The rules for peer review have a few requirements to help make sure that a peer reviewer keeps some distance when performing a peer review. In other words, independence is required.
Here are some of the specific situations:
Annual inspection – a firm has the option to contract out its annual inspection or its monitoring. Often times a CPA firm will hire it’s peer reviewer to do the inspection. In that situation, a peer reviewer cannot perform an inspection in the year of the peer review or the preceding year. Typically the peer review itself substitutes for an inspection, so on a practical basis this means that a peer reviewer cannot do the inspection in the year prior to the review.
Engagement quality control review, or pre-issuance review – sometimes firms will contract with another CPA firm if they have engagements that meet the criteria for an engagement quality control review. The need to outsource is more likely in small firms where there is not another partner available who did not work on the engagement. This might especially be true for a sole practitioner.
If a firm contracts out the engagement quality control review it will probably be done with the same person who does the peer review. This makes sense when you think about it — the peer reviewer would have a lower learning curve because of the familiarity with the firm’s personality, processes, and documentation.
However, to maintain independence, the peer review rules do not allow a reviewer to provide an engagement quality control review in the year of the review or the prior year .
Consultation – there are also limits on the amount of consulting a peer reviewer can provide in the year of the review or the year prior.
All of these restrictions make sense when you think about them. Having the peer reviewer back off on other services in the year prior to the review would allow a bit more intellectual distance and probably increase the objectivity of the reviewer.
All of this is to say that if you rely on your peer reviewer for other services in the off-years then you may find your peer reviewer declining to helping with some projects.
I rarely call attention to services I provide while writing on my blog. This paragraph will be one of the extremely few exceptions to that pattern. If you find yourself in a situation where your peer reviewer cannot assist you because of the new independence rules, my firm can assist you with inspections, monitoring, engagement quality control reviews, or consultations on engagement issues. Feel free to contact me to see whether I would be a good fit for your firm. End of self-promotion!