ICAI's Peer Review Programme Phase IV extends mandatory peer review to all CA firms performing attestation functions—including small and sole-practitioner firms that were previously exempt. The phase-in began in 2023 and continues through 2026. If your firm signs audit reports, you need to prepare now.
What Is Peer Review Under ICAI?
Peer Review is a quality review programme mandated by ICAI where an independent reviewer examines a CA firm's systems, standards, and processes to ensure compliance with Standards on Auditing, Engagement and Quality Control Standards, and ICAI guidelines. Unlike inspections or investigations, peer review is designed to be a constructive process—helping firms improve quality, not punish errors.
Peer Review Phases: Who Is Covered When
| Phase | Firm Category | Effective From |
|---|---|---|
| Phase I | Firms with 7+ partners and signing listed/public interest entity audits | 2009 |
| Phase II | Firms with 5+ partners doing attestation work | 2017 |
| Phase III | Firms with 3–4 partners doing attestation work | 2020 |
| Phase IV | Firms with 1–2 partners doing attestation work (sole practitioners included) | April 2023 onwards |
What Counts as "Attestation Function"?
If your firm performs any of these, you are subject to peer review:
- Statutory audit of companies under Companies Act
- Tax audit reports (Form 3CA/3CB)
- Bank audit / stock audit
- Limited review engagements
- Certification of financial statements
- Compilation or agreed-upon procedures engagements
Note: GST audit (GSTR-9C) and income tax audit (Form 3CD) are attestation functions. Even a sole practitioner signing Form 3CD is in scope for Phase IV.
What Peer Reviewers Check
Reviewers assess your firm across five areas:
| Area | What They Look For |
|---|---|
| Engagement Performance | Working papers quality, audit evidence, documentation of judgements |
| Human Resources | Competency of team, CPE compliance, conflict of interest checks |
| Engagement Acceptance | Client acceptance/continuance procedures, independence declaration |
| Monitoring | Inspection processes, partner review of completed engagements |
| Quality Control Standards | SQC 1 compliance — firm-level quality manual, policies, procedures |
Key Documentation Every Small CA Firm Needs
1. Quality Control Manual
A written SQC 1 quality manual is mandatory. It should document your firm's policies on: client acceptance, independence, competency requirements, engagement supervision and review, and monitoring procedures. ICAI provides a model quality manual for smaller firms—download it from the ICAI Peer Review Board portal and customise it for your firm.
2. Engagement Files
For each audit or attestation engagement, maintain a complete engagement file containing:
- Client acceptance form with independence confirmation
- Engagement letter signed by client
- Risk assessment documentation
- Audit programme with sign-off for each step
- Working papers supporting every material figure
- UDIN record for the signed report
- Final audit report copy
3. Continuing Professional Education (CPE) Records
ICAI requires 120 CPE hours in 3 years (or 20 hours per year structured). Peer reviewers verify CPE compliance for all partners. Ensure your CPE records are up to date and accessible.
4. Independence Declarations
For each engagement, both the signing partner and all key members of the engagement team must sign an independence declaration confirming no financial relationship, family connection, or other conflict with the client.
How to Apply for Peer Review
- Register on the ICAI Peer Review Board portal (peerreview.icai.org)
- Submit details of your firm, partners, and attestation work volume
- A peer reviewer is assigned by the Board
- Reviewer schedules a visit (or remote review) — typically 1–3 days for a small firm
- Receive the review report with observations and recommendations
TaxZeo helps CA firms maintain organised engagement files, UDIN records, and client compliance history—making peer review documentation significantly easier to assemble.
See TaxZeo FeaturesFrequently Asked Questions
Do I need peer review if I only sign Form 3CD (tax audit)?
Yes. Form 3CD is an attestation function under ICAI guidelines. Any CA firm signing Form 3CD for even one client falls within the scope of the Peer Review Programme. Phase IV specifically brings solo practitioners and two-partner firms into scope. You should register with the Peer Review Board and submit to a review.
What happens if my firm fails peer review?
There is no "pass" or "fail" in the traditional sense. The reviewer issues an observation report with findings categorised as Major or Minor. The firm must respond with a corrective action plan. Serious or repeated non-compliance can be referred to the ICAI disciplinary mechanism, but the primary intent is improvement, not punishment. Most small firms receive minor observations on documentation gaps—addressable within one review cycle.
How long is a Peer Review Certificate valid?
A Peer Review Certificate is valid for three years. Before it expires, the firm undergoes another review. If the firm has grown to a different category (e.g., added partners to move from Phase IV to Phase III), the review frequency and scope may change accordingly.