The Institute of Chartered Accountants of India-constituted Financial Reporting Review Board has kicked off its maiden peer review exercise for auditors by calling for annual reports of select companies for the year ended March 31, 2003.

The FRRB's mandate is to review the general purpose financial statements of certain enterprises with a view to determining : compliance with the generally accepted accounting principles in the preparation and presentation of financial statements; compliance with the disclosure requirements prescribed by regulatory bodies, statutes, rules and regulations relevant to the enterprise; and compliance with the reporting obligations of the enterprise as well as the auditor.

Through a review of attestation services (involving auditing or verification of financial transactions, books, accounts or records etc), peer review identifies the areas where a practicing member may require guidance in improving the quality of his performance and adherence to various requirements as per applicable technical standards.

According to Vipul Choksi, past chairman of ICAI's Western India Regional Council, the peer review will be undertaken by the Institute empanelled practising chartered accountants having at least 15 year experience.

All the practising units will be required gear up their office systems, including documentation systems, and procedures for maintaining the quality of attestation services they perform.

FRRB's review will be limited to appropriate reporting by the auditor on non-compliances, if any. It may review the general purpose financial statements selected on a random basis or suo moto or on a reference made to it by any regulatory bodies like the Reserve Bank of India, the Securities and Exchange Board of India, Insurance Regulatory and Development Authority of India, Department of Company Affairs etc.

The peer review is to be introduced in three stages.

In Stage I, which has been kicked off, practice units that have been selected are : (a) central statutory auditors (CSAs) of public and private sector banks, foreign banks, public financial institutions and insurance companies; (b) CSAs of central and state public sector undertakings and central co-operative societies; (c) firms conducting audit of companies having paid up capital of over Rs five crore (Rs billion) and an annual turnover of more than Rs 50 crore (Rs 500 million); (d) firms conducting audits or rendering attestation functions for asset management companies and mutual funds.

In Stage II, which will be initiated from April 1, 2004, practice units that will be included are : (a) branches of public and private sector banks, foreign banks, regional rural/ co-operative banks; (b) non-banking finance companies; (d) companies having paid-up capital of Rs 5 crore (Rs 50 million) or less; (e) concerns which have raised funds from the public/ financial institutions of over Rs 1 crore (Rs 10 million) at any time during the period covered by the review.

In Stage III, which will be initiated from April 1, 2005, all other practice units selected on random sample basis will be selected.