14 th National Conference of Practicing Company Secretaries on “ Integrating Growth, Governance...

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PRESENTED BY:CS R.SridharanR Sridharan & AssociatesCompany Secretaries,New No. 5, Sivasailam Street, T. Nagar, Chennai - 600017

THEME

INTEGRATING

GROWTH , GOVERNANCE AND CHALLEN

GES BEYOND

ENHANCING QUALITY OF SERVICE OF

A PRACTISIN

G COMPANY

SECRETARY

PEER REVIEW – A TOOL FOR IMPROVING

THE QUALITY OF SERVICE BY A PRACTISING

COMPANY SECRETARY

R.Sridharan & Associates , Company Secretaries 2

PEER REVIEW- MEANING

PEER = Person of same standing or a person who is

equal to another in abilities.

REVIEW = A report or evaluation of past events

PEER + REVIEW = Evaluation of an similar standing

person’s work i.e.., evaluation of performance in same

profession.


…… CONTD

Peer Review means an examination and review of the systems, procedures and practices to determine whether they have been put in place by the practice unit for ensuring the quality of attestation services as envisaged and implied/ mandated by the Technical Standards and whether these were effective or not during the period under review.


PEER REVIEW - DEFINITIONPeer Review has been defined as

“ The examination and review of systems and procedures to determine whether the systems and procedures are in:

Subsistence

Efficiency

Constant working during the period under review

Established by the practice Unit”.


HISTORY

• The first recorded editorial prepublication peer-review process was at “ The Royal Society” in 1665 by Henry Olderburg. • In the 20th century, peer review became common for science funding allocations,• A professional peer-review process is found in the Ethics of the Physician written by Ishaq bin Ali al-Rahwi (854–931).


….CONTD

• Peer review has been a touchstone of modern scientific method only since the middle of the 20th century, the only exception being medicine. Before then, its application was slack in other scientific fields.• The ICAI Peer Review Board was setup in the year 2003.• ICSI Peer Review Guidelines came into effect from the year 2011.

R.Sridharan & Associates , Company Secretaries

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WHY PEER REVIEW?

Evaluation of attestation services provided by PCS Maintenance and enhancement of the quality of

attestation services Assurance of compliance with the Technical standards

issued by ICSI from time to time and other regulatory and statutory requirements

Assisting members in identifying the areas of improvement and receiving guidance from their peer members


….CONTD

Upholding the standards of the profession and building greater faith and confidence in the eyes of the stakeholders

Sharing of good practices, experience and mutual learning among peer members of ICSI

Recognition of quality performance by PCS in the form of issue of peer review certificate

Improving global presence of the members of ICSI in practice


GENESIS OF PEER REVIEW PROCESS IN ICSI

Need was felt to introduce a Peer Review of Practising Company Secretaries in 2003 on the basis of the recommendations issued by Naresh Chandra Committee in November 2002

Establishment of Peer Review Board Guidelines for Peer Review of Attestation Services by

Practicing Company Secretaries


….CONTD

Exposure Draft of the Guidelines released at the 12th National Conference of Practicing Company Secretaries held at Ooty during July 13-14-15, 2011

Approved by the Council in its 202nd Meeting held on August 25-26, 2011

ICSI Guideline No. 1 of 2011 – Guidelines for Peer Review of Attestation Services by Practicing Company Secretaries notified in the official Gazette of India dated October 18, 2011


ATTESTATION SERVICESAttestation Services means services involving the secretarial audit issuing of various certificates, but does not include: Management consultation Representing a client before the Authorities; Testifying as expert witness; and Providing expert opinion on points of principle, The phrase ‘Attestation Services’ is used in the

guidelines interchangeably with secretarial or compliance audit Services, Attestation Functions and secretarial audit functions.


ATTESTATION SERVICES COVERED UNDER PEER REVIEW

One of the main Objective of Peer Review is aimed at review of the following attestation services rendered by a Practice Unit: Signing of Annual Return pursuant to Section 161(1) of the

Companies Act, 1956 Issue of Compliance Certificate pursuant to Section 383A(1) of

the Companies Act, 1956 Issue of certificate of Securities Transfers in compliance with the

Listing Agreement with Stock Exchanges Certificate of reconciliation of Capital as per SEBI Circular dated

Dec. 31, 2002 Conduct of Internal Audit of Operations of Depository

Participants Certification under Clause 49 of Listing Agreement


OBJECTIVES OF PEER REVIEWTo ensure that in carrying out their attestation services and professional assignments, the Practicing Company Secretary (PCS) is to – Comply with the Technical Standards laid down by

the Institute, and Have in place proper systems (including

documentation systems) for maintaining the quality of the attestation services work they perform.


…..CONTDPeer 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.

Peer Review is directed towards – • Maintenance as well as enhancement of quality of

attestation services• Providing guidance to members to improve their

performance and adhere to various statutory and other regulatory requirements.


SCOPE OF PEER REVIEW

The peer review process is directed at the attestation services of a practice unit.

(1) Once a practice unit is selected for review, its attestation engagement records pertaining to the immediately preceding financial year shall be subjected to review.


…. CONTD

(2) The Review shall focus on: Compliance with Technical Standards. Quality of Reporting. Office systems and procedures with regard to

compliance of attestation services systems and procedures.

Training Programs for staff (including apprentices) concerned with attestation functions, including appropriate infrastructure.


TECHNICAL STANDARDS - MEANING

Technical Standards means and includes – • Secretarial Standards issued by ICSI,• Guidance Notes on Secretarial Standards issued by ICSI,• Compliance of Guidance Notes on other subjects issued

by ICSI,• Notifications / Directions issued by the Council of ICSI,• Compliance of the provisions of the various relevant

Statutes and/or Regulations, applicable in the context of engagements being reviewed.


BENEFITS OF PEER REVIEW

Adherence to statutory, documentary and regulatory requirements by the Practice Unit,

The Practicing Unit will have an opportunity to correct the deficiencies and thereby enhance his professional competence,

If a peer review certificate is issued in favor of the practicing unit , it enhances his credibility in the eyes of the general public,

Clients of the practicing unit will benefit from knowing that their Practicing unit is periodically reviewed by ICSI.

R.Sridharan & Associates , Company Secretaries

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OFFICE SYSTEMS

• Simple, Spacious and cluster free space,• Document management system to prove efficiency,• Time management for timely compliances,• Office library for references,• Office equipments and other tangible assets and• Updated circulars for easy access.• Making a Ready – Referencer about the clients


.… CONTD

5S :- Sorting Setting in order Sweep Standardize Sustain

Office administration in a PU is a crucial area of importance for carrying out the Peer Review Process.


OFFICE SYSTEMS - DOCUMENTATION

Every professional work needs to be backed up by adequate documents.

Broadly documents can be classified into two files :

Permanent (must contain the letter of engagement, correspondences, constitution of the entity, nature and history of business, location and work details) &

Current (must contain appointment letter, acceptance letter, work assignment, queries raised and explanations received, checklists, other expert’s opinion, applicable secretarial standards and their appliance details, detailed working papers)



EXPECTATIONS FROM

PCS

ICSI

CORPORATE

GOVERNMENT

STAKEHOLDERS

REGULATORS

SHAREHOLDERS

CREDITORS

POSITION OF A COMPANY

SECRETARY UNDER NEW

COMPANIES BILL 2012

Inclusion in the definition of

key management

Personnel (CLAUSE 203)

Increase in Penalty on

appointment of CS

Removal of defense

regarding CS (SECTION

383A)

Increased role in annual return (CLAUSE 92)

Introduction of Secretarial

Audit (CLAUSE 204)

Professional assistance to

company liquidator

(CLAUSE 291)


SECRETARIAL AUDIT (LAWS TO BE COVERED)

UNDER COMPANIES ACT , 1956: Companies (Central Government’s) General Rules and Forms, 1956; Companies (Disqualification of Directors under Section 274(1)(g) of the

Companies Act, 1956) Rules, 2003. Companies (Issue of Share Certificates) Rules, 1960. Companies (Disclosure of Particulars in the Report of Board of Directors)

Rules, 1988. Companies (Director Identification Number) Rules, 2006. Companies (Electronic Filing and Authentication of Documents) Rules, 2006. Companies (Transfer of Profits to Reserves) Rules, 1975. Companies Unpaid dividend (Transfer to General Revenue Account of the

Central Government) Rules, 1978.


….CONTD

UNDER SEBI :- Securities and Exchange Board of India (Substantial Acquisition of Shares

and Takeovers) Regulations, 2011. Securities and Exchange Board of India (Prohibition of Insider Trading)

Regulations, 1992. Securities Exchange Board of India (Employee Stock Option Scheme and

Employee Stock Purchase Scheme) Guidelines, 1999. Securities Exchange Board of India (Issue and Listing of Debt Securities)

Regulations, 2008 Securities Exchange Board of India (Issue of Capital and Disclosure

Requirements) Regulations, 2009 Securities Exchange Board of India (Delisting of Equity Shares) Regulations,

2009.


….CONTDOTHER LAWS:- Investor Education and Protection Fund (Awareness and Protection of Investors),

Rules 2001 The Depositories Act, 1996, Regulations and Bye-laws made under the Act. Non Banking Financial Companies Auditors Report (Reserve Bank) Directions, 1998 Non-Banking Financial Companies (Non-Deposit Accepting or Holding) Companies

Prudential Norms (Reserve Bank) Directions, 2007 The Equity Listing Agreement with National Stock Exchange Ltd., and Bombay Stock

Exchange Ltd. RBI Directions, Norms, Notifications, Guidelines as applicable to Non-Banking

Financial Companies. Secretarial Standards issued by the Institute of Company Secretaries of India. Corporate Governance Voluntary Guidelines, 2009 issued by the Ministry of Corporate

Affairs, Government of India.


OTHER SIGNIFICANT FEATURES

STATEMENT OF CONFIDENTIALITY :High Level of Integrity is commanded in

the conduct of peer review process and all the persons involved in the Peer Review Process. Before accepting to undertake a Peer Review , the Reviewer and Authorised Assistant are required to sign a Statement of Confidentiality and submit the same to the Peer Review Board.


….CONTD

EXISTENCE OF CHINESE WALL :In view of the necessity of safeguarding the

interest of the Practice Units , ICSI has ensured to bring in existence a “ Chinese Wall ” between the Peer Review Process and Disciplinary Proceedings that in the event of any deficiencies noticed by the Peer Reviewer, no Disciplinary Proceedings shall be initiated against the Practice Unit.


….CONTD

IMMUNITY FROM LIABILITY:A Practice Unit , which shall make all the

documents or records or any information available shall not be liable for violation of the Code of Conduct under the Company Secretaries Act, 1980.


….CONTD

DISPUTE RESOLUTION MECHANISM :Any matter of dispute arising between the

Practice Unit and the Peer Reviewer in the matter of Peer Review, the same shall be forwarded to the Board within 2 months and the Board shall decide the matter within 6 months. On dissatisfaction by the Practice Unit , it shall refer the same matter to ICSI Council within 2 months.


FUTURE OUTLOOK

Peer Review Process- An outstanding tool for (a) Reviewed firms to improve their practices; and (b) Users of PCS services to make decisions on whom to hire

Upholding the standards of profession by providing reassurance of maintenance and enhancement of quality of professional services rendered by ICSI members

Peer Review Certificate – Hallmark of excellence in services rendered by PCS

Enhanced Global presence by Peer Reviewed Firms/PCS Peer Reviewed Firms/PCS may get privilege over other firms in case

of listed companiesR.Sridharan & Associates ,

Company Secretaries32

OBLIGATIONS OF THE PRACTICE UNIT

Practice Unit (PU) shall – • Provide access to any record or document as may be

asked for by the reviewer.

• Afford and provide explanation or further particulars in respect of anything produced before the Peer Reviewer

• Provide all assistance in connection with peer review

• Allow the reviewer to inspect, examine or take any abstract of or extract from a record or document or copy there from which may be required by the reviewer.


THE REVIEWER’S APPROACH

• Should be courteous, professional and helpful,• Should be appreciative of good practices while

suggesting areas of improvement,• Collaborative approach and minimum disruption• Provide practical and insightful comments,• Should try and give value addition to PU• In determining subjective issues, the Reviewer has to

verify the process followed in exercise of judgment by the PU. Verification of the process will include verification of working papers maintained by the PU.


EXPECTED QUALITIES OF REVIEWER

• Well acquainted with the technical aspects

• Awareness on the provisions of Code of Conduct of ICSI

• Should have studied the provisions of the Code of Conduct of ICSI

• Acquaintance with decisions of various courts on “deficiency in service”

.R.Sridharan & Associates , Company Secretaries 35

….CONTD

• Knowledge on relevant provisions of CS Act, 1980, Consumer Protections Act, Evidence Act, IPC, etc.

• Good in Drafting and Communication skills.

• Professional ethics and courteous behavior while on visit

• Recognizing his limitations


METHODOLOGY TO BE FOLLOWED BY REVIEWER

Offsite Review

Study of information given by PU in the Questionnaire and based on the same make own observations about possible areas where enhancement is possible and note other aspects to be discussed in personal meeting with PU


….CONTD

Onsite Review Authentication of information given by Practice Unit

(PU). Test checks in respect of attestation assignments handled by PU

Communication with the staff & trainees of PU should be part of Peer Review

Inspection of the records of the client maintained by PU to verify compliance


PEER REVIEW - PLANNING

Intimation to PU about impending Peer Review along with Questionnaire and list of three suggested Peer Reviewers.

Reply by PU within 15 days. Questionnaire to be returned within one month Sampling of Attestation Services Engagements Confirmation of visit by Reviewer. Initial Meeting. Compliance Review – General Controls. Selection of attestation services engagements to be reviewed. Review of Records.


PEER REVIEW - EXECUTION

On site review for two or three days on the assumption that the PU has made records and information ready on hand.

Initial Meeting to discuss the agenda and confirm the accuracy of the responses in the Questionnaire.

Compliance Review on General controls based on their installation , operation and maintenance.


.... CONTD

Selection of attestation services engagements to be reviewed which include the number of attestation services engagement, not to undertake services subject to disciplinary proceedings.

Review of Records to adopt either a compliance approach or substantive approach


PEER REVIEW - REPORTING

PRELIMINARY REPORT• Preliminary Report of

Reviewer at the end of on-site review before the report is made to the Board.

• After on-site review, reviewer may communicate with PU and seek clarifications and consider sending a preliminary report if replies not found satisfactory

• After on-site review, in case of deficiencies in systems and procedures or non-compliances the reviewer to issue preliminary report to PU immediately

• Reviewer to take care not to mention any names

• Scope of review performed and scope limitations, if any, to be mentioned

INTERIM REPORT

•Interim Report based on representation made by the Practice Unit and follow up review.•Reviewer to issue interim report if not satisfied with reply of the PU and deficiencies are of such serious nature that they do not ensure quality of attestation services performed by the PU -weakness in compliance with technical standards and/ or in internal quality control systems •Report to clearly indicate "Interim Report"•On receipt of interim report by the Board or receipt of response from the PU, the Board may instruct the reviewer to carry out a follow up review after a period ranging from 6 months to 12 months at the discretion of the Board

FINAL REPORT• Final Report of Reviewer to the Board.

• Reviewer to submit Final Report to the Board with a copy to the PU

• Final Report should incorporate the findings as discussed with the PU

• Final report to be submitted to the Board.

• The Board shall consider the report and if satisfied, will issue Peer Review Certificate

• If not satisfied, the Board may issue recommendations to the PU and direct the reviewer for further review


ESTABLISHMENT OF ICSI PRB

(1)The Board shall be established by the Council.(2) The Board shall consist of a maximum of seven members

to be appointed by the Council, of whom at least four shall be from amongst the Members of the Council.

(3) The balance members of the Board shall be drawn from amongst prominent members of high integrity and reputation, including but not limited to former public officials, regulatory authorities etc.

(4) The Council shall appoint the Chairman and the Vice-Chairman from amongst the Members of the Council.


…CONTD

(5)At least one-half of Council Members on the Board shall hold Certificate of Practice.

(6) The tenure of the Peer Review Board shall be co-terminus with the tenure of the Council and the term of a member shall be for such period as may be prescribed by the Council.

(7) Any vacancy(ies) on the Board shall be filled in by the Council.

(8) Members of the Disciplinary Committee of the Institute of Company Secretaries of India shall not concurrently serve on the Board.


ICSI PRBMr. Harish K Vaid,

Chairman

Mr. R Sridharan, Vice-Chairman

Mr. Ashok Kumar Pareek,

Member

Mr. Sanjay Grover,

Member

Mr.Mahesh Ananth Athavale,

Member

Mr. V Sreedharan,

Member

Ms. Savithri Parekh, Member


OBJECTIVE OF ICSI PRB

The main objective of Peer Review is to ensure that in carrying out the assurance service assignments, the members of the Institute :

(a) Comply with Technical, Professional and Ethical Standards as applicable including other regulatory requirements thereto and

(b) Have in place proper systems including documentation thereof, to amply demonstrate the quality of the assurance services.


…CONTD

Thus Peer Review is meant for the purpose of enhancing quality of professional work, transparency in technical standards used, world class procedures and techniques resulting into more reliable reports and it has no relationship whatsoever with any disciplinary or any other regulatory mechanism. The review begins with the assumption that professionals discharge their responsibilities properly and the aim of review is to enhance those attributes of professionalism that serve to keep the profession in India.


POWERS OF ICSI PRBTo call for information from

practice units in such form as it deem fit

To maintain a panel of Reviewers.

To define the terms of appointment of the reviewers

To send a Panel of at least three reviewers (from the Board’s

own panel) to the practice unit and allow the practice unit to choose any one reviewer from the panel so forwarded to it

To examine the aspects of basis of selection of records

pertaining to the attestation services in terms of the appropriate Technical

Standards.

To arrange for such training programs for reviewers as may

be deemed appropriate

To prescribe the system, practice and procedure to be observed in relation to peer

reviews

On considering the Report of a reviewer, to do any or all of the

following:(a) To issue recommendations to the practice unit;(b) To order a further peer

review to be carried out

After considering the report of the reviewer and compliance of

recommendations by the Practice Unit, wherever deemed

appropriate by the Board, to issue Peer Review Certificate.

To guide the members on best practices on peer review.


CONCLUSION

Peer Review , as a self – regulatory mechanism allows a professional to reassure the society and the stakeholders at a large that this profession is conscious of its responsibilities and is determined to do its best by ensuring the members to observe high standards.



THANK YOU

14 th National Conference of Practicing Company Secretaries on “ Integrating Growth, Governance...

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