Increasing Audit Profits Series No. 18—Creating a System of Quality Control for Modifying Practice Aids
Many practitioners have recognized that one-size-fits-all practice aids don’t always serve the needs of audit, compilation and review engagements for smaller reporting entities. In previous blogs, I’ve discussed the opportunity to save time on smaller engagements by modifying practice aids from major publishers. When a CPA firm undergoes a peer review, it must either 1) demonstrate its purchased practice aids have been peer reviewed at the request of the publisher or 2) it has established its own system of quality control for internally developed practice aids that will be evaluated during the firm’s peer review.
In this blog, I’ll present excerpts from the peer review requirements in PRP Section 8100, Instructions to Providers Having Quality Control Materials or Continuing Professional Education Review.
PRP 8100.04: “A QCM or CPE Review is intended to provide the reviewer with a reasonable basis for expressing an opinion on whether, during the year under review
a. the provider’s system for the development and maintenance of the QCM or the CPE programs was suitably designed and was being complied with during the period under review to provide user firms with reasonable assurance that the materials are reliable aids to assist them in conforming with those professional standards the materials purport to encompass, and
b. the resultant materials are reliable aids.”
While the wording of these requirements implies the materials are being provided by a publisher, the same requirements are applicable to a CPA firm that modifies practice aids from major publishers or that creates its own proprietary documentation. A CPA firm’s system of quality control for developing quality control materials will be evaluated during its peer review.
Following is the list of information that will be requested by the peer review team captain:
a. The quality control documentation, including the procedures for developing materials (including distribution), ensuring the currency and relevancy of the materials issued, soliciting and evaluating feedback from users of the materials, policies regarding the issuance of updates to the materials, the method of updating and the procedures undertaken to provide such updates (if such policies exist).
b. A list of materials on which an opinion is to be expressed.
c. A list of the personnel involved in the development and update of the materials, and a current resume including title or position, relevant training, experience and industry expertise.
d. A list of external or guest authors and technical reviewers involved in the development and update of the materials, and documentation to support their experience and industry expertise.
e. Other information requested by the team captain.
In an article published in the Journal of Accountancy in December, 2009, entitled Risked Based Audits Best Practices, Michael Ramos said this:
“Once thought to be the purview of only the largest firms, growing numbers of audit firms are developing a more customized, firm-specific set of audit practice aids by creating their own forms or checklists for highly judgmental areas such as the documentation of internal controls.”
The end results of modifying a firm’s audit documentation is 1) proprietary practice aids that result in effective and efficient engagements and 2) engagement leaders that have an in-depth understanding of the applicable standards and are better equipped to train staff personnel. More information on establishing a firm’s system of quality control for developing quality control materials will be included in my webcast, Saving Time with Quality Control, which will be presented in a live webcast later this fall. You can register by clicking on the applicable box on the left side of my home page, www.cpafirmsupport.com.