Peer Review Guidance Update FFC Forms, Implementation Plans, Reviewer Performance, Impact of QCM on Peer Review and Other Guidance

Transcription

1 Peer Review Guidance Update FFC Forms, Implementation Plans, Reviewer Performance, Impact of QCM on Peer Review and Other Guidance December 12, 2011 Presenters AICPA Staff Sue Lieberum, Senior Technical Manager Rachelle Drummond, Technical Manager 2 1

2 Objectives The webinar will inform participants of the recent changes to peer review guidance (approved at August and October 2011 PRB meetings) as well as provide you with an opportunity to learn about and weigh in on the guidance that is being developed. Understand the peer review requirements for completion of FFC Forms, the impact revised guidance for implementation plans, reviewer performance, and QCM will have on peer reviews and understand the basis for developing guidance. 3 Topics to be Covered Finding for Further Consideration (FFC) Forms Implementation Plans Reviewer Qualifications, Responsibilities and Performance Peer Review Focus Areas On the Horizon Peer Review Hotline Upcoming Peer Review Events 4 2

3 Finding for Further Consideration (FFC) Forms Revisions effective January 1, 2012 FFC Forms Used on both System Reviews and Engagement Reviews Firm Responses comprehensive, genuine, feasible Previously requested: Whether the firm agrees with the finding and will implement the reviewer s recommendation A description of the firm s plan, including timing, to address the finding 6 3

4 FFC Forms FFC Form revised for firm s responses to include: How the firm intends to implement the reviewer s recommendation - Or alternative plan if the firm does not agree with the recommendation The person(s) responsible for implementation The timing of the implementation Additional procedures to ensure the finding is not repeated in the future, if applicable. Example: The engagement partner for all ERISA engagements will take 8 hours of ERISA CPE and the Quality Control (QC) partner will be responsible for ensuring the CPE is obtained by December 31, The QC partner will also monitor CPE for all A&A personnel to ensure compliance with firm policies and procedures

5 Questions 9 Implementation Plans Revisions effective January 1,

6 Implementation Plans Finding vs. Deficiency IPs should not be used: To correct a finding communicated on an FFC form that should be a deficiency in the report. To make up for poorly constructed recommendations and responses on the FFC form. As a 4 th level of reporting If it is determined that a severe IP is necessary to correct the finding, RABs should ensure the conclusion of finding vs. deficiency was accurate. 11 Implementation Plans If finding does not rise to level of deficiency RAB considers whether firm s response is comprehensive, genuine, and feasible. Repeat Finding If the firm s previous response was the same and it did not work to correct the finding, it should not be deemed as comprehensive, genuine, and feasible. Interpretation 83-2 Supplemental Guidance (Section 3300) Overarching Principle if the firm s response properly addresses the issue, the RAB generally should allow the firm to proceed without additional intervention. 12 6

7 IPs Allowable for a System Review Finding Allowable plan(s) to be performed as soon as reasonably possible Engagements not performed or Require the firm to hire an outside party reported on in accordance with professional standards in all material respects Initial finding on must select acceptable to the RAB to perform preissuance or postissuance reviews of certain types or portions of engagements focusing on the areas identified in the finding industry Require the firm to hire an outside party Repeat findings for any industry acceptable to the RAB to review the firm s internal monitoring or inspection report Repeat findings Require members of the firm to take specified types of and amounts of CPE Require firm to submit monitoring or inspection report to the RAB Failure to possess applicable firm license(s) Submit proof of valid firm license(s) 13 IPs Allowable for an Engagement Review Finding Allowable plan(s) to be performed as soon as reasonably possible Repeat findings Require members of the firm to take specified types of and amounts of CPE Require firm to submit monitoring or inspection report to the RAB Failure to possess applicable firm license(s) Submit proof of valid firm license(s) 14 7

8 Implementation Plans Other Actions Guidance in exhibits 4-2 and 5-2 must be followed Even in instances where the same finding is included on more than two reviews - Consider more rigorous implementation plan - Example: require 24 hours of CPE or change the nature of the required courses. - Example: require both CPE and submission of monitoring report to the RAB Actions Not Allowed Team captain revisit Monitoring performed by an outside party Accelerated review Compliance monitored during oversight 15 Questions 16 8

9 Reviewer Qualifications, Responsibilities and Performance Effective January 1, 2012 Topics to be Covered Overview of Required Reviewer Performance Meeting and Maintaining Reviewer Qualifications Responsibility to Perform Timely and Professional Pattern of Poor Performance Reviewer Feedback Other Communications Serious Weakness Reviewer Performs Reviews for Multiple AEs 18 9

10 Topics to be Covered Egregious Performance Allegation or Investigation Limitations or Restrictions Oversight at the Reviewer s Expense Reviewer Monitoring Report Board Hearing Panels Rules of Procedure for Reviewers 19 Overview of Required Reviewer Performance Qualifications Responsibilities Failure to meet and maintain qualifications and responsibilities 20 10

11 Qualifications Meeting and Maintaining Reviewer Qualifications - Meet - Maintain - Monitor 21 Procedure When Reviewer is Ineligible Confirmation Notification Restriction Appeal Release Multiple Times 22 11

12 Committee Considerations Scheduled but not commenced Commenced but fieldwork is not complete Commenced and fieldwork is complete Submitted to Committee Accepted but acceptance letter not issued Accepted and acceptance letter sent 23 Peer Reviewer Decision Model AE determines status of open reviews Review scheduled Review commenced Fieldwork completed Review accepted Reschedule Oversight Oversight Other Reschedule Oversight New review Other If within retention period consider oversight If outside retention period notify affected firms 24 12

13 Questions 25 CASE #1 When a reviewer fails to meet one of the qualifications to be a reviewer and receives notification through an Ineligibility Letter, the reviewer can: a. Continue to perform reviews previously scheduled b. Continue to schedule reviews c. Tell the firm they should be granted an extension d. None of the above The answer is d

14 Timely and Professional Manner Open Review Responsiveness to Requests Resume Verification 27 Procedure for Suspending When Not Timely First Letter Contact Reviewer Suspension 28 14

15 Suspension Procedure for Not Submitting Resume Documentation Initial Request Warning Letter Contact Reviewer Suspension Request National Suspension 29 Reviewer Appeal Process Create opportunity to present sides Committee forms panel 3-member minimum Appoint chair Schedule & conduct meeting Communicate decision Reviewer May Appeal to the Board 30 15

16 Committee Considerations Reviewer is not timely and professional Reviewer fails to submit appropriate documentation to support resume codes 31 Questions 32 16

17 CASE #2 When a reviewer is suspended for not submitting workpapers timely, the reviewer can still perform reviews he/she was previously approved to perform. a. True b. False The answer is a. 33 Feedback Pattern or Poor Performance Reviewer feedback - Weaknesses in the reviewer s performance - Remedial and educational - Not punitive - Used to monitor future performance - Shared by all administering entities - Pattern could lead to board action 34 17

18 Feedback vs. Other Communications Feedback Comes from PRC Must be signed by member of PRC Maintained in reviewer s file Other Communications Can come from technical reviewer , memo Not maintained in reviewer s file 35 Serious Weakness in Performance Performance deficiencies occur when Serious weaknesses in a reviewer s performance on a particular review, or A pattern of weaknesses substantiated by multiple feedback forms and/or suspensions. Performance Monitoring Letter Performance Deficiency Letter 36 18

19 Procedure for Multiple AE s Feedback AE 1 Issues Monitoring Letter Reviewer Performs Reviews in Multiple AE s Performance Does Not Improve Discussion & Agreement Between AE s AE 2 Issues Performance Letter 37 Performance Deficiencies Bypassing the Performance Monitoring Letter 38 19

20 Reviewer Appeal Process Create opportunity to present sides Committee forms panel 3-member minimum Appoint chair Schedule & conduct meeting Communicate decision Reviewer May Appeal to the Board 39 Committee Considerations Performance deficiency letter has been issued within the last 30 days and has not been signed by the reviewer Performance deficiency letter has been signed by the reviewer 40 20

21 Peer Reviewer Decision Model AE determines status of open reviews Review scheduled Review commenced Fieldwork completed Review accepted Reschedule Oversight Oversight Reschedule Oversight New review Other If within retention period consider oversight If outside retention period notify affected firms 41 National Restriction Feedback AE 1 Issues Monitoring Letter Reviewer Performs Reviews in Multiple AE s AE 2 Issues Performance Letter Discussion & Agreement Between AE s Performance Does Not Improve Performance Does Not Improve Removal Letter Board Consideration 42 21

22 Egregious Performance Evidence, facts and circumstances must be weighed If deemed egregious, board may take action against reviewer Feedback, monitoring and deficiency letters not required 43 Committee Considerations Scheduled but not commenced Commenced but fieldwork is not complete Commenced and fieldwork is complete Submitted to Committee Accepted but acceptance letter not issued Accepted and acceptance letter sent 44 22

23 Peer Reviewer Decision Model AE determines status of open reviews Review scheduled Review commenced Fieldwork completed Review accepted Reschedule Oversight Oversight Reschedule Oversight New review Other If within retention period consider oversight If outside retention period notify affected firms 45 Allegation/Investigation Obligation of reviewer and reviewing firms to notify the relevant administering entity of allegation or investigation from Regulatory, monitoring, enforcement bodies or others Related to the conduct of accounting, audit or attestation engagements performed by the reviewer Does not automatically make reviewer ineligible to perform reviews Administering entity may consider oversight 46 23

24 Limitations/Restrictions Obligation of reviewer and reviewing firms to notify the relevant administering entity of limitation or restriction from Regulatory, monitoring, enforcement bodies or others Related to the reviewer or reviewing firm s ability to practice Individual may not serve as a reviewer Begins on the date he/she receives notification Must withdraw immediately from peer review Remains in effect until limitation/restriction is removed by regulatory body One or more of a firm s office Board will consider specific circumstances 47 Questions 48 24

25 CASE #3 When a technical reviewer provides remedial guidance to the reviewer in an , this is considered: a. Reviewer Feedback b. Other communication which should be maintained in the reviewers file c. Other communication which should not be maintained The answer is c. 49 CASE #4 Santa Klass has received a performance monitoring letter from AE #1. Santa s next review is performed on a review that AE #2 administers. The committee of AE #2 has performed oversight on this review. The oversight report indicates continual performance problems as outline in the performance monitoring letter. AE #2 should issue another performance monitoring letter. a. True b. False The answer is b

26 CASE #5 Due to poor performance, a restriction is placed on a reviewer. The restriction provides that the reviewer have only one review open at a time. The reviewer disagrees with the restriction and appeals to the committee. While waiting for the appeal to take place, the restriction should be lifted until the appeal process has been completed. a. True b. False The answer is b. 51 Oversight at Reviewer s Expense Same AE 2 Oversights in 2 Calendar Years Oversight at Reviewer s Expense Reviewer Refuses to Pay Fee Dispute? If no, submit to board 52 26

27 Reviewer Monitoring Report The AE that initially requested the reviewer be added to the reviewer monitoring report The reviewer s name, firm, and member number The date of deficiency letter(s) or suspension letter(s) The AE that issued the letter(s) Deficiency type Reviewer status Restriction Whether the action was ratified by the board The date that the restriction was removed, if applicable 53 SHARE 54 27

28 Board Hearing Panel Hearings are ordinarily held for Appeals for ineligibility National ratification of a corrective action Appeals of a committee decision Reviewers not cooperating (for example, not signing the performance deficiency letter) Request for removal from the list of qualified reviewers Panel decisions may be appealed 55 Rules of Procedures for Reviewers Similar to Rules of Procedures for Firms Provides Guidance to Reviewers and AE s Hearing Panels Ad Hoc Committees Review Panels AICPA.org 56 28

29 Three Important Points to Remember Follow the Guidance Fair Procedures Transparency 57 Questions 58 29

30 Peer Review Focus Areas Topics to be Covered Impact of Quality Control Materials (QCM) on Peer Reviews Noncompliance with SSARS No. 19 Other Resume Code Clarification Mentor Program 60 30

31 Impact of Quality Control Materials (QCM) on Peer Reviews QCM New Guidance Effective January 1, 2012 QCM are a Significant Peer Review Consideration Peer Review Standards Interpretations 42-2 and 42-3 New Checklist Questions Summary Review Memorandum Quality Control Policies and Procedures (QCPP) Checklist Guidelines for Review of QCPP Checklist 61 Noncompliance with SSARS No. 19 Preliminary findings Decrease in Pass reports in Engagement Reviews Increase in Pass with Deficiency and Fail reports in Engagement Reviews due to noncompliance with SSARS No. 19 Multiple Instances of Non-Compliance with SSARS No

32 Other Resume Code Clarification The Other reviewer resume code is defined as: Supervising one or more accounting or auditing engagements or carrying out the quality control functions for a firm when the peer reviewer is neither a partner nor a professional employee of the firm. Performing post issuance reviews for other firms does not qualify 63 Mentor Program Team captain candidates may forego the second day of the restructured How To course with significant participation as a team member in a System Review. Significant Participation obtained when an approved and qualified team captain Mentor oversees the candidate perform virtually all team captain responsibilities. Available May 2012 Become a Mentor Now - apply through Peer Review Home Page 64 32

33 On the Horizon Topics to be Covered Matter for Further Consideration Form (MFC Form) System Review Scope and Must Selects Recall Guidance Conference Agenda 66 33

34 Peer Review Hotline Peer Review Hotline Technical Staff (919) , option 3 prptechnical@aicpa.org Administration and Operations Staff (919) , option 2 peerreviewupdates@aicpa.org 68 34

35 Questions 69 Upcoming AICPA Events Peer Review Board Meetings January 20, 2012 May 8, 2012 August 8, 2012 October 2012 date TBD Peer Review Conference August 5-7, 2012 Indianapolis, Indiana at the JW Marriott 70 35

36 Thank you for participating! 36