Peer Review

By Alex Vuchnich, CPA, CFE - I overheard a fellow member of the profession the other day protesting the peer review process and the new transparency initiative that the AICPA is implementing. Under the new initiative, members who have not already opted in by becoming members of the various audit quality centers, may opt to have their reports included in a public filing database. This information would then be sent directly to the applicable State Boards for firm licensing purposes. The comment I overheard was a complaint about the peer review process as a whole. The individual was responding to a comment made by an AICPA staff member that approximately 94% of firm's undergoing peer review receive a pass (unqualified) opinion. The individual attempted to make the argument that since over the past five years firms have proven with a 94% pass rate that audits have been conducted in accordance with professional standards that it is no longer necessary to incur the expense and effort associated with the peer review process.

This comment clearly indicates a lack of understanding as to the value of peer review and of periodic attestations in general made on any system of quality controls or even financial data for that matter. What if this practitioner's clients came to him after he had completed the fifth year of financial statement audits and claimed that the bank/investors/stakeholders should no longer need annually audited financial statements since they had passed their audits the preceding five years. I presume the practitioner would see the fallacy of this argument and respond that the assurance provided by the opinion does not span past the financial statement date. Being a CPA and accepting membership in the AICPA implies that our work is of a higher level of quality. Therefore it is important that we continue to 'prove' that the system of quality controls that are in place within a firm are continuing to operate effectively to maintain the value associated with the services provided by members.

One other observation to draw from this is that the cost benefit analysis made by the practitioner misses the mark of what value a clean peer review report provides. I personally do not believe that mandatory peer review transparency is necessary. That is not based on the idea that firms should be allowed to hide deficient auditing, instead it is because I believe a market solution for transparency already exists. Firms that have clean opinions will want to advertise that fact to existing and prospective clients. All that we really need is an outreach campaign to let those receiving services from our fellow practitioners know to ask for a peer review report as part of the initial proposal. The peer review report should be something that a firm touts to all its clients. Firm's love to claim the high level quality of the services they provide. The peer review report backs up that claim. It should be viewed as a badge of honor and an excellent marketing piece instead of just another cost of complying with State Board and AICPA membership requirements.

This blog

by Alex Vuchnich, CPA, CFE - Alex Vuchnich is the developer of Controlzkit an internal controls anaylsis tool and shares his perspective on how audit and accounting theory, technology and professional ethics interrelate to create forward thinking profitable firms.

More from this blog

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.

46800

Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.

79650

Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.

51893

Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

93959
Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.
23365

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".

59166

William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.

84632

Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (www.ubcc.com), a software development firm of high-volume, high-productivity accounting and payroll technology.

27334

Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

67844

Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

36890
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
107027
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.
28711

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

56105
Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
30692
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.
35126

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.

105302

The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.

36456

FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.

116513

Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.

64870

Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

42291
Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.
69696

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors.

96017

AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish AccountingWEB.co.uk share their ideas, insights, and perspectives from across the pond.

56968