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CPCAF System Reviews Engagement Review Report Review
LOR Samples Updated 2/13/2005 |
Peer Review Guide > Report and LOC Guide > Sample CPCAF Peer Review Report Standard Form of Unmodified Report with LOC Example Reviewers must use the revised report/attachment and letter of comments that follows when performing Center peer reviews. Although the example is for an unmodified report, similar conforming changes should be made to modified and adverse reports as well as other examples contained within the SECPS Reference Manual.
[3] To the Partners of [Firm] and the Center for Public Company Audit Firms Peer Review Committee We have reviewed the system of quality control for the accounting and auditing practice of [Firm] (the firm) applicable to non-SEC issuers in effect for the year ended [YE]. The firm’s accounting and auditing practice applicable to SEC issuers was not reviewed by us since the Public Company Accounting Oversight Board (PCAOB) is responsible for inspecting that portion of the firm’s accounting and auditing practice in accordance with PCAOB requirements. [The preceding sentence should be replaced with “The firm has informed us that it did not audit SEC-issuers for the year ended [Date]” when the firm did not audit SEC issuers for that year ended.] A system of quality control encompasses the firm’s organizational structure and the policies adopted and procedures established to provide it with reasonable assurance of complying with professional standards. The elements of quality control are described in the Statements on Quality Control Standards issued by the American Institute of Certified Public Accountants (the AICPA). The design of the system, and compliance with it, are the responsibilities of the firm. Our responsibility is to express an opinion on the design of the system, and the firm’s compliance with that system based on our review. Our review was conducted in accordance with standards established by the Peer Review Committee of the Center for Public Company Audit Firms and included procedures to plan and perform the review that are summarized in the attached description of the peer review process. Our review would not necessarily disclose all weaknesses in the system of quality control or all instances of lack of compliance with it since it was based on selective tests. Because there are inherent limitations in the effectiveness of any system of quality control, departures from the system may occur and not be detected. Also, projection of any evaluation of a system of quality control to future periods is subject to the risk that the system of quality control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the system of quality control for the accounting and auditing practice applicable to the non-SEC issuers of [Firm] in effect for the year ended [YE], has been designed to meet the requirements of the quality control standards for an accounting and auditing practice established by the AICPA, and was complied with during the year then ended to provide the firm with reasonable assurance of complying with applicable professional standards. * * * * * [Insert the following paragraph if a letter of comments was prepared for an unmodified report: "As is customary in a peer review, we have issued a letter under this date that sets forth comments relating to certain policies and procedures or compliance with them. The matters described in the letter were not considered to be of sufficient significance to affect the opinion expressed in this report.:"] Name of Reviewing Firm Attachment to the Peer Review Report of [1] Overview Firms enrolled in the AICPA Center for Public Company Audit Firms (the Center) Peer Review Program have their system of quality control periodically reviewed by independent peers. These reviews are system and compliance oriented with the objectives of evaluating whether:
A peer review is based on selective tests and directed at assessing whether the design of and compliance with the firm’s system of quality control for its accounting and auditing practice applicable to non-SEC issuers provides the firm with reasonable, not absolute, assurance of complying with professional standards. Consequently a peer review on the firm’s system of quality control is not intended to, and does not, provide assurance with respect to any individual engagement conducted by the firm or that none of the financial statements audited by the firm should be restated. The Center’s Peer Review Committee (PRC) establishes and maintains peer review standards. At regular meetings and through report evaluation task forces, the PRC considers each peer review, evaluates the reviewer’s competence and performance, and examines every report, letter of comments, and accompanying response from the reviewed firm that states its corrective action plan before the peer review is finalized. The Center’s staff plays a key role in overseeing the performance of peer reviews working closely with the peer review teams and the PRC. Once the PRC accepts the peer review reports, letters of comments, and reviewed firms’ responses, these documents are maintained in a file available to the public. In some situations, the public file also includes a signed undertaking by the firm agreeing to specific follow-up action requested by the PRC. Firms that perform audits or play a substantial role in the audit of one or more SEC issuers, as defined by the Public Company Accounting Oversight Board (PCAOB), are required to be registered with and have their accounting and auditing practice applicable to SEC issuers inspected by the PCAOB. (Therefore, we did not review the firm’s accounting and auditing practice applicable to SEC issuers). [Replace the preceding sentence with “The firm did not audit SEC issuers for the year ended [YE]” when the firm did not audit SEC issuers for that year ended.] ([Firm] was never registered with the PCAOB. The firm resigned, declined to stand for reelection, or has been dismissed as auditor of all SEC-issuers prior to the PCAOB’s requirement that firms discussed above be registered with the PCAOB by October 22, 2003. Therefore, during the year under review, the firm’s accounting and auditing practice applicable to SEC issuers, was not subject to the scope of this peer review or the PCAOB’s inspection.) [This paragraph is only to be included if the firm had such engagements and should be appropriately tailored.] Planning the Review for the Firm’s Accounting and Auditing Practice Applicable to Non-SEC Issuers To plan the review of [Firm], we obtained an understanding of (1) the nature and extent of the firm's accounting and auditing practice, and (2) the design of the firm's system of quality control sufficient to assess the inherent and control risks implicit in its practice. Inherent risks were assessed by obtaining an understanding of the firm's practice, such as the industries of its clients and other factors of complexity in serving those clients, and the organization of the firm's personnel into practice units. Control risks were assessed by obtaining an understanding of the design of the firm's system of quality control, including its audit methodology, and monitoring procedures. Assessing control risk is the process of evaluating the effectiveness of the reviewed firm's system of quality control in preventing the performance of engagements that do not comply with professional standards. Performing the Review for the Firm’s Accounting and Auditing Practice Applicable to Non-SEC Issuers Based on our assessment of the combined level of inherent and control risks, we identified practice units and selected engagements within those units to test for compliance with the firm's system of quality control. The engagements selected for review included engagements performed under the Government Auditing Standards, audits performed under FDICIA, multi-office audits, and audits of Employee Benefit Plans. The engagements selected for review represented a cross-section of the firm's accounting and auditing practice with emphasis on higher-risk engagements. The engagement reviews included examining working paper files and reports and interviewing engagement personnel. (We also reviewed the supervision and control of portions of engagements of non-SEC issuers performed outside the United States). The scope of the peer review also included examining selected administrative and personnel files to determine compliance with the firm's policies and procedures for the elements of quality control pertaining to independence, integrity, and objectivity; personnel management; and acceptance and continuance of clients and engagements. Prior to concluding the review, we reassessed the adequacy of scope and conducted a meeting with firm management to discuss our findings and recommendations. 6 The wording should be tailored to describe any of these engagements selected. ated firms or affiliates outside the United States. Sample Letter of Comments [Date] To the Partners of [Firm] and the Center for Public Company Audit Firms Peer Review Committee We have reviewed the system of quality control for the accounting and auditing practice of [Firm] (the firm) applicable to non-SEC issuers in effect for the year ended [YE] and have issued our report thereon dated [Date] [when the report is modified, add the following "(which was modified for the reasons described therein)". ] The matters described below were not considered to be of sufficient significance to affect the opinion expressed in that report, which should be read in conjunction with this letter. Acceptance and Continuance of Clients and Engagements Comment -- The firm’s quality control policies and procedures require that the managing partner approve the acceptance of new clients and document such approval. We noted several instances where this had not been done. Recommendation – We recommend that the firm revise its new client information form to provide an appropriate place for the managing partner’s signature evidencing approval. In addition, an account number should not be assigned to a new client until this form has been completed and approved. Engagement Performance Comment – The firm’s quality control policies and procedures require the use of standard audit and work programs. However, in one recently acquired office of the firm, representing a small portion of the firm’s practice, the firm's standard audit and work programs have not been used consistently . Recommendation – The firm should reemphasize the need to comply with its policies and procedures. In addition, a partner from another office should be assigned the responsibility for training personnel of the acquired office in the use of the firm’s standard programs.
Name of Reviewing Firm
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