peer review

Some preliminary thoughts on the Enhancing Audit Quality initiative and some Peer Review implications

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The AICPA has launched an initiative they are calling Enhancing Audit Quality, or EAQ. This will be a coordinated effort to improve the overall quality of audits.

Why the initiative?

There are some serious quality issues. More on that momentarily.

This will be the first in a long series of articles on the EAQ initiative. I think this will be a big deal over the next few years and we probably ought to start paying attention.

I previously did a quick read through of the EAQ Discussion Paper. You can find that and lots more on the EAQ home page, which has an easy-to-remember link of aicpa.org/auditquality.

Today I listened to a one-hour webcast. You can find the link here, and since it was not for credit, I’m guessing you may soon be able to watch it on your own.

Why is there a perceived quality issue?

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A Halloween costume that would make any CPA pass out from fright – an auditor performing one pension plan audit

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Photo courtesy of DollarPhotoClub.com
Photo courtesy of DollarPhotoClub.com

Amid the cute little kids in their funny costumes, this pleasant Halloween night there was a grown man in a suit at the door asking for candy. White shirt, red tie, gray pinstripe.

Not so scary, thought I.

“What are you dressed up as?”

“An auditor,” came the reply.

That’s not frightening, since I’ve been an auditor for a long time. But it did explain the standard issue uniform.

So, putting on my peer reviewer hat, I asked, “what audit work do you do?”

“Oh, only one pension plan….

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Report your peer review status to California Board every two years starting in 2014

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Staring with renewals in 2014, our requirement to report peer review status will take place every two years along with our bi-annual renewal. This is instead of reporting every 3 years. Should make the reporting easier. We will have one less deadline to track.

The following article is reprinted with permission of the California Board of Accountancy.

STREAMLINING PEER REVIEW REPORTING

Changes have been made to the Peer Review reporting requirements! Beginning January 1, 2014, the process will be streamlined and reporting peer review information to the CBA will be done at the time of license renewal. Even though reporting will be done at license renewal, peer reviews are still only required once every three years. In short, you need to report your peer review every two years and have a peer review every three years.

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Peer review reports are public for some firms – Here’s how to see the report on my firm

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You can find the peer review report at the AICPA web site for those CPA firms who are members of one of three special sections:

  • Employee Benefit Plan Audit Quality Center (EBPAQC)
  • Governmental Audit Quality Center (GAQC)
  • Private Companies Practice Section (PCPS)

Since I’m a member of PCPS, you can find my report there.

Go to the Peer review public file search page to look up a firm.

Enter my firm name there and you can get a screen that lists my firm and shows a link to two documents:

You can see for yourself that I received a “pass” rating.

If a firm is a member of EBPAQC, GAQC, or PCPS, you can find their peer review report at the above page.

Frequently asked questions on the Peer Review program in California

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The California Board of Accountancy has a great FAQ posted here. It covers a lot of general questions on the peer review program.

Check it out.

Good discussion of the transition to reporting your peer review status every two years when you renew your license. Remember the phase-in was over three years.

That two-year reporting requirement doesn’t mean you have to get a peer review every two years. Just that you have to report your status when you renew every two years. Will likely get you into the situation where you tell the board about one specific peer review report on two consecutive renewals.

Ulvog CPA firm receives “Pass” rating in Peer Review

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(Cross-post from my other blog, Nonprofit Update.)

I am pleased to report that my firm received a pass rating on the peer review which was performed in November 2012.

The peer review program is a process the CPA profession has developed to look at the quality of audit and other attestation work performed by CPAs. Firms are inspected by other firms to evaluate compliance with various professional standards.

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Overview of Peer Review from California Board of Accountancy

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The following article is reprinted with permission of the California Board of Accountancy.

What You Want (and need) to Know about Peer review

The most important thing to know about peer review is that ALL LICENSEES are required to submit a Peer Review Reporting Form to the CBA regardless of the type of work performed, status of license, or industry of employment. Undergoing a peer review and reporting peer review information are two different things, so read carefully to determine your responsibilities.

There’s no doubt you’ve been hearing about Peer Review since at least January 1, 2010. That’s the date Peer Review went into effect, and all California–licensed firms that provide accounting and auditing (A&A) services, including sole proprietorships, were required to undergo a peer review once every three years as a condition of license renewal. Peer review is defined as the study of a firm’s A&A practice by an independent CPA using professional standards.

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Want a quick overview of the peer review program?

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Going through your first review soon and want to get an idea what’s involved?  Want to figure out how things are working since your last long-ago review?

Check out pages 4 and 5 of the Fall 2012 issue of UPDATE from the California Board of Accountancy. You can find it on this page. A direct link to the PDF is here.

I’ve been a peer reviewer for over a year now and I’m still learning the subtleties of how the program works. I know it is very complicated.  When I walk CPAs through the process, I can tell it is confusing. New forms. New terminology. New report names (pass instead of unqualified).

If you are going through your first peer review or it’s been a long time since you last did so, you’ll find that summary will give you a survey of what’s involved.

Journey through a peer review – field work finished – next step is technical review

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Seventh in a series.  Field work wrapped up yesterday for my peer review.  The reviewer gave me a draft report. I can’t discuss it until it is accepted by the Peer Review Committee.

The next step is for the reviewer to finish a bunch of checklists and send them to the technical reviewer.  …

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Journey through a peer review – field work is today

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Here’s part 6 of the tale of my journey through my peer review.

Today is field work. The reviewer will arrive at my office soon. Expect him to be here most of the day.

Spent a few minutes yesterday pulling together a few more documents I know he will want to see. Also set up an extra computer for his use while he reads a bunch of workpapers.

I won’t be talking about the results of the review for a long time.

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Journey through a peer review – initial engagement selection

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Part five of my journey through the peer review process.

Since submitting the list of engagements, which I discussed last post, I got back a list of engagements my reviewer wants to look at. He will make an additional surprise selection when he arrives.

He will need a few more things before field work.  I sent him a copy of the financial statements for each of the engagements he selected.

For the audits, I also filled out a profile sheet. You can see the nonprofit form here, assuming you are an AICPA member and can login to their site.

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Journey through a peer review – forms to prep for field work

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Part 4 of my journey through the peer review process for this cycle.

Well, after signing an engagement letter with the reviewing firm I need to get the initial round of checklists completed.

List of engagements

My peer review year ends May 31. This weekend I accumulated a list of completed engagements for clients whose fiscal year ended within my peer review year. That means I listed my clients whose fiscal year ended between in June 2011 and May 2012. Not when I issued the reports, but the client’s year-end. 

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Journey through a peer review – reviewing firm approved

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Part 3 of my journey through the peer review process.

Previously I mentioned there’s a 30 day deadline from when my scheduling form was approved until I needed to advise CalCPA which firm I would like to perform my review.

Well, I didn’t hit the 30 day deadline. So two days after the deadline I received a reminder saying I have an extra 15 days.

It’s almost like the administering entities have figured out that CPAs don’t do things until they have a deadline staring them in the face. Imagine that!

I’ve now made arrangements with the firm that will do my review. I filled out Exhibit 1, which only took a few minutes.

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