AICPA Proposes Peer Review Changes

By:
Chris Gaetano
Published Date:
Aug 18, 2016
Change Ahead Road Sign

The AICPA has proposed changes to its peer review standards that would alter the representation letter and peer review report to make it more clear whether a firm has performed single audits and other must-select engagements, and whether those engagements are within the scope of the peer review. 

When performing peer review of another firm, certain types of engagements such as single audits are categorized as "must-select," as in they must be included in the representation letter and therefore in the review. Despite this, the AICPA said it has found reviewing firms that have omitted must-select engagements from the scope of their peer review, and reviewed firms that have omitted must-select engagements from their background information.

Ordinarily, such actions can cause the AICPA to revoke a reviewing firm's acceptance letter or to ensure that omitted must-select engagements are select for review. In some cases, however, there was not sufficient information to conclude one way or another that an omission took place. In some cases, due to retention guidelines, the workpapers needed to determine this were no longer available. In other cases, while the peer reviewer mentioned that must-select engagements were selected, there was no mention of whether this included single audit engagements. 

To address this, the AICPA has proposed two changes: 

The “Required Selections and Considerations” (must-select) paragraph in the system
peer review reportshould be modified to specify, when appropriate, the selection and review of a Single Audit in the scope of the review.
* The representation letter provided by the firm should be modified for consistency to address all must-select engagements, including single audits, when performed by the firm and selected by the peer reviewer.

"Proposed changes to the firm representation letters for system peer reviews provide enhanced accountability by requiring the firm to specify the types of must-select engagementperformed by the firm and selected by the peer reviewer for review," said the AICPA.  

Comments are due Sept. 30. If passed, the new rules will be effective starting January 2017. 

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