Skip to content

CS Professional · Compliance Management, Audit and Due Diligence

Peer Review and Quality Review for CS Professional

Peer review and quality review are checks on the quality of a professional's audit and assurance work. Peer review is an independent examination of a practice unit by a qualified reviewer. Quality review is the framework of firm-level controls and engagement reviews. To solve questions, state the rule, apply it to the facts, and conclude.

What this chapter covers

This chapter sits in the Audit and Due Diligence part of Paper 3, Compliance Management, Audit and Due Diligence. It asks one question: how do we know an audit or assurance firm is doing its work properly? Two answers are covered. Peer review checks a practice unit from outside. Quality review looks at the firm's own quality control system and at individual engagements.

The chapter has two halves. The first covers peer review: its concept and objectives, the Board that oversees it, who can act as a reviewer, and how the process runs through to the report. The second covers quality review: the framework and scope, then the procedure and outcomes. Questions often ask you to compare the two, so keep the difference clear in your mind.

For the quality control side, SQC 1 is a useful anchor. It requires the firm to set policies on the nature, timing and extent of an engagement quality control review, the eligibility of reviewers, and documentation. It links directly to the rest of the paper: compliance management, audit planning and due diligence all depend on work that is reviewed and documented properly. Where you need exact peer review or quality review rules beyond SQC 1, follow your ICSI study material and the latest regulations.

Paper 3 is a written, case-based paper, and Audit and Due Diligence carries 60 of its 100 marks. This chapter is compact and rule-driven, so it rewards clear recall. A case will give you facts, such as a reviewer picked by the engagement partner, and ask you to spot the breach and conclude. Students who know the conditions precisely write short, correct answers and gain marks that others lose through vague writing.

Peer Review and Quality Review: topics in the order to study them

  1. 1Peer Review: Concept and ObjectivesStart with the meaning and purpose, because every later rule on the Board, reviewers and process flows from why peer review exists.
  2. 2Peer Review Board and Peer Reviewer EligibilityOnce you know the purpose, learn who runs the system and who may review, since eligibility and objectivity are favourite case-study points.
  3. 3Peer Review Process and ReportingWith the players clear, follow the process step by step from selection of units to the review report and its outcome.
  4. 4Quality Review: Framework and ScopeMove to the second half only after peer review is firm, so you can contrast the two and see what the quality control framework covers.
  5. 5Quality Review Procedure and OutcomesFinish with the procedure and results, then revise both halves together to practise comparison answers.

How to prepare Peer Review and Quality Review

Treat this chapter as a set of rules with conditions. Learn each rule, then practise applying it to short facts in answer format.

  1. Read the five topics once in the study order, without notes, to see how peer review and quality review differ.
  2. Make a one-page table for yourself comparing the two on purpose, who conducts it, what is examined, and what follows. Keep it for revision only.
  3. Learn the SQC 1 points on engagement quality control review: the firm must set policies on nature, timing and extent, reviewer eligibility and documentation.
  4. Memorise reviewer objectivity conditions: the reviewer is not selected by the engagement partner, does not take part in the engagement, and does not make decisions for the engagement team.
  5. Practise three or four short case questions in the pattern of provision, analysis of facts, conclusion. Write each in under ten minutes.
  6. Revise the process flow and outcomes in your own words, checking exact conditions against your ICSI study material and the latest regulations.

Common mistakes in Peer Review and Quality Review

  • Treating peer review and quality review as the same thing.

    Fix: Define each in one line and state who conducts it and what it examines before you write any comparison.

  • Saying the engagement partner can choose the quality control reviewer.

    Fix: Remember that objectivity requires the reviewer not to be selected by the engagement partner.

  • Allowing the report to be issued while a disagreement is open.

    Fix: State that the report is not issued until the matter is resolved under the firm's difference-of-opinion procedures.

  • Writing only theory with no application to the facts.

    Fix: Use the order provision, analysis, conclusion, and name the specific fact that breaches or meets the rule.

  • Quoting section or regulation numbers from memory.

    Fix: State the rule in plain words. Give a number only when you are certain of it.

  • Ignoring documentation requirements.

    Fix: Learn the three documentation points: procedures performed, review completed before the report, and no unresolved matters.

Last-day revision: Peer Review and Quality Review

  • 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.

Peer Review and Quality Review practice questions

Peer Review and Quality Review in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Peer Review and Quality Review: frequently asked questions

Is peer review the same as quality review?

No. Peer review is an independent examination of a practice unit by a qualified reviewer. Quality review looks at the quality control framework and how engagements are reviewed. Keep the purpose and scope of each separate in your answers.

Which standard should I study for quality control reviews?

SQC 1 is the key standard in the text for this chapter. It covers firm policies, engagement quality control reviewer eligibility, timing, differences of opinion and documentation. Also follow your ICSI study material for the peer review and quality review rules.

Who can be an engagement quality control reviewer?

The firm's policies must set the technical qualifications, experience and authority needed. For an audit of a listed entity, the reviewer must be able to act as audit engagement partner on listed entity audits. The reviewer must also stay objective.

How should I answer a case question on this chapter?

State the relevant rule first, then apply it to the facts given, and end with a clear conclusion. Point to the exact fact that decides the answer. Keep it short and avoid unsupported section numbers.