System Review

A system review includes a study and evaluation of the firm's quality control policies and procedures in effect for its accounting and auditing practice during the year. The objective of a system review is to provide the reviewer with a reasonable basis for expressing an opinion on whether the firm's system of quality control for its accounting and auditing practice meets the objectives of quality control standards established by the AICPA, and whether the system is being complied with, in order to provide the firm with reasonable assurance of conforming with professional standards. A system review is required for all firms that perform audits, other engagements under the SASs, engagements under the Government Auditing Standards (Yellow Book) or examinations of prospective financial statements under the SSAEs.

A report with a rating of pass will be issued when the peer reviewer concludes that the firm's system of quality control is appropriately designed and being complied with in all material respects. If the reviewer determines that the firm's system of quality control is appropriately designed and being complied with in all material respects, except in certain situations that explained in detail in the report, a rating of pass with deficiencies will be issued. If the reviewer determines that the system of qualify control is not suitably designed or being complied with, a rating of fail will be issued and the reasons why will be explained in detail in the report. If the reviewer issues a report with a rating of pass with deficiencies or fail, the firm is required to prepare and submit a letter of response. View sample letters of response here.

For additional information about the performance of a system review, please review the Instructions to Firms Having a System Review page.

Once all required documentation is received by the VSCPA, the review will undergo administrative and technical review before it is presented to the VSCPA Peer Review Committee. The Committee will accept the review, accept the review if the firm agrees to perform certain corrective actions or defer the review until their next meeting in order to resolve any outstanding questions. The firm will receive a letter explaining the action the Committee takes on the review within 10 working days of the action. Once the Committee accepts the review, an acceptance letter will be issued. At this time, the firm may wish to publicize the results of its review to clients. Firms should remember that the results of a peer review should not be published until accepted by the VSCPA Peer Review Committee.

Under most circumstances, system reviews should be performed at the reviewed firm's office. However, in rare situations, it may be appropriate to perform a system a review at another location. In such case, prior written approval from the VSCPA is required. For more information click here.