Can a Single Member Cpa Perform a Review
| EXECUTIVE SUMMARY | |
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| GARY FREUNDLICH, CPA, is a senior technical director in the AICPA practise monitoring division. His e-postal service address is GFreundlich@aicpa.org . WALTER H. WEBB, CPA, is a partner of Telephone call, Barrick, Ethridge, Webb & Co. LLP in Cushing, Oklahoma, and chairman of the AICPA peer review board. Mr. Freundlich is an employee of the American Institute of CPAs and his views, as expressed in this article, do non necessarily reflect the views of the AICPA. Official positions are determined through certain specific committee procedures, due procedure and deliberation. |
southward function of the development of the peer review process, the AICPA reevaluated and revised its standards for performing and reporting on peer reviews for CPA firms that exercise not audit SEC registrants. Once firms begin to implement them adjacent January, the revisions should result in meaning efficiencies in the way peer reviews are conducted and administered; the changes also should improve the quality of financial reporting and protect members of the public who use and rely on those reports.
Near eighteen,000 of the 30,000-plus firms in the AICPA peer review programme perform reviews or compilations as their highest level of service every bit follows:
| Date review firms | |
| Reviews just | 393 |
| Reviews and full-disclosure compilations merely | 467 |
| Reviews and omit-disclosure compilations only | 2,355 |
| Reviews and full- and omit-disclosure compilations just | 4,106 |
| Total-disclosure compilations only | 500 |
| Full- and omit-disclosure compilations only | 2,540 |
| Total firms | 10,361 |
| Report review firms | |
| Omit-disclosure compilations simply | vii,404 |
| Total date and report review firms | 17,765* |
*Does not include firms performing engagements under the SASs, examinations of prospective fiscal statements nether the SSAEs or under Regime Auditing Standards (the yellow book).
Source: AICPA practise monitoring segmentation, 2000.
While at least some of the changes employ to all of the more than 30,000 firms enrolled in the AICPA peer review program, they nigh notably affect the virtually 18,000 small firms (by and large sole practitioners) that perform only review or compilation engagements and non audits. The revised standards also affect regulators (such every bit land boards of accountancy, which crave peer review for licensure), CPAs who perform the peer reviews and land CPA societies, which administer the peer review program (run into the box). This article focuses on how the key revisions volition affect the peer reviews of small-scale firms.
TYPES OF PEER REVIEWS
The most significant change is that at that place will be three types of peer reviews (organisation, appointment and report) instead of ii (on-site and off-site). The engagements in a firm's bookkeeping and auditing practice currently covered nether peer review still volition be covered under the revised standards. For purposes of the standards, an accounting and auditing exercise is defined as all of a CPA firm's engagements (with few exceptions) that are covered past AICPA statements on auditing standards (SASs), statements on standards for accounting and review services (SSARSs) and statements on standards for testament engagements (SSAEs) equally well equally by Regime Auditing Standards (the yellow book), issued by the U.S. General Accounting Role.
System review. This blazon of review is for firms that perform engagements under the SASs, or the yellow book or examinations of prospective financial information under the SSAEs. Essentially it is the same equally an on-site peer review with a name change. A system review is intended to provide the reviewer with a reasonable footing for expressing an opinion whether—for the year under review—the reviewed house
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Has designed its system of quality control for its bookkeeping and auditing practice in accordance with AICPA quality control standards.
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Is complying with its quality control policies and procedures in a fashion that will provide the business firm with reasonable assurance of conforming with professional standards.
On-site peer review was renamed system review to more accurately describe the type of peer review since the reviewer expresses an opinion on the firm'due south system of quality command. Approximately 15,000 firms are likely to have a system review over the next 3 years.
Then the AICPA tin can focus its efforts on establishing standards, programs, checklists and procedures, the Constitute annually asks each of the 54 state CPA societies (including those in the District of Columbia, Guam, Puerto Rico and the Virgin Islands) to administer the AICPA peer review program or to suit to accept the peer reviews of firms with their main offices in that state administered by another state CPA society. Currently there are 41 administering entities for the 54 jurisdictions. All are country CPA societies except New England Peer Review, Inc., an approved entity that administers the AICPA peer review program for Vermont, Rhode Isle, Maine and New Hampshire.
Appointment review. This type of review is for firms that are not required to have system reviews (and are not eligible to have study reviews,which are discussed beneath). An engagement review's objectives are to provide the peer reviewer with a reasonable basis for expressing express balls that
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The financial statements or information and the related accountant's report on the accounting, review and testament engagements the firm submits for review conform in all material respects with professional standards (the aforementioned as an off-site peer review).
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The reviewed firm'southward documentation conforms with the requirements of the SSARSs and the SSAEs, as applicable, in all material respects (new under the revised standards).
This type of review does non cover the business firm's system of quality control, so the reviewer cannot limited an opinion on the firm's compliance with its own quality control policies and procedures or with AICPA quality control standards. The reviewer can express only limited assurance on the house's conformity with the SSARSs and the SSAEs.
An engagement review does not crave the reviewed firm to document any work other than that required past the SSARSs and the SSAEs, so the peer reviewer expresses limited assurance on whether the firm'south documentation conforms with those standards. Some examples of documentation include
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Direction representation messages on a review date.
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Working papers documenting the matters covered in the accountant's inquiry and analytical procedures on a review of financial statements.
The engagement review also encompasses documentation required under the SSAEs, such every bit might be the instance on a WebTrust date. Currently, there are no documentation requirements for compilation engagements nether the SSARSs. If a house has an engagement review and performs simply compilations under the SSARSs, the review will not include whatever of the firm'southward documentation.
These changes should amend the quality of engagements—protecting the public that uses and relies on those reports—without imposing whatever boosted burden on reviewed firms. The new procedures peer reviewers must perform are based on the minimal documentation requirements under the SSARSs and the SSAEs. More than ten,000 firms are probable to take an engagement review over the next three years.
Report review. Firms performing just compilations that omit essentially all disclosures will have study reviews. Withal, a firm must have an engagement review if it performs—every bit its highest level of service—compilations referred to in the SSARSs equally "selected data—substantially all disclosures required are non included." A report review retains the overall integrity of peer review through a streamlined process.
A report review's objective is to help a firm that performs omit-disclosure compilation engagements as its highest level of service improve the overall quality of its practice. To accomplish this, the peer reviewer selects a sample of engagements and gives the firm a written report listing comments and recommendations based on whether the fiscal statements and the related auditor's reports announced to suit with the requirements of professional standards in all textile respects.
A peer reviewer'south comments should be relevant and supportable past professional standards, giving the firm sound guidance for improving the overall quality of its omit-disclosure compilation engagements. Although materiality and relevance are sometimes subjective, peer reviewers should not establish their own professional standards or impose their own personal preferences on the firms they review. The comments and recommendations should be reasonably detailed so that a business firm can make up one's mind what deportment information technology should have.
An authorized member of the reviewed business firm is required to sign the study—whether or non in that location are comments—acknowledging that at that place are no disagreements on significant matters and that the firm agrees to correct the matters commented on. The business firm then must submit the signed copy of the study to the entity administering the peer review. There is no split letter of annotate or letter of response (as is the case with organization and engagement reviews). Nevertheless, a firm volition non be prohibited from attaching a response to the copy of the peer review report it signed.
The administering entity must technically review all peer reviews. On report reviews, even so, the entity's peer review committee does not e'er need to be directly involved in accepting peer review documents. The technical reviewer, selected past the administering entity, normally helps the committee past reviewing the documents the peer reviewer submits. In a study review, however, the technical reviewer generally should have the authority to accept report reviews on the committee'southward behalf when the technical reviewer determines at that place are no significant issues. This process is immune just on study reviews.
By streamlining the process, including not requiring a formal response, the technical reviewer may be able to take 85% or more of report reviews on the committee's authorisation inside xxx days of receiving the signed peer review report. Currently, the procedure often takes between three and six months. The AICPA peer review board is asking the 41 entities that administer the programme to reevaluate the current scheduling, administrative and other related fees they charge firms based on this streamlined procedure.
If the technical reviewer finds significant deficiencies or issues with the peer review, that reviewer may not accept the report review. He or she should submit it for peer review committee consideration. Examples of such deficiencies include matters cloth to understanding the report, financial statements or other concerns such as significant repeat comments from the firm's previous peer review or issues with the peer reviewer's performance. Since a study review's objective is to enable the house to ameliorate its omit-disclosure compilation engagements, the committee may need to ask the firm for evidence that it has taken corrective action to the committee'due south satisfaction.
The technical reviewer solitary may not impose corrective actions on the firm or peer reviewer; the committee must determine any corrective actions. The AICPA peer review lath, land boards of accountancy and other interested parties responding to the revisions in the exposure draft stressed the importance of ensuring that firms with significant deficiencies have their cosmetic actions monitored past the commission. Since more than vii,000 firms are likely to have report reviews over the side by side three years, this is a pregnant improvement to the process.
Step-UP IN PEER REVIEW
If a business firm is required to take only a report review, it may elect to have an appointment or system review; a firm required to have an engagement review may elect to have a system review. A business firm can brand such an ballot to authorize its members to be peer reviewers or peer review committee members. Although nearly eighteen,000 firms are not required to have arrangement reviews, every CPA business firm must take a system of quality control in place. Some of those firms, therefore, may notice information technology useful to accept peer reviews covering that system.
AICPA BYLAW Change
The AICPA amended its bylaws to require members practicing public accounting in organizations not eligible to enroll in an Institute-approved exercise-monitoring program (a non-CPA-owned entity) to enroll individually if the services they perform and the reports they issue are bailiwick to peer review. Currently, the simply services covered by this situation are compilations performed and reported on under the SSARSs. Those private members will be subject to engagement or report reviews.
Constructive Appointment
The revised standards are effective for all peer reviews commencing on or after January ane, 2001. Early implementation is not allowed either in part or whole primarily because the entire AICPA peer review computer organization, used to administer the program for more than 30,000 firms, is beingness rewritten.
EVERYBODY WINS
The goal of the AICPA peer review program is quality in the performance of accounting and auditing engagements by program members. The revised peer review standards take not changed this goal. Creating new, efficient and less crushing ways to bear and administer peer reviews for the many small-scale CPA firms required to take them benefits everyone—clients, practitioners, regulators and reviewers. In the end, everyone wins, particularly CPA firms that tin can spend more than time serving their clients.
CPAs who accept questions most peer review should call the land CPA society that administers their reviews or the AICPA peer review program staff (201-938-3030). The revised standards tin be obtained on the AICPA peer review Web site at www.aicpa.org/members/div/practmon/alphabetize.htm .
Source: https://www.journalofaccountancy.com/issues/2000/aug/peerreviewforsmallfirms.html
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