CA Final Amendments for May  2024 ICAI Exams Topic Wise

CA Final Amendments for May 2024 ICAI Exams Topic Wise

Check All the amendments applicable for CA Final May 2024 Attempt

Financial Reporting (Relevant for May  2024 examinations)Download
Advanced Financial management (AFM) Download
Advanced Auditing and Professional Ethics Download
Integrated Business Solution (Multi-disciplinary case study with Strategic management ) Download
Indirect Tax Laws (Relevant for May 2024  examinations)Download
Direct Tax and International Taxation (Relevant for May  2024 examinations)Download


Amendments in CA Final Advanced Audit & Professional Ethics


Amendment notes of CA Final audit

CHAPTER 5.3: CARO 2020

Amendment in: Definition of small Company

Not  Applicable


Insurance Company

Banking Company

Private Company (Not being a subsidiary or holding company of public company) Below all condition need to be fulful

Company U/s 8 of  Co. Act 2013

OPC and small Company under Co. Act - Small Company: 2(85) of Co. Act 2013, other than a public company:

 (1) Paid up S/c less than or equal to Rs. 4 crores, AND

(2) Turnover less than or equal to Rs. 40 crores (Imm . preceding  FY)

(Further, it should not be, Holding or Subsidiary of any Company


Paid up Capital & Reserves & Surplus

As on balance sheet date

< Rs. 1 crore

Total borrowings from any bank or financial institution

at any point of time during the FY

< Rs. 1 crore

Total revenue as disclosed in Schedule III (including revenue from discontinuing operations)

as per the financial statements

< Rs. 10 crore

• CARO shall not apply to the auditors report on consolidated financial statements except Para 3(xxi).



2) Infrastructure Finance Company (IFC): A company which has net owned funds of at least ₹ 300 crore and has deployed 75% of its total assets in Infrastructure loans is called IFC provided it has credit rating of A or above and has a CRAR of 15% (with a minimum Tier I capital of 10 %).

3) Systemically Important Core Investment Company (CIC-ND-SI): Core Investment Companies (CIC) having total assets of not less than ₹ 100 crores either individually or in aggregate along with other CICs in the group and which raises or holds public funds are called as Systemically Important Core Investment Companies (CICs-ND-SI).

4) Infrastructure Debt Fund (IDF-NBFC): IDF-NBFC means a non-deposit taking Non-Banking Financial Company that has:

a) net owned funds of ₹ 300 crore or more; and

b) which invests only in Public Private Partnerships (PPP) and post commencement operations date (COD) infrastructure projects which have completed at least one year of satisfactory commercial operation and becomes a party to a Tripartite Agreement

5) Non-Banking Financial Company – Micro Finance Institution (NBFC-MFI): NBFC-MFI is a non- deposit taking NBFC which has at least 85% of its assets in the form of microfinance. Such microfinance should be in the form of loan given to those who have annual income of ₹ 1,00,000 in rural areas and ₹ 160,000 in urban or semi urban areas. Such loans should not exceed ₹ 1,00,000 and its tenure should not be less than 24 months. Further, the loan has to be given without collateral. Loan repayment is done on weekly, fortnightly or monthly installments at the choice of the borrower

  • Four Layers of NBFCs – Scale Based Regulation (SBR):

Effective from 01 October 2022: RBI has revised different facets of existing NBFC Classification and regulation like Capital Requirements, Governance Standards, Prudential Regulations, etc. based on four layers that are defined based on their size, activity, and perceived riskiness:

1) Base Layer (NBFC-BL):

a) NBFC – ND : asset size ₹1000 crore and

b) NBFC undertaking the following activities-

(i) NBFC-Peer to Peer Lending Platform (NBFC-P2P), [online mediator to Lender & borrower]

(ii) NBFC-Account Aggregator (NBFC-AA), [accumulate & distribute F.I. of Persons]

(iii) Non-Operative Financial Holding Company (NOFHC) and

(iv) NBFCs not availing public funds and  not having any customer interface.

2) Middle Layer (NBFC-ML),

a) NBFC-D, irrespective of asset size, [Can be in Mid Layer Or Upper]

b) NBFC – ND, with asset size ≥ ₹1000 crore and

c) NBFCs undertaking the following activities

(i) Standalone Primary Dealers (SPDs), [authorized in buying and selling govt. securities – will Always remain in MID LAYER]

(ii) Infrastructure Debt Fund - NBFC (IDF-NBFCs), [Will Always remain in MID LAYER]

(iii) Core Investment Companies (CICs), [Can be in Mid Layer Or Upper]

(iv) Housing Finance Companies (HFCs) and [Can be in Mid Layer Or Upper]

(v) Infrastructure Finance Companies (NBFC-IFCs). [Can be in Mid Layer Or Upper]

3) Upper Layer


These are specifically identified by the RBI as warranting enhanced regulatory requirement based on a set of parameters and scoring methodology (as per Circular).

The top 10 eligible NBFCs in terms of their asset size shall always reside in the upper layer, irrespective of any other factor

4) Top Layer (NBFC-TL)

  • The Top Layer will ideally remain empty.
  • RBI will add NBFCs in this layer if is of the opinion that there is a substantial increase in the potential systemic risk from specific NBFCs in the Upper Layer. Such NBFCs shall move to the Top Layer from the Upper Layer.

- NBFCs like, viz., Investment and Credit Companies (NBFC-ICC), Micro Finance Institution (NBFC-MFI), NBFCFactors  and Mortgage Guarantee Companies (NBFC-MGC) could lie in any of the layers of the regulatory structure depending on the parameters of the scale based regulatory framework.

- Government owned NBFCs shall be placed in the Base Layer or Middle Layer, as the case may be. They will not be placed in the Upper Layer till further notice.







Demand Deposit

NBFC  cannot  accept demand deposits, however some NBFCs can accept Term Deposits

Can accept


No, NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself;



No, deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation (DICGC) is not available to depositors


Priority Sector

No Minimum Exposure to Priority Sector required by NBFCs




Capital Requirements:

𝑪𝒂𝒑𝒊𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔 ∗ 𝑹𝒊𝒔𝒌 𝑾𝒆𝒊𝒈𝒉𝒕

NBFC : SI (Sys. Imp) – Deposit & Non Deposit taking:

  • Shall maintain a minimum capital ratio (Tier I +Tier II capital) which shall ≥ 15 % of its aggregate risk weighted assets on-balance sheet and of risk adjusted value of of balance sheet items.
  • Tier I capital ≥ 10%
  • NBFCs primarily engaged in lending against gold jewellery Tier I capital ≥ 12%
  • Note: For Cash – Risk weightage is “0”

Income Recognition:

The income recognition shall be based on recognised accounting principles.

  • Income on NPA shall be recognised only when it is actually realised.
  • Any such income recognised before the asset became nonperforming and remaining unrealised shall be reversed.

Asset Classification &

Provisioning Norms:

The asset classification & Provisioning norms as given below shall apply to every applicable NBFC (except NBFC-MFIs):

Note: The class of assets referred to above shall not be upgraded merely  as a result of rescheduling, unless it satisfies the conditions required for the upgradation




Standard Assets:

No default in repayment of principal or payment of interest

NBFC-SI-D & ND : 0.4%

NBFC-NSI-ND : 0.25%

Sub- Standard Assets:

  • NBFC – NSI– ND An asset which has been classified as NPA for a period not exceeding 18 months
  • NBFC – SI– D & ND An asset which has been classified as NPA for a period not exceeding 12 months

10% of total outstanding


  • NBFC – NSI– ND Remains a substandard asset for a period exceeding 18 months
  •  NBFC – SI– D & ND Remains a substandard asset for a period exceeding 12 months
  • 100% Provision: Unsecured or Non-Realizable securities
  • For Secured Portion:


Doubtful for:


Upto 1 Yr


1 to 3 Yr


≥ 3 yrs



  • An asset which has been identified as



Chapter – 16 : Unit 3: Forensic Accounting (Earlier Forensic Audit)

The word “Forensic Audit” in this Chapter including the name of Unit 3 stands changed to Forensic Accounting.

All the references to “Forensic Audit” throughout the study material shall stand changed to Forensic Accounting.

Similarly, Forensic Auditor should also be read as Forensic Accountant.


CHAPTER 17.1 : Peer Review


The Word “Statement” or “Statement on Peer Review” used throughout the chapter shall be substituted as “Guidelines” or “Peer Review Guidelines, 2022” respectively

1) The words “Technical, Professional and Ethical Standards as applicable including other regulatory requirements thereto and” shall be substituted with “Technical, Professional and Ethical Standards as applicable including Audit Quality Maturity Model wherever applicable or any other regulatory requirements as may be prescribed by the Council or any Committee and”

Definition as Per ICAI:

"Peer Review" means an examination and review of the systems and procedures to determine whether the same have been put in place by the Practice Unit for ensuring the quality of assurance services as envisaged by the Technical, Professional and Ethical Standards as applicable including Audit Quality Maturity Model wherever applicable or any other regulatory requirements as may be prescribed by the Council or any Committee."


What are the objectives of Peer Review?


Ensure that in carrying out the assurance service assignments, the members of the Institute:

  • Comply with the Technical, Professional and Ethical Standards as applicable including Audit Quality Maturity Model wherever applicable or any other regulatory requirements as may be prescribed by the Council or any Committee
  • have in place proper systems including documentation thereof, to amply   demonstrate the quality of the assurance services


2) Some Changes in Definition & Additions

Reviewer: [Clause 2(19)]

means a member duly approved and empanelled by the Board on fulfilling the qualifications prescribed for a Reviewer as per Guideline 26 of these Guidelines [Clause 2(19) of Peer Review Guidelines, 2022]

New Unit: [Clause 2 (12)]

• Firm whose date of establishment is less than 12 months immediately preceding the date of receipt of application of Peer Review and which may or may not have rendered any assurance service during the said period or

• Practice Unit in existence for a period exceeding 12 months but not rendering any assurance services.

Branch Peer Reviewer [2(9)]

Means a Reviewer appointed to conduct the Peer Review of the Branch of a Practice Unit.

The qualifications and other obligations and duties of the Branch Peer Reviewer shall be the same as that of the Reviewer [Clause 2 (5) of PRG, 2022]


Clause 1, Part 2 CAAct:

The Peer Review Guidelines, 2022 issued by Council are covered under clause (1) of Part II of Second Schedule to the Act and it is obligatory for the Practice Unit to comply with the provisions contained in this Guidelines.


3) One point Added in Scope



Q. Write short note on scope of peer review. 


The Peer Review process shall apply to all the assurance services provided by a Practice Unit.

1) Once a Practice Unit is selected for Review, its assurance engagement records pertaining to the Peer Review Period shall be subjected to Review 

2) The Review shall cover:

 (i) Compliance with Technical, Professional and Ethical Standards

(ii) Compliance with directions and/or guidelines issued by the Council to the Members, including Fees to be charged, Number of audits undertaken, register for Assurance Engagements conducted during the year and such other related records.

(iii) Compliance with directions and/or guidelines issued by the Council in relating to article assistants and/or audit assistants, including attendance register, work diaries, stipend payments, and such other related records

(iv) Systems and procedures for carrying out assurance services.

(v) Training programmes for staff (including articled and audit assistants) concerned with assurance functions, including availability of appropriate infrastructure.

(vi) Self-evaluation under Audit Quality Maturity Model or any other guideline issued the Centre for Audit Quality by

 (vii) Quality of reporting


4) One point Added in TPE meaning

Technical, Professional and Ethical




Q. Explain technical, ethical and professional standards as per Guidelines on peer review. Answer:

 (i) Accounting Standards issued by ICAI that are applicable for entities other than companies under the Companies Act, 2013;

(ii) Accounting Standards prescribed under section 133 of the Companies Act; 2013 by the Central Government based on the recommendation of ICAI and in consultation With National Financial Reporting Authority (NFRA);

(iii) Indian Accounting Standards prescribed under section 133 of the Companies Act 2013 by the Central Government based on the recommendation of ICAI and in consultation with NFRA and notified as Companies (Indian Accounting Standards) Rules, 2015,

(iv) Framework for the preparation and presentation of financial statements, Preface to the Standards on Quality Control, Auditing, Review, Other Assurance and Related Services and Framework for Assurance engagements;

(v) Provisions of the relevant statutes and / or rules or regulations which are applicable in the context of the specific engagements being reviewed including instructions, guidelines, notifications, directions issued by regulatory bodies as covered in the scope of assurance engagements

(vi) Any other Technical, Professional, Ethical Standards and other Standards issued by any authority governing the profession of Chartered Accountancy. (vii) Standards:

Standards issued by the Institute of Chartered Accountants of India including-

a) Engagement and Quality Control Standards

b) Standards on Internal Audit

c) Statements


5) One point Added in Assurance Engagement:

Assurance Engagement:

Q. What are the areas excluded from the scope of peer reviewer? Or,

Q. CA. M appointed as a Peer Reviewer for M/s. K Associates has asked for all the compilation and the Due Diligence engagements carried out by M/s. K Associates for her peer review during the period considered for peer review purposes by the board. She has also sent out a mail to Peer Review Board regarding her selections. Mr. K, the managing partner of the firm seeks your advise on this matter


The Guidelines on Peer Review defines the scope of peer review which revolves around compliance with technical, ethical and professional standards; quality of reporting; office systems and procedures with regard to compliance of assurance engagements; and, training programmes for staff including articled and audit assistants involved in assurance engagements. The entire peer review process is directed at the assurance services.

Means an engagement in which a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users, but does not include:

1) Engagement for Due diligence

2) Management Consultancy Engagements

3) Testifying as an expert witness;

4) Providing expert opinion on points of principle, such as Accounting Standards or the applicability of certain laws, on the basis of facts provided by the client

5) Engagements to prepare tax returns or advising clients in taxation matters;

6) Representation before various Authorities;

7) Engagements for the compilation of financial statements;

8) Engagements solely to assist the client in preparing, compiling or collating  information other than financial statements;

9) Any other service rendered, or function performed by practitioner not prescribed by the Council to be Assurance Engagement

Assurance engagements does not include engagements for the compilation of financial statements or engagements solely to assist the client in preparing, compiling or collating information other than financial statements; or engagement for Due diligence and Due Diligence engagements i.e., they are not covered within the meaning of assurance engagements and hence outside the scope of Peer Review


6) Peer Review Applicability:

Applicability of Peer Review:

As per Clause 5 of Peer Review Guidelines, 2022, criteria of Peer Review are defined on following basis

1) Mandatory

Peer Review can be mandated for such Practice Units as may be decided by the Council

2) Voluntary

Any Practice Unit may, suo motu, apply to the Board for the conduct of its Peer Review

3) Special Case

The Board, based on specific information received from Secretary, ICAI or

Disciplinary directorate or any other Regulator, which in the opinion of the Board requires a special Peer Review of the Practice Unit, may conduct a special Peer Review of the Practice Unit for such a period determined by the Board

Accordingly, the Peer Review Mandate (Revised), operative from April 1, 2022, has been made in following four stages: [It was clarified that holding a valid Peer Review certificate by Practice Units should be a prerequisite for undertaking audit of all entities falling under phase I; II; III and IV of the mandate from respective dates of mandate becoming operative]



Firms covered for Mandatory Peer Review (PR):

(If Any of the condition fulfilled, i.e., AUDIT BASED or PARTNERS BASED)

Date from which PR is mandatory




PU which propose to undertake Statutory Audit of enterprises:

• Whose equity or debt securities are listed  in India or abroad as defined under SEBI (LODR) For these Practice Units, there is a pre-requisite of having Peer Review Certificate.


1st April 2022


Practice Units which propose to undertake Statutory Audit of unlisted public companies having:

Paid-up capital

Rs. 500 crores ,or

Annual turnover

Rs. 1000 crores or

Aggregate O/s loans, debentures & deposit

Rs. 500 crores


PU rendering attestation services: having 5 or more partners: pre-requisite of having Peer Review Certificate before accepting any Statutory audit

1st April 2023


PU which propose to undertake the Statutory Audit of entities which have:

• Raised funds from public or banks or FIs of

> 50 Crores during the period under review or of

• anybody corporate including trusts which are covered under public interest entities

For these Practice Units, there is a pre-requisite of having Peer Review Certificate.

PU rendering attestation services and having 4 or more partners: Pre-requisite of having Peer Review Certificate before accepting any Statutory audit.

1st April 2024


Practice Units which propose to undertake audits of branches of Public Sector banks : For these Practice Units, there is a pre-requisite of having

Peer Review Certificate.

Practice Units rendering attestation services and having 3 or more partners: There is a pre-requisite of having Peer Review Certificate before accepting any Statutory audit.

1st April 2025


On the date when Peer Review becoming mandatory for a Practice Unit, if PU already have PR Certificate there is no need of once againtill conclusion of the validity period of the said Certificate. It will be require obtain new PR certificate when exiting certificate will get expire


7) Peer Review Board:


Peer Review Board: (Note : Important For MCQs only)


  • Minimum 6 Member

• Maximum of 12 members to be appointed by the Council Of whom 50% shall be from members of the Council

• The Council MAY nominate members to the Board from outside bodies

• Chairman and the Vice-Chairman shall be amongst its elected Council members appointed on the Board

Meeting Requirements:

Provisions related to the time, place and quorum of Meetings of the Peer Review Board as well as procedure for transaction of business shall be governed by the Chartered

Accountants Regulation, 1988

[Earlier requirement of Quorum, No. of Meets are not specified now]



8) Eligibility Of reviewe

7 year audit experience to be read as 7 years of assurance practice experience.

Training & Experience: 

a) Practice  7 Yrs: Member in practice with at least 7 Yrs of assurance practice experience

b) Industry 10 Yrs & Practice 3 Yrs: In case member has moved from industry to practice and is currently in practice he should have at least 10 Yrs of audit experience in


9) Confidentiality:


• Strict confidentiality shall be maintained by all those involved in the Peer Review process, namely, Reviewersmembers of the Board, any Qualified Assistants  or Practice Unit

• Reviewer shall not make use of or disclose the contents of review report or any confidential information EXCEPT as required by the Board or council

• A Declaration of Confidentiality (Form 4) shall be signed by all members of the Board and the Boards Secretariat.





Stage 1: Procedure for initiating Peer Review:

Application Cum Questionnaire Filed (Form 1)

1) PU which desire to get Peer Reviewed shall make an application for Peer Review in the Application cum Questionnaire in Form 1.

2) 2) In case the Peer Review is initiated by the Board, the Application cum Questionnaire in Form 1 should be submitted by the PU on the request of the Peer Review Board Secretary 

Application Received:

The Application mentioned under clauses 6(1) and 6(2) above received by the Board shall be duly numbered.

Selection of reviewer (3 & 1 day)

Name of 3 Reviewers shall be recommended  by the Board to the Practice Unit within 3 days

The Practice Unit shall select 1 out of the 3 Reviewers & intimate to the Board within 1 working day of receipt of the names

Reviewer Confidentiality to PU: (2 days)

The Board shall intimate the Reviewer so selected to submit a Declaration of  Confidentiality  in Form 2 to the PU within 2 working days from the receipt of Selection of name of the Reviewer from the PU.

PU to Reviewer: (1st Point Info): (2 days)

The PU shall also provide a copy of the Application cum Questionnaire in Form 1 submitted to the Board as per clause 6 (1) or 6(2) above to the Reviewer within 2 working days of the appointment of the Reviewer


Step 2:


to be


by the



Confidentiality Confirmation:

Before commencement of Peer Review, the Peer Reviewer shall ensure that the Declaration of confidentiality is furnished to the Practice Unit and acknowledgement of receipt thereof is obtained  by him

Intimation of Samples:

On receiving the Application cum Questionnaire in Form 1 from the PU, the Peer Reviewer shall initiate the Peer Review by:

Intimating the PU of proposed visit and the proposed samples selected to be kept ready by the Practice Unit.

Additional Information furnished by Practice Unit: [1 Day]

The Reviewer may seek further/ additional clarification in Form 6 from the Practice Unit on the information furnished/ not furnished by the Practice Unit in the Questionnaire.

• The Practice Unit shall provide this additional information to the Reviewer within 1 working day.

Samples Intimation: [2 Days]

The Reviewer shall, within 2 working days of receiving the information from the Practice Unit, select assurance service engagements that he would like to review and intimate  the same to the Practice Unit and the Peer Review Board in Form 5.

On-Site Review: [2 Days]

Reviewer shall plan “on–site review” visit in consultation with the Practice Unit.

The Reviewer shall give the PU at least 2 working days to keep ready necessary records of the selected assurance services in Form 5.

Completed within 20 days

The Reviewer and PU shall mutually co-operate and ensure that the entire review process is completed within 20 working days:

• from the date of receipt of application from the PU for Peer Review or

• from the date of notifying the PU about its selection for Review as the case may be, i.e., Whether Suo-Moto applied or selected by Boards

New Unit Completed within 7 Days:

In case of Peer Review of a New Unit, the Reviewer and Practice Unit shall mutually co-operate and ensure that the entire review process is completed within 7 working days from the date of receipt of application cum questionnaire from the Practice Unit for being Peer Reviewed”


Step 3:


Peer Review Visits

This on-site Review should not extend beyond 6 working days

Compliance Review of

General Controls

The Reviewer is required to carry out a compliance Review of the following General Controls for evaluating the degree of reliance to be placed upon them for effective Review:

a) Independence

b) Maintenance of Professional Skills and Standards

c) Outside Consultation

d) Staff recruitment, Supervision and Development

e) Office Administration

Selection of

Assurance Service

Engagements for


The number of assurance service engagements to be reviewed shall depend upon:

a) The number of partners / members involved in assurance service engagements in the Practice Unit;

b) The Fees charged / received / GST paid by the Practice unit.

c) The number of locations / branch offices of the practice Unit;

d) The Standard of quality controls generally prevailing;

e) The size and nature of assurance service engagements undertaken by the Practice Unit.

f) The methodology generally adopted by the Practice Unit in providing assurance services.

Review of Records

A) Compliance Approach – Assurance Service Engagements: The compliance approach is to assess whether proper control procedures have been established / followed by the Practice Unit to ensure that assurance services are being performed in accordance with Technical, Professional and Ethical Standards.

B) Substantive Approach - Assurance Engagements: This approach requires a Review of the assurance working papers in order to establish the extent of compliance, whether the assurance work has been carried out as per the Technical, Professional, and Ethical Standards

Procedure for

Peer Review of a

New Unit

1. Peer Review of a New Unit is to be conducted based on the antecedents (Background) of partners and policy  parameters  announced by the Practice Unit  for conduct of attest function. The Reviewer has to verify the same from the Application cum Questionnaire submitted by the Practice Unit in Form 1 as well as an

2. Onsite visit to the PU which shall be restricted to 1 day.

3. The Reviewer shall thereafter submit a Report to the Board in the formats as prescribed by it.


Step 4: Reporting by the Peer Reviewer

After completing the on-site review, the Reviewer, shall submit the Peer Review Report to the:

• Board along with Form 9 if in his opinion, the Practice Unit has adequate systems and procedures in compliance with the Technical, Professional and Ethical Standards.

• A copy of the report shall also be forwarded to the Practice Unit.

Communication of Findings to PU (Preliminary report)

• In case, in the opinion, the systems and procedures of the Practice Unit are deficient or non-compliant with reference to any matter that has been noticed by him or if there are other matters where he wants to seek clarification, he shall communicate his findings to the Practice Unit, in a Preliminary Report issued by him

Response by PU

• The Practice Unit shall, within 2 days of the date of receipt of the findings, make its submissions or representations, in writing to the Reviewer

Peer review report

• If the Reviewer is satisfied with the reply received from the Practice Unit:

He shall submit an unqualified Peer Review Report to the Board along with Form 9. A copy  of the report shall also be forwarded to the Practice Unit.

• If response by the Practice Unit is not satisfactory:

the Reviewer shall submit a Qualified Report to the Board incorporating his reasons for the same along with Form 9. A copy of the report shall also be forwarded to the Practice Unit.

Report Should State that:

The Peer Review Report should state that the system of quality control for the assurance services of the Practice Unit for the period under Review has been designed so as to carry out the assurance services in a manner that ensures compliance with Technical, Professional and Ethical Standards.

Submit Following

Documents along

with Report:

The Peer Reviewer shall ensure to submit the following documents along with the Peer Review Report:

i) Annexures to the Report as prescribed by the Board

ii) Copy of Questionnaire as received from the Practice Unit

iii) List of samples selected by him in accordance with the criteria prescribed by the Board

iv) Preliminary Report, if issued, along with PUs submissions on the same.

The Practice Unit as well as the Reviewer shall ensure that all documents submitted to the Board are duly dated, signed and complete in all aspects.

Follow on Review:

In case of a modified report, The Board shall order for a “Follow On” Review:

• After a period of 1 year from the date of issue of report as mentioned in (b) above.

• If the Board so decides, the period of one year may be reduced but shall not be less than 6 months from the date of issue of the report.




Some Other Miscellaneous Points:

Issuance of Peer Review


• In case of an unqualified report issued by the Peer Reviewer, the Peer Review Board Secretary shall place the report before the Board or its Sub-Committee for  consideration and issuance of Peer Review Certificate to the Practice Unit, but only after the Peer Reviewer confirms the fee receipt from the Practice Unit by him.

• New Units: A Peer Review Certificate shall be issued to subject to the Procedures followed by the reviewer as prescribed under Clause 8 of these Guidelines and other clauses of these Guidelines, as the case may be.

• SIGNEDThe Certificate shall be  duly signed by the Chairman, Vice Chairman and Secretary of the Board mentioning the validity period.

• SecretaryThe Peer Review Board Secretary shall serve the Peer Review Certificate upon the Practice Unit.

• List on ICAI Website: The PR Board Secretary shall update the List of Practice Units having a valid Peer Review certificate incorporating the names of Practice Units to whom the Peer Review certificates have been issued on the ICAI website.

• Qualified Report: In cases where a Qualified Report has been issued by the Reviewer and has been considered by the Board, the Peer Review Board Secretary shall inform  the  Practice Unit that a Peer Review certificate cannot be issued along with the reasons therefor as well as inform about the due date for conducting a follow-on review as may be decided by the Board.

Peer Review Certificate


• Normally: The Peer Review Certificate shall be valid for a period of 3 years or such other period as may be decided by the Board commencing from the date of receipt of Peer Review report by the Board.

• FOR NEW UNIT: The validity of the Peer Review Certificate issued to New Units shall be decided by the Board.

• The Council may for such reasons as may be prescribed by it extend the validity of existing Peer Review certificate granted to a Practice Unit. The Practice Unit shall make an Application in Form 8 requesting for extension of validity”


Lets Summarize Special Points for “NEW UNITS”

New Unit: [Clause 2(12)]

• Firm whose date of establishment is less than 12 months immediately preceding the date of receipt of application of Peer Review and which may or may not have rendered any assurance service during the said period or

• Practice Unit in existence for a period exceeding 12 months but not rendering any   assurance services.

Completion of P.R:

Within 7 working days [Instead of 20 Working Days]

On-Site Review:

Restricted to 1 day [Instead of 6 days]

Issuance of Certificate:

Peer Review Certificate shall be issued to subject to the Procedures followed by the reviewer as prescribed under Clause 8 of these Guidelines and other clauses of these Guidelines/

Certificate Validity:

Decided by the Board [Instead of 3 years]


CHAPTER 18 : Professional Ethics

Following Provisions of Code of Ethics also became Applicable:

FEES – Relative Size (i.e., Fees from single client is Higher)

Intro & Threats

When the total fees generated from an Audit client [single client & its related parties] by the firm expressing the audit opinion represent a large proportion of the total fees of that firm, the dependence on the client and concern about losing the client create a self-interest or intimidation threat.

What toDo

If Limit mentioned in this Para exceeds  (Threat), Then Audit firm needs to Disclose / report the fact to ICAI (Institute)


Disclosure is required where for 2 consecutive years, Below Limits are Crossed:

When Auditee Is:


Non-Public Interest

Entities (PIE):

The gross annual professional fees from an audit client

represent more than 40% of the total fees of the firm

Public interest entities

The gross annual professional fees from an audit client

represent more than 20% of the total fees of the firm

[If the fees continue to exceed mentioned limits, the firm shall in each such year disclose this fact to the Institute]


Above threshold is NOT APPLICABLE if:

1) Firms exempted - Firm total fees received by the firm does not exceed Rs. 20 Lakhs (Including fees for other services rendered) Including different firms in which such member or firm may be a partner to all audit clients

2) Audit Clients exemptedaudit of government Companiespublic undertakingsnationalized banks, and public financial institutions, or where appointments of auditors are made by Government or Regulators

Public Int. Entity:

a) Listed Entity, Or,

b) Defined by regulation or legislation as a public interest entity

c) For which the audit is required by regulation  or legislation to be conducted in compliance with the same independence requirements that apply to the audit of listed entities.

d) Banks and Insurance Companies are to be considered as Public Interest Entities.

Tax Services to Audit Clients -:


Providing tax services to an audit client might create self-review or advocacy threat. Tax services comprise a broad range of services and if provided to audit clients create following threats and are hence either prohibited or restricted

Tax return preparation

Allow, does not usually create a threat

Tax calculations: (PIE is Public Int. Entity)

Tax calculations for the purpose of preparing the accounting entries: Self-review thereat


Material Effect on FS

Not Permitted


No Material Effect on FS

Permitted if adequate safeguards built to address the threat

For Non-PIE

Material or Non-Material Effect on FS

Tax planning and other tax advisory services:

• Might create self-review or advocacy threat.

• Hence may provide depending on the level of threat and safeguards that can be built.

• However when Effectiveness of Tax Advice Is Dependent on a Particular Accounting Treatment or Presentationnot to provide such services if there is a reasonable doubt about the suggested accounting treatment and it has material effect on FS

Tax services involving valuations

• Might create self-review or advocacy threat.

• Valuation result not having a direct effect on the financial statements –  May provide if

✓ Valuation has no material effect on FS or

✓ Valuation is subject to external review by tax authorities

• Valuation result having a direct effect on the financial statements – Provisions of sub section 603 on providing valuation services to audit clients apply.

Assistance in the resolution of tax disputes:

• Might create self-review or advocacy threat.

• NOT ALLOW: A firm or a network firm shall not provide tax services that involve

assisting in the resolution of tax disputes to an audit client if:

a) The services involve acting as an advocate for the audit client before a court; and

b) The amounts involved are material to the FS.

• ALLOW: Ethics does not preclude a firm or network firm from having a continuing advisory role in relation to the matter that is being heard before a court, for example responding to specific requests for information, providing factual accounts or testimony, assisting client in analyzing the tax issues related to the matter.

• For the purpose of this subsection, "Court" does not include a Tribunal


Non-Compliance with Laws and Regulations (NOCLAR) –Applicable Hai Boss !!

- Now only on Senior Professional Accountant Employees (Not all employees)

- Listed Entity AUDIT only, Not all assignments

- Listed Entity having Specific Networth














(IESBA) Code of Ethics

• In case of members in practice: Applicable to ALL


• In case of members in service: Applicable to ALL employers

As per ICAI Code of Ethics

• In case of Professional Accountant in practice: Applicable to Audit of Listed Entities assignments, Below all conditions must fulfill:

✓ Shares of which are listed on recognized stock exchanges(s) in India and

✓ Net worth >= INR 250 crores

• In case of members in service: Applicable to “Senior

Professional Accountants” in service, being employees of listed entities


➢ Senior professional accountants Means KMP [Directors, officers or senior employees able to exert significant influence over, and make decisions regarding, the acquisition, deployment and control of the employing organizations human, financial, technological, physical and intangible resources]

➢ “Audit engagement” means  reasonable assurance engagement in which a professional accountant in public practice expresses an opinion on whether financial statements give a true fair view by an applicable financial reporting framework


Where a professional accountant in public practice or senior professional accountant identifies any non-compliance with laws and regulations to comply with the principles of integrity and professional behavior it may have to report such non-compliance by alerting management / TCWG and take further actions as appropriate like reporting to regulatory bodies or withdrawing from engagement.

In the course of providing a professional service to a client or carrying out professional activities for an employer, a Senior Professional accountant may come across an instance of non-compliance with laws and regulations (NOCLAR) or suspected NOCLAR committed or about to be committed by:

• The client /professional accountants employing organisation (Employer)

• TCWG of client or Employing organisation

• management of a client/ employing organisation

• other individuals working for or under the direction of a client/ employing


NOCLAR under Revised Code of Ethics does NOT address the personal misconduct unrelated to the business activities of the client/ employing organisation and noncompliance by parties other than listed out in the definition of NOCLAR



Points to Note:

During Course of Providing a Service: 

NOCLAR will be applicable  if a professional accountant encounters, or is made aware of, non-compliance/Suspected also, he is not required to investigate, nor responsible for ensuring compete compliance.

Expertise of Laws NOT Required: 

A professional accountant is expected to apply knowledge and expertise, and exercise professional judgment. However, he is not expected to have a level of knowledge of laws and regulations greater than which is required to undertake the engagement

Out of Scope:

Matters that are clearly inconsequential, or relating to personal misconduct pertaining to business activities of the client not covered

Disclosure contrary to Law:

Disclosure, which is Contrary to Law not Required: As per IESBA Code, disclosure of the matter to an appropriate authority would be precluded if doing so would be contrary to law or regulation

NOCLAR vs. SA-250:





Applicable only on Audit, and not on other Assurance engagements

Applicable on professional accountants in service, and in practice,  it applies to Auditors, as well as professional services other than Audit


Talks of auditors  responsibilities for laws having direct effect on the determination of material amounts and disclosures in the financial statements (such as tax and labour laws); and other laws and regulations that do not have a direct effect on the determination of the amounts and disclosures in the financial statements, but compliance with which may be fundamental to the operating aspects of the business

NOCLAR, while being alike to SA 250 till this point, is further ahead of it in that it takes into account non-compliance that causes substantial harm resulting in serious consequences in  financial or nonfinancial terms


Not defined stakeholders

NOCLAR is related to affect of noncompliance on  investors, creditors,employees as also the general public


This provision is not existent in SA-250

In exceptional circumstances, the professional accountant might become aware of an imminent breach of a law or regulation that would cause substantial harm to investors, creditors, employees or the general public. Having first considered whether it would be appropriate to discuss the matter with management or  those charged with governance of the company, the accountant shall exercise professional judgment and determine whether to disclose the matter immediately to an appropriate authority in order to prevent or mitigate the consequences of such imminent breach. If disclosure is made, that disclosure is permitted


Respond to NOCLAR:

In case of Employment>>

• Responsibility of Senior Professional Accountant in Service

In case of Audit Engagement>>

• Responsibilities of Professional Accountant

Steps to be taken for


1) Obtaining an understanding of the matter

2) Addressing the matter

3) Seeking Advice

4) Determining whether further action is needed

5) Determining whether to disclose the matter to an Appropriate Authority

6) Imminent Breach (Breach that is most likely to happen)

7) Documentation

Note: Situation where disclosure ought to be made by the Auditor, the “Appropriate authority” for the purpose of disclosure will depend on the nature of the matter. For example, the appropriate authority would be SEBI in the case of fraudulent financial reporting


Frequently Asked Questions

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