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Updated 2/13/2005

p01
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Symptom: Recent professional standards were not considered
System Cause: Inadequate professional development policy

Comment - The firm has not established guidelines for the nature and extent of accounting and auditing professional development. Although the firm was in compliance with external continuing professional education requirements, few of these courses were in the accounting or auditing area. As a result, we encountered several instances where recent professional standards were not adequately addressed. None of these represented significant departures from professional standards.

Recommendation - The firm should establish guidelines for the nature and extent of professional development in the accounting and auditing area to ensure that the firm's personnel remain current with respect to professional standards. In addition someone should monitor the content of the continuing education acquired by each professional for purposes of maintaining current knowledge of accounting and auditing standards for the firm as a whole.

p02
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Symptom: Inadequate continuing education as required by regulatory bodies
System Cause: No maintenance or monitoring of continuing education files

Comment - The firm's policies and procedures require that professional staff participate in at least forty hours of continuing professional education courses and that the administrative partner compile, at the end of each educational year, a summary of professional education courses in which the professional staff participated. The policies and procedures do not require that the files be maintained during the period or that the files be reviewed periodically to determine whether the staff is in compliance with the firm's requirements. During our review, we noted a few individuals who had not participated in the required amount of continuing professional education courses during the year under review and were unable to make up the deficiency during the two-month grace period that followed the education year-end.

Recommendation - We recommend that the firm revise its quality control policies and procedures to require that the administrative partner maintain current professional development records and that he review these periodically to determine whether the professional staff are complying with the firm's policies in this area.

p03
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Symptom: Inadequate governmental CPE
System Cause: Firm has not identified those subject to the CPE requirement of Government Auditing Standards

Comment - The firm's policies and procedures require that professional staff participating in governmental engagements meet the continuing education requirements established by Government Auditing Standards. However, we noted that the firm has not specifically identified these staff members and monitored their compliance with government auditing standards. As a result, we noted several individuals who had not completed sufficient professional education courses to comply with government auditing standards.

Recommendation - One of the firm's owners should identify and monitor those individuals participating in governmental engagements to ensure that the government auditing standards continuing professional education requirements are met.

p04
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Symptom: Staff member did not receive professional pronouncement updates
System Cause: Did not comply with firm policy

Comment - Our review disclosed that professional staff had not received copies or summaries of certain professional pronouncements issued during the past year as required by firm policy. During our review, we did not note any significant departures form professional standards as a result of this deficiency.

Recommendation - In order to keep professional staff current on financial accounting, auditing and reporting matters, we recommend that all professional staff receive copies of professional pronouncements as soon as they are available to the firm for distribution.

p05
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Symptom: Requirements of recently effective professional standards not identified
System Cause: Firm does have an effective tracking procedure

Comment - Our review disclosed that the firm does not have a uniform method to tracking and implementing recently effective professional standards other than through attendance at continuing professional development courses. As a result, certain recently effective financial statement disclosure requirements, principally the use of estimates in financial statements, were not identified and implemented in a timely manner. In some cases, questions on the financial statement disclosure checklist that related to these matters were incorrectly marked as not applicable. None of the missing disclosures caused the financial statements to be misleading.

Recommendation - In order to keep firm's professionals current with respect to recently effective financial accounting, auditing and reporting matters, we recommend that the firm supplement it continuing education plan with a mechanism for tracking the applicability and implementation dates of newly released professional standards. One way to do this is by reading and circulating the summaries of new standards that are often printed in publications such as the AICPA's CPA Letter or Journal of Accountancy. In addition, as new pronouncements become effective, although not required by professional standards, the firm should consider briefly consulting with an outside source if the applicability of a particular standard is not apparent.

Peer Review Guide > Report and LOC Guide > Sample LOC Findings