Types of Peer Reviews

System Review

A System Review is designed to provide a peer reviewer with a reasonable basis for expressing an opinion on whether, during the year under review:

  1. The reviewed firm’s system of quality control for its accounting and auditing practice has been designed in accordance with quality control standards established by the AICPA and
  2. The reviewed firm’s quality control policies and procedures were being complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects.

This type of review is for firms that perform engagements that are under the Statement on Auditing Standards (SASs,) the Government Auditing Standards (Yellow Book), examinations under the Statement on Standards for Attestation Engagements (SSAEs), or engagements under the PCAOB standards as their highest level of service.

Example procedures in a System Review include, but are not limited to:

  • interviewing firm personnel,
  • examining CPE records,
  • examining outside consultations regarding A&A matters,
  • examining independence representations,
  • testing a reasonable cross-section of the firm’s engagements with a focus on high risk engagements and significant risk areas.

The majority of the procedures in a System Review should be performed at the reviewed firm’s office. A reviewer can request the AE’s approval to perform the review at a location other than the reviewed firm’s office if an on-site peer review is cost prohibitive or extremely difficult to arrange, or both. The scope of the peer review does not encompass other segments of a CPA practice, such as tax services or management advisory services, except to the extent they are associated with financial statements, such as reviews of tax provisions and accruals contained in financial statements.

Engagement Review

The objective of an Engagement Review is to evaluate whether engagements submitted for review are performed and reported on in conformity with applicable professional standards in all material respects. Enrolled firms that only perform services under SSARSs or services under the SSAEs that do not require System Reviews are eligible to have Engagement Reviews. An Engagement Review consists of reading the financial statements or information submitted by the reviewed firm and the accountant’s report thereon, together with certain background information and representations and the applicable documentation required by professional standards.

An Engagement Review does not provide the review captain with a basis for expressing any form of assurance on the firm’s system of quality control for its accounting practice. However, firms eligible for an Engagement Review may elect to have a System Review.

If you need further guidance in determining what type of peer review your firm needs, please contact the peer review team at 334-834-7650 or email peer.review@ascpa.org .

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