Instructions to Firms Having a Report Review

PRP Section 7100 — from the AICPA Peer Review Program Manual .01 The purpose of these instructions is to provide guidance to firms having report reviews under the AICPA Peer Review Program (Program). Firms should be aware of their peer review responsibilities and requirements as discussed in the Standards for Performing and Reporting on Peer reviews (Standards [PRP section 3100]), with an emphasis on paragraph 1 through 17 of the Standards (PRP section 3100.01-.17), as well as these instructions. In addition, all individuals in your firm involved in the peer review should read and become familiar with the Standards (PRP section 3100), guidance, and materials relative to their part of the review. These instructions should be used for reference on firm-on-firm, committee appointed reviews teams (CARTS) [Note: the VSCPA does not offer CART reviews] and association reviews. .02 A report review is available to firms that only perform compilations under Statements on Standards for Accounting and Review Services (SSARS) where the firm has compiled financial statements that omit substantially all disclosures. However, those firms that issue compilation reports under SSARS where "Selected Information-Substantially All Disclosures Required are Not Included" (as discussed in SSARS) are required to have an engagement review. .03 Prior to the review, the administering entity or the reviewer will ask you to provide summarized information showing the number of compilation engagements under SSARS where the firm has compiled financial statements that omit substantially all disclosures classified into major industry categories and broken down by each partner of the firm who is responsible for the issuance of reports on such engagements. The form that will be used for this purpose is reproduced in Appendix A to these instructions. .04 Discuss with the reviewer the twelve-month period to be covered by the review. Ordinarily, the review should be performed within three to five months following the end of the year to be reviewed. .05 The number of engagements selected should ordinarily adhere to the following guidelines: Select one engagement from each partner of the firm responsible for the issuance of compiled financial statements that omit substantially all disclosures. Ordinarily, at least two engagements should be selected for review. .06 Within thirty days of being notified by the reviewer or the administering entity of the type of engagements selected for review, the firm should submit the following information for each engagement selected: A copy of the financial statements and the accountant's report. The client's name may be deleted and, if that is done, the engagement should be assigned a code number by the firm. The firm should retain a record of those code numbers to facilitate responding to any questions by the reviewer in the course of the review. A completed "engagement questionnaire" (see Appendix B) Firm representation letter .07 The engagements selected should have periods ending during the agreed-upon review year. .08 A firm may be dropped from the peer review program if it has failed to have a review by the date assigned. Therefore, if a firm fails to provide the information described in paragraph .06 in sufficient time to enable the reviewer to perform the report review prior to the required date, the reviewer should promptly advise the entity administering the review of this fact. Appropriate due process procedures will be followed in these circumstances. .09 During the course of the review, the reviewer may have questions about the selected engagements. The firm is expected to respond promptly to questions raised during the review, whether those questions are raised orally or in writing. .10 The reviewer should discuss with the firm, the matters for further consideration (MFCs), and the comments and recommendations prior to preparing the written report. Therefore, the reviewer and the firm should discuss an appropriately tailored recommendation to be included in the report that the firm will agree to implement. .11 Upon receipt of the report on the review, an authorized member of the firm is then required to sign the report, whether or not there are comments, acknowledging that there are no disagreements on comments and that the firm agrees to correct all comments by implementing the recommendation(s). The signed copy of the report should be submitted to the administering entity within thirty days of the date the report was received from the reviewer or by the firm's peer review due date, whichever date is earlier. .12 The administering entity will not make the report on the firm's report review available to the public. The report should not be distributed by the firm to its personnel, clients or others until the firm has received a formal notification that it has been accepted by the administering entity. Timing of Peer Reviews .13 The Standards (PRP section 3100) state that if a firm, subsequent to the year-end of its report or engagement review, performs an engagement that would have required the firm to have a system review (e.g. firm performs its first audit), then the reviewed firm should (a) immediately notify the administering entity and (b) undergo a system review. The system review will be due 18 months from the year-end of the engagement (for financial forecasts and projections 18 months from the date of report) requiring a system review or by the firm's next scheduled due date, whichever is earlier. The engagement must be included in the system review. .14 The Board has determined that the date the report on the engagement is issued triggers whether a firm must undergo a system review. Firms that issue their first report on an engagement performed under the SASs, Government Auditing Standards, or examination of prospective financial statements under the SSAEs, in 2005 and had an engagement or report review on their previous peer review, would be required to undergo a system review. Firms should notify the administering entity when they are engaged to perform such engagements in 2004 and are expecting to issue the reports in 2005. .15 The Board also decided that when a firm is scheduled for an engagement or report review and subsequent to the peer review end but prior to the peer review due date the firm will be issuing a report on an engagement performed under the SASs, Government Auditing Standards, or examination of prospective financial statements under the SSAEs, the firm has the option of undergoing two peer reviews (engagement or report and then system review) or wait until the engagement causing the system review is issued and undergo one system review. However, firms must consider the impact of waiting because this may cause non-compliance with state board of accountancy or other regulatory peer review requirements.