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“Be Prepared – A Comprehensive Peer Review Update”

Image courtesy of Adobe Stock.
Image courtesy of Adobe Stock.

The following article provides a superb update on recent developments in the peer review program. The article is graciously provided by the California Society of CPAs and the information described here applies in all jurisdictions across the U.S.

Because the entire article is quoted verbatim without any additional comments from me, none of the article will be placed in quotation marks.

Originally published by CalCPA (www.calcpa.org) in the October issue of California CPA magazine.

Used with written permission of the California Society of CPAs. 

 

Be Prepared – A Comprehensive Peer Review Update

By Linda McCrone

 

Peer review is a successful program that helps firms improve their quality control systems and elevate the quality of accounting and auditing engagements. The AICPA contributed the software program that tracks peer reviews and the staff that manages the program. AICPA member volunteers contribute their time to oversee the program, keep the peer review program forms current and make certain that the peer review standards remain relevant. But like any successful program, peer review must continue to evolve to keep up with events.

 

Background

“Be Prepared – A Comprehensive Peer Review Update” Read More »

Time to clean up our act – peer review update part 5

This is the last in a series of posts exploring the implication of peer review reports getting withdrawn because firms did not have pension audits included in the scope of the review.

Pensions aren’t the end of the issue

There are hints in the air that the Department of Labor IG staff aren’t the only ones thinking there are firms that didn’t have must-select engagements included in their peer review. As my wild guess, I’m thinking the Department of Education will be trying to figure out some way to match A-133 reports of colleges and universities with peer review reports of their auditors. I’ll go out on a limb and guess there are other agencies thinking about that also.

If I understood comments in the peer review update webcast, the AICPA Peer Review Board is looking at ways to match to A-133 reports. Did anyone hear that differently? Please comment if you have thoughts on that idea.

Bigger issues

Time to clean up our act – peer review update part 5 Read More »

Cascading consequences of your peer review report going away – peer review update part 4

Previous  three   posts are the beginning of a discussion of consequences from having a peer review report withdrawn. Also, there has been an ongoing conversation in the comment section of each of those posts.

More background

Before we jump into more consequences, here’s additional background:  The Illinois CPA Society has good info on their Peer Review page.  It describes the AICPA/DOL project. The DOL sent  the AICPA a list of around 5,000 firms that perform ERISA audits. Then AICPA did the match to peer review reports.

Article mentions that in addition to some firms that didn’t have an EBP plan in the review, there are other firms that are not enrolled in the peer review program.

Let me say that again: the AICPA found firms that provide pension audit that are not even in the peer review program; they are getting neither an engagement review nor system review.  Since I’m making some wild guesses about consequences, those firms may have a rough time explaining themselves to their state board.  You don’t want to be in their company.

A few comments on the page about replacement reviews. There won’t be any extensions on the 90 day deadline. The page also says the replacement review must include a pension audit, so the year-end cutoff for the replacement review may have to be adjusted back in time to pick up an ERISA audit. There’s also a reminder on watching reviewer independence.

One last comment – I’m hearing more hints in the air that the number of reviews being withdrawn is in the range of 1,100.

Cascading consequences

Here’s a few more consequences to ponder of not reporting all your must-select engagements:

Wording on audit reports – Here’s where things compound faster. …

Cascading consequences of your peer review report going away – peer review update part 4 Read More »

Cascading consequences of your peer review report going away – peer review update part 3

Previous posts in this five-part series mentioned that there are a few hundred peer review reports that are in the process of being withdrawn by various state administering entities. The reason is the review did not look at a pension plan audit when the firm performed one or more of them.

As I mentioned before, I’m writing these posts without explaining a lot of the technicalities that exist in the peer review program. I’m leaving out some of the terminology, skipping some details, and simplifying things. I’m doing this to help CPAs who don’t live in the peer review world.

More background

Before jumping in to the consequences, a bit more background:

Charles Hall has an overview of the recall issue at CPA-ScriboPeer Review Reports Being Recalled.

Scuttlebutt he has heard suggests 1,100 reports are in process of being recalled. I heard it may be in the range of a couple hundred.  If that makes you think this is a developing story, you are correct.

Here are a couple of things you can look at:

Peer Review Board Open Session Materials – May 28, 2014 – News flash from that document is that DOL sent the AICPA a list of about 5,000 firms who reported on an ERISA audit for year ending December 31, 2011. AICPA staff researched those firm names with the publicly available peer review report. They found exceptions, with amount not mentioned in the materials.  Resolution of the exceptions by state administering entities and the involved peer reviewer wasn’t what the PRB wanted to see. Thus, in April 2014, the PRB voted to require automatic recall of acceptance letters and require peer reviewers (shall) to withdraw their reports.

That describes how this started and why there seems to be a lot of activity now.

June 2014 Peer Review UpdateContains guidance for the replacement review.

I plan some more updates beyond the 5 already drafted. Now we ponder the consequences.

So what?

Consider the cascading consequences from your peer review report being withdrawn. That means the report on your firm doesn’t exist. You didn’t have a peer review when required.

Consider  the following –

Cost think of the dollar cost and the amount of time it takes to go through a peer review. Depending on the timing, the replacement review may happen in the same year as the review would have otherwise happened anyway. Less lucky firms will have the review a year or two early.  Unlucky firms will get to have a replacement review covering the same time as the previous review – this means the cost will be doubled. …

Cascading consequences of your peer review report going away – peer review update part 3 Read More »

Make sure you tell your peer reviewer about all the audits you do or things could get ugly – peer review update part 2

Previous post explained that hundreds of peer review reports are in the process of being withdrawn because the firms did not tell their reviewer that the firm performs pension audits. As a result, the review did not cover any of those engagements.

Make sure you tell your peer reviewer about all the audits you perform. Things can get real bad real fast if you don’t.

What are the next steps?

The administering entities will confirm information provided by the Department of Labor with the peer reviewer and the reviewed firm. Assuming information is verified, the administering entity will withdraw the acceptance letter. The reviewer may withdraw his or her report.

It is my understanding that some reports have already been withdrawn. Firms are now going through the process of getting the replacement reviews.

They may or may not be able to use their current reviewer.

Impact on the replacement review

Make sure you tell your peer reviewer about all the audits you do or things could get ugly – peer review update part 2 Read More »

Make sure you tell your peer reviewer about all the audits you do or things could get ugly – peer review update part 1

There are apparently several hundred peer review reports in the process of being withdrawn. This means those firms did not actually have a peer review.

This is the first in a series of 5 posts talking about this issue, two of which will consider the cascading consequence of not having a peer review.

By the way, I will try to write this series of posts without using all the technicalities that exist in the peer review program. I’ll leave out some of the terminology, skip some details, and simplify some stuff. Goal is to help CPAs who don’t live in the peer review world. For those who do understand the nuances, please keep in mind I’m simplifying.

How did this get started?

Apparently the Department of Labor pulled a sample of hundreds (maybe thousands) of pension audits from their files. They looked at the peer review reports for the auditors of those plans.

They found hundreds of situations where the firm auditing a pension plan did not have a peer review report which said a pension plan audit was included in the scope of the review.

Why is this an issue? Must-selects must be reviewed

Make sure you tell your peer reviewer about all the audits you do or things could get ugly – peer review update part 1 Read More »

Great survey of Peer Review program

Image courtesy of DollarPhotoClub.com
Image courtesy of DollarPhotoClub.com

The California Society of CPAs has a superb article on the Peer Review program in their October 2016 newsletter: Be Prepared – A Comprehensive Peer Review Update.

Here is the link again: http://californiacpa.calcpa.org/?issueID=65&pageID=15

I will check to see if I can get permission to reprint the article.

Update: CalCPA graciously gave me permission to reprint the article. You may find it here.

Great survey of Peer Review program Read More »

Fellow CPAs, we need to step up our audit game

Today I listened to the rebroadcast of 2015 Peer Review Update. Check out the class if you have the chance.

Update 7/7: The next rebroadcast will be July 20, 2015. Link is here. If that link has expired or disappeared, this page has a long list of all upcoming events in peer review.

Heard several few things that distressed me.

In particular, we CPAs collectively need to improve the quality of the work we are doing in the audit arena.

Consider a few points. This is what I heard from the presentation. I haven’t gone back to source documents to verify the numbers or explanations. This is what I heard and jotted down in my notes while listening to the session.

Fellow CPAs, we need to step up our audit game Read More »