ICAI Peer Review Objectives, Eligibility, Process, Phases, Cost

ICAI Peer Review Objectives, Eligibility, Process, Phases, Cost

Peer Review of Chartered Accountant Firms – Overview

Peer Review for Chartered Accountant firms, overseen by the Institute of Chartered Accountants of India, functions as an independent evaluation mechanism to ensure that firms engaged in assurance services adhere to the prescribed technical, professional, and ethical standards.

The peer review process aims to enhance the quality of audit and assurance services, strengthen public confidence, and promote uniformity and consistency in professional practices across the fraternity.

1. Core Objectives of Peer Review

Core Purpose is to focus on quality assurance for audit and assurance services, ensuring adherence to technical standards, professional ethics, and regulatory requirements. This mechanism enhances service reliability without punitive intent.​ The primary objective of peer review is not punitive in nature but corrective and preventive, focusing on:

• Improving compliance with Standards on Auditing (SAs)
• Ensuring adherence to Institute of Chartered Accountants of India  Code of Ethics

Key Benefits Peer Review

• Enhances audit quality and identifies process gaps for continuous improvement.​
• Builds public trust, boosts credibility with regulators and clients, and provides a competitive edge through certification.
• Promotes professional growth by increasing awareness of standards among reviewers and reviewees.​
• Acts as a continuous improvement tool for firms and professionals
• Enhances compliance with technical and ethical standards
• Strengthens public confidence in the profession
• Provides assurance to clients and stakeholders regarding the quality of professional services

Guiding Philosophy of Peer Review

Peer Review is a vital quality assurance mechanism instituted by the Institute of Chartered Accountants of India. It is a structured process through which the professional work of CA & firms engaged in assurance services is reviewed and evaluated by independent peers. The primary objective of peer review is to enhance the quality of professional services and ensure continued compliance with the standards prescribed by ICAI.

The approach emphasizes nurturing professionalism through guidance and improvement, rather than fault-finding. Reviewers provide constructive feedback to elevate practice unit standards and public trust. Evolution of Peer Review in India

• Peer Review in India is the result of ICAI’s proactive quality assurance initiatives undertaken in the late 1990s. The framework was conceptualized around 1998, culminating in the formal issuance of the Statement on Peer Review in March 2002.
• In the same year, the Peer Review Board (PRB) was constituted by ICAI to administer and oversee the peer review mechanism. With this, the peer review system was formally implemented in the early 2000s, marking a significant milestone in strengthening audit quality and professional accountability in India.

Peer Review Recognition by Regulators

• SEBI (from April 1, 2010): Auditors of listed entities must hold Peer Review Certificate. SEBI mandated Peer Review Certificates for auditors of listed entities starting April 1, 2010, to uphold audit quality standards.
• C&AG: Empanelment policy gives weightage to Peer Review certification. The Comptroller and Auditor General (C&AG) incorporates peer review in its empanelment policy, awarding up to 25 points to certified firms for enhanced eligibility in government audits.​

3.Peer Review Process  - Process Overview

Firms select qualified peer reviewers, undergo system or engagement reviews, and submit reports for acceptance. Substandard results trigger corrective actions, with mandatory reporting to ICAI.  The process ensures compliance with ICAI guidelines, proper systems for quality assurance, and documentation to demonstrate reliability. It targets firms involved in audits of listed companies, statutory audits, and other high-stakes engagements, phased in from 2025 onward.​ The process begins with submission of Form-1 by the practice unit to ICAI's Peer Review Board. A qualified reviewer is then selected and appointed from the Board's panel. basic step for Peer Review Process, The peer review process is carried out in a systematic and objective manner, as outlined below:

1. Selection of Firm / Individual : Firms or individuals are selected for peer review by the PRB based on defined criteria, including Size and complexity of the firm; Nature and volume of assurance services rendered

2. Appointment of Peer Reviewer : An independent and empanelled Peer Reviewer is assigned to conduct the review.

3. On-site Review : The peer review team conducts an on-site visit to the firm or individual’s premises. During the visit, the team Examines internal controls, systems, and procedures, Reviews selected client files and audit documentation, Assesses compliance with Standards on Auditing, professional guidelines, and ethical requirements

4. Reporting and Recommendations : Post review, the peer reviewer prepares a Peer Review Report highlighting observations, deficiencies (if any), and recommendations for improvement. The report is submitted to the PRB for consideration.

5. PRB Review and Remedial Action : The PRB evaluates the report and may Accept the findings, Seek clarifications, Recommend or mandate remedial actions to strengthen systems and procedures, wherever required

Planning involves scoping the review based on firm size and engagements, followed by execution through systematic checks of audit procedures, records, and compliance. The reviewer issues a report with findings, leading to certificate issuance or corrective actions if needed.

4. Eligibility for Peer Reviewer

• Peer reviewers for ICAI's process must be members in practice meeting strict experience thresholds. They require either 7 years of assurance service experience or 10 years of employment plus 3 years in audit roles.​
• Peer Reviewer Training Requirements: Candidates complete mandatory training prescribed by the Peer Review Board and pass an online test to qualify. They also submit declarations of confidentiality and acceptance at appointment.​
• Peer Reviewer Key Restrictions: Eligibility excludes members with pending disciplinary actions, misconduct findings, or conflicts of interest with the practice unit under review. No ongoing proceedings against them are permitted.

Criteria & Types Peer Reviewer

• Peer review under ICAI guidelines categorizes Practice Units (PUs) into voluntary, special case, and new unit types based on specific eligibility criteria.​
• Voluntary Criteria - Voluntary Any firm can apply. Any Practice Unit, such as a firm of Chartered Accountants or a member in practice, may apply suo motu to the Peer Review Board for review. This option allows firms to voluntarily demonstrate compliance with technical, professional, and ethical standards for assurance services.
• Special Case Criteria - Special Case: Based on regulator info. The Board initiates review based on specific information from the ICAI Secretary, Disciplinary Directorate, or any regulator, if it deems a special Peer Review necessary for the PU. [carajput] The review covers a period determined by the Board to address identified concerns. ​
• New Unit Criteria New Unit As per ICAI guidelines.  : A New Unit includes firms established less than 12 months before the Peer Review application date (with or without assurance services rendered) or units over 12 months old but not providing assurance services.  Review focuses on partners' antecedents and policy parameters for attest functions, verified via Form 1 questionnaire and a one-day onsite visit, completed within 7 working days.

6. Mandatory Roll-Out (Phases)

ICAI's Peer Review Mandate rolls out in phases, requiring specified Practice Units to obtain a valid Peer Review Certificate before undertaking certain audit assignments. The roll-out follows a risk-based and scale-based approach, starting with listed entities and gradually covering larger firms, public-fund exposure, and PSU audits, ensuring a smooth transition across the profession. Phases have seen deferments, with the latest updates adjusting timelines for compliance.​

• Phase I (01.04.2022): Firms auditing listed entities : Effective from April 1, 2022, this targets Practice Units auditing listed entities, including those already mandated by SEBI. Firms must hold the certificate prior to accepting such audits.​
• Phase II (01.07.2024): Firms auditing large unlisted public companies or with ≥5 partners. : Originally set for earlier dates but deferred, it applies from April 1, 2024, to Practice Units auditing large unlisted public companies (paid-up capital ≥ INR 500 Cr, turnover ≥ INR 1,000 Cr, or outstanding borrowings ≥ INR 500 Cr) or those with 5 or more partners rendering attestation services.​
• Phase III (01.01.2025): Firms auditing entities with public funds > INR 50 Cr or ≥4 partners. Deferred to July 1, 2025, covering firms auditing entities handling public funds exceeding INR 50 Cr or with 4 or more partners. Compliance ensures no disruptions in statutory audit work.​
• Phase IV (01.04.2025): Firms auditing PSU bank branches or with ≥3 partners. : Now effective January 1, 2026, this includes Practice Units auditing PSU bank branches or those with 3 or more partners. Non-compliance risks restrictions per Clause 25(2) of the 2022 Guidelines.​

Mandatory Roll-Out – Phase-wise Applicability

Firms are advised to assess their applicability phase well in advance and ensure readiness in terms of systems, documentation, and peer review preparedness. Non-compliance or delayed onboarding may lead to regulatory consequences as per applicable ICAI guidelines. The fee structure is progressive, aligned with firm size, audit complexity, and public interest exposure.

7. Cost Structure- Fee Tiers by Receipts –

ICAI Peer Review fees follow a tiered structure based on the average annual gross receipts from attestation services over the review period, typically three years. Additional charges apply for specific reviews like AQMM or listed entity audits, plus firm-type fees.​

Fee Tiers by Receipts - Fees scale with firm size for standard reviews:

AQMM fee slabs in ICAI Peer Review

• Average gross receipts for determining AQMM fee slabs in ICAI Peer Review are calculated from assurance/attestation services only, averaged over the last three years prior to application.​
• Firms submit audited financial statements, Form 3CA/3CD or ITRs (Schedule III for CA firms), and ledgers/extracts detailing attestation receipts, certified by the proprietor/partners. ICAI's Form 1 or PRB application annexures require self-declaration with supporting audit reports or CA certificates verifying the average.​
• The Peer Reviewer cross-checks submitted proofs during the onsite review, focusing on client-wise billing from statutory audits, tax audits, or certifications excluding non-assurance income like consultancy. Discrepancies may lead to fee adjustments or rejection

Additional fees for AQMM review and listed entity audits.

• AQMM additional fees for ICAI Peer Review are charged when the Audit Quality Maturity Model review is conducted as a separate exercise from the standard peer review. Listed entity audits add 20% (e.g., INR 18,000 for up to INR 10 lakh), with AQMM extras like INR 5,000–INR 30,000.​ The fee is tiered based on the firm's average gross receipts/revenue from assurance clients, with a minimum of INR 5,000 and a maximum of 30k 
• Integrated Option : If done alongside a due peer review cycle, the add-on AQMM fee caps at INR 30,000 without separate calculation. Firms apply via PRB or CAQ portals, confirming size-based applicability per guidelines.

Firm-Type Fees  - Firm Constitution-Based Fee

These apply alongside base fees for Peer Reviews initiated post-July 2020.​ The Peer Review Programme of ICAI is a cornerstone of quality assurance in the Chartered Accountancy profession. It is not punitive in nature but educative, corrective, and preventive, aimed at strengthening professional competence and adherence to standards. Through effective oversight by the PRB and active participation of peer reviewers, the peer review mechanism ensures that Chartered Accountants consistently deliver high-quality and reliable professional services in line with ICAI’s expectations.

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