Inspecting Changes to AICPA Peer Review Standards.

• Author: McCRONE, LINDA
• Position: Brief Article

The New Year Will Ring in Changes to Peer Reviews

Jan. 1 always marks a new beginning. For some, Jan. 1, 2001 will signal the true start of the new millennium, while for others its significance will be more practical and serve as a reminder of the multitude of laws and regulations that become effective as we ring in the new year. Among the changes to take note of are the revised AICPA Standards for Performing and Reporting on Peer Reviews. These revisions are effective for peer reviews commencing on or after Jan. 1, 2001, and early implementation in part or whole is not allowed.

Following are highlights of the three types of peer reviews under the new standards:

SYSTEM REVIEW

A system review applies to firms that perform engagements under Statements on Auditing Standards (SAS) or examinations of prospective financial information under the Statements on Standards for Attestation Engagements (SSAE). This is essentially the same as the old on-site peer review with only a name change.

Interpretation No. 1 to the current standards states that an on-site peer review can be performed at another location for a sole practitioner with four or fewer staff. The revised standards also would allow the system review to be performed at another location when, irrespective of the firm's size, the firm does not perform engagements covered by the SASs, or examinations or prospective financial statements under the SSAEs. This change was made to allow a firm, that is required to have a report review, to elect a system or engagement review. If a firm is required to have an engagement review, the firm can elect to have a system review.

ENGAGEMENT REVIEW

An engagement review is for firms that are not required to have a system review, and are not eligible for a report review. It is similar to the old off-site peer review and includes a separate report, letter of comments and letter of response. However, an engagement review's objectives also include whether or not the reviewed firm's working paper documentation conforms with the requirements of Statement on Standards for Accounting and Review Services (SSARS) and the SSAEs applicable to those engagements in all material respects. For review engagements, working paper documentation will be the management representation letter, and documentation of the matters covered in the accountant's inquiry and analytical procedures. Currently, SSARS does not have any documentation requirements for compilations. The documentation...