ICAI Peer Review Mandate: FAQs and Clarifications

The Institute of Chartered Accountants of India

Peer Review Board
The Institute of Chartered Accountants of India
24th December 2024

Clarifications/FAQs on the issues arising out of the Peer Review Mandate

Q.1 What is Peer Review Mandate?

Ans.: As decided by the ICAI Council, Peer Review Mandate is applicable in four phases as follows:

A.2 At which stage should a Practice Unit have a valid Peer Review Certificate as per various phases of the Peer Review Mandate?

Ans. A Practice unit should have a valid Peer Review Certificate before accepting statutory audit and at the time of signing the audit report for the statutory audit. However, in respect of statutory audits already accepted before mandatory applicability of respective phase of peer review mandate, practice units should ensure that they have a valid peer review certificate at the time of signing.

Q.3 What is the meaning of ‘raised funds from public or banks or financial institutions of over fifty crore rupees’ under 1^st criteria of Phase III of the Peer Review Mandate?

Ans. “Raised Funds” means:

(i) The maximum amount outstanding in respect of cash credit/working capital loan/running loan account etc. during the period under review; and

(ii) In respect of term loan, amount disbursed by the lenders during the period under The funds raised from all sources taken together shall be considered.

For example:

During the Peer Review period, Client 1 of the Practice Unit has raised funds from Financial Institution for Rs. 10 crores and from Banks for Rs. 45 crores. Therefore, the total amount of funds raised from all sources is to be taken as over rupees fifty crores and hence in said case the Practice Unit is falling under Phase III of Peer Review Mandate.

Q.4 Whether threshold limit of over Rs. 50 crores is also applicable to ‘any body Corporate including trusts which are covered under public interest entities’ as stated under latter part of 1^st criteria of Phase III of the Peer Review Mandate?

Ans. Threshold limit of over Rupees 50 crores is not applicable to the latter part. It would mean Phase III of Peer Review mandate would be applicable to all body corporates/ trusts (including NGOs/Charitable Trusts) which are covered under “Public Interest Entity” without any threshold limit.

Q.5 Please define Public Interest Entities under Peer Review Mandate?

Ans. Volume-I of Code of Ethics defines “Public interest entity” in its glossary as under:

• A listed entity; or
• An entity: (i) Defined by regulation or legislation as a public interest entity; or

(ii) For which the audit is required by regulation or legislation to be conducted in compliance with the same independence requirements that apply to the audit of listed entities. Such regulation might be promulgated by any relevant regulator, including an audit regulator.

For purpose of this definition, it may be noted that Banks and Insurance Companies are to be considered as Public Interest Entities.

Other entities might also be considered by the Firms to be public interest entities, as set out in paragraph 400.8.

Paragraph 400.8 of Volume-I of Code of Ethics states that:

400.8 Some of the requirements and application material set out in this Part reflect the extent of public interest in certain entities which are defined to be public interest entities. Firms are encouraged to determine whether to treat additional entities, or certain categories of entities, as public interest entities because they have a large number and wide range of stakeholders. Factors to be considered include:

• The nature of the business, such as the holding of assets in a fiduciary capacity for a large number of Examples might include financial institutions, such as banks and insurance companies, and pension funds.
• Size.
• Number of employees.

Q.6 Which type of audits of branches of Public sector banks are covered under Phase IV of the Peer Review Mandate? And whether it covers statutory audits of branches of co-operative banks?

Ans. Statutory Branch Audits of Public Sector Banks would be covered under Phase IV of the Mandate. Statutory Branch Audits of co-operative banks are not covered under Phase IV of the Peer Review Mandate.

Q.7 If Practice Unit does not render attestation services whether Peer Review Certificate is required as per mandate?

Ans. Peer Review Certificate is not required as per Peer Review Mandate if Practice Unit is not rendering attestation services/assurance engagements.

Q.8 What are ‘assurance engagements’?

Ans. As per clause 2(2) of Peer Review Guidelines 2022, ‘Assurance Engagement’ has to be considered as defined in the Framework for Assurance Engagements issued by the Institute of Chartered Accountants of India and as may be amended from time to time means an engagement in which a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria but does not include:

(i) Management Consultancy Engagements;

(ii) Representation before various Authorities;

(iii) Engagements to prepare tax returns or advising clients in taxation matters;

(iv) Engagements for the compilation of financial statements;

(v) Engagements solely to assist the client in preparing, compiling or collating information other than financial statements;

(vi) Testifying as an expert witness;

(vii) Providing expert opinion on points of principle, such as Accounting Standards or the applicability of certain laws, on the basis of facts provided by the client;

(viii) Engagement for Due diligence and

(ix) Any other service rendered or function performed by practitioner not prescribed by the Council to be ‘Assurance Engagement’.

The phrase ‘Assurance Services’ is used in the Guidelines interchangeably with Audit Services, Attestation Functions and Audit Functions.

Note: Type of assurance service engagements include Central Statutory Audit, Statutory Audit, Tax Audit, GST Audit, Internal Audit, Certification work but does not include the engagements as stated at (i) to (ix) above.

Q.9 What is the meaning of Statutory Audit?

Ans. Statutory audit means an audit that is mandated by law or statute.

Q.10 As on which date should the number of having 5 or 4 or 3 or more Partners be reckoned for the purpose of determining applicability under different phases of Peer Review Mandate?

Ans. It would be reckoned as on the date of mandatory applicability of the particular phase of the Peer Review Mandate and onwards.

Q.11 Can the Practice unit, established for less than 12 months immediately preceding the date of receipt of application for peer review, apply for Peer review on mandatory basis if they do not satisfy additional conditions specified for a New unit? Can they apply for peer review on voluntary basis?

Ans. A Practice unit, established for less than 12 months immediately preceding the date of receipt of application for peer review, can apply for peer review as a “New unit” defined under clause 5(iv) of Peer Review Guidelines, 2022 and would have to satisfy additional conditions prescribed for new units.

Such practice units can also not apply on voluntary basis for peer review as they are established for less than 12 months immediately preceding the date of receipt of application for which there is a specific category ‘New unit’ under Peer Review Guidelines, 2022.