What Sole Proprietors and Small Firms Need to Know About the New Peer Review Law

By:
Colleen Lutolf
Published Date:
Nov 16, 2017

Now that Gov. Cuomo signed the peer review bill into law on Oct. 23, firms with two or fewer CPAs that provide attest services to clients and want to continue to provide them will need to undergo a peer review every three years. 

While the law went into effect immediately, the State Education Department's (SED's) New York State Board for Public Accountancy, which met on Oct. 25 in Albany, proposed an amendment to Section 70.10 of the regulations, which governs peer review. The Board of Regents adopted the amendment, as an emergency action, on Nov. 14.

The amended language regarding notification and enrollment states:

Any firm that begins providing attest services as described in Education Law section 7401-a or otherwise becomes subject to mandatory participation in the peer review program shall:
(i) notify the department of its change in status within 30 days and provide the department with evidence of enrollment in an acceptable peer review program; and
(ii) the firm shall have a peer review completed within 18 months of the date such services were first provided.

The SED is thus requiring firms both to notify the SED and to enroll in a peer review program within 30 days of becoming subject to mandatory participation so that they may meet the 18-month requirement.

TIMING
Most firms fall into one of two camps:
1. You were in the middle of an attest engagement when the law was signed on Oct. 23. If this is the case, you have 30 days to notify the SED that you will need to have a peer review and also to enroll in a peer review program. That's 30 days from Oct. 23, so you need to notify the SED by Nov. 22 that you are currently providing this service, and you must also enroll in a peer review program by that date.

2. You were not in the middle of an ATTEST engagement on Oct. 23 and you have not become engaged between Oct. 23 and today. If you have no intention of doing attest work in the future, you do not have to do anything. In fact, if you issued your audit report on Oct. 22, the day before the bill was signed, you are not captured by the peer review law. What triggers your notification/peer review requirement is the date of a signed engagement letter after Oct. 23, 2017. Once you take on that attest engagement, that's what sets the 30-day and 18-month clocks ticking (see Regulation 70.10 above). For example, if you are engaged to provide attest services on Dec. 1, 2017, you would have until Dec. 30, 2017 to notify the SED and enroll in a peer review program and then 18 months from Dec. 1 (May 1, 2019) to have a completed peer review.

HOW TO NOTIFY THE SED
In order to satisfy the requirement of notifying the SED, a firm only needs to email the office; however, if a firm wishes to notify the SED through a formal letter, it may do so, at the following physical or email address:

NY State Education Department
Office of the Professions
State Board for Public Accountancy
89 Washington Avenue
Albany, New York 12234-1000
Phone: 518-474-3817, ext. 160
Fax: 518-474-6375
E-mail: cpabd@nysed.gov

HOW TO ENROLL IN A PEER REVIEW
Firms looking to enroll in peer review should visit the AICPA's PRIMA page at http://www.aicpa.org/InterestAreas/PeerReview/Pages/PRIMA.aspx. On that page, click on the link "Getting Started in PRIMA," for instructions on how to create an account and enroll. By enrolling, a firm agrees to have a peer review of its accounting and auditing practice once every three years.

DEFINITIONS
If a firm only does compilations, New York does not require the firm to be peer reviewed. The following definitions are encoded in New York State's Education Law, Section 7401-a:

 
"Compilation" means providing a service that presents, in the form of financial statements, information that is the representation of the management or owners of the client without undertaking to express any assurance of the accuracy of the information in the statements, to be performed in accordance with standards, developed by a federal governmental agency, commission or board or a recognized international or national professional accountancy organization, that are acceptable to the department in accordance with the commissioner's regulations.

"Attest" means providing the following public accountancy services which all require the independence of licensees:

  1. any audit to be performed in accordance with generally accepted auditing standards or other similar standards, developed by a federal governmental agency, commission or board or a recognized international or national professional accountancy organization, that are acceptable to the department in accordance with the commissioner's regulations;
  2. any review of a financial statement to be performed in accordance with standards, developed by a federal governmental agency, commission or board or a recognized international or national professional accountancy organization, that are acceptable to the department in accordance with the commissioner's regulations;
  3. any examination to be performed in accordance with attestation standards developed by a federal governmental agency, commission or board or a recognized international or national professional accountancy organization, that are acceptable to the department in accordance with the commissioner's regulations; or
  4. any engagement to be performed in accordance with the auditing standards of the public company accounting oversight board.

QUESTIONS? 
The NYSSCPA also has an entire staff dedicated to Peer Review Administration. If you have questions about enrolling in a peer review or want further clarification, call 212-719-8300 and ask to be connected to the Peer Review Department. If you have specific questions about your situation, the best course of action is to call the number above or to contact the State Board for Public Accountancy at 518-474-3817, ext. 160 or email: cpabd@nysed.gov.

The NYSSCPA will hold an information session for firms subject to the new law on Nov. 20, at 6 p.m., which will be available via webcast. Information about the session is available here. You can sign up for the live event here, and the webcast here.

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