CalCPA Preissuance Checklist: Engagement Peer Reviews
—Effective April 30, 2006General r Is the peer review year end three years from the prior peer review year end? If not, was a change approved?
r Was the required rep letter obtained from the firm and was it dated properly?
r If any engagements were excluded from the peer review, was a written request for a wavier submitted and written approval obtained from the administering entity prior to the commencement of the review?
r Are the workpapers, report, Letter of Comment (LOC), and Letter of Response (LOR) submitted by the due date or within 30 days from the completion of the review, whichever is earlier?
r If a review wasn’t completed and submitted within the required time frames, was an extension requested?
r Are the name of the firm (including the correct spelling), peer review year-end date and report date consistent in the report and LOC? (The report/LOC date should be the date the review was completed.)
r Are the current forms, report format and LOC language used?
r Was the firm requested to prepare the LOR and submit it within 30 days along with copies of the report and LOC to the Peer Review Office? If there was no LOC, did you tell the firm to submit a copy of the report?
r Did you review the LOR and provide input if needed to the firm?
r If the report is adverse/modified, was the firm informed that the LOR must make reference to this fact?
r Is the engagement summary form prepared by the firm properly and fully completed? It needs to be signed and dated, the year end period must be the same as the peer review period, and the number and type of engagements must be shown by partner.
r Was one engagement selected from each partner responsible for issuance of reports and from each level of service? Ordinarily at least two engagements need to be selected. If not, is the reason documented? Be aware that reviewers should not review more engagements than recommended by the Peer Review Manual.
r Is the reviewer’s checklist fully and properly completed?
r If there are any substandard engagements, were parts II and III of the statistic data sheet completed?
Reports r Is the report wording that was effective 1/1/06 used? Remember, most engagement reports will refer to the documentation being required by professional standards (See Alert 05-04).
r If there is a LOC, does the report refer to it?
r If the report is adverse, does it contain all of the problems noted during the review and are these problems called “Deficiencies” as opposed to “findings”? (There is to be no LOC if the report is adverse.)
r If the report is modified, does it contain all of the significant problems and are these problems called “Deficiencies” (as opposed to “findings”)?
r Do the deficiencies causing the report to be adverse/modified properly describe the problem?
r Are repeat problems correctly identified in the report? (See LOC section for wording requirements.)
r If the report is adverse/modified, are the substandard engagements identified by industry and level of service?)
r Does the peer review year-end date encompass the year-end dates for all the financial statements that are reviewed?
Letter of Commentsr Is the current LOC wording used and is the caption “Comments” as opposed to “Findings” used?
r Does the first paragraph of the LOC state that the matters included in the LOC were not considered to be of such significance as to affect the opinion expressed in the report?
r If the problem is the same as in the firm’s previous peer review, does the comment indicate that it is a repeat? (Problems aren’t required to be exactly the same to be classified as a repeat finding. For purposes of determining whether a comment is a repeat in an engagement review, some problems are classified in four broad categories --disclosure, reporting, presentation, and documentation. Repeat problems within these grouping are considered repeat comments. For example, if the prior LOC contained a comment that the firm’s reports didn’t mention supplementary information and the current LOC mentions that the firm’s reports didn’t include all periods presented, the current year comment would be considered a repeat reporting comment. Wording along the following lines would then be needed in the comment: “Reporting problems were noted during the firm’s previous peer review.”)
r If there is a repeat comment that was also a repeat in the firm’s prior review, does the comment indicate this situation? (An example would be “Disclosure problems were noted during the firm’s previous peer reviews.” Note that this wording just makes reference to “previous peer reviews” and does not state the number of times the problem had been mentioned in prior peer reviews.)
r Are the specific engagement problems described? (For example, the comments should mention the specific areas where disclosures were missing or the specific reporting deficiency noted and not just that disclosures were missing or reports were not in compliance with the requirements)
r Do comments refrain from describing a system problem and the related conclusion?
Matters for Further Consideration (MFC)r Are the MFC forms fully completed?
r Is there a completed MFC supporting each problem mentioned in the report/LOC?
r Did the reviewer sign all MFCs, and does the MFC indicate whether or not the firm agrees with the problem, indicate if the problem is to be included in the report/LOC, and (if more than one owner) identify with whom in the firm the matter was discussed ?
r Is the professional standard reference completed?
r If the matter is not included in the report/LOC is an appropriate reason given? (Stating that a matter is immaterial can be adequate justification for not including a problem in the LOC. However, while stating that a certain problem didn’t make the F/Ss misleading is a valid reason for not categorizing an engagement as substandard, it is not a valid reason for excluding the problem as a comment in the LOC.)
r Is the deficiency cross-referenced to the questionnaires?
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