New 2006 Peer Review Requirements

Transparency. While the reviewed firm is the primary user of the review report, other users include regulatory bodies, such as the U.S. Department of Labor and General Accounting Office; the general public; and in some states, the state board of accountancy. 

To help achieve enhanced transparency for all users, the following significant changes were introduced for system and engagement peer reviews:

• All peer review reports will refer to the letter of comments if a letter of comments is issued.

• If a peer review report expresses an adverse opinion, all deficiencies and related recommendations will be contained in the report and no letter of comments will be issued.

• If a peer review report expresses a modified opinion, the deficiencies resulting in the modified opinion will be included in the report.  A letter of comments could also be prepared to present the comments and recommendations that did not result in the modified opinion.

• System peer reviews will specifically identify engagements required to be selected by the Peer Review Board (normally ERISA and Yellow Book engagements) and identify the comments noted on these engagements in the report (if modified or adverse) and/or the letter of comments

• A substandard engagement in a modified or adverse peer review report will be identified by industry and level of service.

For report reviews, deficiencies describing a substandard engagement will be identified and reported on under the caption “Significant Comments.”  Other deficiencies will be reported on under the caption “Comments.”

Firm Representation. Firms are responsible for maintaining a system of quality control and complying with rules and regulations of state boards and other regulatory bodies.  To emphasize this responsibility, all firms will be required to provide a representation letter to their peer reviewers. 

For system reviews, the representations should be dated the same date as the peer review report.  For engagement and report reviews, the representation should be dated the same date that the firm submits the list of engagements to the reviewer.  The representation letter should be signed by those members of management whom the team captain/reviewer believes are responsible for and knowledgeable about the matters covered in the representations, the firm and its system of quality control.  Normally, the managing partner and the quality control partner will be appropriate parties to sign the representation letter.

Performance of System Reviews. In addition to the transparency and representation letter changes, other changes affecting the performance of the peer review include:

• Reviewers can provide a partial list of the engagements selected for review up to two weeks in advance of field work, since firms may need time to assemble required documentation and personnel before the review team arrives.  The complete list which will include at least one “surprise” engagement (normally from the highest level of service), can only be provided upon commencement of the review.
   

• System reviews at other than the firm’s office (referred to as Interpretation I reviews) are only available to sole practitioners with no professional staff who perform three or fewer engagements (defined as engagements under SASs, Government Auditing Standards or examinations of prospective financial statements under the SSAEs) that require a system review to be performed.

Increased Level of Service. If a firm that had an engagement or report review undertakes an engagement (defined as engagements under SASs, Government Auditing Standards or examinations of prospective financial statements under the SSAEs) that would require a system peer review, they must immediately notify the peer review administrator and undergo a system review.  The system review would be due within 18 months from the year-end of the engagement that triggered the system review or by the firm’s next scheduled due date, whichever is earlier.

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The letter of the law
Wisconsin law requires all firms (including sole practitioners) who provide certain services to their clients to have a peer review every three years in order to be licensed to practice in Wisconsin.  The Wisconsin Accounting Examining Board has approved the AICPA Peer Review Program, administered by the WICPA as the program to be used by Wisconsin firms.

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Report Acceptance Body (RAB)
This group of WICPA members will review the entire engagement including the results of the Administrative review and the Technical review before making a decision on acceptance of the Peer Review. Listed below are the scheduled RAB meeting dates for 2006. All reviewers and firms should be aware of the dates. Reviews must be submitted at least one month in advance of RAB dates. For more information, contact Jessica Murphy at jessica@wicpa.org or (800) 772-6939 ext. 3025.

 

SYSTEM REVIEW RABs 2006
1/17	5/2
2/7	6/6
3/7	7/11
4/4	8/8
ENGAGEMENT/REPORT  RABs 2006
1/17	5/16
2/21	6/20
3/21	7/18
4/18	8/22