A frank look at peer review.

AuthorBrown, Lisa
PositionCover Story

Since its beginning, peer review has had its supporters. At the same time, there have been some CPAs who question the need for it, as well as some who loathe its very existence. Those that support peer review value it as an educational process providing a rewarding and beneficial experience for both firms and reviewers, while also strengthening the profession and protecting the public. Those that hate peer review see it as an expensive, inconvenient, regulatory instrument. At the same time, it is a function shrouded in confidentiality and anonymity, with few knowing the true thoughts and experiences of a peer reviewer.

We talked to a number of peer reviewers to gather their thoughts and experiences. Here is a look at the process of peer review--where it is today, and where it is going tomorrow.

The Good News

The majority of the 1,700+ Ohio firms enrolled in the peer review program take the review process seriously and reap the many benefits peer review offers. These firms are dedicated to gaining knowledge from their peer reviewer and improving their practice based on the reviewer's findings. It's the rarity that there are repeat findings in the reviews of these firms.

When such a firm receives either a modified or adverse report and is required to take some type of additional follow-up, they take it seriously. Through their conscientious efforts to improve, they complete the follow-up requirement, implement the reviewer's comments and make the appropriate changes within their firm. As a result, these firms receive the best possible peer review report (an unmodified report without a letter of comment) on their next review.

The Bad News

Unfortunately, not all firms wholeheartedly subscribe to the reasoning behind peer review. There are those that take the opposite approach and choose to be uncooperative throughout the entire review process.

According to the reviewers, these firms are generally uncooperative for one of the following reasons:

  1. A lack of concern regarding the quality of work they are providing.

    "I am always bothered by firms that seem to be unconcerned with providing quality work," one reviewer said. "One of the most common problems I experience is firms developing a PPC checklist mentality. They merely go through the check-lists in their mind without looking at the questions for updates or thinking about their responses."

  2. A lack of respect for the peer review process and the value it provides.

    In such situations, the general sentiment seems to be they feel they know how to provide quality work and peer review is a waste of their time. These firms constantly resist the guidance the reviewer is trying to provide, which leads to frustration for the reviewer and robs the firm of any benefit from the peer review process.

    "Most of my negative experiences have been the result of the partners' egos in a firm being reviewed. They often want to argue their work quality, even after being shown the professional standard supporting the deficiency," another reviewer said.

  3. A lack of understanding among the firms that only perform one compilation without disclosures for their church or other similar entity.

    These firms typically perform this type of engagement free of charge for their client. The clients are the only ones that see the financial statement, therefore, the firms don't see a benefit in having a peer review. The firms feel the review is a waste of time and delay the review process by not cooperating.

    Even when resistance isn't an issue, some firms struggle with peer review more than others. As one reviewer noted, "Smaller firms seem to have the hardest time with peer review. These firms are typically sole-proprietors or have three or fewer partners. In order to service their clients' needs, these individuals must stay current with accounting and auditing standards as well as tax standards. Unfortunately, in many cases, they lack the resources and time to learn all the information they need. Since most of the clients are more interested in tax, sometimes these firms will let the accounting and auditing side of the practice slide."

    Top Ten Deficiencies

    Regardless of the level of cooperation, many engagements reviewed in the peer review process result in findings (noted deviations from professional standards). The result of a peer review finding does not necessarily mean that a firm does not provide quality professional services. While most peer review findings are not significant enough to result in a substandard engagement, all CPAs dedicated to providing quality...

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