Government of India has, in exercise of the powers conferred under Section 28A of the Chartered Accountants Act, 1949, constituted a Quality Review Board (the ‘Board’) to perform the following functions u/s 28B of the Chartered Accountants Act, 1949:-
a) to make recommendations to the Council with regard to the quality of services provided by the members of the Institute;
b) to review the quality of services provided by the members of the Institute including audit services; and
c) to guide the members of the Institute to improve the quality of services and adherence to the various statutory and other regulatory requirements.
2. Government of India has also issued ‘Chartered Accountants (Procedures of Meetings of Quality Review Board, and Terms and Conditions of Service and Allowances of the Chairperson and Members of the Board) Rules, 2006’. In terms of its Rule 6, in the discharge of its functions, the Board may, inter alia, evaluate and review the quality of work and services provided by the members of the Institute in such manner as it may decide and also lay down the procedure of evaluation criteria to evaluate various services being provided by the members of the Institute and to select, in such manner and form as it may decide, the individuals and firms rendering such services for review. Pursuant to the Rule 6, the Board has issued the detailed ‘Procedure for Quality Review of Audit Services of Audit Firms’ (the ‘Procedure’) providing for various matters, adopting best practices, in laying down the necessary system for conducting reviews of audit firms undertaking audits of public interest entities and other entities in India. Further details can also be accessed through the website www.qrbca.in.
3. In terms of the aforesaid Procedure, the Quality Review Board has initiated a robust system of independent review of statutory audit services of the audit firms auditing accounts of public interest entities in India in August 2012 pursuant to a process comprising selection of the audit firms for review and engagement of Technical Reviewers. The Board had selected a total of 216 review assignments for review of statutory audits of 168 top listed entities in India. These entities selected for review represent about 62% market cap of the stocks listed on the National Stock Exchange (NSE) and 63% market cap of the stocks listed on Bombay Stock Exchange (BSE). Since then, the Board has finalised a total of 175 review reports while reviewing audits of top listed entities in India. Based upon these 175 review reports, 25 cases have been recommended to the ICAI Council for consideration and in 74 cases appropriate advisories were issued to the concerned audit firms for improvement in future. So, a total of 99 reviews out of 175 i.e., about 57% reviews indicated need for improvement in diverse areas. The whole review mechanism has been administered as per best international practices based upon a detailed analysis of the inspection systems of the audit regulators around the world.
4. The Board has brought out ‘A Report on Audit Quality Review Findings (2012-15)’ providing analysis and summary of observations made by the Technical Reviewers in review reports completed during the financial years 2012-15. The report is accessible at the weblink http://www.qrbca.in/wp-content/uploads/2015/07/qrb28179.pdf. It is hoped the various stakeholders will find it useful and it would go a long way in improving the overall quality of auditing.