ICAI merges phase two and three of mandatory peer review, guidelines to impact firms undertaking audit of large unlisted companies
Aug 14, 2023
The decision comes after the ICAI deferred the phase two involving mandatory peer review of auditors of large unlisted companies to April 1, 2024
Summary
Move after second phase of peer review postponed to next fiscal
ICAI President says this gives enough time to firms to prepare
Fourth phase of peer review scheduled from April 1, 2025
A large number of audit firms will have to be prepared for mandatory peer review from April 1, 2024 after the Institute of Chartered Accountants of India (ICAI) decided to merge the second and third phase of the process.
The new guidelines will impact firms undertaking statutory audit of large unlisted companies as well as firms auditing entities which have raised over Rs 50 crore of funds from the public or banks or financial institutions as well as public interest entities.
The decision comes after the ICAI deferred the phase two involving mandatory peer review of auditors of large unlisted companies to April 1, 2024. This was to coincide with the timeline for the third phase of mandatory peer review involving auditors of companies that have raised over Rs 50 crore or are public interest entities as well as auditors with four or more partners.
“What we've done is we've merged both the phase two and phase three,” said Aniket Talati, President, ICAI.
In an interview with Business Today, Talati said that phase two would impact many firms and the focus was to ensure quality of the review.
“Phase two involves many firms. And because of certain regulatory changes, which has made peer review more important, there's a huge requirement of firms who want to get themselves peer reviewed. It's then about ensuring that we don't compromise on the quality of peer review,” Talati said.
Extending the deadline gives these firms sufficient time to prepare and also provides sufficient time to a peer reviewer, to go verify the documentation, and thereby improve the entire audit quality in the country, Talati said.
Peer review is an exercise that expected to help improve the quality of services provided by audit firms by ensuring that they comply with technical standards laid down by the ICAI and have in place proper systems for maintaining the quality of attestation services work they perform. At present, peer review of firms undertaking statutory audit of listed firms is already compulsory. The fourth and final phase of peer review is expected to be rolled out from April 1, 2025 and would involve audit firms that conduct audits of branches of Public Sector banks or firms with three or more partners that render assurance services.
[Business Today]
