A peer review of statutory auditors of listed companies may have become mandatory from April this year, but the Securities Exchange Board of India (Sebi) is yet to come out with a notification on the same. This is essential as listed companies are regulated by Sebi.
Both the Institute of Chartered Accountants of India (ICAI), which regulates CAs, and Sebi had decided to implement the peer review process. Under this, all external auditors of about 5,000 listed companies have to be peer-reviewed by another CA before they sign on an auditors statement.
The issue became important after the Satyam fiasco and Sebi approached ICAI to make it mandatory for audit firms of all listed companies to have a peer review certificate, ICAI President Uttam Agarwal said, adding that the institute had been advocating for this much before the Satyam scam surfaced.
While saying that he was not aware about when Sebi could issue the notification, Agarwal pointed out that the institute wanted to be ready.
An industry official said that, while Sebi has not yet notified the rule, companies might oppose the move if asked to implement it without giving them ample time. He said that, at present, talks are on between the institute and Sebi only.
The ICAIs council had accepted last month a Sebi recommendation that, from accounting periods commencing on or after April 1 this year, all listed companies would be audited by only those firms or practice units that have been issued a peer review certificate by the peer review board of the institute.
As a result, limited review reports or audit reports furnished by the listed companies to the stock exchanges from April 1, 2009 can only be given by an audit firm that has been issued a peer review certificate from the peer review board of the institute.
3,500 peer reviewers now There are about 3,500 peer reviewers in the country and ICAI is increasing their number by conducting training programmes and online programmes. The peer reviews are to be carried out by reviewers empanelled with the Peer Review Board of ICAI.
The criteria for empanelment as a reviewer is that a person should be an ICAI member, possess at least ten years experience of audit and be currently active in the practice of accounting and auditing. The fee for doing peer review goes to the reviewer and it is decided depending on the turnover of the audit firm.