In our ongoing effort to improve the AICPA Peer Review Program, we rarely step back to see how far we’ve come and the positive impact the peer review process has on our profession, those we serve, and their overall impact on quality of the audit.
The AICPA, its Peer Review Board (PRB) and the profession is focused on protecting the public interest. We accomplish this by conducting audits of the highest possible quality and seeking continuing education, technology adoption, and maintaining dialogue with stakeholders. It cannot be underestimated that the nearly 11,000 public accounting firms (CPAs), and their employees, who perform auditing work for private companies, non-profit organizations, governments, and employee benefit plans and are enrolled in the Review Program By peers also protect the public interest through audits and other attesting engagements, maintaining independence and many, many other initiatives.
Today’s accounting profession has a highly effective internal monitoring system of review, remediation and discipline thanks to its foundation of professional and ethical standards, disciplinary procedures and educational resources, as well as its commitment to evolve with the fast-paced business environment. Our focus on protecting and serving the public interest is unwavering. AICPA and the PRB are proud of our efforts to evaluate (and where necessary remediate) auditors and reviewers, develop innovative and proven solutions to improve audit quality, and work closely with a network of stakeholders, including state licensing boards, GAO, and auditees. as government agencies and private companies, to generate awareness, transparency and access to Peer Review data and processes.
Peer review is one of many initiatives in the profession that contributes to high quality auditing. For example, AICPA’s Government Audit Quality Center (GAQC), Employee Benefit Plan Audit Quality Center (EBPAQC), and the Audit Quality Improvement (EAQ) initiative, as well as robust delivery of guides, training, education, tools and other resources move the profession’s focus on high performance and continuous improvement forward.
As an integral part of the regulatory framework for CPAs, Peer Review’s primary function is evaluation and remediation, where warranted. When combined with other CPA licensing hallmarks, educational and experience requirements, passing the CPA exam, and meeting continuing education requirements, the accounting profession is recognized by many as forward-looking, service-oriented, and quality-focused.
As an example, in 2014, the PRB implemented significant enhancements to help peer reviewers stay focused on what matters most and identify problems in practice more quickly. These reforms, which resulted in a more specific, meaningful and timely remediation, included:
- Require subject matter experts to review significant public interest commitments after the peer review (Enhanced Oversight Program) is conducted, but prior to issuance of a peer review report to ensure the adequacy of the findings.
- Institute new procedures to expedite the removal of underperforming companies (those that fail to remedy) from the Peer Review Program and refer those companies to their state licensing agencies. Since peer review is required in all states as a condition of licensing, this has the impact of requiring a company to remedy or eliminate its ability to practice in the certification space.
- Implement new peer reviewer training requirements to facilitate the detection and correction of reviewer performance issues.
- Build a new data comparison program designed to ensure that all firms that should be subject to peer review are, and that all engagements that should be subject to review are included in the scope of the peer review.
The AICPA and PRB also work with state accounting boards to collaborate and together we educate and share information on compliance activities. This interaction is effective because the information we provide to state boards often enables them to track non-compliant companies. For example, the Easy Access to State Boards program provides all state boards with peer review information for all companies registered in your state, including the two most recent peer review reports for a company.
Peer Review’s transparency assures auditees, regulators, and others that the profession is continually improving. For example, most peer review information is publicly available through a variety of sources, such as the AICPA Public Peer Review Archive and its list of peer review firm downturns and terminations. Federal agencies’ peer review report disclosure requirements also help expand access, and we encourage companies to share their peer review reports and upon request by auditees.
Ongoing dialogue between the peer review community, federal and state regulators, and others helps keep peer review dynamic, responsive, and accessible. AICPA takes great strides to ensure that the standards to which the profession’s services are performed reflect the realities of today’s complex business environment.
We educate members on how to perform services effectively and help companies remediate if problem areas are found. When AICPA and the PRB identify a potential challenge to the profession, such as applying new and complex standards, we collaborate with stakeholders such as state boards, regulators, state societies of public accountants, and accounting firms to improve auditor performance.
The data shows that the peer review works as designed and identifies areas where companies need additional support. AICPA and the PRB have also conducted additional analysis to better understand the effectiveness of the required remediation. Today, peer reviewers are detecting four times more deficiencies than in 2014 as a result of the improvements we made at the time, with a corresponding 170 percent increase in required corrective actions.
Our current data shows that remediation improved the report scores (on subsequent peer review) of companies that received a non-approval report when they took the following required corrective actions:
- 77 percent when company personnel completed specific continuing professional education (CPE).
- 86 percent when, in addition to the completion of the CPE, an external third party conducted a review of quality control commitments or documents.
- 90 percent when, in addition to completion of the CPE, the engagements were reviewed by an individual (who was not part of the engagement team) prior to issuance of the audit report.
The profession should be proud of our collective efforts to maintain high quality auditing, and, as president of the PRB, I am grateful for our volunteers and the peer review community whose tireless efforts help protect the public interest. Together, we are focused on continuous improvement, innovation, and dialogue with various stakeholders, including peer review administrators, technical reviewers, AICPA members, and many others.
The dialogue during the Peer Review Conference, as well as the steps the profession takes every day, reassures me that our dedication is having a positive impact.