Quality Control Review The Institute of Chartered Accountants of India

2 Presentation Agenda International Scene Indian Scene Process of Quality Review Concluding Observations

3 IFAC – Quality Assurance Mandatory for member bodies – March 31, 2005 Scope: Minimum - Listed Cos. –Adequate system of quality control –Compliance with the system –Adherence to professional, legal and regulatory requirements Approach : Cycle Approach vs. Risk Based Approach

4 IFAC : Quality-Assurance Reporting –Designing of system –Compliance –Reasons for negative conclusions, if any –Recommendation for areas of improvement Corrective and Disciplinary Action –To make appropriate correction –Repeated failure demonstrate compliance - Appropriate disciplinary action

5 Special Features of Indian Quality Review* An independent quality review board Nomination of Reviewers at the discretion of the Board No Disciplinary Action An exercise of quality enhancement * In India, the nomenclature is “Peer Review”

6Objectives  Assessing the maintenance of Quality of Attestation Service Engagements performed by Practice Units through:  Compliance with Technical Standards; and  Existence of proper system (including documentation systems)  Adherence to statutory & regulatory requirements  Enhance reliance placed by users of financial statements

7 Three Embedded Questions Is it designed to ensure compliance with Technical Standards and maintenance of quality attestation work? Was it effective during the review period? Does the PU have a system of quality control for attestation services?

8 Question 1 Task Assess based on completed questionnaire developed by the Institute and initial meeting with PU Does the PU have a system of quality control for attestation services?

9 Question 2 Tasks Is it designed to ensure compliance with Technical Standards and maintenance of quality attestation work? Review of general controls: Independence Maintenance of skills Outside consultation Staff supervision and development Office administration

10 Question 3 Task Six Key Controls Audit Record Administration Review & Evaluation of System of Internal Controls Substantive Tests Financial Statement Presentation Audit Conclusion and Audit Report Review of records: Compliance approach Substantive approach Was it effective during the review period?

11 PricewaterhouseCoopers | 11 Stages of Peer Review Stage I 15 Years Exp. required Review once in 3 years Stage II 10 years experience required Review once in 5 years Stage III 10 years experience required Review once in 7 years

12Process…. Empanelment of reviewer Selection of PU Intimation to PU Communication Selection of sample engagements Confirmation of visit Initial meeting Compliance review Review of records Preliminary report Reply to report Interim report Final report Selection Actual review Reporting

13 General Considerations Ensure Independence Ensure Independence Maintain strict confidentiality Maintain strict confidentiality Exercise Due Professional Care Exercise Due Professional Care Follow principles of Integrity and Objectivity Follow principles of Integrity and Objectivity

14 What is not intended notThe Quality Review is not intended to be: A source of new auditing standards An opportunity to “second guess” another auditor’s judgments A source of competitive information An opportunity to put down a fellow professional or indulge in a “witch hunt”

15 The Goal Enhance Quality Share Expertise Instill Confidence Build Image Create Brand Value

Thanks