Preparing for Your Peer Review December 2017

Peer Review Requirements Membership requirements of the AICPA: A firm’s initial peer review must be submitted no later than 18 months from the date enrolled, or should have enrolled in the peer review program Once every three years thereafter State Board of Accountancy Mandatory Requirements: NYS, NJ, CT

Peer Review Requirements State Board of Accountancy Requirements NYS – (Prior to October 23, 2017) Firms, except for unincorporated sole proprietorships, performing attest services in NYS must enroll if the firm has three or more CPA and or Public Accountants, or The firm, including unincorporated sole proprietorships, provides governmental attest services (attest services rendered for any NYS or municipal department, board, bureau, division commission, public authority etc. or other governmental or proprietary function for NYS)

Peer Review Requirements State Board of Accountancy Requirements NYS – Law Change (Effective October 23, 2017) Any firm that begins providing attest services or otherwise becomes subject to mandatory participation in the peer review program shall: Notify the NYS board of its change in status within 30 days and provide the department with evidence of enrollment in an acceptable peer review program Have a peer review completed within 18 months of the date such services were first provided

Peer Review Requirements State Board of Accountancy Requirements NYS – Law Change (Effective October 23, 2017) Timing: If you were in the middle of an attest engagement when the law was signed, you have 30 days to notify the NYS board and to enroll in a peer review program If you do not plan on performing attest services, your firm has no requirement to register for a peer review as there is no requirement to do so If you issued your audit report on October 22, 2017, the day before the bill is signed, your are not subject by the revised peer review law The trigger for your notification/peer review requirement is the date an attest engagement letter is signed

Types of Peer Reviews Two Types: Engagement Review – Applies to firms that only perform services under SSARS or services under the SSAEs (reviews/AUPs) that do not require a system review. Does not apply to firms that perform audits (GAAS) or examinations (SSAEs) Objective is to evaluate whether engagements submitted for review are performed and reported on in conformity with applicable professional standards in all material respects.

Types of Peer Reviews Two Types: System Review – Applies to firms that perform audits (GAAS) (Yellow Book) (PCAOB not subject to permanent inspection), examinations (SSAE) Objective is to determine whether the system of quality control for the accounting and auditing practice id designed and complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards.

Administration Administering Entity Selecting an administering entity: National Peer Review Committee – Must be the administering entity for peer reviews of firms that perform audits of broker-dealers or issuers State administering entities

Timing Peer reviews are due six months after a firm’s peer review year end (3 years and 6 months after the previous peer review). Initial peer review is ordinarily due 18 months from the date the firm enrolled or should have enrolled in the program

The Information Request System reviews: Inventory of A & A engagements including: Approximate hours Level of Service Industry New or continuing client/level of service Office and Engagement Partner Relevant engagement files

The Information Request Firm licenses and professional licenses Are partners and the firm licensed in the required jurisdictions Regulatory communications: Licensing boards AICPA or State Societies PCAOB/SEC/FINRA etc. DOL/GAO Nature of changes to practice (mergers/acquisitions)

The Information Request Independence affirmations CPE records: AICPA State Quality Centers Yellow book Internal monitoring reports & Consultation memorandums

Field Work Peer review team performs reviews of the selected engagements Selections will be a representative cross section of the practice covering: Mandatory selections Levels of service Partners/Offices Interview of selected firm personnel

Selecting a Peer Reviewer Peer reviewer qualifications: Industry experience – Does the peer reviewer possesses experience in the review firm’s industry practice areas? Peer reviewer’s capacity – Can the firm perform a timely review? Does the peer review possess adequate resources? Experience – How many peer reviews has the reviewer performed? Independent

Mandatory Selections Mandatory Selections are: Employee Benefit Plans Audits under Government Auditing Standards Single Audit FIDICA banks Carrying Broker dealers, 1/1/18 all BD’s SOC 1 , SOC 2 and SOC 3 reports

Oversight The peer review process is subject to oversight by the administering entity, including: The reviewed firm The peer reviewer Objective of oversights are to ensure compliance with the peer review standards AICPA Enhanced Audit Quality Initiative

Quality Control Document Requirements of a firm’s quality control system are provided for in: AICPA Quality Control Standard No. 8 Firm’s MUST have a written quality control document Peer Review form 4300 or 4400 is obsolete

Quality Control Document Represents a firm’s policies and procedures, including the related forms, checklists etc. The extent of the quality control document may vary depending on the size and structure of the firm Firm’s should take care to avoid unnecessary policies and procedures that burden compliance

Quality Control Document The quality control document will address the following five elements: Leadership Responsibilities Relevant Ethical Requirements Acceptance and Continuance of Client Relationships and Specific Engagements Human Resources Engagement Performance Monitoring

Questions ??????????

Peer Review / Quality Control Services Peer reviewer services Peer review consulting services Quality control consulting services: Technical resource CPE Inspection/monitoring Pre-issuance/Post-issuance reviews

Contact Information Vincent Gaudiuso, CPA, MST E-mail: vgaudiuso@buchbinder.com Phone: (212) 896-1920 Michael Wolansky, CPA E-mail: mwolansky@buchbinder.com Phone: (212) 220-2548