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.
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…… 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.
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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”.
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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).
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….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.
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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
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….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
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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
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….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
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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.
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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
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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.
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…..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.
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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.
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…. 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.
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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.
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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.
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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
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.… 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.
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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)
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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)
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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.
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….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.
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….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.
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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.
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….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.
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….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.
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….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.
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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.
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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.
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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”
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….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
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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
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….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
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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.
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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.
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.... 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
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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
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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.
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…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.
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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
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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.
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…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.
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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.
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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.
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THANK YOU
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