Quality Review – Secretarial Audit Compliance Management and Due Diligence Important Questions
What is peer review and describe Its contents?
Peer Review is a process for examining the work performed by one’s equals (peers) and to understand the systems, practices and procedures followed by the Practice Unit and to give suggestions, if any, for further improvement.
The Institute of Company Secretaries of India provides a mechanism of Peer Review of their Members in Practice to enhance the quality of attestation services, to enhance credibility and provide competitive advantage and provide a forum for Guidance and knowledge sharing. The peer review includes the following services by the company secretaries in practice :
- Certification/Signing of Annual Return pursuant to section 92 of the Companies Act, 2013.
- Issuance of Secretarial Audit Report in terms of section 204 of the Companies Act, 2013.
- Issuance of Certificate of Securities Transfers in Compliance with the LODR with Stock Exchanges.
- Certificate of reconciliation of capital, updation of Register of Members, etc. as per the Securities & Exchange Board of India.
- Conduct of Internal Audit of Operations of the Depository Participants.
- Compliance Certification under LODR.
- Attestation services of Form AOC-4, MGT-7, DIR-12, SH-7 and PAS-3 filed with the ROC.
- Such other services as decided by the Council of ICSI under the scope of peer review from time to time.
What are the benefits which a practice unit will obtain in undergoing a peer review?
Significant benefits which a Practice Unit will obtain in undergoing a Peer Review summarised below :
1. A successful Peer Review will provide comfort to the Practice Unit (PU) that it has adhered to various statutory, documentary and other regulatory requirements.
2. If deficiencies are noticed and corrective measures suggested the Practice Unit (PU) will have an opportunity to correct the deficiencies and thereby enhance professional competence.
3. If a Peer Review Certificate is issued in favour of the Practice Unit (PU) it enhances credibility of the Practice Unit in the eyes of the general public.
4. Since a Chinese wall exists between the Peer Review Process and the Disciplinary Proceedings, the Practice Unit (PU) will benefit from Peer Review without any apprehension of any disciplinary proceedings being initiated against for any deficiencies noticed on its part.
5. Clients of the PU will benefit from knowing that their Practice Unit is periodically reviewed by the ICSI.
Write short note on: “Peer Review for Company Secretaries”.
1. Peer Review contemplates examination of the systems and approach of a Practice Unit (PU) by another member of the Institute with the objective of identifying the areas, where the practicing member may require guidance in improving the quality of his performance and adherence to the requirements of various technical standards.
2. The focus lies on the promotion of continuing quality improvement in an atmosphere of openness and mutual trust that contributes to enhancing transparency and comparability.
3. A Peer review examines whether a Practice Unit (PU) has adequate policies and procedures in place to comply with the Technical Standards of ICSI and other legal requirements.
4. The Council of ICSI decided to introduce peer review for Practicing Company Secretaries (PCS) to periodically evaluate the quality, sufficiency of systems, procedures and practices so that excellence in their performance is maintained.
In attestation services, what are the guidelines on Peer Review issued in relation to conduct of members?
The Guidelines on Peer Review are issued in relation to conduct of members in attestation services:
- To promulgate an appropriate mechanism for ensuring the quality of attestation services and guide the members to conduct themselves in a manner that the-Council considers appropriate.
- To provide guidance in relation to the statutory powers and obligations with respect to the parties involved in peer review.
- To prescribe the scope of peer review and the procedures to be adopted during the conduct of a peer review.
- To establish the expected conduct of members during a peer review.
What are the significant benefits which a Practice Unit (PU) will obtain in undergoing the Peer Review?
Following are significant benefits which a Practice Unit (PU) will obtain in undergoing a Peer Review:
- A successful peer review will provide comfort to the PU that he has adhered to various statutory, documentary and other regulatory requirements.
- If deficiencies are noticed and corrective measures suggested then the Practice Unit (PU) will have an opportunity to correct the deficiencies and thereby enhance his professional competence.
- If a Peer Review Certificate is issued in favour of Practice Unit (PU) it enhances his credibility in the eyes of the general public.
- Clients of the PU will benefit from knowing that their Practice Unit (PU) is periodically reviewed by the ICSI.
- Practice Unit (PU) will benefit from peer review without any apprehension of any disciplinary proceedings being initiated against him for any deficiencies noticed on his part.
What qualifications are required for becoming Peer Reviewer?
The eligibility for become a Peer Reviewer need to be a Member of the ICSI who should:
- possess at least 10 years of post-membership experience.
- be currently in whole time practice as a Company Secretary.
List out attestation services under the scope of Peer Review?
The following attestation services are covered under the scope of Peer Review:
- Signing of Annual Return pursuant to proviso to Section 92(1) of the Companies Act, 2013 in Form MGT -7.
- Certification of Annual Return pursuant to Section 92(2) of the Companies Act, 2013 in Form MGT- 8.
- Issuance of Secretarial Audit Report in terms of Section 204 of the Companies Act, 2013.
- Issuance of Certificate of Securities Transfers in Compliance with Regulation 40(9) of the SEBI (LODR) Regulations.
- Certificate of reconciliation of Share Capital Audit, updation of Register of Members, etc.
Write short note on: “Guidelines For mandatory Peer Review for rendering certain professional services”.
1. The ceiling on 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. April 1, 2020 and an additional limit of 5 (five) Secretarial Compliance Reports individually/per partner in case the Unit has been Peer Reviewed.
2. The Council has approved the recommendations of the Peer Review Board making Peer Review mandatory for rendering Professional Services viz. Secretarial Audit, Secretarial Compliance Report under SEBI (LODR) Regulations and Diligence Reports for Banks and it has decided to issue the following Guidelines:
- Secretarial Audit/Annual Secretarial Compliance Report under SEBI (LODR) of Top 100 companies as per market capitalisation to be undertaken only by Peer Reviewed PCS w.e.f. April 1,2020.
- Secretarial Audit/Annual Secretarial Compliance Report under SEBI (LODR) of Top 500 companies as per market capitalisation to be undertaken only by Peer Reviewed PCS w.e.f. April 1,2021.
- Secretarial Audit/Annual Secretarial Compliance Report under SEBI (LODR) of all listed companies to be undertaken only by Peer Reviewed PCS w.e.f. April 1, 2022.
3. Secretarial Audit of all companies to be undertaken only by Peer Reviewed PCS w.e.f. April 1, 2023.
4. Issuance of Diligence Report for banks in case of Consortium Lending/Multiple Banking Arrangements to be undertaken only by Peer Reviewed PCS w.e.f. April 1,
Write note on: “Objectives of Peer Review”.
Objectives of Peer Review:
1. Peer review ensure that in carrying out their services,, the PCS has complied with the technical standards laid down by the Institute and has in place proper systems for maintaining the quality of the services/ work they provide.
2. Peer review does not seek to redefine the scope and authority of the technical standards specified by the council but seeks to enforce them within the parameters prescribed by the technical standards.
3. Peer review is directed towards maintenance as well as enhancement of quality of attestation services and to provide guidance to members to improve their performance and adhere to various statutory and other regulatory requirements.
4. Peer review identifies the areas where a practising member may require guidance in improving the quality of his performance and adherence to various requirements as per applicable technical standards and regulatory requirements.
Suppose, PCS Gopal appointed as Peer Reviewer. What qualities must be possessed by PCS Gopal as peer reviewer?
The nature and complexities of peer review requires the exercise of professional judgment. PCS Gopal should:
- be well acquainted with the technical aspects of the attestation services.
- know the provisions of Code of Conduct of ICSI.
- have studied various cases decided on Code of Conduct of ICSI.
- get himself acquainted with decisions of various courts on ‘cases relating to deficiency in service’.
- be aware of relevant provisions of Company Secretaries Act, 1980, Consumer Protection Act, Evidence Act, IPC, etc.
- have studied the technical standards like Secretarial Standards, Guidance Notes, Notifications and Guidelines issued by Council of ICSI.
- be aware of evolving standards and best practices in the field.
- be good at drafting, written and spoken English.
- display professional and courteous behaviour while on peer review visit.
- understand his limitations.
- be clear about what is outside the scope of Peer Review
Write short note on: “Peer Reviewers’ Approach”.
1. The reviewer should be courteous, professional and helpful throughout the review process.
2. Peer reviewer should be appreciative of good practices while suggesting areas of improvement and should adopt a collaborative approach with the PU during the review process and should ensure minimum disruption to the PU during the peer review.
3. Peer reviewer should able to provide practical and insightful comments in a discussion mode as a Peer during the review process and should provide value addition to PU and not merely adopt a tick box approach.
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 judgments by the PU.
Discuss the obligations of the Practice Unit (PU) under Peer Review Process?
The obligations of Practice Unit (PU) under Peer Review process are discussed below:
1. Any person who is reasonably believed by a reviewer to have in his possession or under his control any record or other document, which contains or is likely to contain information relevant to the peer review shall:
2. produce to the reviewer or afford him access to any record or document specified by the reviewer or any other record or document which is of a class or description so specified, and which is in his possession or under his control/being in either case a record or other document which the reviewer reasonably believes is or may be relevant to the peer review, within such time as the reviewer may reasonably require.
3. afford and provide to him such explanation or further particulars in respect of anything produced in compliance with a requirement as the reviewer shall specify.
4. provide to the reviewer all assistance in connection with peer review which he is expected to provide.
5. Where any information or matter relevant to a practice unit is record¬ed otherwise than in a legible form, the practice unit shall provide and present to the reviewer a reproduction of any such information or matter, or of the relevant part in a legible form, with a suitable translation in English if the matter is in any other language, and such translation is requested for by the reviewer.
6. The practice unit shall ensure that the reviewer is given access to all documents relevant to his review no matter which office of the practice unit these documents may be available in, in case the practice unit has more than one office.
7. A practice unit shall allow the reviewer to inspect, examine or take any abstract of or extract from a record or document or copy therefrom which may be required by the reviewer.
Write Short Note on:
(a) Cost of Peer Review.
(b) Periodicity of Peer Review.
(c) Framework for Peer Review.
(a) Cost of Peer Review:
- The cost of Peer Review for the reviewer and his qualified assistants) is decided by the Board from time to time shall be borne by the Practice Unit.
- The Cost of Peer Review shall be paid by the practice unit within 30 days from the receipt of invoice from the Peer Reviewer.
- In case reviewer has to conduct a second review the same rate would apply to the second review also.
Each of the branch / office under review would be considered as a separate unit for the purpose of payment of cost of Peer Review.
- If a company / concern requests the Board for the conduct of peer review of its secretarial auditor (practice unit), the Board shall take due cognizance of such request and in that case the cost of the peer review shall be borne by such company/concern.
(b) Periodicity of Peer Review:
- The peer review of every practice unit should be mandatorily carried out at least once in a block of five years.
- If the Board so decides or otherwise at the request of the practice unit, the peer review for such a practice unit can be conducted at shorter intervals.
(c) Framework for Peer Review:
- A peer review entails a review of attestation engagement records and related financial/other statements to ascertain whether the practice unit is adhering to technical standards.
- Where a practice unit is not following technical standards in certain situations, suggestions and recommendations for improvement may be made and possibly followed by a further review in keeping with the primary thrust of Peer Review.
What methodology to be followed by Peer Reviewer?
Methodology to be followed by Peer Reviewer:
Offsite review: This contemplates studying the information given by the Practice Unit (PU) in the Questionnaire and based on the same make his own observations about possible areas where improvement is possible and to note other aspects to be discussed in personal meeting with Practice Unit (PU).
- verification of information given by the Practice Unit (PU).
- test checks in respect of attestation assignments handled by the Practice Unit (PU).
- interaction with the staff & trainees of Practice Unit (PU) should be a part of the peer review.
- calling for the records in respect of the client maintained by the Practice Unit (PU) to verify whether proper systems and procedures have been followed.
Write Short Note on:
(a) Preliminary Report of Reviewer.
(b) Interim Report of Reviewer.
(c) Final Report of Reviewer.
(a) Preliminary Report of Reviewer: It has been provided that at the end of an on-site review, the Reviewer shall before making his report to the Board, communicate a Preliminary Report to the practice unit. The reviewer shall report on the areas where systems and procedures had been found to be insufficient or deficient or where any non-compliance has come to his notice with reference to any matter.
The reviewer shall not name any individual in his reports. The Reviewer need not communicate any Preliminary Report if he has not noticed any instance of non-compliance or deficiency during the Peer Review.
(b) Interim Report of Reviewer:
In case the reviewer is not satisfied with the reply of the Practice Unit (PU) the reviewer shall submit his Interim Report to the Board. Then on receiving such a report from a reviewer in terms of these guidelines the Board having regard to the Report and any submissions or representations attached to it may make recommendations to the Practice Unit (PU) concerned regarding the application by it of Technical Standards if it is of the opinion that:
- in case the review is related to a firm, any one or more or all of the partners in the firm may have failed to observe, maintain or apply, as the case may be, the Technical Standards.
- in case the review is related to a member practicing on his own account, the member may have failed to observe, maintain or apply, as the case may be, the Technical Standards.
- specify in the instruction, the matters in respect of which the review is to be carried out.
(c) Final Report of Reviewer:
1. The reviewer will prepare the final reviewer’s report to the board for incorporating the findings as discussed with the practice unit. The model forms of such final reports shall be communicated to the reviewer by the board.
2. The final report will be examined by the board in terms of the degree of compliance with the technical standards by the reviewed practice unit.
3. The board shall consider the reviewer’s final report and the practice unit’s submissions. Thereafter, the board may issue recommendations if considered appropriate to the practice unit and/or instruct the reviewer to perform any follow-up action.
4. The board may if deemed fit issue peer review certificate to the practice unit.