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.
SSARS #22 addresses Compilation of Pro Forma Financial Information. This document rolls SSARS #14 into the clarified format. This is the last section of the old SSARS to be rewritten as a clarified document.
If your peer review resulted in anything other than a pass report there are a couple of deadlines you need to remember if you are in California.
Keep in mind you are responsible for your compliance with regulations. Here are a few tips to point you in the right direction. These comments discuss the regs in California. If you are in another state, you really ought to check out what your board of accountancy has to say. I’ll guess there is some comparable reporting requirement when a peer review does not turn out well.
Notification requirement for reports less than pass — 45 days
If you received either a pass with deficiency or a fail report, you need to be in touch with the California Board of Accountancy (CBA).
Got an email last evening which contained a link to the on-line ballot for the vote.
The AICPA has proposed combining their operations with the Chartered Institute of Management Accountants (CIMA). The new entity will be the Association of International Certified Professional Accountants. Yes, to confuse the market place there will be another AICPA.
The AICPA is proposing a merger with the Chartered Institute of Management Accountants (CIMA) with the merged entity being called the AICPA.
Yes, that’s right. The new organization will be the Association of International Certified Professional Accountants.
Fifteen years ago we had the “cognitor” mess. That faded.
Now we have the CGMA credential which initially was available to anyone with a CPA certificate that wanted to write a check. Now it is open to anyone that wants to take a rigorous test, with no CPA credential needed. Apparently that hasn’t gone over very well, according to an article I will mention shortly.
So now we have a proposed merger of the AICPA (with CPA) with the CIMA to create the AICPA (with professional accountants in title).
Caleb Newquist doesn’t see much purpose here other than a power play by the AICPA (with CPA in title) leadership to increase their power by bringing in a lot of new members. He also sees AICPA (without CPA in title) as a dilution of the CPA brand.
That is my biggest concern. In addition to removing certified public accountant from the title of our new trade association there is a serious risk this would reduce the focus on the CPA world which would further reduce the brand.
Tom Hood, CEO of the Maryland Association of CPAs, speaks in favor of the proposal in a comment at the Going Concern article.
Previously mentioned that I looked disciplinary actions reported in the last four newsletters from the California Board of Accountancy (CBA). Want to better understand what happened with firms that got in trouble for audit quality or for not getting a peer review when one was required.
Will continue that discussion by looking at sanctions imposed on smaller firms and then self-imposed trouble generated by some larger firms.
Three times a year the California Board of Accountancy issues a newsletter. It contains a variety of information useful for CPAs. If you are a CPA, you really ought to be reading the newsletter.
That newsletter is also where the board publicizes disciplinary actions against CPAs.
In the last few newsletters I’ve noticed a number of cases where firms are sanctioned for substandard audits. Have also noticed a number of firms sanctioned for not getting a peer review when it was required or fibbing to the board whether they had complied with the peer review standards.
I wanted to understand better what I’ve noticed in passing so decided to dive into the disciplinary reports to get a better picture of the extent of sanctions for audit quality and peer review issues. I looked at the Fall 2014, Winter 2015, Summer 2015, and Fall 2015 newsletters.
That covers 16 months of reporting for disciplinary actions by CBA.
I focused on sanctions for audit issues excluding anything that was a follow-up to PCOAB or SEC sanctions. That rules out quite a few cases.
Also ignored a long list of social misbehavior such as DUIs (several incidents), fabricating Form E (once – fabricating the experience report? – really??), embezzlements, disbarment (once), and other such human foibles. Also excluded a variety of contingency fee violations, breaches of client trust, and sundry tax fiascos.
For context, the Fall 2015 newsletter had 28 disciplinary actions of which 5 were of interest for this little bitty research project. Of those 5 cases, the public notices refer to 2 firms which had substandard audits, 1 had a substandard compilation, and 4 included failures to get a peer review when required of which 2 fibbed to CBA about compliance with the peer review requirement.
Charles Hall has written a book describing a new service called ‘preparation’ and the changes for compilations from SSARS 21.
If you perform a few compilation engagements a year and have not started paying attention to the complete rewrite of comp and review rules, this is the book for you. The transition date is financial statements for years ending after December 15, 2015. Essentially this applies to all your 12/31/15 comp and review work.
Might want to check it out quickly and archive a copy since there is no comment on how long these items will be made available on a complimentary basis.
Looks like the CPEA has some good resources. Seems like a good idea to have their voice inside the AICPA world. However, at an annual membership cost of $795 for a firm with five or less professionals, I won’t be joining anytime soon.