Peer review without panic

"Peer review" makes many partners nervous. They picture a senior CA arriving with a red pen, opening old audit files and finding everything that was rushed in September. Some firms put it off for years for exactly this reason.

The reality is calmer. A peer review is a planned, time-bound check of how your firm does its assurance work. You know which files will be looked at a few days before the visit. You get a chance to answer every point in writing. And most of what the reviewer wants to see is ordinary good housekeeping that a well-run office should have anyway.

What a peer review actually checks

ICAI's Peer Review Guidelines 2022 define peer review as an examination of the systems and procedures a firm has put in place to ensure the quality of its assurance services, and whether those systems were applied consistently during the period under review. In plain words, the reviewer asks two questions:

1. Do you have a system? Written policies for independence, accepting clients, doing and reviewing the work, training people and checking your own quality.
2. Did you follow it? Do the files from the last three years show that the system was actually used?

It is not a re-audit of your clients. The reviewer is not there to change anyone's accounts. The reviewer is a practising CA, empanelled and trained by ICAI's Peer Review Board, who is independent of your firm.

Who needs it

ICAI has made peer review mandatory in four phases, mostly based on whose audits a firm signs. The most recent phase, Phase IV, applies from 31 December 2026 to:

• firms that propose to audit branches of public sector banks, for which a peer review certificate is a pre-requisite; and
• firms rendering attestation services with three or more partners, which need a peer review certificate before accepting any statutory audit.

Firms with no attestation or assurance work are not covered by the mandate. Any firm may also apply voluntarily. Lesson 1 walks through all four phases and what counts as assurance work.

One honest point before we start: nobody can promise you a certificate. ICAI's Board issues it after a clean report from the reviewer, complete documents and the reviewer's confirmation of fee receipt. What this course does is give you the best chance of a clean report, without panic.

The readiness test

Answer yes or no. Be strict: "we sort of do it" is a no.

1. Is there one register of every audit, certificate and other assurance report the firm signed in the last three years?
2. Does that register match the UDINs generated and the fees billed?
3. Does the firm have a written quality control manual, approved by the partners and dated?
4. Does every person sign an independence declaration every year?
5. Is there a signed acceptance or continuance form for every assurance client?
6. Does every audit file follow the same index, so anyone can find the engagement letter, planning, evidence and review sign-off?
7. Can you show who reviewed each file and when?
8. Are training and CPE records kept for partners and staff?
9. Are article assistants' attendance and work records kept as ICAI requires?
10. Has anyone, inside or outside the firm, inspected a completed audit file in the last year?

A score of 8 or more: you need a few weeks of tidying. 5 to 7: plan two to three months. Below 5: start now, because the gaps are in the system, not just the paperwork.

The route this course takes

Who does what