Peer Review Bill Becomes Law, Affected Firms Have 30 Days to Notify SED

Chris Gaetano and Ruth Singleton
Published Date:
Oct 24, 2017

Governor Andrew Cuomo on Oct. 23 signed legislation that mandates peer review for all CPA firms in the state that provide attest work for their clients, regardless of size. The legislation takes effect immediately, giving affected firms with two or fewer CPAs 18 months to have a completed peer review.

However, a more immediate deadline looms. Small firms and sole proprietors have until Nov. 22 to notify the New York State Education Department (SED) of their change of status. The SED is also recommending that firms enroll in a peer review program by that date to ensure completion of a peer review within the required 18-month window.

“What we have found is that it is nearly impossible to enroll [at the] one-year mark and complete the process within six months,” said New York State Board for Public Accountancy Executive Secretary Jennifer Winters at a recent state board meeting. “So what we advise people is that they enroll [and] notify [the state board office] within 30 days and get everything done they need to do. And then they don’t have to come back to us twice."

By eliminating an exemption for firms with two or fewer CPAs, the bill (S6026A/A7895A) aligns New York with the other 49 states, all of which require peer review for all firms that do attest work regardless of the number of CPAs in the firm. The bill also aligns the language used to describe the process with the rest of the country by using the term "peer review" as opposed to "mandatory quality review."

The NYSSCPA advocated for the bill, arguing that it protected the public interest and ensured best practices within the audit community. 

The Society has compiled the following FAQs on the matter: 

Peer Review Legislation in New York FAQs

Q: Now that Gov. Cuomo has signed the bill into law, how much time do I have before I have my attest practice peer reviewed?

A: The New York State Board for Public Accountancy recommends that any firm with two or fewer CPAs with an attest practice notify the New York State Education Department (NYSED) and enroll in a peer review program by Nov. 23. A firm will have 18 months, from the date the governor signs the bill into law, to undergo and complete a peer review.

Q: How do I enroll my firm in a peer review program?

A: Firms looking to enroll in peer review should visit the AICPA’s PRIMA page here. 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. 

Q: My firm only does compilations. Does that mean I have to get a peer review?

A: No. Included in the state’s definition of attest are audits, financial statement reviews and examinations. Compilations are not considered attest services. However, even if a firm has only one client for which it provides any type of aforementioned attest service, the firm would be obligated under state law to undergo a peer review once the bill is signed into law.

Q: How much is this going to cost?

A: Costs include an annual administrative fee and a fee for the review itself in the year it is performed. The annual administrative fee is levied on Peer Review Program (PRP) enrollees to cover the costs of PRP administration, which includes the administrative and technical review of peer reviews, required program oversight procedures, and reviewer résumé and CPE verification. For more information and a formula that will help you to determine your annual administrative fee, go to this page

For the peer review, the cost varies according to firm size, the number of attest clients and the types of engagements a firm may have. A firm with a single attest client should not expect to pay anything less than $1,000 for the cost of a peer review, which would be required every three years.

Q: How do I know what type of peer review I need to have?

A: There are two types of peer reviews.

A system review is for firms that perform engagements under the Statements on Auditing Standards (SAS), government auditing standards (Yellow Book), examinations under the Statements on Standards for Attestation Engagements (SSAE), or engagements under the PCAOB standards, as their highest level of service. The reviewer tests, among other things, a reasonable cross section of the firm’s engagements, with a focus on high-risk engagements as well as significant risk areas for non-high-risk engagements.

An engagement review is for enrolled firms that perform services under Statements on Standards for Accounting and Review Services (SSARS) or services under the SSAEs that do not require a system review. Engagement reviews are designed to determine whether engagements submitted for review are performed and reported on in conformity with applicable professional standards in all material respects.

Both types of reviews culminate in a report. System reviews report whether the firm’s quality control system provides reasonable assurance of conforming to professional standards in all material respects. An engagement review reports whether the firm’s engagements that were tested by the reviewer conform in all material respects with professional standards. 

Q: Why is the NYSSCPA supporting this bill?

A: Attest service engagements come with the highest level of risk that you can provide as a CPA. Not having at least a peer review is a recipe for audit failure. It’s not good for your business, it’s not good for your client and it’s not good for the profession. The New York State Quality Review Oversight Committee, a state board, which is charged with overseeing peer reviews, has recommended for a number of years that the NYSED remove the small firm exemption in the law. Mandatory peer review ensures adequate quality control and fosters best practices among the CPA firms that perform audits. New York state is the only state in the country that does not mandate peer review of attest services for all firms that provide them. This bill seeks to ensure that all CPA firms with attest practices are subject to peer review.         

The bill passed, 60-2, in the Senate on June 21, and was sponsored by Republican Sen. Pamela Helming; Democratic Assemblyman Albert “Al” A. Stirpe Jr. sponsored the Assembly bill, which passed, 108-0, on June 14. 
The bill passed, 60-2, in the Senate on June 21, and was sponsored by Republican Sen. Pamela Helming; Democratic Assemblyman Albert “Al” A. Stirpe Jr. sponsored the Assembly bill, which passed, 108-0, on June 14. 

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