Home > Peer Review > CalCPA Peer Review Program FAQs

CalCPA Peer Review Program FAQs

Where are the standards and interpretations discussed below?

I just perform bookkeeping for clients. Am I subject to peer review?

If I only issue management use only financial statements, am I subject to California’s mandatory peer review?

I am a part time controller for several clients. Would this work subject me to peer review?

When does peer review apply to me?

How much will my peer review cost?

How do I determine my peer review year?

How do I get started?

What can I do now?

Where are the standards and interpretations discussed below?
Visit the AICPA website, where you will find the Statements on Standards for Accounting and Review Services (SSARS) discussed here .
Back to Top

I just perform bookkeeping for clients. Am I subject to peer review?
The determining factor is whether you are issuing financial statements or a trial balance. See the related interpretations of section of AR 100 question 15 (AR Section 9100.54).

If you are issuing financial statements, you must either issue a compilation report or follow the guidance in AR 100.24 for management use only financial statements. If your client will not be giving the financial statements to a third party, such as a bank, you may document an understanding with your client and include a reference on each page of the financial statements such as “restricted for management’s use only.” More details and a sample engagement letter are available in the standards.
Back to Top

If I only issue management use only financial statements, am I subject to California’s mandatory peer review?
No, the regulations of the California Board of Accountancy exclude the following from the peer review requirement: “Firms, which as their highest level of work, perform only compilations where no report is issued in accordance with the provisions of SSARS.”

Some firms that perform monthly bookkeeping services for their clients issue monthly information as management use only and then issue a compilation or review at year-end. One advantage to management use only statements is that they do not have to follow generally accepted accounting principles or cash or tax basis. For example, the current portion of debt does not have to be in current liabilities.
Back to Top

I am a part time controller for several clients. Would this work subject me to peer review?
If you are part of the management of your client, you should not be issuing a report on your firm letterhead. Instead you could issue a transmittal letter on the letterhead of the client. See the related interpretations of section AR 100 question 21 (AR Section 9100.80) for sample language. This would not be subject to peer review.
Back to Top

When does peer review apply to me?
Although the mandatory peer review standards become effective Jan. 1, 2010, firms will begin reporting peer review information to the CBA in the summer of 2011. The proposed regulations have a three-year phase in using the last two digits of a firm number (for sole practitioners this would be the individual license number). For 01-33, the reporting date is July 1, 2011; 34-66, the reporting date is July 1, 2012; for 67-00, the reporting date is July 1, 2013.

Under the CBA’s regulations, a firm operating or maintaining an accounting and auditing practice shall have a peer review report accepted by a peer review program within 36 months prior to its license renewal date and have a peer review report accepted once every three years.

The CBA determines who will be subject to mandatory peer review. Since the statute becomes effective Jan. 1, 2010, the CBA could determine that a firm issuing any compilation, review, audit or attest engagements with report dates after Jan. 1, 2010 is operating an accounting and/or auditing practice.
Back to Top

How much will my peer review cost?
The California Peer Review program charges an annual registration fee. Firms pay this fee every year, not just in the year of their peer review. Even though the program is part of CalCPA, it maintains separate financial statements to ensure that revenue covers expenses. Every year the California Peer Review Committee evaluates these financial statements to determine if the registration fee to be charged in the following year is appropriate. For calendar year 2010, the fee is $175 for the first professional and $50 for each professional up to a maximum fee of $2,000. A professional is a CPA or college graduate pursuing CPA licensure. This applies to all members of the firm that fit the definition of a profession even if they perform no accounting or auditing work or are not full-time employees.

In addition to the registration fees, in the year of peer review the firm will pay a peer reviewer to perform the peer review. A peer review is performed every three years. For firms that perform only compilations and reviews, the engagements and documentation can be sent to the peer reviewer. Peer review standards require that we look at one engagement from each level of service: compilation without disclosures, compilation with disclosures, and one review with a minimum of two engagements to be reviewed. In addition at least one engagement is reviewed from each partner. For example, if you have two partners who each perform each level of service, we would only look at three engagements, making sure that both partners are covered. The fee you pay will be negotiated between you and your peer reviewer. California does offer a program where we contract with independent contractors to perform these peer reviews. Engagement reviews typically take three to six hours.

For firms that perform audits, the fee will be dependent on the type and number of audits. Peer reviewers visit the firm, evaluate the system of quality control, and review a representative sample of accounting and auditing engagements. For firms that have just a few audits, the reviews typically take 12 to 20 hours..
Back to Top

How do I determine my peer review year?
Peer reviewers select engagements to review with periods or years ending within the peer review year. Firms need to have completed most of their engagements so the peer reviewer will be able to select appropriate engagements. For this reason firms are assigned a due date six months after their peer review year-end. The peer reviewer must have submitted the peer review work papers to the administering entity by the due date at the latest. Once the administering entity receives the peer review it goes through a technical review and is then submitted to the California Peer Review Committee for acceptance. Although this process ordinarily takes two months, it can sometimes take three or even four months.

Choosing a correct year for your peer review is one of the most important decisions you will make. The program assigns a due date, but this does not determine your year-end. You should discuss this issue with your peer reviewer.

For example, if you perform only compilations and reviews and must report your peer review in the summer of 2011, you should start the process in the fall of 2010. Compilation and review practices usually have most of their engagements with calendar year-ends. Good peer review year-ends for this type of practice would be July 31, Aug. 31 or Sept. 30, as most of the engagements will have been completed. The peer review could occur in the fall and go through the administrative process in the winter. Firms using a year-end of Dec. 31, 2010, run the risk of their peer review not being completed by the July 1 report date.

For system reviews the determination of year-end will depend on the nature of a firm’s audit practice. For example, if you perform ERISA audits, these are generally calendar year audits due by Oct. 15. A good year-end would be June 30. If you perform nonprofit or government audits, these often have June 30 year-ends and sometimes run into the following year to complete. A good year-end may be May 30 and your prior year audits could be reviewed during the summer before you start your audit season.
Back to Top

How do I get started?
Visit CalCPA’s peer review website , which is available to everyone. Under the firm section complete the enrollment form. The information on this form will determine the due date. Non-AICPA firms do not need to enroll until the year before your peer review is due to the CBA.

Peer review is paperless and it is very important that we have the correct e-mail address for the managing partner/owner and that you add ca@prcpa.org and peerreview@calcpa.org to your e-mail safe senders list to ensure you continue to receive peer review information.

In the month of a firm’s peer review year-end, we send an e-mail to the managing partner/owner of the firm asking them to complete a peer review scheduling form to start the peer review. In this form the firm will need to choose their peer reviewer. A directory of reviewers is available on our website.
Back to Top

What can I do now?
CalCPA’s peer review website contains useful information, including two webcasts: one dealing with peer review standards, quality control standards and other helpful information for firms, and one for peer reviewers. You also will find relevant articles from California CPA magazine. Also, some firms are hiring a consultant to either review some engagements for a period prior to their peer review year or to become part of their pre-issuance review process.
Back to Top