This course prepares you for a peer review and what can be done on a daily basis to create a strong quality control environment for your firm. Learn the most common, significant deficiencies that peer reviews find time after time and what can be done to prevent them from occurring in your firm.
Objectives:Prerequisite: Experience in providing audit, compilation and review services.
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Chapter 1 - Introduction
Learning Objectives
• To review the course learning objectives.
• To review the organization of the course.
• To highlight the course topics.
What Is a Successful Peer Review?
This course is designed to provide you with the information necessary to achieve a successful peer review. What is a successful peer review? It depends on your point of view. The honest answer is that a successful peer review helps a firm improve its ability to perform engagements in conformity with professional standards. Therefore, this course assumes that participants are committed to establishing, maintaining, and improving the quality of their accounting and auditing practices. Often this attitude and commitment yields a peer review rating of pass.
Of course, no one can guarantee a peer review rating of pass. However, if you properly implement the information in this course, you can certainly put the odds in your favor. A firm adds the most important ingredient of a successful peer review recipe well before the peer review starts. That ingredient is an environment within the firm that focuses on quality control. It starts with proper leadership at the top and a quality-oriented tone throughout the firm. Few firms can consistently achieve a successful peer review without this environment.
Course Perspective
This course presents quality control information from a firm's perspective. Since the objectives of firms and peer reviewers converge at the point of the peer review, information that is critical to one group is critical to the other. Consequently, much of the information in this course forms important components in the training of peer reviewers.
The standards applicable to a system of quality control apply to all firms, from the smallest practices to firms with SEC practices. However, firms with SEC practices are required to have additional quality control features in place. These firms are subject to inspection procedures by the Public Company Accounting Oversight Board (PCAOB) with respect to their SEC clients. The PCAOB is required to inspect and discipline auditors of SEC issuers. PCAOB activities also include establishing auditing, quality control, and independence standards for auditors of issuers, as defined by the SEC.
While the concepts in this course apply to all firms, the additional PCAOB requirements are beyond the intent and scope of this course. As a result, PCAOB inspections and the engagements subject to them are not covered in this course.
The AICPA Peer Review Program (PRP)
Effective January 1, 2009, one peer review program - the AICPA Peer Review Program (PRP) - will apply to all AICPA members subject to peer review. The PRP combined the peer review programs of the AICPA and the Center for Public Company Audit Firms (CPCAF) into one program. The nature of the firm's practice will determine who administers the PRP. The peer reviews of firms not subject to inspection by the PCAOB will continue to be administered by the designated state CPA society. For a firm required to be registered with and inspected by the PCAOB and any firm voluntarily enrolled in the NPRC PRP (formerly CPCAF), a new National Peer Review Committee (NPRC) will administer the peer reviews for the portion of the firm's practice not subject to PCAOB inspections. The National PRC was established as a successor to the CPCAF Peer Review Committee.
As a result of the expiration of an SEC Order on January 1, 2009, financial statements of nonpublic broker-dealers for fiscal years ending after December 31, 2008, must be certified by a registered public accounting firm. Although firms performing these audits must register with the PCAOB, the firms are not required (as of April 2009) to be inspected by the PCAOB. Since the PCAOB inspection requirements do not include firms auditing non-public broker-dealers, these firms can chose whether to have their peer review administered by the NPRC PRP or the state CPA societies.
How This Course Is Organized
The course content generally follows the sequence of events in a typical peer review cycle. Chapter 2 outlines the general timeline of significant peer review milestones. Understanding the flow of the cycle can help keep you on track between reviews. The timeline starts at the inception of a system of quality control and finishes with the completion of your peer review. It also includes elements for planning for your external peer review. Chapter 3 provides a summary of relevant quality control concepts, including the performance and reporting standards used by external reviewers. This knowledge provides the context in which to evaluate your system of quality control. It is also the context in which your external peer reviewer will evaluate it.
Chapter 4 shows you how to properly implement QC concepts into a workable system that fits the size, nature, and service mix of your firm. Topics include considerations for external practice aids and sample quality control documents. Even if your firm already has a system in place, it is important to monitor that system. Chapter 5 covers the basics of monitoring and includes examples for four different types of monitoring reports. Monitoring includes both administrative reviews and inspection of engagements. Since it can help to know the types of matters and findings that other firms have encountered, Chapter 6 includes a summary of common areas of noncompliance with professional standards as well as other information that can help you perform effective inspections of engagements. Chapter 6 also provides guidance for addressing specific matters and findings through effective and efficient prevention. Chapter 7 shows examples of ways that firms can strengthen the design of their quality control and individuals' compliance with it. Finally, Chapter 8 wraps up the process by highlighting important areas to consider when completing a peer review.
How This Course Will Help You Learn
Each chapter explains and refreshes the main concepts of quality control, monitoring, and peer review. Key areas are illustrated through presentation, examples, exercises, and group discussion. Please share your quality control experiences, ideas, and questions. It adds to the quality of information and can make the day more interesting. If there a particular QC process you want to streamline, ask about it. Someone in the class might have just the answer you are looking for.
Topics
Course topics focus on areas of Professional Standards and Standards for Performing and Reporting on Peer Reviews that relate directly to organizing and monitoring your firm's system of quality control and preparing for your external review. Group exercises are provided as a starting point for practical group discussions. The following topics are included:
• Peer review timeline
• Review of Statements on Standards for Quality Control and Standards for Performing and Reporting on Peer Reviews. This includes consideration of Statement on Quality Control Standard No. 7, A Firm's System of Quality Control (SQCS No. 7)
• Quality control considerations for designing a system that best fits your firm
• The basics of performing monitoring procedures
• How to perform an inspection of engagements
• Areas of common noncompliance with professional standards
• Methods of strengthening a system of quality control
Consideration of SQCS No. 7
SCQS No. 7, A Firm's System of Quality Control, is effective for a firm's accounting and auditing practice as of January 1, 2009, and supersedes all previous quality control standards. The new standard will require firms to compare the policies, procedures, and terminology used in their existing system of quality control to the new requirements. This is considered a monitoring procedure that all firms should have performed prior to January 1, 2009. Chapter 3 summarizes SQCS No. 7. Where applicable, notations have been incorporated into the text to show how the new standard might affect your current system of quality control.
Peer reviews will begin to address the implementation of SQCS No. 7 starting with peer review for years ending after December 31, 2008. For example, a firm with a peer review year ending June 30, 2009, will have operated under slightly different systems during each half of their peer review year. Peer reviewers will need to consider this when evaluating matters related to the design of the firm's system of quality control or its compliance with that system.
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