance services, such as management consultancy, tax advisory, or due diligence.
- Assurance Engagements: Peer review Includes statutory audits, tax audits, GST audits, and certifications. Excludes engagements like tax return preparation, expert opinions, and due diligence.
- Partner Thresholds: Peer review Partner count is reckoned on the date of mandatory applicability and onwards.
- New Practice Units (<12 months): Peer review Must meet additional conditions under “New Unit” criteria to apply for mandatory peer review. Cannot apply for voluntary peer review if established for less than 12 months.
CA. Swatantra Kumar Singh, Co-founder | Rajput Jain and Associates
CA Swatantra Kumar Singh, a Fellow Member of The Institute of Chartered Accountants of India, brings over 17 years of expertise in financial reporting frameworks, integrated and interal audit & reporting, IND AS, and SEBI (LODR) compliance. His professional qualifications include FCA, IP (IBBI), & MBA, along with forensic, social, and concurrent auditing certifications. A respected author and keynote speaker, CA Swatantra Kumar Singh has contributed to prominent Blog writing publications on financial reporting and different subject on taxation and compliance education. He also serves as a peer and technical reviewer for renowned professional Ca Frm, further solidifying his reputation as a thought leader in financial reporting and compliance. Relevant For:
• Listed Entities, • Broking Houses, • Corporate Reporting Teams, • Secretaries Teams, • Chartered Accountants, • Company Secretaries, • SEBI Officials