Workpaper Issues
Bookkeeping Hours
For system reviews, one of the criteria used by team captains to determine if there has been adequate scope selection of engagements is to consider the percentage of accounting and auditing hours they have peer reviewed. This information is documented in the SRMs. Accounting and auditing hours do not include time for tax preparation or bookkeeping. When compiling engagements statistics, firms often include bookkeeping and tax preparation hours. Reviewers should advise firms to estimate the time spent to apply professional standards to a compilation – a common range is 1 to 5 hours. If the estimate is 2 hours, an annual engagement would be 2 hours and monthly engagements would be 24 hours. Firms will appreciate receiving this information as it will streamline the time spent compiling the data and reviewers will obtain more accurate scope information.
Audit Checklist
A member of the California Peer Review Committee, Dave Vaughn, has developed a helpful checklist for reviewing audit files during a peer review. This does not replace the peer review checklists but is an interim tool. The checklist is available at our peer review web site.
Helpful hints for MFC and FFC forms
For system reviews, MFCs relating to issues noted during the review of engagements should be signed by the engagement partner in the box at the bottom of the form. When the matter noted applies to the firm’s quality control system, the MFC should be signed by the individual charged with governance. Examples of quality control system matters are monitoring issues or inadequate CPE under Government Auditing Standards.
For engagement peer reviews, peer reviewers may discuss MFCs by phone and document on the MFCs the agreement of the individual with whom the matter was discussed.
It is the peer reviewer’s responsibility to get signed FFC forms from the firms within two weeks of the peer review exit conference. Some reviewers send the report and FFCs by email to expedite the process. Firms can sign electronically through the adobe signature process or print the FFCs, sign them and either scan or mail them. Please do not fax these documents; they are maintained until the next review and faxed documents are frequently difficult to read. Best practice for system reviews - Prepare the FFCs while at the firm’s office, copy them to a flash drive or email them to firm personnel, have the firm print them out, and get them signed before you leave.
Reviewers can assist firms by completing the bottom portion of the FFC. For example, reviewers can include a generic response in the appropriate response section such as “We agree to implement the reviewer’s recommendation as noted above.” or “We will ensure that all appropriate documentation is performed as noted above.” Also, check the box that the firm agrees with the finding and will implement the reviewer’s recommendation and insert “Immediately” as an answer to the date of actions taken. Inform the firm that you have done this and explain that they are welcome to change the response or add additional comments. Be sure to discuss with the firm your recommendation to correct the matter noted and make certain they are in agreement. This should expedite the process and prevent technical review notes.
