ffc forms, implementation plans, reviewer performance ... · 12/12/11 1 peer review guidance update...
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12/12/11
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Peer Review Guidance Update FFC Forms, Implementation Plans, Reviewer Performance, Impact of QCM on Peer Review and Other GuidanceDecember 12, 2011
Peer Review Program
Presenters
AICPA Peer Review Program Staff
• Sue Lieberum, Senior Technical Manager
• Rachelle Drummond, Technical Manager
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Peer Review Program
Objectives
The webinar will inform participants of the recent changes to peer review guidance (approved at August and October 2011 PRB meetings) as well as provide you with an opportunity to learn about and weigh in on the guidance that is being developed.
Understand the peer review requirements for completion of FFC Forms, the impact revised guidance for implementation plans, reviewer performance, and QCM will have on peer reviews and understand the basis for developing guidance.
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Peer Review Program
Topics to be Covered
Finding for Further Consideration (FFC) Forms
Implementation Plans
Reviewer Qualifications, Responsibilities and Performance
Peer Review Focus Areas
On the Horizon
Peer Review Hotline
Upcoming Peer Review Events
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Finding for Further Consideration (FFC) Forms
Revisions effective January 1, 2012
Peer Review Program
FFC Forms
Used on both System Reviews and Engagement Reviews
Firm Responses – comprehensive, genuine, feasible
Previously requested:• Whether the firm agrees with the finding and will
implement the reviewer’s recommendation
• A description of the firm’s plan, including timing, to address the finding
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Peer Review Program
FFC Forms
FFC Form revised for firm’s responses to include:• How the firm intends to implement the reviewer’s
recommendation
- Or alternative plan if the firm does not agree with the recommendation
• The person(s) responsible for implementation
• The timing of the implementation
• Additional procedures to ensure the finding is not repeated in the future, if applicable.
Example: The engagement partner for all ERISA engagements will take 8 hours of ERISA CPE and the Quality Control (QC) partner will be responsible for ensuring the CPE is obtained by December 31, 2011. The QC partner will also monitor CPE for all A&A personnel to ensure compliance with firm policies and procedures.
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Peer Review Program
Questions
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Implementation Plans
Revisions effective January 1, 2012
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Peer Review Program
Implementation Plans
Finding vs. Deficiency
IPs should not be used:• To correct a finding communicated on an FFC form that should
be a deficiency in the report.
• To make up for poorly constructed recommendations and responses on the FFC form.
• As a 4th level of reporting
If it is determined that a severe IP is necessary to correct the finding, RABs should ensure the conclusion of finding vs. deficiency was accurate.
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Peer Review Program
Implementation Plans
If finding does not rise to level of deficiency• RAB considers whether firm’s response is comprehensive,
genuine, and feasible.
Repeat Finding• If the firm’s previous response was the same and it did not work
to correct the finding, it should not be deemed as comprehensive, genuine, and feasible.
• Interpretation 83-2
• Supplemental Guidance (Section 3300)
Overarching Principle – if the firm’s response properly addresses the issue, the RAB generally should allow the firm to proceed without additional intervention.
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Peer Review Program
IPs Allowable for a System Review
Finding Allowable plan(s) to be performed as soon as reasonably possible
Engagements not performed or reported on in accordance with professional standards in all material respects Initial finding on must select industry Repeat findings for any industry
Require the firm to hire an outside party acceptable to the RAB to perform preissuance or postissuance reviews of certain types or portions of engagements focusing on the areas identified in the finding Require the firm to hire an outside party acceptable to the RAB to review the firm’s internal monitoring or inspection report
Repeat findings Require members of the firm to take specified types of and amounts of CPE Require firm to submit monitoring or inspection report to the RAB
Failure to possess applicable firm license(s)
Submit proof of valid firm license(s)
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Peer Review Program
IPs Allowable for an Engagement Review
Finding Allowable plan(s) to be performed as soon as reasonably possible
Repeat findings Require members of the firm to take specified types of and amounts of CPE Require firm to submit monitoring or inspection report to the RAB
Failure to possess applicable firm license(s)
Submit proof of valid firm license(s)
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Peer Review Program
Implementation Plans – Other Actions
Guidance in exhibits 4-2 and 5-2 must be followed• Even in instances where the same finding is included on more
than two reviews
- Consider more rigorous implementation plan
- Example: require 24 hours of CPE or change the nature of the required courses.
- Example: require both CPE and submission of monitoring report to the RAB
Actions Not Allowed• Team captain revisit
• Monitoring performed by an outside party
• Accelerated review
Compliance monitored during oversight
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Peer Review Program
Questions
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Reviewer Qualifications, Responsibilities and Performance
Effective January 1, 2012
Peer Review Program
Topics to be Covered
Overview of Required Reviewer Performance
Meeting and Maintaining Reviewer Qualifications
Responsibility to Perform Timely and Professional
Pattern of Poor Performance
Reviewer Feedback
Other Communications
Serious Weakness
Reviewer Performs Reviews for Multiple AEs
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Peer Review Program
Topics to be Covered
Egregious Performance
Allegation or Investigation
Limitations or Restrictions
Oversight at the Reviewer’s Expense
Reviewer Monitoring Report
Board Hearing Panels
Rules of Procedure for Reviewers
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Peer Review Program
Overview of Required Reviewer Performance
• Qualifications
• Responsibilities
• Failure to meet and maintain qualifications and responsibilities
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Peer Review Program
Qualifications
Meeting and Maintaining Reviewer Qualifications
- Meet
- Maintain
- Monitor
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Peer Review Program
Procedure When Reviewer is Ineligible
Confirmation
Notification
Restriction
Appeal
Release
Multiple Times
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Peer Review Program
Committee Considerations
Scheduled but not commenced
Commenced but fieldwork is not complete
Commenced and fieldwork is complete
Submitted to Committee
Accepted but acceptance letter not issued
Accepted and acceptance letter sent
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Peer Review Program
Peer Reviewer Decision Model
AE
det
erm
ines
sta
tus
of
op
en r
evie
ws
Review scheduled
Reschedule
Oversight
Review commenced
Reschedule
Oversight
New review
Other
Fieldwork completed
Oversight
Other
Review accepted
If within retention period consider oversight
If outside retention period notify affected firms
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Peer Review Program
Questions
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Peer Review Program
CASE #1
When a reviewer fails to meet one of the qualifications to be a reviewer and receives notification through an Ineligibility Letter, the reviewer can:
a. Continue to perform reviews previously scheduled
b. Continue to schedule reviews
c. Tell the firm they should be granted an extension
d. None of the above
The answer is d.
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Peer Review Program
Timely and Professional Manner
Open Review
Responsiveness to Requests
Resume Verification
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Peer Review Program
Procedure for Suspending When Not Timely
First Letter Contact Reviewer Suspension
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Peer Review Program
Suspension Procedure for Not Submitting Resume Documentation
Initial Request
Warning Letter
Contact Reviewer Suspension
Request National
Suspension
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Peer Review Program
Reviewer Appeal Process
Reviewer May Appeal to the Board
Committee forms panel
3-member minimum Appoint chair Schedule &
conduct meetingCommunicate
decision
Create opportunity to present sides
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Peer Review Program
Committee Considerations
Reviewer is not timely and professional
Reviewer fails to submit appropriate documentation to support resume codes
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Peer Review Program
Questions
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Peer Review Program
CASE #2
When a reviewer is suspended for not submitting workpapers timely, the reviewer can still perform reviews he/she was previously approved to perform.
a. True
b. False
The answer is a.
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Peer Review Program
Feedback
Pattern or Poor Performance• Reviewer feedback
- Weaknesses in the reviewer’s performance
- Remedial and educational
- Not punitive
- Used to monitor future performance
- Shared by all administering entities
- Pattern could lead to board action
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Peer Review Program
Feedback• Comes from PRC
• Must be signed by member of PRC
• Maintained in reviewer’s file
Other Communications• Can come from technical
reviewer
• E-mail, memo
• Not maintained in reviewer’s file
Feedback vs. Other Communications
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Peer Review Program
Serious Weakness in Performance
Performance deficiencies occur when• Serious weaknesses in a reviewer’s performance on
a particular review, or
• A pattern of weaknesses substantiated by multiple feedback forms and/or suspensions.
Performance Monitoring Letter
Performance Deficiency Letter
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Peer Review Program
Procedure for Multiple AE’s
Feedback
AE 1 Issues Monitoring
Letter
Reviewer Performs
Reviews in Multiple AE’s
Performance Does Not Improve
Discussion & Agreement
Between AE’s
AE 2 Issues Performance
Letter
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Peer Review Program
Performance Deficiencies
Bypassing the Performance Monitoring Letter
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Peer Review Program
Reviewer Appeal Process
Reviewer May Appeal to the Board
Committee forms panel
3-member minimum Appoint chair Schedule &
conduct meetingCommunicate
decision
Create opportunity to present sides
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Peer Review Program
Committee Considerations
Performance deficiency letter has been issued within the last 30 days and has not been signed by the reviewer
Performance deficiency letter has been signed by the reviewer
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Peer Review Program
Peer Reviewer Decision Model
AE
det
erm
ines
sta
tus
of
op
en r
evie
ws
Review scheduled
Reschedule
Oversight
Review commenced
Reschedule
Oversight
New review
Other
Fieldwork completed Oversight
Review accepted
If within retention period consider oversight
If outside retention period notify affected firms
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Peer Review Program
National Restriction
FeedbackAE 1 Issues Monitoring
Letter
Reviewer Performs
Reviews in Multiple AE’s
Performance Does Not Improve
Discussion & Agreement
Between AE’s
AE 2 Issues Performance
Letter
Performance Does Not Improve
Removal Letter Board Consideration
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Peer Review Program
Egregious Performance
• Evidence, facts and circumstances must be weighed
• If deemed egregious, board may take action against reviewer
• Feedback, monitoring and deficiency letters not required
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Peer Review Program
Committee Considerations
Scheduled but not commenced
Commenced but fieldwork is not complete
Commenced and fieldwork is complete
Submitted to Committee
Accepted but acceptance letter not issued
Accepted and acceptance letter sent
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Peer Review Program
Peer Reviewer Decision Model
AE
det
erm
ines
sta
tus
of
op
en r
evie
ws
Review scheduled
Reschedule
Oversight
Review commenced
Reschedule
Oversight
New review
Other
Fieldwork completed Oversight
Review accepted
If within retention period consider oversight
If outside retention period notify affected firms
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Peer Review Program
Allegation/Investigation
Obligation of reviewer and reviewing firms to notify the relevant administering entity of allegation or investigation from• Regulatory, monitoring, enforcement bodies or others
• Related to the conduct of accounting, audit or attestation engagements performed by the reviewer
Does not automatically make reviewer ineligible to perform reviews• Administering entity may consider oversight
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Peer Review Program
Limitations/Restrictions
Obligation of reviewer and reviewing firms to notify the relevant administering entity of limitation or restriction from• Regulatory, monitoring, enforcement bodies or others
• Related to the reviewer or reviewing firm’s ability to practice
Individual may not serve as a reviewer• Begins on the date he/she receives notification
• Must withdraw immediately from peer review
• Remains in effect until limitation/restriction is removed by regulatory body
One or more of a firm’s office• Board will consider specific circumstances
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Peer Review Program
Questions
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Peer Review Program
CASE #3
When a technical reviewer provides remedial guidance to the reviewer in an email, this is considered:
a. Reviewer Feedback
b. Other communication which should be maintained in the reviewers file
c. Other communication which should not be maintained
The answer is c.
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Peer Review Program
CASE #4
Santa Klass has received a performance monitoring letter from AE #1. Santa’s next review is performed on a review that AE #2 administers. The committee of AE #2 has performed oversight on this review. The oversight report indicates continual performance problems as outline in the performance monitoring letter. AE #2 should issue another performance monitoring letter.
a. True
b. False
The answer is b. 50
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Peer Review Program
CASE #5
Due to poor performance, a restriction is placed on a reviewer. The restriction provides that the reviewer have only one review open at a time. The reviewer disagrees with the restriction and appeals to the committee. While waiting for the appeal to take place, the restriction should be lifted until the appeal process has been completed.
a. True
b. False
The answer is b.
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Peer Review Program
Oversight at Reviewer’s Expense
Same AE
2 Oversights in 2
Calendar Years
Oversight at Reviewer’s
Expense
Reviewer Refuses to
Pay
Fee Dispute?
If no, submit to board
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Peer Review Program
Reviewer Monitoring Report
The AE that initially requested the reviewer be added to the reviewer monitoring report
The reviewer’s name, firm, and member number
The date of deficiency letter(s) or suspension letter(s)
The AE that issued the letter(s)
Deficiency type
Reviewer status
Restriction
Whether the action was ratified by the board
The date that the restriction was removed, if applicable
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Peer Review Program
SHARE
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Peer Review Program
Board Hearing Panel
Hearings are ordinarily held for
• Appeals for ineligibility
• National ratification of a corrective action
• Appeals of a committee decision
• Reviewers not cooperating (for example, not signing the performance deficiency letter)
• Request for removal from the list of qualified reviewers
Panel decisions may be appealed
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Peer Review Program
Rules of Procedures for Reviewers
Similar to Rules of Procedures for Firms
Provides Guidance to Reviewers and AE’s
Hearing Panels
Ad Hoc Committees
Review Panels
AICPA.org
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Peer Review Program
Three Important Points to Remember
Transparency
Fair Procedures
Follow the Guidance
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Peer Review Program
Questions
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Peer Review Focus Areas
Peer Review Program
Topics to be Covered
Impact of Quality Control Materials (QCM) on Peer Reviews
Noncompliance with SSARS No. 19
Other Resume Code Clarification
Mentor Program
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Peer Review Program
Impact of Quality Control Materials (QCM) on Peer Reviews
QCM – New Guidance Effective January 1, 2012
QCM are a Significant Peer Review Consideration
Peer Review Standards Interpretations 42-2 and 42-3
New Checklist Questions
• Summary Review Memorandum
• Quality Control Policies and Procedures (QCPP) Checklist
• Guidelines for Review of QCPP Checklist
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Peer Review Program
Noncompliance with SSARS No. 19
Preliminary findings – Decrease in Pass reports in Engagement Reviews
Increase in Pass with Deficiency and Fail reports in Engagement Reviews due to noncompliance with SSARS No. 19
Multiple Instances of Non-Compliance with SSARS No. 19
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Peer Review Program
Other Resume Code Clarification
The “Other” reviewer resume code is defined as:• Supervising one or more accounting or auditing
engagements or carrying out the quality control functions for a firm when the peer reviewer is neither a partner nor a professional employee of the firm.
Performing post issuance reviews for other firms does not qualify
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Peer Review Program
Mentor Program
Team captain candidates may forego the second day of the restructured “How To” course with significant participation as a team member in a System Review.
Significant Participation – obtained when an approved and qualified team captain “Mentor” oversees the candidate perform virtually all team captain responsibilities.
Available May 2012
Become a Mentor Now - apply through Peer Review Home Page
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On the Horizon
Peer Review Program
Topics to be Covered
Matter for Further Consideration Form (MFC Form)
System Review Scope and Must Selects
Recall Guidance
Conference Agenda
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Peer Review Hotline
Peer Review Program
Peer Review Hotline
Technical Staff(919) 402-4502, option 3
Administration and Operations Staff(919) 402-4502, option 2
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Peer Review Program
Questions
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Peer Review Program
Upcoming AICPA Events
Peer Review Board Meetings
• January 20, 2012
• May 8, 2012
• August 8, 2012
• October 2012 – date TBD
Peer Review Conference
• August 5-7, 2012
• Indianapolis, Indiana at the JW Marriott
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Thank you for participating!