chartered accountant
The Institute of Chartered Accountants of India (ICAI) has developed a structured Peer Review Mandate aimed at enhancing the quality of statutory audits. This process spans four phases, with implementation scheduled according to the nature and scale of different practice units. The mandate goes into effect as follows:
Phase I: Effective from April 1, 2022, practice units auditing listed entities, as defined under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, must possess a valid Peer Review Certificate prior to accepting statutory audits and at the time of signing audit reports.
Phase II: Starting July 1, 2024, this phase targets practice units conducting statutory audits of unlisted public companies with:
Additionally, practice units offering attestation services with 5 or more partners will also require a Peer Review Certificate.
Phase III: This phase is effective from January 1, 2025, and includes:
It also includes practice units with 4 or more partners under the attestation services category needing a Peer Review Certificate.
Phase IV: From April 1, 2025, this phase applies to practice units auditing branches of Public Sector Banks and those with 3 or more partners engaged in attestation services.
The mandate emphasizes that all practice units must obtain a Peer Review Certificate prior to accepting statutory audits and while signing audit reports.
Q.1 What is the Peer Review Mandate?
The Peer Review Mandate is implemented in phases, which are categorized based on the specific types of practice units.
Q.2 When must a Practice Unit obtain a Peer Review Certificate?
A valid Peer Review Certificate is required before undertaking statutory audits and upon signing audit reports. If a statutory audit was accepted before the respective phase became mandatory, a valid certificate must still be secured before signing.
Q.3 What does "raised funds from public or banks" mean?
“Raised Funds” refers to:
Q.4 Is the INR 50 crores threshold applicable to all public interest entities?
No, the INR 50 crores threshold does not apply to all entities classified as public interest entities, meaning all such entities, including trusts, are covered without restriction.
Q.5 How is a Public Interest Entity defined?
According to Volume-I of the Code of Ethics, a Public Interest Entity includes:
Q.6 Which audits are included in Phase IV?
Phase IV includes statutory audits of branches of Public Sector Banks; however, it does not encompass audits of co-operative bank branches.
Q.7 Is a Peer Review Certificate required for units not offering attestation services?
No, practice units that don’t provide attestation services are not obligated to have a Peer Review Certificate under the mandate.
Q.8 What qualifies as an 'Assurance Engagement'?
Assurance Engagements are defined in the Peer Review Guidelines, encompassing engagements that provide conclusions aimed at increasing user confidence, excluding various specified activities such as tax returns preparation, management consultancy, and other non-assurance services.
Q.9 What is a Statutory Audit?
A statutory audit is an audit mandated by law or statute.
Q.10 How is the partner count determined for eligibility under the phases?
The partner count is assessed as of the mandatory applicability date for each respective phase.
Q.11 Can newly established Practice Units apply for mandatory Peer Review?
New practice units, operational for less than 12 months prior to their application receipt, may apply for Peer Review but must meet the additional conditions specified under the guidelines for new units. They cannot apply voluntarily outside these parameters.
Through these phases and clarifications, the ICAI demonstrates its dedication to enhancing audit quality and ensuring regulatory compliance across the sector.