The future of peer review: it is a misconception that the CBA requires peer review.

• Author: McCrone, Linda
• Position: PeerReview; California Board of Accountancy

Peer review traditionally has been linked to AICPA membership. To maintain membership in the AICPA, an individual practicing public accounting must be enrolled in a practice monitoring program or be employed by a firm enrolled in such a program.

Further, if a firm performs services within the scope of the AICPA's practice monitoring standards--such as audits, reviews, compilations and most attest engagements--the firm must undergo a peer review every three years.

The AICPA Peer Review Program and the SEC Practice Section (SECPS) Peer Review Program were the two approved practice monitoring programs. Firms with clients filing periodic reports with the Securities and Exchange Commission, excluding certain brokers or dealers, enrolled in the SECPS Peer Review Program; other firms could choose between SECPS and the AICPA Peer Review Program.

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CalCPA administers reviews for California firms enrolled in the AICPA Peer Review Program and will keep doing so. The SECPS administers peer reviews for firms belonging to its section at the national level, but its role has changed since the Public Company Accounting Oversight Board's arrival.

OTHER REGULATORS INFLUENCED

After seeing the benefits of peer review, the NYSE, NASDAQ and AMEX now require registrants listed on these exchanges to only use auditors with a current peer review report.

The Government Auditing Standards requires a peer review to be completed--meaning a peer review report has been issued--within three years from the date a firm begins its first audit under generally accepted government auditing standards. Audits of governmental units or nonprofit organizations expending $300,000 ($500,000 effective for fiscal years ending after Dec. 31, 2003) or more per year in federal awards typically fall under government auditing standards.

In addition, state and local regulations can require audits to be performed under Government Auditing Standards. For example, state law requires audits of California redevelopment agencies to be performed under these standards. An agreement or contract also can contain these requirements.

The stock exchanges and the GAO did not establish practice monitoring programs to perform and administer peer reviews; rather, they expect auditors to enroll in an established program, such as an AICPA program.

THE ROLE OF THE PCAOB

A provision of the Sarbanes-Oxley Act established the PCAOB, which will, among other duties, inspect all firms with clients...