The benefits of peer reviewed CPA firms

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Every three years audit firms enrolled in the AICPA Peer Review Program are required to have a peer review of their accounting and audit practice. Since the AICPA oversees the peer review program, the entity that performs the peer review is another firm approved by the AICPA. Basically, this is where the term “peer review” comes from. An approved CPA firm reviews the accounting and auditing practice of another CPA firm. A firm does not need to enroll for a peer review if its sole service is to prepare engagements under Statements on Standards for Accounting and Review Services (SSARSs). An accounting and audit practice is defined by services performed, such as audits, review engagements, attestation agreements and agreed-upon procedures. Here are the benefits to doing business with peer reviewed CPA firms.

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Peer reviews help monitor a firm’s services. Practice monitoring is conducted with the intent of promoting and improving the quality of services provided by CPA firms subject to the standards. By CPA firms engaging in the peer review process, it is beneficial for the public, as well as the accounting and audit quality provided to their clients. There are two types of peer reviews that are done: system reviews and engagement reviews.

A system review evaluates the firm’s systems of quality control when performing any accounting or audit service. When performing services, a firm should follow a systems’ policies and procedures that everyone in the firm is expected to use when doing their work. A peer reviewer must get to know a firms practice and the industries they do work for, and the overall design of the firm’s systems regarding procedures and how the firm verifies that everyone is compliant with set policies. A reviewer selects a sample of the firms’ engagements. Peer reviewer will also interview personnel, review a selection of personnel and administrative documents, and reviews representations from the firm. This testing of the system helps the peer reviewer form an overall opinion for the report, which reports one of three opinions: pass, pass with deficiencies and fail. If deficiencies are noted on the report the firm must take actions to fix the deficiencies and the corrective action is also evaluated to verify that it remedied the deficiency noted.

An engagement review is used by the peer reviewer to evaluate a firm’s actual accounting work that includes documentation, accounting work and any reports issued. Engagement reviews are mainly associated with firms that perform compilation and reviews and making sure they are complying with professional standards. From their selected sample they read financial statements, information submitted by the firm, the accountants report thereon and applicable documentation set by professional bodies. After the reviewer is done with their review the firm gets their rating , which uses similar terminology as that above for system review opinions. If deficiencies are noted, firms must take corrective action, so they are in conformity with professional standards.

If you have any questions about peer reviewed CPA firms, please contact your Henry+Horne advisor.

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