Which peer review do I need — PCAOB, Center PRP or AICPA PRP?

By Raymond J. Locke, CPA

The rise of the Public Company Accounting Oversight Board (PCAOB) and the demise of the SEC Practice Section (SECPS) of the AICPA has left many CPA firms wondering what type of peer review they need and which organization will administer their peer review.

The administration of your firm's peer review depends on the nature of your firm's practice. The ultimate guidepost is whether your firm performs work that requires it to be registered with the PCAOB (generally, audits of SEC-registered companies).

What happened to the SECPS?

In early January 2004, SECPS member firms received a letter from the Center for Public Company Audit Firms (the Center) informing them that their SECPS membership was converted to a membership in the Center. Any AICPA member firm that performs SEC audits must be enrolled in the Center. However, you do not have to perform SEC audits to be a member of the Center.

Does your firm need a peer review?

Your firm may need to undergo a peer review if you perform engagements under Statements on Auditing Standards (SASs), Statements on Standards for Accounting and Review Services (SSARSs), Statements on Standards for Attestation Engagements (SSAEs) or Government Auditing Standards issued by the U.S. General Accounting Office (the Yellow Book).

Certain regulatory entities such as the SEC, GAO and the AICPA require peer reviews for firms that perform these engagements. Once you decide you need (or want) a peer review, you need to determine who will administer your peer review.

If your firm is required to be registered with the PCAOB ...

The Sarbanes-Oxley Act of 2002 prohibits accounting firms that are not registered with the PCAOB from preparing or issuing audit reports on U.S. public companies and participating in such audits. If your firm is required to be registered with the PCAOB, your SEC work will be subject to periodic inspection by the PCAOB. The frequency of the PCAOB's inspection depends on the number of SEC audits your firm performs.

Your non-SEC work will be subject to peer review under the Center's peer review program (Center PRP).

If your firm is not registered with the PCAOB but is a member of the Center ...

Many CPA firms that were members of the SECPS and are now members of the Center decided not to register with the PCAOB, since they did not perform SEC work. If your firm is not registered with the PCAOB but you are a member of the Center, you have two options: You may have your firm's peer review administered under either the Center PRP or the AICPA peer review program (AICPA PRP). The differences between the two programs are discussed below.

If your firm became a member of the Center through a rollover from the SECPS, you were automatically enrolled in the Center PRP on Jan. 1, 2004. You may change your Center PRP enrollment to the AICPA PRP by mailing a letter (AICPA, Center for Public Company Audit Firms PRP, Harborside Financial Center, 201 Plaza Three, Jersey City, N.J. 07311-3881) or sending an e-mail (centerprp@aicpa.org) resigning from the Center PRP. Then, you must submit an enrollment form for the AICPA PRP.

To download the form, visit ftp.aicpa.org/public/download/members/div/practmon/enroll900.pdf.

If your firm is not a member of the center ...

If your firm is not a member of the Center and you want a Center peer review, you must submit an enrollment form (it's the same form as above) to the Center's Peer Review Committee, who will consider your firm's request.

All other firms will have their peer review administered under the AICPA PRP.

Differences between the Center PRP and the AICPA PRP

What are the differences between Center PRP and AICPA PRP administered peer reviews?

Under Center PRP peer reviews:

the reviews are administered by the Center and are subject to administration fees imposed by the Center;
member firms of the Center will be tested for compliance with the membership requirements of the Center; and
results of all Center PRP peer reviews will be placed in a file available to the public.

Under AICPA PRP peer reviews:

the reviews are administered by one of 41 state CPA societies across the USA (peer reviews of Maryland firms are administered by the MAPCA); and
results of the AICPA PRP peer reviews are not publicized. However, your firm is required to present your peer review report to clients for which it performs engagements under Yellow Book standards.

Summary

The administration of your peer review depends upon whether your firm is registered with the PCAOB. If your firm is not registered with the Center, you have a choice between being administered by the Center PRP or the AICPA PRP. The deciding factor between a Center PRP and the AICPA PRP may be whether you want your peer review to be available to the public.

Under either program, your peer review is designed to be an educational process for your firm while helping to assure the high standards of the CPA profession are maintained.

Raymond J. Locke, CPA, of Watkins, Meegan, Drury & Co., is chair of the MACPA's Peer Review Committee.