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 Peer Review Q&A: Quality Control Standards By Robert C. Thompson, CPA, Dennis, Gartland & Niergarth, and member of the MACPA Peer Review Task Force Quality control standards continue to generate questions and confusion regarding monitoring and the peer review process, despite the fact that Statement of Quality Control Standard No. 3, Monitoring a CPA Firm’s Accounting and Auditing Practice, went into effect ten years ago. This is the fourth Q&A article in a series highlighting frequent inquiries addressed by the MACPA Peer Review Task Force. Additional questions on monitoring will be addressed in future issues of Leaders’ Edge.
A – Monitoring is a continual process and really does not have a beginning and an end. However, to be useful, it is important that periodic (at least annual) reports be prepared so policies and procedures in need of change and non-compliance can be addressed on a timely basis. Typically, firms establish annual periods to be covered by monitoring procedures. Summary reports should be prepared as soon as practical after the end of the year so corrections can be made without substantial delay. Q – I’m having a peer review this year so I don’t have to worry about monitoring, right? A – A peer review does not substitute for monitoring procedures. However, since their objectives are similar, it is permissible to substitute a peer review for some or all of the firm’s inspection procedures for the year covered by the peer review. On the other hand, a thorough and well-documented inspection may enable the peer reviewer to reduce the scope of the peer review and reduce its cost. Q – Will my peer reviewer want to see my monitoring documentation? A – Yes, if you have a system review the reviewer is required to determine whether you have established and complied with policies and procedures for monitoring. If your peer review is an engagement review or a report review, monitoring will not be considered. Q – What kind of documentation is required? A – Your peer reviewer will probably ask for a copy of your monitoring reports issued since your last peer review or, if this is your first peer review, for the past year or two. However, professional standards provide flexibility as to what documented evidence the firm can provide to the reviewer to indicate compliance with the monitoring element of quality control. The adequacy of the documentation is left to the judgment of the firm and its peer reviewer. Q – How long do we need to keep our documentation? A – A summary report, including the scope and result of monitoring procedures and the planned corrective actions, should be retained until your next peer review is completed. It is recommended that detailed monitoring working papers be discarded after a summary report has been prepared. |
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| PO Box 5068 Troy, MI 48007-5068 Phone: 248.267.3700 Fax: 248.267.3737 E-mail: macpa@michcpa.org | |
