Should peer review results be made public? A future AICPA referendum will give members an opportunity to vote on changes to the peer review program.

At its spring 2004 meeting the AICPA’s governing Council approved a resolution supporting increased transparency in the peer review process. It also authorized a member awareness program to inform members about the issues surrounding peer review transparency and to assess how they feel about two possible ways to make peer review results more widely available:

1. Creating a public file that would be open to inspection by the general public; or
2. Creating a state regulatory file open to inspection only by state boards of accountancy.

Greater Transparency as a Badge of Honor
Today, almost 35,000 U.S. accounting firms rely on peer review to demonstrate that their accounting and auditing practices meet the highest standards. About 6,400 firms voluntarily place their peer review results in a public file accessible to anyone with Internet access. Another 15,000 or so provide peer review results to regulatory bodies or to clients as part of regulatory requirements (e.g., GAO Yellow Book).

In addition, many firms communicate their peer review results in their marketing literature, and some suggest that prospective clients request peer review reports from all firms they are considering.

Confidentiality or Transparency
Probably the most common argument against making all peer review results public is that any such change would rescind a commitment the AICPA made to its members in 1988. When members agreed to mandatory peer review, it was designed as an educational and remedial program that would strengthen quality control. Its role was corrective, not punitive, and confidentiality was a critical component of passage.

Opponents of greater transparency argue that asking firms to make their peer review results public would violate these promises.

Others, however, counter that in today’s environment of heightened accountability, this kind of confidentiality is becoming increasingly difficult to support. This view holds that the primary user of peer review has expanded from AICPA members alone to now include regulators, clients and credit grantors. These constituents expect greater transparency, but have no way of evaluating peer review results as long as they remain confidential.

Another concern of some members is that by making peer review results public the AICPA would be taking on a responsibility that should be left to regulators. Some CPAs are also worried that making peer review results public will make reviewers less candid, rendering the recommendations less helpful to the reviewed firm.

Members of the AICPA’s Center for Public Company Audit Firms (CPCAF) and the Alliance for CPA firms (PCPS), who already make their peer review results public, counter that full transparency actually improves the quality of peer review by ensuring that reviewers write thoughtful, helpful recommendations.

They also believe that the quality of their firms’ work improves when people know a reviewer is going to come in every three years and that the information is going to be made public. Many members want the profession to increase transparency before the government steps in and does it for them.

Another concern is whether this move would require structural changes, with a resulting increase in peer review fees. However, since an apparatus already exists to post peer review results for those firms that have agreed toe PCPS and CPCAF public files on the AICPA website, broader public disclosure should not appreciably add to the cost of peer review.

We Need to Hear from You
Because any change requiring greater transparency of peer review results only could occur after a membership referendum, members in Michigan and throughout the United States need to begin a dialogue on the ramifications of any such change.

As part of the AICPA’s awareness program, more information on the subject is available online. An FAQ is available for download.

Members are also invited to submit their comments and views to the MACPA at peerreview@michcpa.org and to the AICPA at peerreviewtransparency@aicpa.org.
 

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