Discrepancies Noted by Peer Reviewers ICAI
Peer Review is directed towards maintenance and enhancement of quality of attestation services and to provide guidance to members to improve their performance and adhere to various statutory and other regulatory requirements. Essentially, through a review of attestation service engagement records, peer review identifies the areas where a practicing member may require guidance in improving the quality of his performance and adherence to various requirementsas per applicable Standards. The main objective of Peer Review is to ensure that in carrying out their attestation service assignments; the Practice Unit should (a) comply with the Technical Standards, Ethical Standards and Professional Standards laid down by the Institute and (b) have in place proper systems including documentation systems, for maintaining the quality of the attestation services work they perform for their clients.
While reviewing, the work of Practice Unit the peer reviewers have noted discrepancies which may be non compliance of various Standard issued by ICAI (i) AAS3/SA 230 (Documentation) (ii)AAS 5/SA 500 (Audit Evidence) (iii)AAS 6/SA 315 (Risk Assessment and Internal Control) (iv)AAS 7/SA 610 (Relying upon the work of an Internal Auditor) (v)AAS 8/SA 300 (Audit Planning) (vi)AAS 14/SA 520 (Analytical Procedures) (vii)AAS 15/SA 530 (Audit Sampling) (viii)AAS 17/SA 220 (Quality Control of Audit Work) (ix)AAS 23/SA 550 (Related Parties) (x) AAS 29 (Auditing in a Computer Information System Environment). (xi) AAS 11/SA 580 (Representation by
Management) (xii) AAS 10/SA 630 (using work of another Auditor).
It is also noted that the financial statements have not included all the disclosures required by the technical standards and PU does not have a practice obtaining representation from the management on matters material to the financial information, Non evidence for Articles Diaries/Statement are being maintained and verified by Partner/Incharge, Independence policies and procedure has been made available, however, the same is neither signed by the partner nor communicated to partner as well as the employees. Further working papers such as photo copies of office expenses, challans, TDS Certificate, Insurance, Payable Bills obtained without satisfactory attestation of parties. The review of the audit work performed by each audit assistant by the Seniors/ Partners is not being documented to show the evidence of work conducted as per laid policies or performed in accordance with Audit Programme or no Management Representation letters are obtained and duly kept in record.
Other discrepancies include that the Practice Unit has not separately maintained the current and permanent files of working papers for attestation services Letter of Appointment of the Auditors was not obtained from their clients. Further Working papers not properly arranged as required by SA 230 (AAS 3) of Documentation and there is no proper system of Indexation and cross referencing and also there is no Audit plan and Audit Programme documented. No Practice of issuing engagement letter as required by SA 210 (AAS 26) terms of Audit Engagement and no policy & procedures found in place to ensure independence.
Keeping in view these discrepancies, the Practice Units may ensure such compliance by taking various corrective actions. A system of maintenance of permanent and current files where basic and fundamental documents form part of the permanent file and yearly routine/general working papers form part of current file which may be properly maintained in an organised manner. Proper documentation should be done with regard to audit programmes, and evidences/details on major issues obtained during the audit function are made part of the working papers. A checklist may be prepared before the commencement of the audit and most of the issues which have to be generally checked and items which have to be specifically checked for the clients may be clearly mentioned in the same. The audit Programs should be properly drafted with details of audit work, to be carried out along with audit Schedule and system of filing of important working papers. The staff and article must maintain diaries showing their daily work report and records of professional education being maintained. It should be ensured that there is a system of continuing professional education for staff and regular staff meeting is held in the offices to impart necessary training. Records of CPE Hrs and programmes attended by qualified staff should be properly maintained The Practice Units may ensure that the cited deficiencies may be kept in view to avoid deviations and shortfalls. Proactive approach in this regard would help in improving the quality of professional services being rendered to the clients by the Practice firms.