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AICPA Peer Review Standard Changes | Are you prepared?

Posted by Daniel K. Goff, CPA on Mar 27, 2017 11:35:30 AM
Daniel K. Goff, CPA
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At this time
of year, Peer Review, is the last thing you want to hear. Unfortunately, if your firm's peer review is due this year, it is now beyond the time to start preparing.

In 2016, the Peer Review Board approved significant changes to the Peer Review Standards, Interpretations, and other related guidance
. These changes became effective on January 1, 2017. Peer reviews commencing on or after January 1, 2017 take note.
 

The following summarizes these changes to help you prepare for your review.

January 2017: The AICPA will no longer update or maintain the Quality Control Policies and Procedures Documentation Questionnaires (PRP 4300 and 4400 checklists). This change requires every firm to have a written quality control document. Firms can no longer use PRP 4300 and 4400 checklists for documenting quality control policies and procedures.
The AICPA has several tools available to assist firms in developing a written document. The same vendor providing the firm’s other audit and accounting materials can provide the quality control materials, such as a guide to quality control. For most firms, it would be more efficient to purchase the quality control materials from these vendors.
 
As part of the peer review process, the peer review team must now perform a more robust review of each firm’s system of quality control. So I encourage all firms to take this change seriously.

The most important changes include:

The firm must provide:

  • A list of quality control personnel such as:
    • human resources director,
    • quality control director,
    • and/or the individual responsible for monitoring.
  • A copy of the inspection reports, including all relevant communications, for each of the three years after the prior peer review.

The team captain or review captain will:

  • Conduct a closing meeting at the end of the on-site segment of the peer review.
    • The purpose of this meeting is to discuss any preliminary issues identified by the review team with senior members of the reviewed firm, i.e.;
      • matters,
      • findings,
      • deficiencies,
      • significant deficiencies
      • or non-conforming engagements 
  • The review team will also remind the firm to respond to those issues noted (As required).

The closing meeting:

  • Typically on-site (engagement reviews may hold the meeting via teleconference),
  • 30 days before the firm’s exit conference.
  • Scheduling your peer review in the same month it is due is no longer an option. 

30 days provides the firm with time to determine the appropriate remediation for any issues noted by the review team.

The exit conference:

  • Usually held via teleconference.
  • Held after the firm has responded to (and the team captain has assessed those responses):
    • any matters,
    • findings,
    • deficiencies
    • or significant deficiencies.
  • The firm should assist the review team in identifying the systemic cause of any matter, finding, deficiency, or significant deficiency.

The closing meeting and exit conference may be combined if, for example, there are no matters, findings or deficiencies to discuss.

Before the exit conference, the team captain or review captain will evaluate the firm’s responses to:

  • Any MFC forms,
  • FFC forms,
  • Deficiencies,
  • Significant deficiencies
  • Or non-conforming engagements.

The team captain will evaluate:

  • The firm’s actions (taken or planned) to remediate any engagements identified as nonconforming engagements on an FFC form or in the report
  • The firm’s actions (taken or planned) to remediate any findings or deficiencies noted in the firm’s system of quality control
  • The timing of the remediation (taken or planned).

Representation Letters:

  • There are now separate firm representation letters for System Reviews and Engagement Reviews.
  • Firm representation letters for Engagement Reviews are now to be dated the same day as the peer review report, similar to a System Review.
  • Firms should not remove required representations from their letters.
    • However, include any additional information if deemed appropriate.
  • Some of the required representations are new or have changed.
    • Firms should be careful to ensure they are using the most up to date language, for example, Firms undergoing a System Review are required to:
      • List which must-select engagement types they performed during the peer review year.
      • Represent to the best of their knowledge and belief that the peer reviewer selected and reviewed at least one of each type.
      • For the firm’s System Review, the types of must-select engagements listed in the representation letter, should agree to those listed by the team captain in the peer review report.

Representation letters must contain all the required representations. Representation letters that fail to do so won't be accepted. This risks delaying the acceptance of the firm’s peer review report.

Other Information:

There are some clerical changes to the peer review report including a reorganization of some information and headings for select paragraphs.

Find Additional information regarding these changes on the AICPA Peer Review website. Information provided at the AICPA Peer Review website includes:

Topics: Peer Reviews, Accounting, CPA Firms, AICPA

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