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.

The review team will obtain a general understanding of the firm's quality control policies and procedures by requesting that the firm fill out a questionnaire. The reviewer also may request information regarding relevant manuals, checklists and other practice aids that the firm uses in performing accounting and auditing services.

The review will include an examination of selected engagements, including relevant working paper files and reports on those engagements. The reviewer will select engagements placing greater emphasis on those in the practice with higher levels of risk. To select the engagements, the reviewer will request that the firm complete a list of accounting and auditing engagements showing the level of service, year-end, industry code, name of partner responsible and approximate hours of accounting and auditing services.

Interviews with firm personnel also will be included. This is done to determine the understanding staff has of the firm's quality control policies and procedures. The firm will be asked to provide a list of professional personnel including name, position and years of experience with the firm and overall experience. Professional personnel includes all leased and per diem employees who devote at least 25 percent of their time to performing audits, reviews, compilations or other attest engagements, or those professionals who have partner/manager level responsibility for the overall supervision or review of such engagements.

The reviewer will hold an exit conference with senior members of the firm when the review is complete and will discuss the findings, recommendations and type of report that will be issued.

The reviewer will provide the firm with a copy of the report and letter of comments, if any, within 30 days of the date of the exit conference. If a letter of comments was issued, the firm should prepare a letter of response to those comments and submit a copy of the report, letter of comments and letter of response to the VSCPA within 30 days of the date of report issuance or by the due date, whichever is earlier. Prior to submitting the letter of response to the VSCPA, the firm should submit its response to the reviewer for review and comment. If no letter of comments was issued, the firm should submit a copy of the report to the VSCPA within 30 days of the date of report issuance or by the review due date, whichever is earlier.

Once all documentation is received by the VSCPA, it 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 performs follow-up 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 meeting. Once the Committee accepts the review, it is considered complete and 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.