PEER REVIEW AN OVERVIEW Definition of Peer Review

PEER REVIEW (AN OVERVIEW)

Definition of Peer Review n The dictionary meaning of the term “peer” is, a person of the same legal status or a person who is equal to another in abilities, qualifications, age, background, etc. n “Review” means to look back upon (a period of time, sequence of events, etc. ) n “Peer Review” is a self improvement process and is a method of evaluation of a person’s work or performance by a group of people in the same occupation, profession, or industry. 2

PEER REVIEW: GUIDELINES n Guidelines for Peer Review of Attestation Services by Practicing Company Secretaries n Exposure Draft of the Guidelines released at the 12 th National Conference of Practicing Company Secretaries in 2011 Approved by the Council in its Meeting held on August 2526, 2011 ICSI Guideline No. 1 of 2011 – Guidelines for Peer Review of Attestation Services by Practicing Company Secretaries notified in the official Gazette of India dated October 18, 2011 Guidelines effective from October 1, 2011 Guidelines revised by the Council in its 229 th Meeting held on March 19 -20, 2015 Guidelines further revised by the Council in its 254 th (Adj. ) meeting held on 1 st September, 2018. n n n 3

Peer Review of Company Secretaries Peer Review deals with examination and review of systems and procedures to determine whether the systems and procedures are : – Put in place by the practice Unit – Effective – Operating continuously during the period under review. 4

Services covered under Peer Review Signing / Certification of Annual Returns Issuance of Certificate under Regulation 40 (9) of SEBI (LODR) Regulations, 2015 Issuance of Secretarial Audit Reports in terms of Section 204 of the Companies Act, 2013 / Regulation 24 A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 Issuance of Annual Secretarial Compliance Reports Internal Audits under Section 138 of the Companies Act, 2013 Audit Reports under Clause 76 of SEBI (Depositories & Participant Regulations) 2018 issued Certificate issued under Regulation 56 of LODR Regulation 34(3) read with Schedule V, Para C, Clause (b) (i) Compliance Certificates issued under Clause E, Schedule V of SEBI (LODR) Regulations, 2015 Internal Audit of Registrar and Share Transfer Agent (RTA) under SEBI Circular No. SEBI/HO/MIRSD/CIR/P/2018/73 Internal Audit of Credit Rating Agencies under SEBI Circular No. SEBI/MIRSD/CRA/Cir-01/2010 Internal Audit Certificate for operations of the Depository Participants Issuance of half yearly bank due diligence certificates Audit Reports under Clause 76 of SEBI (Depositories & Participant Regulations) 2018 issued 5

RATIONALE FOR PEER REVIEW Ø Expectation of the Regulators that the professionals are their extended arm in ensuring compliance in corporates. Ø Expectation of service Receiver to receive quality service Ø Gap between minimum quality of service and actual service rendered. Ø Reassuring the stake holders and the society at large that the profession is conscious of its responsibilities and strives its best to ensure that the highest standards are observed by all practising members rendering attestation services to the society. Ø The Peer Review process is an endeavour to enhance the quality of services rendered by members of ICSI in practice. 6

OBJECTIVES OF PEER REVIEW To ensure that in carrying out their attestation services and professional assignments, the PCS is to – (a) Comply with the Technical 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. Peer Review is directed towards – maintenance as well as enhancement of quality of attestation services providing guidance to members to improve their performance and adhere to various statutory and other regulatory requirements. 7

SCOPE OF PEER REVIEW Peer Review is directed at the audit & attestation services provided by a practice unit – (a) Once a practice unit is selected for review, its audit / attestation engagement records pertaining to the immediately preceding financial year shall be subjected to review. (b) Review shall ascertain – - Compliance with Technical Standards (i. e. Guidance Notes, Auditing Standards issued by ICSI) - Quality of Reporting - Office systems and procedures with regard to compliance of attestation services systems and procedures - Training programmes for staff concerned with attestation functions. 8

Guidelines issued by Council with respect to Peer Review Limits for the issue of Secretarial Audit Reports: • 10 Secretarial Audits per partner/ PCS, and • an additional limit of 5 secretarial audits per partner/PCS in case the unit is peer reviewed. The limits will be applicable for the Secretarial Audit Reports to be issued for the financial year 2016 -17 onwards. Number of Annual Secretarial Compliance Reports to be issued by PCS is 5 (five) reports individually/ per partner in each financial year w. e. f. 1 st April, 2020 and an additional limit of 5 (five) Annual Secretarial Compliance Reports individually / per partner in case the Unit has been Peer Reviewed. Secretarial Audit / Annual Secretarial Compliance Report under SEBI (LODR) to be done by Peer Reviewed Units only for: • Top 100 companies as per market capitalisation w. e. f 1 st April, 2020 • Top 500 companies as per market capitalisation w. e. f 1 st April, 2021 • all listed companies w. e. f 1 st April, 2022 • all companies w. e. f 1 st April, 2023 Issue of Diligence Report for Banks in case of Consortium Lending / Multiple Banking Arrangements to be undertaken only by Peer Reviewed Practice Units w. e. f 1 st April, 2020 9

Guidelines issued by Council with respect to Peer Review Council has also decided that the PCS shall mention mandatorily the Peer Review Certificate Number in Secretarial Audit Report / Secretarial Compliance Report / Diligence Report for Banks in format PR-123/2018 and opined the signature of the PCS in the following format: For XYZ & Associates Company Secretaries Name ______ FCS ______ Date _____ CP ______ Place _____ PR 123/2018 10

Authority of the Guidelines on Peer Review Guidelines shall apply to all or any of the following cases: a) Whenever a peer review is mandated by the order of Government / Regulators b) Whenever a peer review is requested by Practice Unit voluntarily or Client / Company to which the Practice Unit renders Attestation / Audit services. c) Whenever peer review is done on the basis of random selection 11

The Reviewer’s eligibility criteria A member of the Institute– (a) possesses at least 10 years of post membership experience (b) is currently holding Certificate of Practice as issued by the Institute. 12

a) b) The Reviewer’s approach? c) d) e) f) Not as an inspector, auditor or investigator but as a pathologist. Should be appreciative of good practices while suggesting areas of improvement Collaborative with a friendly demeanour Discussion mode as a peer to be adopted by the Reviewer Should try and give value addition to PU and not merely a tick box approach In determining issues which are subjective, the purpose is not to replace the PU’s opinion with the opinion of the Reviewer but to verify the process followed in exercise of judgment by the PU. Verification of the process will include verification of working papers maintained by 13 the PU.

a. Qualities of Reviewer b. c. d. e. Should be well acquainted with the technical aspects of the attestation services Should have studied the provisions of the Code of Conduct of ICSI Should get himself / herself acquainted with decisions of various courts on “deficiency in service” Relevant provisions of CS Act, 1980 and CS Regulations, 1982 Should have knowledge of the Consumer Protection Act, Evidence Act, IPC, etc. contd. . . 14

Qualities of Reviewer …contd. f. Should have studied the technical standards like Auditing Standards, Guidance Notes, Notifications issued by the Council of ICSI g. Should be good at drafting and written and spoken English. h. Professional behaviour while on visit – dress code, punctuality, neatness, soft language. i. Understand his limitations – what is outside the scope of Peer Review. 15

Empanelment of Reviewers n Members fulfilling the eligibility requirement may make an application for empanelment in the format prescribed by the Board. n After scrutiny of the application the Board issues the empanelment letter. n Members against whom Disciplinary proceedings are pending or who have been found guilty of misconduct are not eligible to be empanelled as a Peer Reviewer n Office bearers of the Council / Regional Councils / Managing Committee of Chapter are not empanelled as a Peer Reviewer till the time they are in office 16

Offsite Review – Study of information given by PU in the format and based on the same make own observations about possible areas where improvement is possible and note other aspects to be discussed in personal meeting with PU n Onsite Review – Verification of information given by PU. Test checks in respect of attestation assignments handled by PU – Interaction with the staff & trainees of PU should be part of PR – Calling for the records of the client maintained by PU to verify whether proper systems and procedures have been followed n Methodology to be followed by Reviewer 17

Obligations of the Practice Unit shall n provide access to any record or document as may be asked for by the reviewer n afford and provide explanation or further particulars in respect of anything produced before the Peer Reviewer n provide all assistance in connection with peer review n allow the reviewer to inspect, examine or take any abstract of or extract from a record or document or copy there from which may be required by the reviewer. 18

The validity of the Peer Review Certificate is five years from the date of its issue. n However, in case the PU is being reviewed within two year of its incorporation, the validity shall be two years. n Validity of Peer Review Certificate issued? 19

Cost of Peer Review for reviewer and his qualified assistant(s) as may be decided by the Board from time to time, shall be borne by the Practice Unit in the following situations: § Peer Review is mandated by the order of Government / Regulators; § Peer Review is requested by Practice Unit voluntarily; § Peer Review is done on the basis of random selection. § In case the Peer Review has been requested by client / company, the cost shall be bear by such client / company. n Same rate shall apply to second review also. n Each branch / office under review would be considered separately. n Cost of Peer Review 20

Prescribed rates of Fee for Peer Review As on date the prescribed fee is Rs. 10, 000/- to be paid directly to the Peer Reviewer (inclusive of TA/DA and any out of pocket expenses). The fee shall be paid by the Practice Unit within 30 days from the receipt of Invoice from the Peer Reviewer and submission of Report by the Reviewer. The Peer Reviewer may charge a sum higher / lesser thane the prescribed fee as mutually decided between the Practice Unit and the Peer Reviewer. 21

n Review Framework Three stage process – – Planning • Intimation • Asking of further information be Reviewer. – Execution • Sample of Attestation service engagements • Confirmation of Visit – Initial meeting – Compliance Review – General Controls – Selection of Attestation services engagements to be reviewed – Review of record – Reporting • Preliminary Report of Reviewer, in case the Reviewer finds some deficiency in the systems and procedures adopted by Practice Unit; • Final Report of Reviewer. 22

Dispute Resolution Disagreement between Peer Reviewee and Peer Reviewer – Peer Reviewer was qualified but has not exercised the desired competence in undertaking the peer review. – Proper procedure was not followed in the Peer Review Process. – Additional information has not been considered by the Peer Reviewer. – Observations of the Peer Reviewer are at variance with the information presented. 23

Procedure for resolving Disagreement between Peer Reviewee and Peer Reviewer – Written request to the Peer Review Board within 15 days of the Peer Review Report – Copy of the Request forwarded to the Peer Reviewer for his comments within 15 days of receipt of request Dispute Resolution – PRB shall examine the written request and the comments of the Peer Reviewer • Provide opportunity to both for personal appearance • Call additional clarifications – PRB shall pass final orders within 30 days • Reject the request with reasons • Appoint some other Peer Reviewer • Copy of Order forwarded to the Council 24

Dispute Resolution Appeal against Order of the Peer Review Board – Appeal to the Council within 30 days from the date of receipt of order – Appeal in writing and clearly spelling out reasons for the appeal and the relief sought – Council may pass any of the following orders: • Dismiss the appeal stating reasons in writing • Admit the appeal and remand the case back to the PRB for reconsideration • Pass such orders as it may deem fit. – Order of the Council shall be within 60 days from the date of the Appeal 25

QUESTIONS! QUERIES! SUGGESTIONS! 26

THANK YOU! 27