New York CPAs Weigh in on the Future of Peer Review

The AICPA’s ambitious plan to revolutionize the 35-year-old peer review process with a near-real time engagement monitoring tool is being positioned to improve practice monitoring overall, but the New York State Society of Certified Public Accountants (NYSSCPA) has identified some aspects of that plan that need attention.

“While we share the AICPA’s commitment to improve the effectiveness of the peer review program, our organization has concerns about some of the changes being proposed,” says NYSSCPA executive director Joanne Barry.

The AICPA wants to build a system that would be programmed to provide a continuous analytical evaluation of a firm’s engagement performance that would require human review when the system identified concerns. It would review all firms that perform accounting, auditing and attestation engagements as well as monitor all engagements subject to review.

In a June 12 letter to the AICPA, the NYSSCPA expressed several concerns with the concept; namely the cost of the tool, which the Society said may be prohibitive for smaller firms; confidentiality – that the tool may go beyond understanding solely the quality aspects of how a firm performs engagements; and a concern that a metric-based peer review process — which relies on a CPA’s professional judgment — would lead to a “check the box” mentality, leading audit quality to suffer.

The NYSSCPA also urged the AICPA to make improvements on a firm’s peer reviewer selection and reviewer training requirements.

“We can see the merit in having a peer reviewer selected and assigned or recommended by the system based on objective and measurable criteria,” the drafters wrote. “The selection and assignment of a reviewer by the system would, in some measure, enhance the objectivity of a peer reviewer and the integrity of the peer review system.”

“Clearly there is no one-size-fits all approach for all firms,” says Barry, “but the CPA profession needs to begin harnessing the power that big data offers and that goes beyond peer review. This is a step in the right direction.”