Peer Review – What’s going on, and how to get through it Presented by Chris Rouse Windham 1 Brannon, PC
Peer Review – What’s going on Agenda AICPA Audit Quality Initiative • Peer Review Future • How to Have a Successful Peer Review • 2
Peer Review – What’s going on AICPA Audit Quality Initiative • Initiated in 2014 in response to concerns of users of financial statements about the quality of the work of practitioners of public accounting • Significant changes and efforts proposed included … o Competence and due care Aligning CPA exam with real world practice Ensure auditors adhere to the Code of Conduct regarding competence and due care 3
Peer Review – What’s going on AICPA Audit Quality Initiative • Auditing and Quality Control Standards o Monitor application of Standards and provide guidance, tools and education to meet needs of profession o Identify and understand where and how deficiencies occur so revisions can be to Standards and resources • Guidance, Tools, Learning and Resources o Enhance curricula, content and methods of instruction to support areas the profession serves o Release a rigorous, profession-wide competency framework validated by users and regulators 4
Peer Review – What’s going on AICPA Audit Quality Initiative • Practice Monitoring (Peer Review) o Enhance and expand peer review procedures o Address risks posed by low-volume auditors of high- risk and complex engagements o Evaluate certain engagements promptly o Enhance the quality of peer reviewers o Develop peer review process that provides firms near real-time feedback on their accounting and audit practice 5
Peer Review – What’s going on AICPA Audit Quality Initiative • Ethics Enforcement o Use available information to proactively identify deficient audits and require corrections o Consider sanctions for firms not properly disclosing their practice to peer review • Dialogue and Feedback o Engagement of all parties with interests in private entity audits 6
Peer Review – What’s going on Peer Review Future AICPA considering results of inspections performed by • regulators President’s Council on Integrity and Efficiency o Study of +/-400 A-133 audits revealed about 50% with deficiencies Department of Labor o Over many years DOL inspections show about one-third of employee benefit plan audits are deficient Sample of 400 audits from 2011 had almost 40% deficiency rate PCAOB inspections o Consistently result in 20-30% deficiencies Recent broker/dealer inspections were even higher 7
Peer Review – What’s going on Peer Review Future AICPA Peer Review Committee enhanced oversight • program o Inspections currently being performed of engagements when submitted but before going to Acceptance Body o Results are consistent with findings of regulator oversights 8
Peer Review – What’s going on Peer Review Future The Future of Practice Monitoring • o Phase One Firms push engagement data to master server The system continuously process the data and measures it against engagement quality indicators Firm’s internal dashboard gets real-time performance snapshots System would generate flags when performance not meeting expected metrics 9
Peer Review – What’s going on Peer Review Future The Future of Practice Monitoring • o Phase Two Dashboards could be shared with and customized for other users “Seals” would show firm’s overall performance measures 10
Peer Review – What’s going on How to Have a Successful Peer Review What is a successful peer review? • o Improves your ability to perform engagements in conformity with professional and firm standards o Provides new knowledge about professional standards o Offers new perspectives on implementing standards o Suggests tips for preventing deficiencies 11
Peer Review – What’s going on How to Have a Successful Peer Review How to prepare for peer Review • o Starts when you finish your peer review o Rework you Quality Control Document Complete and use the AICPA QC Questionnaire as a basis Tailor the QC Document practice aid using the QC Questionnaire responses o For your engagement inspections, use the AICPA Engagement Checklists Use all the A&A supervisors to perform engagement inspections o Use the AICPA website resources 12
Peer Review – What’s going on How to Have a Successful Peer Review • Chris’s Top 10 Peer Review Deficiencies 1. Inadequate partner involvement o Manage the planning meeting o Go beyond “how’s it going” o Answer the question, “If you only had one day to do this audit, what would you do?” 2. Inadequate relevant CPE o Appropriate for level o Appropriate for industry 13
Peer Review – What’s going on How to Have a Successful Peer Review • Chris’s Top 10 Peer Review Deficiencies 3. Failure to consult with others o Not just “when you’re unsure” o Reading vs Internal vs External o Early partner involvement 4. Not tailoring audit and review work programs o Key is excellent risk assessment o Purchased practice aids are never right o Vision a planning meeting where you tailor the programs 14
Peer Review – What’s going on How to Have a Successful Peer Review • Chris’s Top 10 Peer Review Deficiencies 5. Misunderstanding sampling o Study practice aids and Audit Sampling Guide o Understand not sampling, attribute sampling and monetary sampling 6. Conversational review of workpapers is not effective o Knowing its right isn’t enough o Focus on accounting and audit matters first o Focus on staff development second o Don’t forget client service 15
Peer Review – What’s going on How to Have a Successful Peer Review • Chris’s Top 10 Peer Review Deficiencies 7. Inadequate Engagement Quality Control Review o A cold pre-issuance review of financials, key area workpapers and discussion with engagement partner o The EQCR policy should help manage your engagement risk 8. Inadequate communications with management and governance o Find the value in the engagement for the client o Use a written Agenda 16
Peer Review – What’s going on How to Have a Successful Peer Review • Chris’s Top 10 Peer Review Deficiencies 9. Documentation, documentation, documentation o Staple or upload yourself to the workpapers o Put a picture of your peer reviewer behind you and imagine him/her looking over your shoulder while you prep the workpapers 10. Ineffective monitoring o Ongoing for functional areas o Focused inspection for engagement performance 17
Peer Review – What’s going on So, once again, what is a successful peer review? One that … Improves your ability to perform engagements in conformity with professional and firm standards Provides new knowledge about professional standards Offers new perspectives on implementing standards Suggests tips for preventing deficiencies Key to success – Find a peer reviewer that knows more than you know 18
Peer Review – What’s going on Bon Auditpetite! Questions? Contact Chris Rouse crouse@windhambrannon.com 404-898-2000 19
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