AICPA and OSCPA Peer Review Program FAQs

Answers to Frequently Asked Questions

What is peer review?

Peer review is an evaluation of the systems and/or work product of a public accounting practice by a qualified, fellow practitioner.

Which firms must undergo peer review?

Any firm or sole practitioner licensed in Oregon that performs attest and compilation services, including by not limited to: any level of review, audit, agreed-upon procedures, report on a financial statement, examinations of prospective financial statements, reports on internal control effectiveness, and compilations of a financial statement must undergo a peer review.

If the firm has an owner that is a member of the AICPA, the firm must be enrolled in an AICPA However, if the firm does not perform services that include reports purporting to be in accordance with AICPA professional standards it is not required to enroll in a practice-monitoring program.

Does my firm have to enroll in peer review if the only engagements it performs are compilations issued with engagement letters and without a report as detailed in SSARS No. 8?

If a compilation issued with an engagement letter and without a report (SSARS 8) is the highest level of engagement performed by the firm, the firm would not be required by the AICPA or Oregon Board of Accountancy (BOA) to enroll in a peer review program.

However, if a firm is already enrolled in a peer review program, this engagement would be included in the definition of a firm's accounting or auditing practice and would be within the scope of peer review.

In addition, if a firm is already enrolled (even though not required) and chooses not to resign from the AICPA peer review program, that firm is subject to peer review if it performs these engagements as its only accounting or auditing engagements.

If a CPA or PA works in private industry but performs one audit for a local charity, must the CPA or PA enroll and undergo a peer review?

Yes, and the peer review must be a system review. CPAs and PAs must enroll if they perform any financial statement engagements as part of their public accounting practice, no matter how limited. If the CPA or PA performs even one audit of historical or prospective financial statements, the firm is subject to a system review. If the CPA or PA performs one or more compilations or reviews, but no audits, the firm qualifies for an engagement review. If the CPA or PA performs one or more compilations that omit substantially all disclosures, but no audits, reviews or disclosure compilations then the firm qualifies for a report review.

What must CPAs in public practice do to maintain their AICPA memberships if their firms enroll in the peer review program?

Nothing, as long as the AICPA shows the CPA as employed by an enrolled firm. The AICPA requires all members in public practice to be associated with an enrolled firm. Firms may be enrolled in the AICPA Peer Review Program or the Center for Public Company Audit Firms Peer Review Program (CPCAF PRP.) Any firm required to be registered with and inspected by the Public Accounting Oversight Board (PCAOB) must also enroll in the CPCAF PRP.

What if I am a member of the AICPA, but I am employed by a firm whose owners/partners/shareholders are not members of the AICPA?

If an AICPA member practices in a firm not eligible to enroll, the member may enroll in the peer review program if the services performed by such a firm or individual are within the scope of the AICPA’s practice-monitoring Standards and the firm or individual issues reports purporting to be in accordance with AICPA professional standards.

When do firms undergo peer review?

A firm performing financial statement engagements must have a peer review every three years. When firms enroll in the program they are notified of their initial review date by the AICPA or OSCPA. In general, a firm is given a review due date either eighteen months after the fiscal year of the first financial statement engagement performed or eighteen months from the time the firm enrolls in a peer review program.

What is the difference between a system, engagement and report review?

If the firm performs audits of historical financial statements or examinations of prospective financial information, the firm must undergo a system review. A system peer review is intended to provide the reviewer with reasonable assurance for expressing an opinion on whether, during the period under review, the firm's system of quality control for its accounting and auditing practice met the objectives of quality control established by the AICPA and was complied with in order to provide the firm with reasonable assurance of conforming with professional standards.

If the firm performs only reviews and compilations of financial statements, the firm may have an engagement review. An engagement review has a limited scope which precludes the reviewer from expressing assurance on the firm's quality control system. Instead, the reviewer's report focuses on whether the selected financial statements and accountant's reports comply with professional standards in all material respects.

If the firm performs only compilations of financial statements that omit substantially all disclosures, the firm may have a report review. A report review retains the overall integrity of peer review through a streamlined process. The objective of a report review is to help a firm that performs omit-disclosure compilation engagements as its highest level of service improve the overall quality of its practice.

What happens in a typical system peer review?

A reviewer or review team: visits the firm; examines how its quality control system works; tests relevant records and files; inspects the financial statements, reports and working papers for a representative sample of engagements; discusses the findings at an exit conference; receives a representation letter from the firm and issues a report and letter of comments, if necessary. The firm responds to the report and letter of comments regarding what it has done or will do to address the reviewer's comments.

What does the reviewer focus on in a system review?

AICPA Statement on Quality Control Standards No. 2 requires every firm, regardless of size, to consider the five elements of quality control: independence, integrity, and objectivity; personnel management; acceptance and continuance of clients and engagements; engagement performance; and monitoring.

The reviewer first focuses on obtaining a general understanding of the reviewed firm's quality control policies and procedures with respect to each of the five elements of quality control and then tests the firm's compliance with its system. This includes a review of selected engagements and relevant working paper files and reports. At least one of the engagements (of the highest level of service performed by the firm under review) will be selected at the time that the reviewer begins their field work. Engagements are chosen to represent a cross section of the firm's accounting and auditing practice based on prescribed criteria and will usually represent 5 to 10 percent of the firm's accounting and auditing hours. The reviewer will also interview firm personnel for evidence of the firm's compliance with its quality control policies and procedures.

If the firm is a member of the AICPA Private Companies Practice Section (PCPS), the review will be expanded to also include testing the firm's compliance with the section's membership requirements.

What happens in a typical engagement review?

A reviewer examines the accountant's report, financial statements and other limited information provided by the firm on a selection of review and/or compilation engagements. The reviewer calls the firm and discusses any issues or questions that arose during the review. The reviewer issues a report and letter of comments, if necessary. The firm responds to the report and letter of comments regarding what it has done or will do to address the reviewer's comments. If the firm is a member of the AICPA PCPS, the review will be expanded to also include testing the firm's compliance with the section's membership requirements.

What happens in a typical report review?

A reviewer will ask the firm to provide summarized information showing the number of compilation engagements where the firm has compiled financial statements that omit substantially all disclosures. The reviewer selects a sample of engagements and gives the firm a report listing comments and recommendations based on whether the financial statements and the related accountant's report appear to conform with the requirements of professional standards in all material aspects.

What happens if the reviewer finds deficiencies? Is this information available to the Oregon Board of Accountancy?

The peer review program is remedial and educational, not punitive. When the reviewer issues an unmodified report with repeat findings, modified report or adverse report, the OSCPA Peer Review Committee may require corrective action. The corrective action is intended to be educational and specific to the particular deficiency. No information is reported to the Oregon Board of Accountancy regarding the peer review reports. However OAR 801-050-0040, which became effective December 15, 2005 requires firms that receive substandard peer review reports to provide written notice to the BOA within 45 days of the date of the acceptance letter issued by the peer review report acceptance body.

Peer review documents of firms enrolled in the AICPA or OSCPAPeer Review Program are confidential, unless the firm is a member of the PCPS, the Center for Public Company Audit Firms, or the Employee Benefit Plan Audit Quality Center, or Governmental Audit Quality Center.

Who performs reviews?

The AICPA maintains a reviewer bank. A reviewer or review team can be selected by the firm undergoing peer review (Firm-on-Firm), the OSCPA (Committee Appointed Review Team or CART) or an association of CPA firms authorized to perform peer reviews. Reviewers must be registered with the AICPA reviewer bank and meet the reviewer requirements to perform peer reviews. CART reviews are not available for a system review but are available for engagement and report reviews.

How much does a review cost?

The cost depends on the type of review the firm requires. CART review fees are set by the OSCPA Board of Directors. Other review fees are negotiated between the reviewed firm and the reviewer. In addition to the reviewer's fees and expenses, there is an administrative fee, scheduling fee for CARTs and a technical review fee.

The OSCPA meets its peer review program expenses through administrative fees and scheduling fees set by the OSCPA Board of Directors. View the current fees.

How can a firm prepare for peer review?

The firm members may consider the following in preparing for their review:

• Is the firm committed to the practice of public accounting?
• Does the firm know and use the five elements of quality control?
• Are the firm's documents updated and available for the reviewer to examine?
• Is the firm monitoring its accounting and/or auditing practice?
• Are there any new materials needed?
• Is the review scheduled through an approved, practice-monitoring program?

For more information Contact

OSCPA Peer Review Division,
OSCPA
PO Box 4555
Beaverton, OR 97076-4555

503-641-7200 / 1-800-255-1470, ext. 27
Fax: 503-626-5328
Email address: eaqvlgiewg@kvklo.bij