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Guidance by Peer Review Board for Peer Reviewers

Peer Review

Comprehensive Guidance by Peer Review Board for Peer Reviewers

The list you’ve shared outlines comprehensive advisories issued by the Peer Review Board for Peer Reviewers. This framework ensures you conduct peer reviews with integrity, quality assurance, and adherence to standards, while fulfilling all requirements of the ICAI Peer Review Board. Here’s a structured summary and practical interpretation to help ensure compliance and efficiency throughout the peer review process:

BEFORE STARTING THE REVIEW

Know the Basics:

  • Always mention the correct RE/PU number.
  • Do not use the firm’s letterhead.
  • Avoid names of clients, employers, or partners in communications.
  • Understand the Framework:
  • Study the Peer Review Manual and the Statement on Peer Review thoroughly.
  • Follow the Illustrative Time Schedule.

Adhere to applicable Standards on Auditing (SAs):

  • SA 230 – Audit Documentation
  • SA 580 – Written Representations
  • SA 210 – Engagement Terms

Accepting the Assignment:

  • Send the consent or refusal letter (with reasons) to the Board—not to the PU.
  • If using an assistant, send their Confidentiality Declaration too.

PEER REVIEW PROCESS

Stage I: Planning

  1. Peer Review Board (Board) selects the Practice Unit (PU) for Peer Review or The PU voluntarily applies for Peer Review.
  2. The PU is notified and requested to submit a duly filled Declaration to confirm its level.
  3. Based on the PU’s level, the Board selects a panel of three eligible reviewers.
  4. The Board seeks acceptance from the selected reviewers.
  5. Upon receiving confirmation from all three reviewers, the Board sends the following to the PU:
    • The panel of three reviewers
    • The prescribed Questionnaire
    • Notification regarding Peer Review Fees
  6. The PU selects one reviewer from the panel and informs the Board within 10 days.
  7. The PU sends the completed Questionnaire, along with a complete list of Assurance Services clients, to the selected reviewer within 15 days.
  8. The PU provides any additional information requested by the reviewer.
  9. The reviewer selects an initial sample representative of the PU’s Assurance Services portfolio.
  10. The PU is notified of the selected sample at least two weeks before the commencement of the review.

Stage II: Execution- DURING THE REVIEW

Sample Selection Guidelines for Peer Review

Engagement Sampling:

  • Select engagements based on PU’s size and receipts, ensuring:
  • Representative cross-section
  • Tender-based assignment
  • Largest turnover engagement
  • One per category (30A to R)
  • Branch samples if they exceed HO in turnover or have > ₹25 lakh in assurance services.

Sample Size Criteria (for 3-4 year validity):

  • Defined in relation to PU’s gross receipts.
  • If not met: 1-year certificate only.

Newly established firms

  • <1 year: 3 samples (1-year certificate)
  • 1–3 years: 5 samples (3-year certificate if criteria met)

Exclusions: Do not review assignments under disciplinary or judicial proceedings.  Execution Methodology:

  • Use both compliance and substantive procedures.
  • Follow SA-based documentation practices.
  • Inform the PU and Board if the review exceeds 2 days (limit: 72 hours).

Special Provisions for Newly Established Firms (Less than 1 Year)

  • Minimum Sample Size: At least 3 (three) samples must be selected.
  • Certificate Validity: Only a 1-year validity Peer Review Certificate will be issued, regardless of the firm’s level (L1, L2, L3).
  • Reapplication: After expiry of the 1-year certificate, the firm may suo motu reapply for Peer Review.
  • Full Validity Certificate: Granted only if the firm has completed 3 years of existence and undergoes a successful review covering 3 years.

General Guidelines for Sample Selection (Applicable to All Firms)

  • Minimum Sample Criteria: If Average Gross Receipts > ₹50 Lakhs: Minimum 10% of assurance services from each category (Clause 30 A to Q of Part A of the Questionnaire) must be selected.
  • Mandatory Inclusions in Sample
    • Highest Turnover Assignment: The assurance assignment with the highest turnover must be included in the sample.
    • Tender-Based Assignment: At least 1 assurance engagement obtained via tender must be included.
    • Branch Services: If a branch’s turnover exceeds head office OR exceeds ₹25 Lakhs, at least 1 sample from the branch must be selected.
    • Category-Wise Coverage: At least one sample from each category under Clause 30 A to Q must be selected. And At least one sample from each type of Assurance Engagement (e.g., audit, review, certification) is required.
    • Representative Sampling: Selected samples must be representative of the total population of assurance services.
    • Exception Handling: If minimum sample size cannot be met, the Reviewer must:
      • Perform 100% selection of assurance assignments.
      • Inform the Peer Review Board of the deviation.
      • Such a case (even for L1 or L2 or new PUs) will lead to issuance of 1-year validity Peer Review Certificate only.
      1. Fixation of the initial meeting date between the PU and the reviewer. Initial meeting is held. Reviewer conducts a Compliance Review of General Controls, covering the following five key areas:
        • Independence
        • Maintenance of Professional Skills & Standards
        • Outside Consultation
        • Staff Supervision & Development
        • Office Administration
      2. Reviewer performs a final selection of Assurance Engagements and Client Files using random sampling.
      3. Review of records begins.

Focus Areas: Compliance with:

      1. Technical, professional, and ethical standards
      2. Quality of reporting
      3. Office systems and controls
      4. Staff training practices

Determining Review Approach:

  • Proper control procedures exist?
    • Yes → Intend to rely on control procedures?
      • Yes → Perform less extensive substantive procedures.
      • No → Perform more extensive substantive procedures.
    • No → Perform more extensive substantive procedures.
  • Approach Types:
    • Compliance Approach: Tests control effectiveness and efficiency
    • Substantive Approach: Focuses on detailed examination of records

Stage III: Reporting- REPORTING PHASE

  1. Start –Reviewer sends a Preliminary Report to the PU.  Preliminary Report:
  • Issued after on-site visit.
  • Must not contain advice/suggestions.
  • PU’s written response must be obtained.
  • Final (Clean/Qualified) Report:
  • Discuss draft with PU.
  • Incorporate and deal with objections.

Should:

  • Be on Reviewer’s personal letterhead
  • Include RE/PU number
  • Be addressed to the Board and dated as of review conclusion
  • Follow prescribed format (Manual)
  • Be clear, specific, and unambiguous
  • Include suggestions where necessary
  • Include an Annexure describing the review process
    1. PU may submit a written representation on deficiencies or non-compliance (if any) within 15 days of receiving the Preliminary Report.
    2. Reviewer considers the representation and submits the Final Report to the Board.
      • If there is dissatisfaction or disagreement, the Final Report should include:
        • The Preliminary Report
        • PU’s written submission
        • Reviewer’s reasons for dissatisfaction
    3. Submission Requirements: Submit to the Board:
      • Final Report
      • Annexures I & II
      • PU’s questionnaire
      • Preliminary Report
      • PU’s response
      • How PU’s response was dealt with
      • Send a copy to PU as well
    1. FOLLOW-ON REVIEWS (if directed by Board) : Cover New Period: Only review the period after the one covered in the previous report. Same as Final Report, with references to Board’s direction. Include how earlier deficiencies were addressed.
    2. COST & ETHICS : Cost Recovery: REVIEWS Charge TA/DA and review costs as per Board’s notified rates. and Confidentiality: REVIEWS Maintain strict confidentiality. Do not extract client files/records into your working papers.

Illustrative Time Schedule of Peer Review Process

Sr. No. Review Process Time Limit Cumulative Days
1 PU is notified of selection and asked to submit Declaration. Within 3 days Day 3
2 Board selects panel of 3 reviewers based on PU level. Within 2 days Day 5
3 Board seeks acceptance from the reviewers. Within 2 days Day 7
4 Panel of 3 reviewers sent to PU along with Questionnaire and Fee Notification. Within 1 day Day 8
5 PU to choose and inform name of Reviewer. Within 2 days Day 10
6A Reviewer to submit consent, confidentiality declaration. Within 7 days Day 17
6B Board issues confirmation to PU and Reviewer. Within 3 days Day 20
6C PU submits filled Questionnaire to Reviewer and Board. – Day 25
7 Reviewer may call for more info after reviewing Questionnaire. Within 5 days Day 30
8 PU submits additional info to Reviewer. Within 5 days Day 35
9 Reviewer selects initial sample from client list. Within 7 days Day 42
10 Reviewer notifies PU and PRB about selected sample (5-day notice before visit). – Day 47
11 On-site review visit at PU’s office. Within 23 days Day 70
12 Reviewer sends Preliminary Report to PU. Within 5 days of visit Day 75
13 PU submits representation on Preliminary Report. Within 5 days Day 80
14 Reviewer submits Final Report and annexures, incl. sample list, conclusions, confirmations, and Questionnaire copy. Within 10 days Day 90
15 Board considers Final Report and issues Certificate or gives rectification suggestions (Quarterly Meeting). Next PRB Meeting –

Documents Required in Final Submission:

  • Final Report with Annexure I
  • Annexure II (mandatory for Level I & II)
  • Client sample list and selection basis
  • Preliminary Report, if any, with PU’s response
  • Final Report conclusion rationale
  • Completed Peer Review Questionnaire
  • Reviewer may need to produce working papers if asked by the PRB

Issuance of Peer Review Certificate:

  • Clean Report: Certificate issued in the next PRB meeting (held quarterly or by subcommittee).
  • Qualified Report: PU is advised to rectify deficiencies; reviewer must provide proof of fee receipt.

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