The proposals would enhance the focus of reviewed firms on the proper design and operating effectiveness of their systems of quality control. They would also look to reinforce the need for appropriate planning and preparation for a peer review by firms and peer reviewers in order to allow sufficient time for proper identification of systemic causes and appropriate solutions.
The AICPA Peer Review Program monitors the quality of reviewed firms’ accounting and auditing and evaluates the systems under which the engagements are performed. Participation in the peer review program is mandatory for AICPA membership. Peer review is also now required for licensure in nearly all states.
The Peer Review Board approved a plan last year to implement major changes to the current peer review process, part of the AICPA’s Enhancing Audit Quality (EAQ) initiative. Under the EAQ, the AICPA issued a Six-Point Plan to Improve Audits, whose peer review enhancements include testing of firms’ controls to identify risks to audit quality.
“This exposure draft is another step in our continuing holistic initiative to further the profession’s efforts to move the audit quality needle,” stated James Brackens, CPA, CGMA the Institute’s vice president for ethics and practice quality. “We encourage all stakeholders to review and comment on the proposals.”
The AICPA’s proposed changes are thusly:
- Enhance the peer review of the firm’s system of quality control to better assist the team captain and firm in identifying systemic causes and appropriate remediation of nonconforming engagements and systemic weaknesses
- Supplement the existing guidance for peer reviewer, reviewed firm, technical reviewer and Report Acceptance Body responsibilities for nonconforming engagements
- Clarify the timing of when results of the peer review should be communicated to the firm to allow time for the firm to identify appropriate remediation
- Clarify the guidance for drafting descriptions of findings, deficiencies, and significant deficiencies
- Clarify the peer review report model and provide greater transparency on the results of the review
- Clarify the required firm representations for System and Engagement Reviews
- Clarify information the AICPA and administering entities may provide about a review to third parties
The AICPA are accepting comments until January 31, 2016. They may be submitted to PR_expdraft@aicpa.org.