“What is peer review?” “How do I know if I need to be enrolled?” “How often do I need to have one?” “What type do I need?”
As peer review manger, I get asked these questions on a daily basis. I too had these very similar questions when I first started my career almost seven years ago at the Society, originally in member services. I remember hearing about peer review, but only knew that it was confidential and complicated and not much more than that. As I soon found out – three years ago when I moved into the peer review position – my previous perception was only partially true; peer review is confidential, but not nearly as complicated as I once thought.
Now when I’m asked, “what is peer review?” I have an answer: a peer review is a periodic review of a CPA firm’s accounting and auditing services by a licensed CPA not affiliated with the firm, to provide assurance that work performed by the firm conforms to professional standards. Simply put a CPA firm will hire another CPA firm (their peer) to review their accounting and auditing work … thus it’s called “peer review.” Not too complicated, right? In Indiana we perform firm on firm peer reviews where the reviewed firm selects a qualified firm to perform their review.
How do you know if you need to be enrolled in peer review? Any CPA firm who performs any audit, compilation or review engagements is required by Indiana law to be enrolled in peer review. I would suggest you become familiar with the Indiana Board of Accountancy Laws and Regulations. Specifically, Indiana Administrative Code Title 872, Rule 6: Peer Review.
INCPAS serves as the administering entity in Indiana for the AICPA Peer Review Program. We administer peer reviews for Indiana CPA firms regardless of whether you are INCPAS or AICPA members. If at least one partner of a firm is a member of the AICPA, then that firm must complete the AICPA enrollment form to enroll. If the partners in a firm are not members of the AICPA, then that firm must complete the INCPAS enrollment form to enroll.
After a firm is enrolled in peer review I get asked, “how often do I need to have a peer review?” A firm’s initial peer review due date is ordinarily 18 months from the date it enrolled in the program, or should have enrolled in the program, whichever date is earlier. After the initial peer review, an enrolled firm is required to have a peer review once every three years. “Once every three years!” you might say. Or, “how am I going to remember in three years that I’m due for another peer review?” Easy, as your administering entity, after your initial review, in the year of your subsequent peer review, we will send your firm a scheduling form six months out to remind you.
You might ask, “how do I know what type of review I need?” There are two types of peer review, a system review and an engagement review. A system review is for firms that perform audit engagements along with any attestation engagements. A system review is performed on-site at your office. An engagement review is for those firms that perform compilations and reviews. An engagement review is performed offsite where the reviewed firm sends their reviewer all the information needed to perform the peer review.
I could keep going with endless Frequently Asked Questions about peer review, but I think I’ve covered the basic questions most firms call or email about. Not so complicated after all, right? So, I have a question for you, “Is your firm enrolled in peer review?”