ICAI Decides to make Peer Review Process Mandatory

The Council resolved at its 407th Meeting, held from January 7th to 9th, 2022, to mandate the Peer Review procedure in order to cover additional enterprises. On the website, https://www.icai.org/post/peer-review-mandate-roll-out, an announcement dated 12.02.2022 was made in this regard.

Certain issues, such as the time limit for compliance with the mandate, the credentials of the reviewer of listed business auditors, and so on, needed to be revised to provide more clarity. The Council addressed the issue at its 410th Meeting, which took place on March 24th and 25th, 2022. It was clarified that Practice Units (referred to as “firms” in the Announcement dated 12.02.2022) must have a valid Peer Review certificate in order to audit all organizations falling within phases I, II, III, and IV of the mandate.

It should be emphasized that the first phase, which will begin on April 1, 2022, will require Practice Units to have a Peer Review Certificate in order to conduct Statutory Audits of enterprises whose equity or debt securities are listed in India or abroad, as defined by the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Practice Units in this phase were needed to submit a declaration form by March 31, 2022, which may be found at https://forms.office.com/r/AA5Zpgdsrr.

Furthermore, for Practice Units, phase II, which begins on April 1, 2023, there is a pre-requisite of having a Peer Review Certificate for undertaking a Statutory Audit of unlisted public companies with paid-up capital of not less than rupees five hundred crores, annual turnover of not less than rupees one thousand crores, or outstanding loans, debentures, and deposits of not less than rupees five hundred crores as of the 31st March of the current fiscal year. Before conducting any Statutory Audit, Practice Units that provide attestation services and have 5 or more partners must get a Peer Review Certificate.

For Practice, Units to undertake the Statutory Audit of entities that have raised funds from public or banks or financial institutions in excess of Fifty Crores rupees during the period under review, or of anybody corporate including trusts that are covered under public interest entities, there is a pre-requisite of having Peer Review Certificate. Before conducting any Statutory Audit, Practice Units that provide attestation services and have four or more partners must get a Peer Review Certificate.

Phase IV, which will begin on April 1, 2025, will require Practice Units to have a Peer Review Certificate in order to conduct audits of Public Sector Bank branches. Before conducting any Statutory Audit, Practice Units that provide attestation services and have three or more partners must get a Peer Review Certificate.

In the case of auditors/Practice Units auditing listed entities, a reviewer who has conducted an audit of the listed entity and has also undertaken special training and testing for this purpose, in addition to regular training and testing, is eligible to perform peer review.

The Peer Review Board will soon announce guidelines for the granting of Peer Review Certificates to newly created firms (i.e. firms that have been in operation for less than 12 months).

The website will soon include an announcement regarding the Revised Peer Review Mandate.