Peer Review – Checklist for Preliminary Review Procedures

Peer Review  Checklist related to Preliminary Review Procedures

Sl. No.		Item	Key Checks / Clarifications
1		Pre-audit meeting minutes	Available & documented
2		Appointment letter with terms, resolution, and audit fees method	Mandatory review
3		ADT-1 filing & NOC from predecessor auditor (for first audit)	Verify records & ROC filings
4		Audit risk assessment	Using professional judgment
5		Organizational understanding: AOA, MOA, structure, internal controls	Permanent file references
6		Materiality assessment (entity-specific basis)	With logical rationale
7		Applicability analysis: Small company, CASR, IFC, CARO, etc.	Preliminary checklist must
8		Appropriate audit team deployment	Based on risk, size, nature
9		Documented & communicated audit plan/strategy	Internal communication logs
10		Client acceptance procedures	Especially for new clients
11		Client continuation procedures	Documented re-evaluation
12		Written agreement of engagement terms	In line with SAs
13		Competency assessment of audit team	Before engagement
14		Compliance with QC procedures (SQC-1)	Ensure applied properly
15		Review of prior year’s FS, Auditor’s, Director’s, and Internal Auditor’s Reports	Also check for significant changes
16		Fundamental accounting assumptions: Going concern, accrual, consistency	Document client policy
17		Entity-specific ownership reviews	Company: shareholding, MCA, Board Minutes; Partnership/LLP: PSR ratio, DP details
18		Journal entry testing checklist	Mandatory to address fraud risks
19		Analytical procedures & substantive testing	Ensure sufficiency & reliability
20		Audit programme checklist preparation	To guide execution
21		Inter-team discussion checklist	Evidence of collaboration
22		Statutory Audit & Accounting Standards checklist	Including Ind AS/AS applicability
23		CARO & GST compliance checklists	Legal/regulatory adherence
24		Disclosure of accounting policy changes	Documented with rationale
25		Significant issues discussion with management & TCWG	Memos, minutes, emails

Checklist related to Audit Planning

26	Engagement with management & TCWG; consideration of internal audit reliance; fraud risk review
27	Comprehensive audit plan including assertion-level procedures
28	Sign-off of strategy and audit plan by partner/manager

Checklist related to Performance & Execution

29	Partner supervision and real-time involvement
30	Timely reviews and changes in audit plan
31	Areas requiring consultation identified and acted upon

Checklist related to Senior Review Procedures

32	Working papers cross-referenced and complete
33	Summary of procedures, issues, judgments, conclusions
34	In-charge senior’s review of assistants’ work and adherence to timelines
35	Working paper updates, including permanent files
36	Checklists reviewed by audit manager
37	Time budget vs actual with explanations for deviations
38	Unadjusted errors assessed for materiality
39	Draft FS figures reconciled with audit working papers
40	Draft FS reviewed for compliance with accounting principles
41	Draft audit opinion prepared and justified
42	Events after balance sheet date identified and addressed
43	Final deliverables checklist approved by audit partner
44	Next year audit planning initiated

Checklist related to Partner Review

45	Availability and secure storage of documents
46	Tax computation review clearance (if required by independent reviewer)
47	Partner review of final deliverables checklist
48	Audit report reviewed for accuracy and qualifications discussed with management

Checklist related to Final Audit File & Closing Procedures

49	Review of final audit files should typically include: Working papers, lead schedules, conclusions, etc.
50	Matters escalated to partner resolved satisfactorily
51	Unadjusted errors summarized and checked for materiality
52	Lead schedules and conclusions documented for each material area
53	All MOCs and audit adjustments approved and signed by TCWG
54	Qualifications/Emphases communicated to TCWG before final issuance
55	Signed closing trial balance retained in file

Important Notes for Peer Reviewers

1. Minimum 3 samples for firms <1 year old – 1-year certificate issued.
2. Include highest turnover assurance engagement.
3. At least 1 sample from:
   • Each Clause 30 A to Q category (Part A of Questionnaire).
   • Each type of assurance engagement.
   • Tender-based assurance services.
   • Branch with turnover > HO or > ₹25 lakhs.
4. If required sample size < minimum, select 100% population & intimate Board.
5. Certificate of 1-year validity to be issued for L1, L2, or new PUs not meeting criteria.

Recommended Next Steps for PU (Practice Unit):

1. Immediate Implementation of SQC 1 – with comprehensive documentation of policies and procedures.
2. Training and Development Programs – for all audit staff on current SAs and industry-specific knowledge.
3. Strict Documentation Controls – to ensure working papers reflect planning, execution, and conclusions.
4. Peer Review Remediation Plan – submit a corrective action plan to ICAI if under peer review scrutiny.
5. Engagement Quality Control Review (EQCR) – for all high-risk audits
6. Peer Review Process, structured clearly in three stages: Planning, Execution, and Reporting.
7. Total duration: Entire process should be completed within 90 days from PU notification. Reviewer must not start the review before receiving Board’s approval and confidentiality declarations. Final Submission Includes:
   1. Final Report + Annexure I & II
   2. Sample list and selection basis
   3. PU’s representation + Reviewer’s verification
   4. Compliance confirmation (AS/SQC)
   5. Completed Questionnaire copy
   6. Peer Review fee receipt

Non-compliance with mandatory auditing & Quality control standards &  corresponding implications

Non-compliance with mandatory auditing and quality control standards, particularly those issued by the Institute of Chartered Accountants of India (ICAI), such as SQC 1 (Standard on Quality Control)- Standards on Auditing (SAs) like SA 210, SA 300, SA 315, SA 320, SA 330, SA 240, SA 530, SA 570, etc. Summary breakdown of key findings of non-compliance with mandatory auditing and quality control standards and the corresponding implications:

1. Absence of Quality Control Policies – SQC 1

• Issue: No documented quality control policies; rudimentary practices.
• Implication: Indicates a systemic failure in ensuring audit quality, especially in ethical requirements and client acceptance.

2. Independence Not Evidenced

• Issue: No evidence that independence policies were followed or applied at the engagement level.
• Implication: Breach of Code of Ethics; may impair auditor’s independence and objectivity.

Quality control standards & implications

3. Absence of Engagement Letters – SA 210

• Issue: Engagement letters not obtained.
• Implication: No formal agreement with the client; increased risk of misunderstandings on scope, fees, responsibilities.

4. Inadequate Staff Training & No Review Process

• Issue: Staff lacks industry knowledge; no senior review.
• Implication: Non-compliance with SA 220 on quality control for an audit; risks improper audit execution.

5. No Standard Audit Planning or Checklists – SA 300

• Issue: No documented planning or standard audit checklists.
• Implication: Weak audit planning, inconsistent quality, and non-compliance with fundamental auditing principles.

6. No Risk-Based Approach – SA 315, SA 330

• Issue: No planning, audit strategy, risk assessment, or documented audit responses.
• Implication: High audit risk; failure to detect material misstatements or fraud.

7. No Evaluation of Internal Controls – SA 315 & SA 330

• Issue: No control environment evaluation or testing of internal controls.
• Implication: Potential misstatement risks not identified or mitigated; undermines audit reliability.

8. Non-Compliance with SA 240 – Fraud Responsibility

• Issue: No procedures relating to risk of fraud performed.
• Implication: Violates a critical audit standard; exposes auditor to liability in case of fraud.

9. No Audit Sampling Methodology – SA 530

• Issue: No audit sampling plan; biased and undocumented sample selection.
• Implication: Ineffective audit conclusions; increased detection risk.

10. Lack of Documentation for Testing

• Issue: Testing only evidenced via query sheets; no clear trail.
• Implication: Breach of SA 230, Audit Documentation; weakens audit defensibility and quality control.

11. No Audit of Significant Estimates and Judgments

• Issue: No evidence of evaluating client estimates or judgments.
• Implication: Contravenes SA 540, risk of unchallenged bias or misstatements in financial reporting.

12. No Going Concern Assessment—SA 570

• Issue: Severe financial distress indicators ignored; no going concern evaluation.

Implication: Major risk; misleading opinion issued without proper assessment.