Peer Review Is Revised.

The AICPA peer review board (PRB) and its standards task force received approximately 300 comment letters on its proposed revisions to Standards for Performing and Reporting on Peer Reviews, issued as an exposure draft last spring (see The Practicing CPA, Jul.99, page 3). Those comments were not ignored.

At its October 1999 meeting, the PRB incorporated into the revised peer review standards for firms that do not audit SEC registrants many of the suggestions from smaller firms who had been concerned that the costs associated with their peer reviews would soar. In fact, the wording adopted for several of those standards is quite different from that in the exposure draft. The new standards become effective January 1, 2001.

"I am very pleased with the new standards and the work of the PRB," said Bea L. Nahon, president-elect of the Washington State Society of CPAs and sole owner of a firm in Bellevue, Washington. "I spoke with a number of members who had been concerned that the proposed revisions in the exposure draft would require firms that performed only a few review engagements to have a system review. These firms would have experienced a significant increase in costs," said Nahon. "The final revisions remedy this and many other potential problems in the exposure draft."

The new standards

According to Susan Coffey, AICPA vice-president of self-regulation and the SEC practice section, the revisions to the peer review performance and reporting standards will improve the way peer reviews are conducted and administered. The new standards establish the following three categories of peer review for firms that are enrolled in the AICPA peer review program.

1. System review. This review will be required for firms that perform engagements under the SASs and/or examinations of prospective information under the SSAEs. It is essentially the same as the current on-site peer review, with a name change.

2. Engagement review. This review is for firms that are not required to have a system review and who are not eligible to have a report review (discussed below). It is similar to the current off-site peer review in that it requires, among other things, a separate report and letter of comments, a technical review, committee acceptance and monitoring actions. However, the objectives of an engagement review will include establishing whether the reviewed firm's working paper documentation conforms with the requirements of SSARSs and SSAEs that are--in all...