In recent commentaries, both Eli Mason and Lou Grumet expressed concern regarding the effectiveness of the current peer review program administered by the American Institute of CPAs and state CPA societies.The board of the National Association of State Boards of Accountancy shares their concern. NASBA has maintained that peer review has evolved from the voluntary educational and remedial process that the AICPA envisioned in 1988 to a mandatory regulatory and firm- licensing requirement that now exists in at least 39 jurisdictions.
Legislatures in all 55 licensing jurisdictions are consistent in their view that:
* The accounting profession is to be licensed and regulated;
* Boards of accountancy are charged with that responsibility;
* The boards make and enforce rules and regulations under the accountancy laws of the jurisdiction; and,
* The boards are to develop rules of professional conduct.
The emergence of state boards of accountancy as a true regulatory force will lessen the profession's influence on the other licensing, regulatory and enforcement responsibilities in which the profession has been heavily involved for decades. One significant area where state boards must have greater influence and involvement, and where the AICPA will correspondingly have less, is in the development of peer review standards and the administration of peer review programs.
NASBA formed the Compliance Assurance Committee to explore, develop and implement opportunities for state boards to become involved in standard-setting and oversight of mandatory peer review programs.
The AICPA/state society-administered peer review is accepted as meeting the state-mandated peer review requirements in all 39 jurisdictions that have them. However, currently none of the state boards have direct and unfettered access to the peer review reports that they require, and few, if any, of the boards have any significant oversight of the system under which the peer reviews are administered. These are undesirable restrictions on regulatory authority upon state boards, driven largely by the AICPA through its 1988 commitment to its members that peer review results will remain confidential.
The AICPA has undertaken a significant member education program related to the need for greater transparency of peer review results. This education program is a precursor to a member vote to repeal or modify the 1988 confidentiality commitment to members.
With regard to the AIPCA's education program, NASBA chair Diane Rubin commented, "NASBA is pleased that the AICPA has undertaken an education program of its members regarding public interest expectations of peer reviews. NASBA will work with its member boards to move forward with regulatory peer review requirements that include access to peer review reports and oversight of the process."
Whether the current peer review program can be modified to meet the public protection requirements of state boards or whether it should be replaced with an inspection program conducted by professional reviewers is still open to debate. The NASBA Compliance Assurance Committee believes, and has reported to the NASBA board, that the current AICPA/state society program can be appropriately modified to give assurance to state boards that firms statutorily mandated to be reviewed are being reviewed under a system that will protect the public.
The first step in the NASBA Compliance Assurance Committee's system modification process was to recommend major changes in the peer review provisions of the Uniform Accountancy Act, jointly maintained by the AICPA and NASBA. Under UAA revisions jointly proposed by the AICPA and NASBA UAA Committees, and expected to be adopted by year's end, state boards will be given access to compliance assurance review reports. In addition, a monitoring procedure has been authorized giving state boards assurance that reviews are being conducted in a way that meets the public protection requirements of their statute.
The second step in the modification process was the development of a conceptual framework for an organization that could perform the monitoring and oversight procedures needed in the revised UAA peer review provisions. This body, which has been named the Compliance Assurance Review Board, will be organized by NASBA. Its function will be to provide assurance to the state boards that request it that the peer reviews are conducted in accordance with the requirements of the state statute by well-trained and qualified reviewers using standards that have been evaluated and approved by the CARB. Any state board that chooses to do so may conduct its own oversight and monitoring process; however, the committee believes that significant efficiencies can be achieved by using a common oversight body applying a uniform set of standards.
Finally, the Compliance Assurance Committee is developing a set of recommendations outlining the specifications that a state board-regulated compliance assurance program should endeavor to meet. These recommendations include strong and independent oversight of the peer review process; appropriate quality control measures; transparency of the process, including open access to boards of peer review reports; and an appropriate scope of practice covering assurance and attest services where the public has an interest or where independence is required.
The significant changes to the present program contemplated by the Compliance Assurance Committee provide a public interest focus through which we will preserve the credibility and future relevance of peer review. Continuing our work with state societies, the AICPA, state boards and other relevant interests, NASBA looks forward to the maturity of a peer review process that meets the needs of the public.
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