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How to Prepare For a Peer Review

Peer reviewers are at times subjected to the question: “I’m due for my peer review t..Continued...

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How to Prepare For a Peer Review

Peer reviewers are at times subjected to the question: “I’m due for my peer review this year, what do I have to do to get ready?”

Surprisingly, the response should be: “Not much.”

 Engagement reviews are simple in the fact that it is just a review of engagements performed. System reviews are more involved. They are an evaluation of the design of, and compliance with, the firm’s system of quality control. If your system is designed in accordance with the Statements on Quality Control Standards, then you should already have done what you were supposed to be doing and documented all of it.

 If this is your first system review, here’s what to expect:

  1. Your reviewer will ask you for a list of engagements performed during your peer review year, and ask for your quality control document or ask that you fill out a lengthy checklist to document your firm’s system of quality control.
  1. Your reviewer will select the engagements to be reviewed. Reviewers are required to choose a selection that represents a reasonable cross section of the firm’s accounting and auditing practice, with at least one engagement from each partner, and at least one from each level of service (audit, review, compilation, compilation without disclosures, etc).
  1. You are allowed to know what is selected for review prior to the commencement of fieldwork, but the reviewer is required to withhold one selection as a “surprise” pick.
  1. Once fieldwork begins, your reviewer will ask for the following:
    1. Engagement files (this is when you learn the surprise pick)
    2. A listing of firm personnel, showing name, position and years of experience with the firm and in total
    3. Documentation that demonstrates compliance with the monitoring element of quality control (importantly, this needs to include documentation of your firm’s internal inspection)
    4. Information about substantial changes made as a result of implementing Statements on Quality Control Standard #7.
    5. CPE records for select personnel
    6. Written representations the firm is required to obtain from firm personnel regarding independence, integrity and objectivity
    7. Copies of staff and partner evaluations
  1. The reviewer will also ask to interview a staff member during the review. This shouldn’t make firms or staff members nervous. It’s not intended to be a fishing expedition or a witch hunt.
  1. Once fieldwork is complete, the reviewer will hold the exit conference. At this point you’ll learn the results of the review.

If you receive a pass report, there won’t be much more for you to do (other than responding to findings or other smaller matters). If your report is a pass with deficiency(ies) or fail, your reviewer will ask you to write a letter of response addressing the issues that led to the modification of the report.

Once your reviewer has assembled all the necessary documentation, he or she will submit the review to the administering entity (In Ohio it’s the Ohio Society of CPAs) for acceptance. Once it’s accept, the report becomes official and you can use it to renew your firm’s registration (by October 31 for Ohio firms).

Peer review is a simple process. If you have any questions, please feel free to call.

Jon Majkut CPA

Majkut CPAs LTD

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