Peer Review & Quality Review Flashcards
Reviewers, based on the conclusions drawn from the quality review, shall issue a preliminary report and subsequently the final report.
As a quality reviewer briefly discuss the basic elements of Quality Review Report.
Basic Elements of Quality Review Report:
The report should contain:
(a) Elements relating to audit quality of companies:
(i) A reference to the description of the scope of the review and the period of review of audit firm conducted along with existence of limitation(s), if any, on the review conducted with reference to the scope as envisaged.
(ii) A statement indicating the instances of lack of compliance with technical standards and
other professional and ethical standards.
(iii) A statement indicating the instances of lack of compliance with relevant laws and
regulations.
(b) Elements relating to quality control framework adopted by the audit firm in conducting audit:
(i) An indication of whether the firm has implemented a system of quality control with
reference to the quality control standards.
(ii) A statement indicating that the system of quality control is the responsibility of the
reviewed firm.
(iii) An opinion on whether the reviewed firm’s system of quality control has been designed to
meet the requirements of the quality control standards for attestation services and whether
it was complied with during the period reviewed to provide the reviewer with reasonable
assurance of complying with technical standards in all material respects.
(iv) Where the reviewer concludes that a modification in the report is necessary, a description
of the reasons for modification. The report of the reviewer should also contain the
suggestions.
(v) A reference to the preliminary report.
(vi) An attachment which describes the quality review conducted including an overview and
information on planning and performing the review.
The Quality Review Report should be issued on the reviewer’s (individual) letterhead and signed by
the reviewer. The report should be addressed to the Board and should be dated as of the date of the
conclusion of the review.
What are the inherent limitations of Peer Review?
Inherent Limitations of Peer Review:
Peer review suffers from certain inherent limitations given as below:
- The reviewer conducts the review in accordance with the Statement on Peer Review.
- The review would not necessarily disclose all weaknesses in compliance of technical standards and maintenance of quality of assurance services since it would be based on selective tests.
- As there are inherent limitations in the effectiveness of any system of quality control which happens to be subject-matter of review, departure from the system may occur and may not be detected.
TR
Technical Reviewer
While assigning the quality review work to the respective Technical Reviewers, in order to ensure
independence and avoid conflict of interest, certain eligibility conditions were specified for carrying
out the specified quality review assignment to the Technical Reviewers who were required to submit
a declaration of eligibility before starting the assignment. In view of above, briefly discuss those
eligibility conditions prescribed for Technical Reviewer.
While assigning the quality review work to the respective Technical Reviewers, in order to ensure independence and avoid conflict of interest, the following eligibility conditions were specified for carrying out the specified quality review assignment to the Technical Reviewers who were required to submit a declaration of eligibility before starting the assignment.
For being a TR:
- He should not have disciplinary proceeding under the CA Act, 1949 pending against him/ her or any disciplinary action under the CA Act, 1949/ penal action under any other law taken/ pending against him during last 3 FY and/ or thereafter.
- He or his/her firm or any of the network firms or any of the partners of the firm or that of the network firms should not have been the statutory auditor of the company, as specified, or have rendered any other services to the said entity during the last 3 FYs and/ or thereafter.
- He or his/her firm or any of the network firms or any of the partners of the firm or that of the network firms should not have had any association with the specified AFUR, during the last 3 FYs and/ or thereafter.
- He should comply with all the eligibility conditions laid down for appointment as an auditor of a company u/s 141(3) of the Companies Act, 2013 which apply mutatis mutandis in respect of the review of the quality of statutory audit of the entity, as specified, so far as applicable.
- He does not belong to the city/ region of head office of the AFUR.
AFUR
Audit Firm Under Review
QRB
Quality Review Board
List out the consequences if the Quality review board notices major non-compliances with the requirements of the Standards on quality control or standards on auditing or accounting standards?
Consequences if QRB notices major non-compliance with requirements of SQC or SA or AS:
The actions that the Board may take, based upon consideration of recommendations of the QRG,
include one or more of the following:
(a) Make recommendations to the Council of ICAI for referring the case to the Director (Discipline)
of the Institute for consideration and necessary action under the Chartered Accountants Act,
1949.
(b) Issue advisory and guidance to the AFUR for improvement in the quality of services and
adherence to various statutory and other regulatory requirements. A copy of such advisory may
also be sent to the ICAI for information.
( c) Inform the details of the non-compliance to the regulatory body(ies) relevant to the entity as
may be decided by the Board.
( d) Intimate the AFUR as to the findings of the Report as well as action initiated as above.
( e) In case of review arising out of a reference received from a regulatory body, inform the results of
review and the details of action taken to the concerned regulatory body.
(f) Consider the matter complete and inform the AFUR accordingly.
CA. Sita, appointed as a Peer Reviewer for M/s. Ram Associates, has asked for all the compilation
and the Due Diligence engagements carried out by M/s. Ram Associates for her peer review during
the period considered for peer review purposes by the board. She has also sent out a mail to Peer
Review Board regarding her selection. Mr. Ram, the managing partner of the firm seeks your
advice on this matter.
Selection of Assurance Service Engagements for Review: The Statement on Peer Review
defines the scope of peer review which revolves around compliance with technical, ethical and
professional standards; quality of reporting; office systems and procedures with regard to
compliance of assurance engagements; and, training programmes for staff including articled and
audit assistants involved in assurance engagements. The entire peer review process is directed at
the assurance services.
Assurance Services means assurance engagements services as specified in the “Framework for
Assurance Engagements” issued by the Institute of Chartered Accountants of India and as may be
amended from time to time. Assurance engagements does not include engagements for the
compilation of financial statements or engagements solely to assist the client in preparing,
compiling or collating information other than financial statements; or engagement for Due diligence.
In the given situation, CA. Sita is appointed as a peer reviewer for M/s Ram Associates, has asked
for all the compilations and the due diligence engagements carried out by M/s Ram Associates for
her peer review. In view of above, Peer Review of compilation and due diligence at the time of
execution step by CA. Sita is not correct as due diligence and compilation engagements are not
covered in the scope of Assurance engagement and Peer Review is directed at assurance
engagement only.
