CalCPA Preissuance Checklist: System Peer Reviews
—Effective April 30, 2006General r Is the peer review year end three years from the prior peer review year end? If not, was a change approved?
r Was the required rep letter obtained from the firm and was it dated properly?
r Was the initial engagement selection provided to the firm no more than two weeks prior to commencement of the peer review and was the “surprised” engagement selection the highest level of service provided?
r If any engagements were excluded from the peer review, was a written request for a wavier submitted and written approval obtained from the administering entity prior to the commencement of the review?
r Are the workpapers, report, Letter of Comment (LOC), and Letter of Response (LOR) submitted by the due date or within 30 days from the exit conference, whichever is earlier?
r If a review wasn’t completed and submitted within the required time frames, was an extension requested?
r Are the name of the firm (including the correct spelling), peer review year-end date, and report date consistent in the report and LOC, and are the report/LOC dates the same as the exit conference date?
r Are the current forms, report format and LOC language used?
r Was the firm requested to prepare the LOR and submit it within 30 days along with copies of the report and LOC to the Peer Review Office?
r Did you review the LOR and provide input if needed to the firm?
r If the report is modified, did you inform the firm that the LOR must make reference to this fact?
r Even if there is no LOC, did you tell the firm to still send a copy of the report to the Peer Review Office?
r Was the team captain physically present during the exit conference?
Reports r Is the most current report wording used?
r If the firm performs engagements required to be selected (normally ERISA and Yellow Book), is it mentioned in the report along with the fact that such engagements were selected for review? Also, if there are any deficiencies relating to these engagements in the report, is the type of engagement mentioned?
r If the report is adverse, does it contain all of the findings and are these findings called “Deficiencies”? (There is to be no LOC if the report is adverse.)
r If the report is modified, does it contain all of the significant findings and are these findings called “Deficiencies?
r Are all substandard engagements identified by industry and level of service?
r Did you make sure that all findings in the report properly described the system problem and contained a conclusion (loop closing) that describe what the firm was going to do to correct the deficiency?
r Are repeat system problems correctly identified in the report? (See LOC section for wording requirements.)
r If there are no accounting engagements, is the report (and LOC) language adjusted to remove references to the accounting engagements? Conversely, if there are no audit engagements, is the report language adjusted to remove reference to the firm’s auditing practice?
r If there is a LOC, does the report refer to it?
Letter of Commentsr Is the current LOC wording used and is the caption “Comments” as opposed to “Findings” used? (The quality control functional headings are no longer used in the LOC.)
r Does the first paragraph of the LOC state that the matters included in the LOC were not considered to be of such significance as to affect the opinion expressed in the report?
r Do the comments describe the system problem that caused the specific problems? (It’s not appropriate in a system review to just list the specific problems.)
r Is there a conclusion (closing the loop) for the comments? (Such a conclusion is normally that the comment did not cause the statement to be misleading or the problem was not considered significant.) However, a conclusion for a comment involving a documentation problem is not required.
r Are comments with the same system problem combined?
r If the system problem is the same as in the firm’s previous peer review, does the comment indicate that it is a repeat?
r If there is a repeat comment that was also a repeat in the firm’s prior review, does the comment indicate this situation? (Example: “Similar system problems were noted during the firm’s previous peer reviews.” Note that this wording just makes reference to “previous peer reviews” and does not state the number of times the problem had been mentioned in prior peer reviews.)
r If any comments in the LOC relate to an engagement required to be selected, is the type of engagement indicated in the LOC?
r If an isolated problem is included in the LOC, is the fact that the problem is isolated mentioned?
Summary Review Memorandum (SRM)r Were all of the applicable questions fully answered? (Some questions in the SRM have two parts and require further explanation depending on the answer to the first part of the question. For example, if the firm was previously reviewed, ,question E on page 4811 of the SRM also asked if there were repeat findings and if so, information on what the firm was going to do to prevent a recurrencne.)
r If at least two audit engagements were not chosen for review, is there adequate justification in the risk assessment or other parts of the SRM as to why?
r If there are any ERISA or Yellow Book audits, was at least one of each reviewed?
r If the reviewed firm specializes in certain industries, is the review team’s area of experience properly indicated on the first page of the SRM?
r Was at least one engagement selected for review from each of the 13 levels of service shown on page 4808 of the SRM in which there was some activity or is there adequate justification in the risk assessment or other parts of the SRM as to why a certain level wasn’t selected? (See the AICPA Peer Reviewer’s Alert for specific guidance in this area.)
r Does the “engagements reviewed” section of the SRM agree with the “engagement statistics” page?
r Does the risk assessment adequately describe inherent, control and detection risks? (A list of engagements selected is not, by itself, an adequate risk assessment. Prior Peer Reviewer’s Alerts contain examples of acceptable risk assessments.)
r Is the “overall findings and conclusions” matrix on page 4809 of the SRM completed correctly, and is it consistent with the information in the LOC?
r If substandard engagements were identified, were they noted on the engagement statistics page and adequately described in the appropriate section of the SRM? (This needs to be accomplished even when the problem was determined to be isolated and not included in the report/LOC.)
r Was another type of report considered other than the one issued, and if so was question C on page 4810 of the SRM completed?
r If the SRM indicates that the firm did not perform monitoring or did not document the monitoring which was performed was a MFC prepared as well as a deficiency in the report or a comment in the LOC?
r Is the SRM being submitted legible and dark enough to be clearly readable even after a second copying?
r If there is no LOC, is the reason stated on page 4809 of the SRM?
r Based on the deficiencies noted during the peer review, did you consider suggesting follow-up action and if so, is question N on page 4818 of the SRM completed?
Summary Review Memorandum (SRM)r Were all of the applicable questions fully answered? (Some questions in the SRM have two parts and require further explanation depending on the answer to the first part of the question. For example, if the firm was previously reviewed, ,question E on page 4811 of the SRM also asked if there were repeat findings and if so, information on what the firm was going to do to prevent a recurrencne.)
r If at least two audit engagements were not chosen for review, is there adequate justification in the risk assessment or other parts of the SRM as to why?
r If there are any ERISA or Yellow Book audits, was at least one of each reviewed?
r If the reviewed firm specializes in certain industries, is the review team’s area of experience properly indicated on the first page of the SRM?
r Was at least one engagement selected for review from each of the 13 levels of service shown on page 4808 of the SRM in which there was some activity or is there adequate justification in the risk assessment or other parts of the SRM as to why a certain level wasn’t selected? (See the AICPA Peer Reviewer’s Alert for specific guidance in this area.)
r Does the “engagements reviewed” section of the SRM agree with the “engagement statistics” page?
r Does the risk assessment adequately describe inherent, control and detection risks? (A list of engagements selected is not, by itself, an adequate risk assessment. Prior Peer Reviewer’s Alerts contain examples of acceptable risk assessments.)
r Is the “overall findings and conclusions” matrix on page 4809 of the SRM completed correctly, and is it consistent with the information in the LOC?
r If substandard engagements were identified, were they noted on the engagement statistics page and adequately described in the appropriate section of the SRM? (This needs to be accomplished even when the problem was determined to be isolated and not included in the report/LOC.)
r Was another type of report considered other than the one issued, and if so was question C on page 4810 of the SRM completed?
r If the SRM indicates that the firm did not perform monitoring or did not document the monitoring which was performed was a MFC prepared as well as a deficiency in the report or a comment in the LOC?
r Is the SRM being submitted legible and dark enough to be clearly readable even after a second copying?
r If there is no LOC, is the reason stated on page 4809 of the SRM?
r Based on the deficiencies noted during the peer review, did you consider suggesting follow-up action and if so, is question N on page 4818 of the SRM completed?
Matters for Further Consideration (MFC)r Are the MFC forms fully completed and legible?
r Is there a completed MFC supporting each problem mentioned in the report/LOC?
r Did the reviewer and engagement partner sign all MFCs, and does the MFC indicate whether or not the firm agrees with the problem and if the problem is to be included in the report/LOC?
r Is the professional standard reference completed?
r If the matter is not included in the LOC, is an appropriate reason given? (Stating that a matter is immaterial or isolated can be adequate justification for not including a problem in the LOC. While stating that a certain problem didn’t make the F/Ss misleading is a valid reason for not categorizing an engagement as substandard, it is not a valid reason for excluding the problem as a comment in the LOC.)
r If a problem was determined to be isolated, is it clear how this determination was made?
r If there are two or more related MFCs or if the MFC applies to several engagements but the problem is not included in the report/LOC, is it clear why the problem isn’t mentioned in the LOC?
Is the deficiency cross-referenced to the questionnaires.
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