DRT & Associates were appointed by Peer Review Board to conduct review of ALM LLP, a practicing unit. After completing the on-site review, DRT & Associates submitted the report to the Board. Later after few months, one of the client of ALM LLP, DOT Infosystems filed the case for disciplinary action alleging that the firm does not have a proper system of quality control and there are certain deficiencies in QC policies because of which the partners of the firm were unable to conduct their audit and their report had some irrelevant observations and hence it is affecting the continuance of client relationship with ALM LLP.
Before setting up any inquiries against ALM LLP to decide any act of misconduct, Board of Discipline referred the matter to Peer Review Board and raised the correctness of report submitted by the reviewer DRT & Associates seeking reply as to why the practioner failed to report the deficiencies in Quality Control of the practice unit ALM LLP. The respondent made a clear submission that there are certain inherent limitations of Peer Review and review might not necessarily disclose all the weaknesses with respect to maintenance of quality control of Practice Unit since the peer review report is submitted on the basis on some selective tests only.
Board of Discipline, upon receipt of submission by Peer Reviewer , raised objection against submission of Reviewer concluding it to be unsatisfactory, filed a case of misconduct against both, the practioner and the Practice Unit under Clause 7 of Part I of Second Schedule of CA Act, 1949 stating that both the firms were grossly negligent in conduct of their professional duties.
DRT and Associates, being aggrieved of order passed by Board of Discipline filed and appeal before Appellate Authority within prescribed time limit alleging that there is no misconduct on part of peer review process and submission of review report and further claimed that the subject matter does not fall under the disciplinary procedure by Board of Discipline but shall be investigated by Peer Review Board of ICAI.
1. Whether the order passed by Board of Displine against the Reviewer and the Practice Unit stands correct?
2. Does the appeal of Practioner against Board of Discipline can be called into action?
- First explain that there is inherent limitation of peer review in short, it cannot identify all weakness.
- BOD cannot pass order of second schedule it is outside its domain, Disciplinary Committee looks into this matter.
- Yes any dispute relating to peer review should be first taken to peer review board.
- Immunity — A Practice Unit, which makes available records or documents to a Reviewer, shall not
be held liable under the Code of Ethics or under the Chartered Accountants Act, 1949 and the
Regulations framed there under, by reason of compliance with peer review statement. There is process by which disciplinary proceeding can be started against PU. Not followed in this case.
- The Reviewer, by virtue of conducting the Peer Review shall not be held liable except for the liability arising out of his own conduct under the Code of Ethics under the Chartered Accountants Act, 1949 and Regulations framed there under as well as under the relevant clauses of this Statement
Conclusion — Order passed by Board of Discipline is in appropriate
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