Peer Review Guide

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CPA Firm Name

Quality Control Document Template:
Monitoring

Objective of this quality control element:

To provide the firm with reasonable assurance that the policies and procedures relating to the other elements of quality control are suit-ably designed and being effectively applied. Monitoring is an ongoing consideration and evaluation process.

General Policies:

QC Document Sections:
  • Independence
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  • Engagement Performance
  • Personnel Management
    		•
  • Monitoring
  • Acceptance and Continuance
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  • Introduction to QC Document


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    Relevance and Adequacy of QC Policies and Procedures

    Policy Statement: 
    The firm will consider and evaluate, on an ongoing basis, the relevance and adequacy of its quality control policies and procedures.

    Implementation: The firm implements this policy through the following procedures: 

    1. Designating a partner or a management-level individual with appropriate authority to be responsible for quality assurance, including
      • Assuring that the firm’s quality control policies and procedures and its audit methodology remain relevant and adequate. Factors to be considered include
        1. Mergers and divestitures of portions of the practice.
        2. Changes in professional standards, and SEC or other regulatory requirements applicable to the firm’s practice.
        3. Results of annual inspections and peer reviews.
        4. Review of litigation and regulatory enforcement actions against the firm and others.
        5. Impact that changes in technology may have on clients’ methods of doing business.
        6. Changes in clients’ industries that impact their operations.
        7. Changes in applicable AICPA membership requirements.
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    2. Determining whether personnel have been appropriately informed of their responsibilities for maintaining the firm’s standards of quality in performing their duties.
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    3. Identifying the need to:
      • Revise policies and procedures related to the other elements of quality control because they are ineffective or inappropriately designed.
      • Improve compliance with firm policies and procedures that are related to the other elements of quality control.
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    4. Additional implementation procedures, if desired by the firm
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    Top of Monitoring
    Top of Quality Control Document


     

    Appropriateness of Guidance Materials

    Policy Statement: 
    The firm will consider and evaluate, on an ongoing basis, the appropriateness of its guidance materials and any practice aids.

    Implementation: The firm implements this policy through the following procedures: 

    1. Reviewing and updating firm practice aids, such as audit programs, forms, and checklists, based on the issuance of new professional pronouncements.
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    2. Issuing guidance regarding new professional standards, regulatory requirements, and related changes to firm policy.
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    3. Soliciting comments from partners and managers as to the effectiveness of practice aids and tools.
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    4. Providing guidance during staff meetings or other training regarding new professional standards, regulatory requirements, and related changes to firm practice aids.
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    5. Additional implementation procedures, if desired by the firm
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    Top of Monitoring
    Top of Quality Control Document


     

    Effectiveness of the Firm's Professional Development Programs

    Policy Statement: 
    The firm will consider and evaluate, on an ongoing basis, the effectiveness of professional development programs.

    Implementation: The firm implements this policy through the following procedures: 

    1. Designating a partner or other qualified individual in each office to review the summary of evaluations of in-house training programs to determine whether the programs are achieving their objectives.

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    2. Designating a partner or qualified individual in each office to review summaries of CPE records for that offices professional staff to determine that the office has established a means of tracking each individual’s compliance with the requirements of the AICPA and other regulatory bodies.
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    3. Interviewing selected professional personnel regarding the effectiveness of training programs.
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    4. Considering the results of the firm’s inspection in connection with the effectiveness of the firm’s professional development program.
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    5. Ascertaining whether inquiries received by individuals consulted within the firm indicate the need for additional CPE, programs.
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    6. Additional implementation procedures, if desired by the firm
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    Top of Monitoring
    Top of Quality Control Document


     

    Compliance with Policies and Procedures

    Policy Statement: 
    The firm will consider and evaluate, on an ongoing basis, compliance with its policies and procedures.

    Implementation: The firm implements this policy through the performance of the firm's annual inspection, which includes the following procedures: 

    1. Developing and coordinating the firm's inspection program to achieve feedback about the effectiveness of the firm's policies and procedures.
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    2. Developing a plan for an appropriate test of compliance with the firm's policies and procedures on sample of engagements. Such a review could be preissuance or postissuance.
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    3. Reviewing the resolution of matters reported by professional personnel on independence circularization forms to determine that matters have been appropriately considered and resolved.
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    4. Interviewing personnel at all professional management and staff levels to obtain information regarding operating procedures in practice offices and to determine whether personnel are knowledgeable of firm policies and procedures and whether they are being effectively communicated.
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    5. Reviewing the following documentation to determine compliance with firm policies and procedures:
      • Personnel evaluations, including documentation of hiring and advancement decisions 
      • Documentation of client acceptance and continuance decisions
      • Participants' evaluations of practice office training programs
      • Professional development records of personnel
      • Correspondence regarding the resolution of independence matters within the practice office
    6. Reviewing a cross-section of engagements from the selected practice offices using the following criteria:
      • All partners and managers who have significant accounting and auditing responsibilities in the selected offices
      • Engagements for financial institutions
      • First-year engagements
      • Significant specialized industries with emphasis given to high-risk industries
      • Level of service performed (that is, audit, review, compilation, and attestation)
      • Level of attestation services (that is, examination, review, and agreed-upon procedures)
    7. Summarizing findings from the inspection procedures.
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    8. Communicating findings to practice office personnel and determining the corrective action to be taken on the engagements reviewed. These findings are discussed and communicated in a report issued to each office. The practice office responds regarding the specific corrective actions or steps to be taken to improve compliance with the firm's policies and procedures and professional standards.
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    9. Preparing a summary inspection report to the firm's senior management that evaluates the overall results of the inspection to determine whether:
      • The firm as a whole needs to improve compliance with the firm's policies and procedures.
      • Revisions to the firm's quality control policies and procedures are necessary.
    10. Communicating the need for improved compliance with or changes to the system of quality control in training programs, partner manager meetings, and firm policy correspondence.
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    11. Periodically reviewing the system of personnel evaluation and counseling to assess that that:
      • Procedures for evaluation and documentation are being followed on a timely basis.
      • Requirements established for advancement are being achieved.
      • Personnel decisions are consistent with evaluations.
      • Recognition is given to outstanding performance.
    12. Additional implementation procedures, if desired by the firm:
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    Top of Monitoring
    Top of Quality Control Document


     

    Compliance with Policies and Procedures– Local Firm (performing inspections)

    Policy Statement: 
    The firm will consider and evaluate, on an ongoing basis, compliance with its policies and procedures.

    Implementation: The firm implements this policy by:

    1. Designating a partner to he responsible for performing an annual inspection using guidance prepared by the AICPA for performing inspection procedures. These procedures include reviewing a cross-section of engagements using the following criteria:
      • Significant specialized industries with emphasis given to high-risk engagements
      • Engagements for employee benefits
      • First-year engagements
      • Level of service performed (that is, audit, review, compilation, and attest)
      • All partners and other management level personnel having accounting and auditing responsibilities
    2. Reviewing correspondence regarding consultation on independence, integrity, and objectivity matters, and acceptance and continuance decisions.
    3. Reviewing the resolution of matters reported by professional personnel on independence circularization forms to determine that matters have been appropriately considered and resolved.
    4. Summarizing findings resulting from the inspection procedures.
    5. Preparing a summary inspection report for the partner or management group that evaluates the overall results of the inspection and that sets forth any recommended changes to the firm’s policies and procedures.
    6. Communicating inspection findings and agreed-upon quality control changes to all professional personnel.
    7. Additional implementation procedures, if desired by the firm:
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    Top of Monitoring
    Top of Quality Control Document


     

    Compliance with Policies and Procedures– Local Firm (no inspections)

    Policy Statement: 
    The firm will consider and evaluate, on an ongoing basis, compliance with its policies and procedures.

    Implementation: The firm implements this policy by:

    1. Designating a partner or management-level individual not previously associated with the engagement to perform a preissuance review of the engagement or a postissuance review of the engagement shortly after the release of the report. Deficiencies identified as a result of this process will be continuously summarized and evaluated to determine whether
      • Additional emphasis should be placed on the specific areas or industries in future engagements.
      • Existing policies and procedures should be modified so any deficiencies noted do not recur.
    2. Reviewing correspondence regarding consultation on independence, integrity, and objectivity matters, and acceptance and continuance decisions.
    3. Reviewing the resolution of matters reported by professional personnel on independence circularization forms to determine that matters have been appropriately considered and resolved.
    4. Summarizing the deficiencies noted resulting from the preissuance and postissuance reviews.
    5. Preparing a summary of the deficiencies noted for the partner or management group in order to set forth any recommended changes to the firm’s policies and procedures.
    6. Communicating the deficiencies noted and the agreed-upon quality control changes to all professional personnel.
    7. Additional implementation procedures, if desired by the firm:
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    Top of Monitoring
    Top of Quality Control Document

    (Version dated XX XX, XXXX)