The American Institute of CPAs (AICPA) established the Peer Review Program nearly 20 years ago to enhance the quality of accounting, auditing and attestation services performed by AICPA members in public practice. The AICPA Peer Review Program illustrates the accounting profession’s dedication to integrity and protection of the public and is driven by adherence to the highest possible professional standards.
The AICPA Peer Review Program is well-respected by both practitioners, state boards of accountancy and other users of the peer review process, who recognize the program as an effective quality improvement tool.
Since 1977, more than 50,000 CPA firms have undergone more than 160,000 peer reviews, resulting in reports that provide insight into participating firms’ quality control standards and their real-world use of those standards. Approximately 32,000 firms are currently subject to peer review, with 41 individual state CPA societies serving as administering entities in the 55 licensing jurisdictions. Currently, 39 states require peer review as a condition of licensure.
Peer review provides a mechanism for a firm to engage a peer firm to review its system of quality control related to its application of professional accounting, auditing and attestation standards. The AICPA Peer Review Program is important because it strengthens member firms’ quality control and encourages firms to improve processes and correct any shortcomings. Peer review enhances the quality of the profession and contributes to the public’s confidence in the profession.
The Maryland Board of Public Accountancy recognizes the value and importance of peer review. In 2005, a law was passed making peer review mandatory for all CPAs in Maryland who perform a compilation, review audit or other attest services.
There are two types of peer reviews: system reviews and engagement reviews. The type of peer review that is performed on a CPA firm is dependent upon the type of work that a firm delivers to its clients.
A system review is a study and appraisal by an independent evaluator(s), known as a peer reviewer, of a CPA firm’s system of quality control to perform accounting and auditing (“A&A”) work. The quality control system represents the policies and procedures that the CPA firm has designed, and is expected to follow, when performing its work. The peer reviewer’s objective is to determine whether the quality control system is designed to ensure compliance with professional standards and whether the firm is following its system appropriately.
Firms that perform engagements under the Statements on Auditing Standards (SASs), Government Auditing Standards (Yellow Book) or examinations of prospective financial statements under the Statements of Standards for Attestation Engagements (SSAEs) are subject to system reviews.
Approximately 15,000 firms are likely to have a system review over the next three years. The scope of the peer review does not encompass other segments of a CPA practice, such as tax services or management advisory services, except to the extent that they are associated with financial statements, such as reviews of tax provisions and accruals contained in financial statements.
This type of review is for firms that are not required to have a system review, but do perform compilations of financial statements with disclosures and/or compilations of financial statements that omit substantially all disclosures (formerly considered a Report Review).
Unlike system reviews where a firm’s system for quality control policies and procedures are evaluated, an engagement review evaluates the firm’s financial statements and documentation with regard to conformance to AICPA professional standards. The reviewer does not express an opinion on the firm’s compliance with its own quality control policies and procedures or compliance with AICPA quality control standards.
An engagement review provides reviewers with a reasonable basis for expressing limited assurance that:
More than 10,000 firms are likely to have an engagement review over the next three years.
There are two types of peer reviewers – team captains and team members. Team captains are those who are qualified to perform all types of peer reviews. Team members are those who are qualified to perform engagement and report reviews and may also assist team captains in various aspects of the system review.
In certain situations, it is also possible for a professional to be involved in peer review as a team member without the specialized training requirement, where they only review specific areas of quality control or engagements on a system review.
For more information on the AICPA Peer Review Program administered by MACPA, contact Mary Beth Halpern at (443) 632-2330 or Marybeth@macpa.org. You also may visit www.aicpa.org, e-mail the AICPA peer review staff at PeerReviewupdates@aicpa.org or call (919) 402-4502.