The American Institute of CPAs’ (AICPA) proposal to enhance peer review and to get all states to mandate it, is drawing mixed support from the New York State Society of CPAs (NYSSCPA), the nation’s largest society and one of the few states that does not currently mandate peer review.
“The AICPA proposal certainly fits with what we want to do, but they don’t go far enough,” said Lou Grumet, executive director of the 33,000 member NYSSCPA. The society, which earlier this year issued a report finding gaping shortcomings in the peer review process, is throwing its weigh once again behind a bill in the state legislature that would make a peer review a mandatory part of the state’s CPA licensing process.
The AICPA also recently issued a report finding major problems with how peer reviews are done. However, according to Grumet, his society’s study has made stricter recommendations that he says are truly needed to repair the process. “We are both in the same direction, but New York goes farther,” he said.
The AICPA’s governing council, at its regional meetings later this month, will discuss a task force proposal that the institute urge all states’ boards of accountancy to require peer review as part of the CPA licensing process. While all states societies manage a peer review program administered nationally by the AICPA, only 39 states now tie the reviews to getting licensed; New York is among those that do not require it.
The New York society has long favored legislation that would mandate peer review, but measures have failed to pass in the Legislature. Its hopes that a new bill in the Senate will get full passages are being buoyed by a series of high-profile audit failures in the state; the audits involved public school districts, so they have gotten the broader kind of publicity that could influence legislators to vote to strengthen the peer review process.
The audit failures in New York also prompted the society’s study which has recommend peer review reforms much tougher and broader than what the AICPA has proposed. Hence Grumet’s reserved support of the AICPA proposal
The main difference between the different groups is that the NYSSCPA report recommends the establishment of disciplinary procedures against firms and CPAs who get poor ratings in their peer reviews, while the AICPA has made no such recommendation. Under the existing AICPA program, those getting poor review rating are required only to take additional training and other “remedial” steps.
“The AICPA’s discipline is more training, while we say that in some cases there should be serious disciplinary sanctions, including the loss of license,” Grumet said.
Both the society and AICPA recommendations call for increased recruitment and training of people who conduct the peer reviews. The NYSSCPA also recommended that reviewers from different firms be pooled into teams of reviewers, which would alter the current “firm-on-firm” process in which one firm’s reviewers all hail from the same firm.