.01  An engagement review is available to firms that do not perform engagements under Standards on Auditing Standards (SASs) or examinations of prospective financial statements under the Statements on Standards for Attestation Engagements (SSAEs) but that do provide other types of services listed in the definition of an accounting and auditing practice for peer review purposes as defined in paragraph 4 of the AICPA Standards for Performing and Reporting on Peer Reviews [(the Standards); (PRP section 3100.01)]. See Exhibit 1 for a copy of that paragraph. Engagement reviews are administered by state CPA societies that elect to participate in the program. One of those entities, as appropriate (the administering entity) will contact your firm at the appropriate time to make arrangements for the conduct of the review. In preparation for the review, you should read the applicable sections of the Standards issued by the AICPA Peer Review Board (at least the sections headed Introduction, General Considerations, Performing Engagement Reviews, Reporting on Engagement Reviews, and Acceptance of System, Engagement and Report Reviews).

.02  Prior to the review, the administering entity or the assigned reviewer will ask you to provide summarized information showing the number of accounting and review engagements,¹, classified into major industry categories and broken down by each partner of the firm who is responsible for the issuance of reports on accounting and review services and attest services.

.03  Discuss with the reviewer the twelve-month period to be covered by the review. Ordinarily, the review should be performed within three to five months following the end of the year to be reviewed.

.04  Based on that information, the administering entity or the assigned reviewer will advise you of the types of engagements to be selected for review. (For example, you may have reported that Partner A issues review reports on four construction contractors, two retailers, and ten manufacturers, while Partner B issues compilation reports on thirty doctors and review reports on five restaurants. You may be asked to submit one of Partner A’s review reports on a construction contractor and one of partner B’s compilations reports on a doctor. You will select the specific engagements following those instructions.)

.05  The number of engagements selected should ordinarily adhere to the following guidelines:

a.       Select one engagement from each area of service performed by the firm:

·         Review of historical financial statements

·         Compilation of historical financial statements with disclosures

·         Compilation of historical financial statements that omits substantially all disclosures

·         Attestation ²

b.       Select on engagement from each partner of the firm responsible for the issuance of reports listed in the “a” above.

c.       Ordinarily, at least two engagements should be selected for review.

The above criteria are not mutually exclusive. For example, one of every type of engagement that a partner performs does not have to be reviewed as long as, for the firms taken as a whole, all types of engagements noted in “a” above performed by the firm are covered.

.06  Within thirty days of being notified by the reviewer or the administering entity of the type of engagements selected for review, the firm should submit the following information for each engagement selected:

a.       A copy of the financial statements or information and the accountant’s report, and the firm’s documentation required by SSARs and the SSAEs. The client’s name may be deleted and, if that is done, the engagements should be assigned a code number by the firm. The firm should retain a record of those code numbers to facilitate responding to any questions by the reviewer in the course of the review.

b.       A completed “Engagement Questionnaire” form.

.07  The engagements selected should have periods ending during the agreed-upon review year.

.08  A firm may be dropped from the peer review program if it has failed to have a review by the date assigned. Therefore, if a firm fails to provide the information described in paragraph .06 in sufficient time to enable the reviewer to perform the engagement review prior to the required date, the reviewer should promptly advise the entity administering the review of this fact. Appropriate due process procedures will be followed in these circumstances.

.09  During the course of the review, the reviewer may have questions about the selected engagements. The firm is expected to respond promptly to questions raised during the review, whether those questions are raised orally or in writing.

.10  Upon receipt of the report and letter of comments, if any, on the review, the firm should prepare a letter of response to any deficiencies noted in the report and letter of comments. The report, letter of comments, if any, and the letter of response should be submitted to the administering entity within thirty days of the date the report was received from the reviewer or by the firm’s peer review due date, whichever date is earlier. The reviewed firm should submit a draft of its letter of response to the reviewer for review and comments prior to submitting the response to the administering entity.

.11  The administering entity will not make the report on the firm’s engagement review available to the public. The report should not be distributed by the firm to its personnel, clients or others until the firm has received a formal notification that it has been accepted by the administering entity.

1 – See Exhibit 1 for a description of the types of attestation engagements included within the definition of an accounting and auditing practice for peer review purposes.

2 – See footnote 1.  the attestion engagement selected for review con be on either prospective financial statements or assertions.

Exhibit 1

Definition of an Accounting and Auditing Practice for Peer Review Purposes

Paragraph 4 of the AICPA Standards for Performing and Reporting on Peer Reviews states:

An accounting and auditing practice for the purposes of the AICPA Standards for Performing and Reporting on Peer Reviews is defined as all engagements covered by Statements on Auditing Standards (SASs), Statements on Standards for Accounting and Review Services (SSARS), Statements on Standards for Attestation Engagements (SSAEs) Government Auditing Standards (the Yellow Book) issued by the U.S. General Accounting Office (GAO).

 

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