CS Professional · Compliance Management, Audit and Due Diligence

Peer Review and Quality Review: formula sheet

Full chapter guide

Key formulas

Meaning of peer review: Peer review = independent review of a professional's work + by a qualified peer + against professional standards and quality policies; Use this as your opening definition. Add that the purpose is improvement, not only fault-finding.
Core objectives: Quality improvement + compliance with standards and law + detection of weaknesses + public confidence; Write these as separate bullet points and give one line of reasoning for each.
What a reviewer considers (SQC 1, Section 50): Work done as per standards and law; significant matters raised; consultations documented; need to revise nature, timing and extent; work supports conclusions; evidence sufficient and appropriate; objectives achieved; Seven tests. Use them as a checklist when a case asks what a reviewer should look at.
Engagement performance matters (SQC 1, Section 47): Team briefing; compliance with standards; supervision, training and coaching; review methods; documentation; keeping policies current; These show what consistent engagement quality looks like inside a firm.
Engagement quality control review timing (SQC 1, Sections 61 and 66): Complete before the report is issued; reviewer works at appropriate stages; Do not confuse with peer review, which is an external check of the firm's quality.
Review does not shift responsibility (SQC 1, Section 64): Review does not reduce the responsibilities of the engagement partner; A review supports quality. The partner still answers for the work.
Retention of engagement documentation (SQC 1 modification): Minimum retention period = 7 years; SQC 1 sets seven years against five in ISQC 1, because the Chartered Accountants Act, 1949 requires seven years for working papers.
Two-part eligibility test: Eligible reviewer = technical qualification (expertise, experience, authority) + objectivity; SQC 1 para 68 requires the firm's policies to establish eligibility through both limbs. Use this as the frame for every answer.
Listed entity reviewer: Reviewer for a listed entity audit = experience and authority to act as audit engagement partner on listed entity audits; SQC 1 para 69. What is sufficient otherwise depends on the circumstances of the engagement.
Objectivity safeguards: Not selected by engagement partner + no participation in the engagement + no decisions for the team + no other threats; SQC 1 para 70, (a) to (d). Learn all four in order.
Consultation rule: Consultation allowed; if significant, protect objectivity or replace the reviewer; SQC 1 para 71. Consulting the reviewer need not disqualify them, unless it becomes significant and objectivity cannot be kept.
Timing and unresolved differences: Review at appropriate stages before the report is issued; no report until differences are resolved; SQC 1 paras 66 and 67. Differences are resolved by the firm's own procedures.
Documentation: Procedures performed + review completed before report + no unresolved significant matters; SQC 1 para 73, (a) to (c).
Retention of documentation: Minimum retention of engagement documentation = 7 years; SQC 1 modifies ISQC 1's five years, because the Chartered Accountants Act, 1949 and its regulations prescribe seven years.
Four stages of a review: Selection → Conduct → Report → Follow-up; Use this as the skeleton of every answer on the process.
Selection of engagements (SQC 1, para 91): Individual engagements are selected; some without prior notice; The inspectors must not be involved in performing the engagement or its quality control review.
Extent of review (SQC 1, para 64): Extent depends on complexity of the engagement and the risk that the report is inappropriate; Review covers discussion with the partner, the financial statements and report, and selected working papers on significant judgments.
Outcome of deficiencies (SQC 1, para 95): (a) remedial action; (b) tell training heads; (c) change policies; (d) disciplinary action; Recommendations are one or more of these four.
Further action (SQC 1, para 96): Report may be inappropriate or procedures omitted → decide further action; consider legal advice; Needed to comply with standards and legal requirements.
External inspection (SQC 1, para 91): External inspection ≠ substitute for internal monitoring; The firm may consider the external programme in setting scope, but must still monitor itself.
Quality Review Board: nature: Quality Review Board = statutory body under the Company Secretaries Act, 1980 → reviews quality of services of members → guides improvement; Write this as the opening line of any answer. Do not add a section number unless you are certain of it.
Peer review vs quality review: Peer review = review of a practice unit by a peer reviewer; Quality review = wider statutory oversight by the QRB; Show the difference on who reviews, source of authority, and purpose.
SQC 1: review before report: Engagement quality control review must be completed before the report is issued (SQC 1, Section 61); Use as a firm-level quality control illustration.
SQC 1: mandatory review: EQC review required for all audits of financial statements of listed entities (SQC 1, Section 60(a)); For other engagements, the firm sets criteria: public interest, unusual circumstances or risks, and legal requirement (Section 62).
SQC 1: extent of review: Extent depends on complexity of the engagement and the risk that the report might not be appropriate (Section 64); The review does not reduce the engagement partner's responsibility.
SQC 1: purpose of monitoring: Monitoring evaluates: (a) adherence to standards and legal requirements; (b) design and effective implementation of the quality control system; (c) proper application of policies (Section 87); Useful to explain what a quality review checks.
Outcomes of deficiencies (SQC 1, Section 95): Remedial action + communication to training + changes to policies + disciplinary action; Recommendations may include one or more of these four. Disciplinary action is aimed especially at repeated non-compliance.
Communicating deficiencies (Section 94): Monitoring findings + recommended remedial action → relevant engagement partners and other appropriate personnel; Findings must be communicated, not kept within the monitoring team.
Monitoring documentation (Section 100): Procedures (incl. selection of completed engagements) + evaluation + deficiencies, effect and further action; The evaluation covers adherence to standards and laws, design and effective implementation of the system, and whether reports issued are appropriate.
Monitoring responsibility (Section 88): Competent individuals with sufficient experience and authority; cover design and operating effectiveness; Review is of both how the system is designed and how it works in practice.
Engagement quality control review (Sections 60, 61, 67): Required for listed-entity audits; complete before report is issued; unresolved differences stop the report; The report is not issued until the matter is resolved through the firm's procedures for differences of opinion.

Quick revision

Peer review is an independent check of a practice unit; quality review covers the firm's quality control system and engagements.
SQC 1 requires firm policies on nature, timing and extent of engagement quality control review.
Firm policies must also cover reviewer eligibility and documentation requirements.
Reviewer eligibility rests on technical qualifications, experience and authority, and on objectivity if consulted.
For a listed entity audit, the reviewer must have enough experience and authority to act as audit engagement partner on listed entities.
The engagement partner does not select the reviewer.
The reviewer does not participate in the engagement during the review period and does not make decisions for the team.
Review is done in a timely way, at appropriate stages, so significant matters are resolved before the report is issued.
If the partner rejects a recommendation and the matter stays unresolved, the report is not issued until the firm's difference-of-opinion procedure resolves it.
Documentation must show the review was completed before the report and no unresolved matters remain.
Inspection of engagements is done by people not involved in the engagement or its quality review.
External inspection does not replace the firm's own internal monitoring.

Common mistakes

Treating peer review as a disciplinary action Fix: Say it is an improvement tool. Misconduct is handled by the separate disciplinary mechanism.
Confusing peer review with engagement quality control review Fix: State that the engagement quality control review is done before the report is issued by a reviewer for that engagement. Peer review is an independent check of the firm's quality.
Treating the engagement quality control reviewer and the peer reviewer as the same person. Fix: Say the SQC 1 reviewer works inside a firm on a specific engagement before the report. A peer reviewer reviews the practice under the Institute's scheme. Use SQC 1 only for the shared principles.
Writing exact experience years or Board strength from memory. Fix: State the principle, and say the specific conditions are as in the Institute's current Peer Review Guidelines. A wrong number loses marks.
Quoting exact timelines, fees or form numbers from memory. Fix: Describe the step in words and refer to the ICSI Peer Review Guidelines. Wrong figures lose marks.
Saying the review shifts responsibility to the reviewer. Fix: State that the review does not reduce the responsibility of the engagement partner or practitioner.
Treating peer review and quality review as the same thing Fix: Write that peer review is a review of a practice unit by a peer reviewer, while quality review is the wider statutory oversight by the QRB.
Quoting a section number for the QRB from memory Fix: Say 'under the Company Secretaries Act, 1980' unless you are certain of the section. A wrong number costs more than none.
Treating quality review as a punishment exercise. Fix: List all outcomes. Most findings lead to corrective action. Discipline is for serious or repeated failure.
Confusing quality review with an audit of the client's accounts. Fix: Say that the review examines the practitioner's work and systems, not the client's compliance.

Exam tips

Open every answer with a one-line definition. It earns easy marks and anchors the rest.
Write objectives as separate bullets, each with a reason. Examiners reward distinct points.
When a case is given, name the fact and the matching quality principle together, then conclude.
Keep peer review and engagement quality control review separate. Say which one the question is about.
For ICSI-specific rules on the Board and reviewers, rely on the ICSI study material and cite numbers only when sure.
Always name both limbs, competence and objectivity, even if the question stresses only one.
Use the exact wording of the four objectivity safeguards when the facts mention who selected the reviewer.
Do not quote numbers for Board strength or experience unless you are sure. Refer to the Institute's current Peer Review Guidelines.