The American Institute of CPAs is proposing to change the current peer review report so it clearly indicates if a Single Audit was chosen.
The AICPA’s Peer Review Board issued an exposure draft Wednesday containing the proposal along with another proposal that the representation letter should be modified to reflect all must-select engagements, including Single Audits.
A Single Audit is a strict audit or examination across an organization that spends $750,000 or more of federal assistance such as federal funds, grants, and awards that it receives for its operations.
The AICPA's Audit Review Board has found that certain types of engagements are of such significance to the public interest that, if a firm performs them, at least one of each type must be chosen for review as part of the firm’s peer review process. The board refers to this type of engagement of this nature as a “must select.” The firm's leadership signs a representation letter attesting to the accuracy and completeness of the information given to the peer reviewer.
“As we continue our efforts to better detect firms and engagements subject to peer review, we have discovered that some firms are not enrolled in the program as required by AICPA Bylaws or state law,” said AICPA vice president for ethics and practice quality James Brackens in a statement. “We also have found that certain ‘must select’ engagements have been omitted from the scope of peer review. Bringing all audit firms into the peer review fold and having a complete population of engagements, including those that are ‘must-select’, will result in a more effective peer review process and improved work by practitioners.”
The exposure draft proposes that firms take several steps to align their procedures with Interpretation 63-1. The document also describes additional accountability for the selection, identification and performance of all must-select engagements during the peer review process. The proposed revisions include:
- The “Required Selections and Considerations” (must-select) paragraph in the system peer review reports should be changed to specify, when appropriate, the selection and review of a Single Audit in the scope of the review.
- The representation letter provided by the firm should be modified for consistency to address all must-select engagements, including Single Audits, when performed by the firm and selected by the peer reviewer.
The AICPA is asking for comments on the proposal by Sept. 30, 2016. After approval of the revisions to the illustrative peer review reports and the illustrative firm representation letter, the changes will take effect for reviews beginning on or after Jan. 1, 2017.
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