ICAI Issued New Announcement for for A Report on Audit Quality Review Findings. In exercise of the powers conferred by Section 28A of the Chartered Accountants Act, 1949, consequent to the Chartered Accountants (Amendment) Act, 2006, the Central Government, by notification, constituted a Quality Review Board consisting of a Chairperson and ten other members.
Scope and objective of quality review:
- The TR has to examine whether the Statutory Auditor has ensured compliance with the applicable technical standards in India and other applicable professional and ethical standards.
- The TR has to examine whether the Statutory Auditor has ensured compliance with the relevant laws and regulations.
- The TR has to examine whether the Statutory Auditor / Audit firm has implemented a system of quality control with reference to the applicable quality control standards.
- The TR has to examine whether there is no material misstatement of assets and liabilities as at the reporting date.
- The TR may, within the scope of his review, go beyond the issues covered in the Questionnaire recommended by the Board.
- Scope of review includes the statutory audit of standalone financial statements as well as consolidated financial statements reported upon by the statutory auditor, if any
A Report on Audit Quality Review Findings
Government of India has, in exercise of the powers conferred under Section 28A of the Chartered Accountants Act, 1949, constituted a Quality Review Board (the ‘Board’) to perform the following functions u/s 28B of the Chartered Accountants Act, 1949:-
- to make recommendations to the Council with regard to the quality of services provided by the members of the Institute;
- to review the quality of services provided by the members of the Institute including audit services; and
- to guide the members of the Institute to improve the quality of services and adherence to the various statutory and other regulatory requirements.
2. Government of India has also issued ‘Chartered Accountants (Procedures of Meetings of Quality Review Board, and Terms and Conditions of Service and Allowances of the Chairperson and Members of the Board) Rules, 2006’. In terms of its Rule 6, in the discharge of its functions, the Board may, inter alia, evaluate and review the quality of work and services provided by the members of the Institute in such manner as it may decide and also lay down the procedure of evaluation criteria to evaluate various services being provided by the members of the Institute and to select, in such manner and form as it may decide, the individuals and firms rendering such services for review. Pursuant to the Rule 6, the Board has issued the detailed ‘Procedure for Quality Review of Audit Services of Audit Firms’ (the ‘Procedure’) providing for various matters, adopting best practices, in laying down the necessary system for conducting reviews of audit firms undertaking audits of public interest entities and other entities in India. Further details can also be accessed through the website www.qrbca.in.
Approach to the quality review:
- Make on-site visit to the Statutory Auditor / Audit firm for conducting the review and reviewing the audit working papers.
- TR shall furnish an undertaking that he would not outsource the review assignment to other person
- Follow below guidelines issued by QRB:
- a) Provide detailed comments giving proper justification and explanation in respect of the various comments to be commented upon in the final report
- b) Refer Industry specific guides, if any, brought out by ICAI
- c) Refer “Technical Guide on Conducting Quality Review” available at QRB website www.qrbca.in
- d) Segregate your observations into material and non-material
- e) In respect of joint audit, provide details of work allocation among the joint auditors and in case any particular area of observation falls under the scope of other joint auditor, clearly provide the details of such joint auditor in the report.
- • Embrace the digital world and accept documentation maintained in electronic form by the Audit firms in line with SA 230
- Specifically include a paragraph in the review report on the adequacy of fraud reporting by the Statutory Auditors in their Independent Auditor’s Report.
- Refer ICAI publication titled ‘Indian Accounting Standards (Ind AS): Disclosures Checklist’, in case Ind AS are applicable and ensure that all the disclosure requirements as per checklist specified in the publication have been made, whenever applicable, and report on the non-compliances in the final report.
- Follow the approach set out in the Peer Review Manual issued by ICAI.