Peer Review to Protect the Public Interest
2006 - The proposal on revamping peer review developed by
the NYSSCPA’s Quality Enhancement Policy Committee
(QEPC) and approved by our board of directors last December
has been generating significant interest. Many diverse viewpoints
are being expressed, which is both constructive and welcome.
change that the proposal calls for is that peer reviews
should be conducted by individuals drawn from a pool of
reviewers from different firms. This would replace the current
firm-on-firm structure and would better accomplish learning
and an exchange of information among reviewers and reviewed
firms. Assigning qualified individual reviewers, not firms,
out of a pool would obviate potential weaknesses in the
current program, in which firms select their own reviewer.
A pool of reviewers would mitigate issues concerning firm-on-firm
reviews or the rotation of reviewers, because each review
would be conducted by a new team composed especially for
that one-time review project.
of the reviewer-pool concept have been telling the Society
that if CPAs can no longer select their own peer reviewers,
then the profession is beginning to descend a slippery slope.
Some of them ask: What’s next? Companies not being
able to hire their own auditors? This analogy shows a lack
of understanding about what peer review is, and of the differences
between an audit and peer review, which has been one of
the accounting profession’s self-regulated functions,
carried out to ensure that CPAs meet the profession’s
the Profession the Client
peer review isn’t helping the profession achieve continuous
improvement, then the government may feel obligated to intervene
in order to protect the public interest, the same as when
the passage of the Sarbanes-Oxley Act in 2002 mandated the
establishment of the Public Company Accounting Oversight
Board, which replaced peer review for auditors of publicly
owned companies with its own inspections.
A better perspective might be to see the CPA profession
itself, not the reviewed firm, as the client. In effect,
the AICPA and state societies, or other organizations conducting
the reviews, would be acting on behalf of the entire profession.
this system, the fee for a peer review would be an assessment
not dissimilar to the fees the PCAOB charges publicly owned
companies to pay for auditor inspections. Similarly, review
fees would be paid to the entity that selects peer reviewers
from among its pool. The client relationship would be between
the administering organization and the reviewers in the
pool. Viewing the peer review program this way makes particularly
good sense for firms that audit governments and government-funded
framework is analogous to the idea that the investing public,
not publicly owned companies, is the true beneficiary of
PCAOB inspections. It underscores the mission of CPAs to
protect the public interest in matters of financial reporting
and public accounting.
Publisher, The CPA Journal
Executive Director, NYSSCPA
note: The text of the QEPC’s white paper
appears on page 12; a panel discussion of the proposal appears
on page 22.