Delving into peer review: a roundtable discussion.

The CPA profession's peer review program continues to receive significant public attention. At the center of the concern is whether such an impactful and influential profession can police its own--away from the light of public scrutiny. The fundamental nature of peer review--being remedial, educational and non-punitive in nature--hasn't changed since its initial adoption in 1987, but the public and regulators are now questioning the transparency and timeliness of the peer review process.

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The AICPA peer review program is for firms conducting only attest services for non-SEC issuers. The process, administered by the AICPA and the state CPA societies, is currently confidential. Originally intended to be educational and remedial, many believed there was no reason for the results of those reviews to be made public. Today, many question whether the peer review process under its current restrictions is acceptable in today's post-Enron environment. Should the public--particularly current and potential clients--know more about the quality of a firm's work product and about current or past problems.

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We gathered a variety of individuals to discuss the key issues surrounding the peer review model.

Participants

* Sue Coffey

Vice President of Audit Quality and Professional Ethics, AICPA

* Del Hoover, CPA

President, Hoover and Roberts, Inc.

* Dennis McLaughlin, CPA

Shareholder, Clark Schaefer Hackett and Co.

* Jeff Tucker, CPA

Partner, Rea & Associates, Inc.

Chair, Ohio Society of CPAs Executive Board

* Joe Weaver, CPA

Partner, Weaver & Evans

Chair, Ohio Society of CPAs Peer Review Committee

* Lisa Brown

Manager, peer review for The Ohio Society

Call Moderator

What do you see as the biggest challenges affecting the profession's peer review program?

DENNIS: I think our biggest challenge is credibility outside of the CPA community. With the audit failures and CPA firm problems in recent years, we've gotten people's attention. Now the peer review process, which is designed to prevent such things from occurring, is being viewed with skepticism by people in the financial community.

JEFF: The biggest challenge I foresee is making sure peer reviewers are properly trained. There are big changes for next year's reviews. Because of the three-year requirement for training, many of the peer reviewers may not be trained on the changes going into effect.

JOE: We need to make sure we don't relax our standards. Statistics are showing fewer modified and adverse reports. We have to make sure this is a result of the firms really doing better work. I hope it isn't a situation where the reviewers, and especially the acceptance committees, are relaxing their standards or becoming too lenient. I hope it isn't something analogous to grade inflation at the college level.

SUE: My biggest concern is the credibility of the peer review program, both within the profession and external to the profession. Reviewer performance is a big part of that. It is critical for our peer reviewers to perform to the highest standards, and resist any urges to be lenient toward the firms they are reviewing.

Another issue from my perspective is maintaining the uniformity of the program. We see a trend of state regulators wanting to add things to the program that are specific to their states. So far we have successfully resisted this trend through the recommendation of acceptable alternatives.

DEL: One of the problems I see is the number of qualified reviewers. We don't see many new reviewers coming into the program and the learning curve is quite steep. The people that are doing the reviews, at least in Ohio, are all getting older and there is just not enough young blood to replace the people getting out of the program.

What impact do you see coming from the increased involvement of various regulatory bodies (SEC, PCAOB, state boards of accountancy, etc.)?

SUE: As regulators become more interested in the peer review process, I think they'll definitely want more involvement. We see a trend towards that now with NASBA and the state boards. More...