Proposed peer review change would remove inconsistencies for engagement reviews

Changes to peer review standards proposed last week by the AICPA Peer
Review Board (PRB) are designed to remove inconsistencies and improve
the transparency of reports for engagement reviews.

The proposal, outlined in an exposure
draft, would change the impact to an engagement review report when
all of the following occur:

In this scenario, current guidance calls for firms to receive a
“pass with deficiencies” rating in the engagement review report. Under
the proposed changes, this scenario would result in a “fail” rating.

The “pass with deficiencies” rating for this scenario in the current
guidance is the result of an exception created when new peer review
standards took effect on Jan. 1, 2009. Feedback had indicated that the
peer review community did not believe a “fail” rating under this
scenario was fair to a firm that performs multiple engagements with
the same deficiency and no others.

In response to this feedback, the PRB created the exception for
multiple engagements that meet the criteria under the one scenario.
But after hearing concerns from the peer review community regarding
the inconsistencies in the current guidance and considering the
perspective of report users, the PRB is proposing to remove the exception.

Comments on the proposal are due July 5 and can be submitted at PR_expdraft@aicpa.org. If
approved, the changes would take effect Sept. 1.

—
Ken Tysiac (
ktysiac@aicpa.org
) is a JofA senior editor.

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