A System Review includes determining whether the firm’s system of quality control for its accounting and auditing practice is designed and complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards, including SQCS No. 8, in all material respects. This type of review is for firms that perform engagements under the Statement on Auditing Standards (SAS), the Government Auditing Standards (Yellow Book), examinations under the Statement on Standards for Attestation Engagements (SSAE) or audits of non-Securities and Exchange Commission (SEC) issuers performed pursuant to the standards of the Public Company Accounting Oversight Board (PCAOB) as their highest level of service.
In a System Review, the reviewer will study and evaluate a CPA firm’s quality control policies and procedures that were in effect during the peer review year. This includes interviewing firm personnel and examining administrative files. To evaluate the effectiveness of the system and the degree of compliance with the system, the reviewer will test a reasonable cross-section of the firm’s engagements with a focus on high-risk engagements in addition to significant risk areas where the possibility exists of engagements being performed and/or reported on that are not in accordance with professional standards in all material respects. The majority of the procedures in a System Review should be performed at the reviewed firm’s office, unless the reviewer has requested and received prior approval from the administering entity.
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.
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 14 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.