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Upcoming Peer Review: Is Your Firm Ready?

Author/Moderator: Duane Reyhl, CPA
Publisher: AICPA
Availability: In Stock
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Description

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: 
  • Create a firm environment that focuses on quality control
  • Understand significant recurring engagement deficiencies and how to prevent them
  • Prepare for your next peer review — decisions to make and pulling together the right information

Prerequisite:  Experience in providing audit, compilation and review services.

Table of Contents

  • Chapter 1 - Introduction
    • Learning Objectives
    • What Is a Successful Peer Review?
    • Course Perspective
    • Center for Public Company Audit Firms Peer Review Program (CPCAF PRP)
      • Background
      • CPCAF Peer Review Program
    • How This Course Is Organized
    • How This Course Will Help You Learn
    • Topics
    • Consideration of SQCS No. 7
    • A Final Note
  • Chapter 2 - Peer Review Timeline
    • Learning Objectives
    • Introduction
    • Initial Considerations
    • Between Reviews
    • Scheduling Your Review
    • Select and Schedule Your Reviewer
    • Just Before Your Peer Review Starts
    • During the Peer Review
    • After the Peer Review
  • Chapter 3 - Review of Applicable Standards and Related Topics
    • Learning Objectives
    • Introduction
    • Establishing and Maintaining a System of Quality Control for a CPA Firm's Accounting and Auditing Practice (QC Practice Aid)
    • Statements on Standards for of Quality Control - Summary
    • SQCS No. 2: System of Quality Control for a CPA Firm's Accounting and Auditing Practice
    • Parameters of a System of Quality Control
    • What Is a System of Quality Control?
    • What Is an Accounting and Auditing Practice?
    • Elements of Quality Control
      • Element 1: Leadership Responsibilities for Quality within the Firm
      • Element 2: Independence, Integrity, and Objectivity (Relevant Ethical Requirements)
      • Element 3: Personnel Management (Human Resources)
      • Element 4: Acceptance and Continuance of Clients and Engagements (Client Relationships and Specific Engagements)
      • Element 5: Engagement Performance
      • Element 6: Monitoring
    • Administration of a System of Quality Control
      • Assigning Responsibility
      • Communicating Policies and Procedures
      • Documenting Compliance
    • SQCS No. 3, Monitoring
      • Goal of Monitoring
      • Monitoring Procedures
      • Inspection as a Component of Monitoring
      • Pre-Issuance or Post-Issuance Review of Engagements as a Component of Monitoring
      • Monitoring Issues in Small Firm
    • SQCS No. 5, The Personnel Management Element of a Firm's System of Quality Control - Competencies Required by a Practitioner-in-Charge of an Attest Engagement
    • SQCS No. 6, Amendment to Statement of Quality Control Standards No. 2, "System of Quality Control for a CPA Firm's Accounting and Auditing Practice"
    • SQCS No. 7, A Firm's System of Quality Control
      • How the New Standard Differs from Existing Standards
    • Standards for Performing and Reporting on Peer Reviews - Summary
      • Revisions to the Peer Review Standards Effective January 1, 2009
    • Types of Reviews
      • System Review
      • Engagement Review
      • Report Review
    • Peer Review Risk
      • Risk-Based Approach to Selecting Office and Engagements for Review
      • Peer Review Risk Equation
      • Assessing Inherent Risk
      • Assessing Control Risk
      • Assessing Detection Risk
    • Selection of Engagements
    • Current AICPA Peer Review Standards
      • Interpretation No. 5 – Independence, Integrity, and Objectivity
      • Interpretation No. 9 – Significant Matters and Comments on a Report Review
      • Interpretation No. 13 – Communications Relating to Allegations or Investigations in the Conduct of Accounting, Auditing, or Attestation Engagements
      • Interpretation No. 14 – Ethics Interpretation No. 101-3 and its Effects on Peer Review (issued in October 2005)
    • Peer Review Firm Licensure Guidance
      • Peer Review Requirements
      • Firm Licensure Issues
      • Individual Licensure Issues
    • Granting Peer Review Extensions
      • Scenario 1
      • Scenario 2
      • Scenario 3
    • Background and Reviewer Résumé Forms
    • Scope Limitations when a Firm's Only Audit Subject to Government Auditing Standards Cannot Be Selected on the Peer Review
  • Chapter 4 - Quality Control Considerations
    • Learning Objectives
    • Introduction
    • Definition of Quality Control
      • Definition of a System of Quality Control
      • Definition of a Firm's Accounting and Auditing Practice
    • Elements of Quality Control
      • Overview
    • Design Effective and Efficient Policies and Procedures
      • Compensating Controls
    • Choose the Right Reference Material and Practice Aids
      • Choose Appropriate Technical References
      • Establish Guidance for Using Practice Aids
      • How to Tailor Practice Aids for Specific Engagements
      • Documenting Changes in Your Work Programs
      • Completing Forms Correctly
      • Mix and Match
      • Electronic Documentation
      • Establish Outside Reference Sources
      • Summary
    • Place Your Quality Control System in Operation
      • Assign Monitoring Responsibility
      • Monitor the System during Engagement Review
    • Communicate the Firm's Policies and Procedures
      • Communication Objective
      • Formal Policies and Practices
      • Informal Policies and Practices
      • Which Are Better: Written or Unwritten Policies?
      • Informal versus Vague Policies
    • Issues Related to Independence, Integrity, and Objectivity
      • Summary of Interpretation 101-3
      • Other Documentation Considerations
      • Independence and Government Auditing Standards
    • Issues Related to Personnel Management
      • CPE under Government Auditing Standards
    • Sample Templates for a Quality Control Document
      • Introduction
    • Appendix - AICPA Audit and Accounting Practice Aid - Establishing and Maintaining a System of Quality Control for a CPA Firm's Accounting and Auditing Practice
  • Chapter 5 - Basics of Monitoring
    • Learning Objectives
    • Introduction
    • An Overview of What an External Reviewer Does
      • Understanding the Firm's System of Quality Control
      • Interviews with Firm Partners
      • Discussions with Professional Staff
      • Engagement Review
      • Matters for Further Consideration
      • The Conclusion of the Review
    • Monitoring Basics
      • Are You a Reviewer, Inspector or Monitor?
      • Areas to Cover in Your Monitoring Procedures
      • Assessments to Make While Monitoring
      • Monitoring Procedures to Use
      • Does a Pre-issuance or Post-issuance Review Qualify as Monitoring?
      • What Should You Expect to Find When Monitoring?
    • Planning for Monitoring
      • Assign Individuals to Perform Monitoring Procedures
      • Determine the Timing of the Monitoring Procedures
      • Determine the Work Programs and Documentation Required
      • Planning Inspection Procedures
      • Develop Monitoring Scope Guidelines
      • Design a Process to Resolve Differences That Might Arise During Monitoring
      • Common Monitoring Problems to Avoid
    • Making the Four Assessments
      • Assessing the Relevance of the Firm's Policies and Procedures
      • Assessing the Adequacy of the Firm's Guidance Materials and Practice Aids
      • Assessing the Effectiveness of Professional Development Programs
      • Assessing Compliance with the Firm's Policies and Procedures
    • Monitoring Procedures
      • Approaches to Monitoring Selected Engagements
      • Conduct Tests of Selected Engagements
      • Evaluate Engagement Review Findings
      • Document a Summary of Monitoring Results
      • Determine Corrective Action
      • Monitor the Implementation of Corrective Action
    • How to Ask "Why" (and Find the Right Solution)
      • Is the Systemic Deficiency Identified?
      • Are the Symptoms Described?
      • Is a Conclusion Stated?
      • Is the Recommendation Appropriate?
    • Substandard Engagements: How to Handle Them
      • The Firm's Responsibility
      • Omitted Procedures
      • Subsequent Discovery of Facts
    • Common Deficiencies: Independence, Integrity, and Objectivity
      • Objectives
      • Conditions That Might Increase the Risk of Deficiencies
      • Common Findings Noted in Peer Reviews
      • Developing Solutions
    • Common Deficiencies: Personnel Management
      • Objectives
      • Hiring: Common Objectives and Procedures
      • Assignment of Personnel to Engagements
      • Advancement
      • Professional Development
      • Conditions That Might Increase the Risk of Deficiencies
      • Common Findings Noted in Peer Reviews
      • Developing Solutions
    • Common Deficiencies: Acceptance and Continuance of Clients and Engagements
      • Objectives
      • Conditions That Might Increase the Risk of Deficiencies
      • Common Findings Noted in Peer Reviews
      • Developing Solutions
    • Common Deficiencies: Engagement Performance
      • Objectives
      • Engagement Planning
      • Engagement Performance
      • Engagement Review
      • Consultation
      • When to Consult
      • Conditions That Might Increase the Risk of Deficiencies
      • Common Findings Noted in Peer Reviews
      • Developing Solutions
    • Common Deficiencies: Monitoring
      • Conditions That Might Increase the Risk of Deficiencies
    • Engagement Reviews
      • Common Findings Noted in Peer Reviews
  • Chapter 6 - Inspection of Engagements
    • Learning Objectives
    • Introduction
    • Inspecting Engagements - General
      • Objectives of Inspecting Engagements
      • Decisions Based on the Inspection
      • Assessing the Use of Firm's Disclosure Checklist in an Engagement
    • Accounting and Auditing Alerts for 2008
      • Risk Assessment Auditing Standards
      • SAS No. 114, The Auditor's Communication With Those Charged With Governance
      • Audit Quality Problems Noted with OMB Circular A-133 Audits
    • Documentation Requirements - Specific References
      • Effect of SAS No. 104 - SAS No. 114 on Documentation
    • Common Deficiencies Noted in Engagements
    • Peer Review Engagement Deficiencies - Significant
      • Accountant and Auditor Reports
      • Financial Statement Recognition/Measurement, Presentation, and Disclosure
      • Audit Procedures and Documentation
      • SSARS Procedures and Documentation
      • Attestation Procedures and Documentation
    • Peer Review Engagement Deficiencies - Minor
      • Accountant and Auditor Reports
      • Financial Statement Recognition/Measurement, Presentation, and Disclosure
      • Audit Procedures and Documentation
      • SSARS Procedures and Documentation
    • Common Deficiencies in Specific Financial Statement Elements
      • Assets
      • Liabilities
      • Equity
      • Statement of Income
      • Statement of Cash Flows
      • Disclosures (Incomplete or Missing)
    • Common Deficiencies Unique to Specialized Engagements
      • Engagements Subject to Government Auditing Standards and OMB A-133
      • Common Interest Realty Associations (CIRAs)
      • Not-for-Profit Organizations
      • Employee Benefit Plans
      • Personal Financial Statements
      • Construction Contractors
      • Other Comprehensive Basis of Accounting (OCBOA) Engagements
    • Handling Specific Engagement Deficiencies
      • Questionable Matters
      • Investigating the Issues
      • Advising the Inspection Team
      • Considering the Response
    • Other Engagement-Related Matters
      • Variations from Illustrative Reports
      • Reporting vs. Financial Statement Departures
      • Communication of Reporting Deficiencies
      • Consideration of Personal Preferences
      • Over-Reliance on Third-Party Practice Aids
      • Handling Engagements That Do Not Meet Professional Standards in All Material Respects
      • Literature Reference
      • Factors to Consider
      • Suggested Actions
      • Disclosure in Subsequent Statements
      • Consulting an Attorney
      • Disagreements Regarding Engagement Findings
    • Considerations When Encountering Engagements That Do Not Meet Professional Standards in All Material Respects
      • Documentation vs. Performance Deficiencies
    • Determining the Cause of Engagement Deficiencies
      • Quality Control System Perspective
      • Expanding the Scope of the Inspection
    • Isolated Deficiencies
      • Definition
      • How to Evaluate Whether a Deficiency Is Isolated - Summary
      • Inability to Expand Scope
      • What If You Cannot Determine the Systemic Deficiency?
      • Focus on the System
      • System Deficiencies Not Evidenced by Engagement Deficiencies
  • Chapter 7 - Methods of Strengthening Quality Control
    • Learning Objectives
    • Introduction
    • What Is a System Weakness?
      • Design Deficiency
      • Compliance Deficiency
      • Performance Deficiency
      • Documentation Deficiency
    • Independence, Integrity, and Objectivity
      • Reporting
      • Recognition of Impairment
      • Noncompliance with Firm Policy
      • Failure to Consider Independence
      • Documentation
    • Personnel Management
      • Hiring
      • Engagement Assignment
      • Individual Skill and Training
      • Firm-Wide Knowledge
      • Other Knowledge-Related Matters
      • Advancement
    • Acceptance and Continuance of Clients and Engagements
      • Client Integrity
      • Engagement Completion
      • Client Understanding
    • Engagement Performance
      • Engagement Planning
      • Engagement Performance
      • Engagement Review
      • Financial Statement Presentation and Disclosure
      • Reporting on Engagements
      • Reference Sources
      • Identification of Need for Consultation
      • Consultation Documentation
    • Monitoring
      • Relevance and Adequacy of Policies and Procedures
      • Appropriateness of Guidance Materials and Practice Aids
      • Effectiveness of Professional Development Programs
      • Compliance with Firm Policies and Procedures
    • CPA Firm's Quality Control Compared to a Client's Internal Control
      • Control Environment
      • Risk Assessment
      • Control Activities
      • Information and Communication Systems
      • Monitoring
  • Chapter 8 - Peer Review Wrap-Up and Other Matters
    • Learning Objectives
    • Written Representation Letter
      • Example of a Written Representation Letter
      • Refusal to Furnish the Written Representation Letter Is a Scope Limitation
    • Peer Review Exit Conference
    • Engagement and Report Reviews
    • Letters of Response
    • Guidance for Writing Letters of Response
      • Objective
      • Focus Your Response on the Underlying Issue Not the Symptom
      • 10 Steps to Preparing Your Letter of Response
      • Sample Letters of Response
    • Common Letter of Response Deficiencies
      • Introduction
      • Threshold for a Reviewer's Findings
      • Tailoring a Response to an LOC Finding
      • Repeat Findings
      • Common LOR Deficiencies
    • Potential Accelerated Reviews for Some Firms
    • Presentation of Reviews to the Peer Review Committee
    • Considering Monitoring Actions
      • Monitoring Philosophy of the AICPA Peer Review Program
      • Implications of the Philosophy for System Reviews
      • Common Types of Follow-Up Actions
    • Notifying the Firm of a Monitoring Action
  • Chapter 9 - Ethics Focus: Accounting and Auditing
    • Ethics Overview
    • Recent Developments
    • Spotlight on Independence
    • Key Ethical Dilemmas
    • Addressing Ethical Dilemmas
    • Available Resources
  • Chapter 10 - Latest Developments

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Excerpts

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 unmodified peer review reports.

Of course, no one can guarantee an unmodified peer review report or one with no letter of comments. 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 the environment within the firm that focuses on quality control. It starts with the proper tone at the top. Few firms can consistently achieve a successful peer review without it.

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. 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 the course. For informational purposes, a summary of the Center for Public Company Audit Firms Peer Review Program (CPCAF PRP) is provided in the following text.

Center for Public Company Audit Firms Peer Review Program (CPCAF PRP)

Background

Effective January 1, 2004, the AICPA SEC Practice Section (SECPS) was restructured into the Center for Public Company Audit Firms (CPCAF). Since the PCAOB is required to inspect and discipline auditors of SEC issuers, the restructuring removed those activities that are performed by the PCAOB which inspects, disciplines, and establishes auditing, quality control and independence standards for auditors of public companies. The PCAOB monitors member firms' SEC practices through programs like peer review and quality control inquiry and establishes practice requirements such as concurring review. CPCAF's mission and activities allow it to continue to serve and represent firms that practice or are interested in practicing before the SEC and PCAOB.

CPCAF Peer Review Program

CPCAF's framework includes the continuation of a peer review program (PRP) for a firm's accounting and auditing practice applicable to a firm's non-SEC issuers. Given the short time between the creation of the CPCAF PRP and the performance of the first reviews in 2004, CPCAF evaluated the SECPS peer review program to identify the revisions necessary to bridge the SECPS peer review program to the PCAOB's inspection process, thereby transitioning into the CPCAF PRP.

The result was a bridging document that identified the procedures to be performed and the documents to be used in performing a CPCAF peer review. The SECPS Reference and Peer Review Program Manuals remained the foundation of the peer reviews with the bridging document that must be used for guidance in identifying changes in procedures and reporting requirements.

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 you should evaluate your firm's system of quality control and the context in which your external peer reviewer will evaluate it. In Chapter 4, you will learn 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 using 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 engagement deficiencies that other firms have encountered, chapter 6 includes a summary a summary of common deficiencies as well as other information that can help you perform effective inspections of engagements. This chapter also provides guidance for addressing specific engagement deficiencies. Although identifying deficiencies is important, knowing how to effectively and efficiently prevent them from recurrence is even more important. 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 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
  • 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
  • Common engagement deficiencies
  • Methods of strengthening a system of quality control

A Final Note

A good system of quality control is fluid enough to change with the demands of public accounting. Understand the profession. Understand your firm. Monitor your system within this context. Make changes in your system as needed. These basics form the foundation of any strong organization - whether a CPA firm or any other type of organization.

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Videocourse Details

NASBA Field of Study: Auditing
Level: Intermediate
Recommended CPE Credit: 12
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