Peer Review

System Review - Letter of Response

The purpose of a letter of response is to describe the actions the firm has taken or will take to prevent a recurrence of each matter discussed in the letter of comments. If the reviewed firm disagrees with one or more of the findings or recommendations in the letter of comments, its response should describe the reasons for such disagreement. The letter of response should be carefully prepared because of the important bearing it may have on the decisions reached in connection with acceptance of the report on the review. The letter of response should be submitted to the team captain for review and comment prior to submitting the response to the PICPA. If the firm has received a modified or adverse report, the firm's responses should be separated between those findings that resulted in a modified or adverse report and those that did not.

Sample Letter of Response

Month date, 20XX

(Address to PICPA)

Ladies and Gentlemen:

This letter represents our response to the letter of comments issued in connection with our firm's review of its system of quality control for the year ended [month date, year]. The matters discussed herein were brought to the attention of all professional personnel at a training session held on [month date, year]. In addition, the matters discussed in this letter will be monitored to ensure they are effectively implemented as a part of our system of quality control.

Matters that Resulted in a Modified Report
(This caption is to be used only if a modified or adverse report is being issued and should be tailored to fit the circumstances.)

Partner Involvement in Auditing Planning - The firm modified its quality control policies and procedures to require a partner to be involved in the planning stage of all audit engagements. In addition, we identified review engagements that are sufficiently large or complex to warrant partner involvement in the planning stage. The revised policies and procedures require the engagement owner to document his or her timely involvement in the planning process in the planning section of the written work program. The importance of proper planning, including timely partner involvement, to quality work was emphasized in the training session referred to previously.

Matters that Did Not Result in a Modified Report
(This caption is to be used only if a modified or adverse report is being issued and should be tailored to fit the circumstances.)

Financial Reporting and Disclosure Checklists - All professional personnel were reminded of the importance of complying with the firm's policy requiring completion of its financial reporting and disclosure checklist at the training session held [month date, year]. In addition, the firm's engagement review questionnaire is being revised to require the engagement partner to document his or her review of the completed checklist. (The engagement review questionnaire is a brief form completed by the engagement partner and the manager at the conclusion of an audit to document their completion of their assigned responsibilities.)

Monitoring - A partner of the firm has been designated as responsible for summarizing the findings on the firm's annual inspection and the monitoring the actions taken as a result of those findings to prevent their recurrence.

We believe these actions are responsive to the findings of the review.

Sincerely,

(Name of firm)