Peer Review Questions

Who Needs Peer Review

• Who needs to have a peer review?
• If I need a peer review for Pennsylvania licensing, do I need to be a PICPA member to have them administer my peer review?
• How confidential are peer reviews?
• We are a small firm with less than 10 professionals and we perform only one audit. Do we need to have a system review?
• I heard that a sole practitioner could have a review outside of their office even if he or she does an audit. Is this true?

Peer Reviews in General

• What will a peer review of my firm cost?
• What does the administrative fee cover?
• What happens if my firm doesn't get an unmodified report?
• What period will the review cover?
• How long does it take before a peer review is final?
• How often is a peer review required?

Meeting Your Peer Review Date

• Can I have my review sooner than my assigned due date?
• My review due date falls during tax season, what can I do?
• Can I get an extension for my review because I'm not ready?
• Our firm is merging/demerging. Will our review date change?
• What happens if a firm maintains an accounting practice, but plans to give up its only audit, or obtain its first audit engagement?
• I still have questions. Where can I get more information?

Q. Who needs to have a peer review?
A. Peer review is an AICPA and DSCPA (Delaware Society of CPAs) membership requirement for all members with an accounting and auditing practice, and is a licensing requirement for the state of Pennsylvania for all firms that have performed audits or review engagements.

back to top

Q. If I need a peer review for Pennsylvania licensing, do I need to be a PICPA member to have them administer my peer review?
A. No. PICPA administers reviews for members and nonmembers.

back to top

Q. How confidential are peer reviews?
A. Information concerning the reviewed firm or any of its clients or personnel, including the findings of the review, is confidential. Peer reviewers may not disclose such information to anyone who is not involved in carrying out the review or administering the program, or use such information in any way not related to meeting the objectives of the program. Peer review documents of firms enrolled in the Peer Review Program are confidential.

back to top

Q. We are a small firm with less than 10 professionals and we perform only one audit. Do we need to have a system review?
A. Yes. A firm that performs audits of financial statements is required to have a system review. The scope of the review, however, may be less than that for firms with more professionals, depending on the size and nature of a firm's practice. Additionally, the review will cover engagements representing approximately 5-10 percent of the firm's annual accounting and auditing hours, so the scope of the review is proportionate to the size of the firm's practice.

back to top

Q. I heard that a sole practitioner could have a review outside of their office even if he or she does an audit. Is this true?
A. A sole practitioner with no professional staff, who performs a total of three or less engagements covered by the SASs, Government Auditing Standards or examinations of prospective financial statements under the SSAEs, may bring, or send, the required files, reports, and other evidential matter to the reviewer's office or another agreed upon location. The review scope will not be changed from that of a system peer review and should not be confused with an engagement or report review, which is only available to firms that do not perform any audits. While this procedure may save on reviewer travel costs, firms should be aware that it may also make for a less efficient review, since there may be delays and difficulties with communication between the parties when the review is not done "face-to-face."

back to top

Q. What will a peer review of my firm cost?

A. The cost of a peer review varies depending upon the type of review, the rate charged by the reviewer, the efficiency of the review process, and the size and nature of a firm's practice. In addition to the basic cost of the review there is a processing fee charge by the administrative entity that covers the scheduling, evaluation, and acceptance of the review. This fee varies by type of review and also by the size of the firm -- based on the number of professionals. See What Will Your Peer Review Cost, which provides more detailed information on costs and fees.

back to top

Q. What does the administrative fee cover?
A. The Pennsylvania Institute of CPAs is fully involved in the administration of the Peer Review Program in Pennsylvania, Delaware, and the U.S. Virgin Islands. This allows our members to have their reviews evaluated by professional staff and a committee of peers who understand the local business and practice environment. It means that all of the administrative procedures are performed by the Pennsylvania Institute of CPAs. These procedures include maintaining enrollment information of reviewed firms, maintaining information on reviewers, obtaining information from firms regarding the nature and timing of reviews, scheduling reviews, obtaining and verifying information on reviews, researching the qualifications of reviewers, evaluating peer review papers and reports, and processing the acceptance of reviews.

back to top

Q. What happens if my firm doesn't get an unmodified report?
A. If deficiencies are found, your firm is expected to identify and take corrective measures to prevent the same type of deficiencies from happening in the future. Such actions could include making appropriate changes in the firm's system of quality control or having personnel take additional continuing professional education in identified areas. In addition, the peer review committee may ask your firm to agree to certain other actions it deems appropriate in the circumstances, such as the submission of a monitoring report or a revisit by the reviewer.

back to top

Q. What period will the review cover?
A. The period is mutually agreed upon by the reviewer and the reviewed firm. It should cover client engagements with years (or periods) ending during a current 12-month period that includes the most recent calendar year end (December 31), unless a more recent report has been issued. Generally the review-year ends about three to four months prior to the review fieldwork. After the initial review, firms may need to perform an annual internal inspection that covers all periods subsequent to the reviewed period. Therefore, firms may want to select a review period that is conducive to performing internal inspections (e.g., during a non-busy period or coinciding with the firm's fiscal year end). After a firm's initial review, the year-end remains the same for subsequent peer reviews.

back to top

Q. How long does it take before a peer review is final?
A. It ordinarily takes 60 to 90 days to process a system or engagement review from the receipt of the review documents by PICPA to acceptance by the peer review committee. The process is shorter for report reviews without significant matters.

back to top

Q. How often is a peer review required?
A. That depends on whether your firm is enrolled in the AICPA's program and the size of your firm. Under the Pennsylvania CPA law, firms with two or fewer licensees may have peer reviews every five years if they received an unmodified peer review report on their last review and have no other problems. This does not apply to firms that are enrolled in one of the AICPA peer review programs, or to firms that perform governmental audits -- including yellow book audits.

If a firm needs a peer review due to AICPA membership requirements or for yellow book purposes, a firm must be reviewed every three years.

back to top

Q. Can I have my review sooner than my assigned due date?
A. Yes. The review due date is the date by which all review documents must be submitted to the PICPA. In some cases, firms may wish to accelerate their review if they have previously received a modified report and they feel that they have implemented the necessary changes to receive an unmodified report on the current year. Firms that want to accelerate their review should contact PICPA.

back to top

Q. My review due date falls during tax season, what can I do?
A. Firms receive significant advanced notice of their due dates and are expected to plan accordingly. If your due date falls within your busy season, you should plan to have the review earlier than the due date, not later. For example, firms with an assigned date of March 31, should plan to have the review take place during November or December. Firms may also make a permanent change in the year-end used for their review, to move the due date to a more convenient time of year.

back to top

Q. Can I get an extension for my review because I'm not ready?
A. Extensions may be granted at the discretion of the peer review committee; however, extensions will not be granted because a firm believes it is not yet ready for a peer review.

back to top

Q. Our firm is merging/demerging. Will our review date change?
A. If your firm undergoes a merger, dissolution, sale, or other change in structure, you should complete and return the Change in Firm Structure form as soon as possible. The form should be returned to the PICPA Peer Review staff or to the AICPA if your firm has at least one AICPA member. Each change in structure will be individually evaluated to determine if it will affect the peer review due date.

Generally, when firms merge, the review status and due date will be that of the firm bringing in 70 percent or more of the accounting and auditing hours of the combined firm. If both are less than 70 percent, the due date will be that of the firm bringing in the greatest percentage of the accounting and auditing hours of the combined firm or 15 months from the effective date of the merger. In a dissolution, if the surviving firm has 70 percent or more of the accounting and auditing hours of the original firm, the due date will not change. If it has between 11 percent and 69 percent, it may be granted an extension of up to 15 months. The portion of the divested practice that is 10 percent or less will be treated as a new firm and assigned a review date 18 months from the effective date of the dissolution.

back to top

Q. What happens if a firm maintains an accounting practice, but plans to give up its only audit, or obtain its first audit engagement?
A. If a firm loses or gives up its audits prior to its initial peer review, it will still need a system review for Pennsylvania licensing purposes if an audit was performed within the previous two years. If a firm has previously been peer reviewed, the firm will not need a system review if the audit engagements do not fall within the peer review year in the firm's normal peer review cycle. If the firm plans to take on an audit engagement, it must notify PICPA as soon as possible. The firm may be required to undergo a system review within 18 months of the year-end of the audit engagement.

back to top

Q: I still have questions. Where can I get more information?
A: The AICPA's Peer Review Program Web site has more information for firms going through a peer review, including an extensive question and answer packet. Also, the Peer Review Team is here to make the process as simple and efficient as possible. If you have questions, please contact us.

back to top