Peer Review Program FAQs
Note: CalCPA strongly urges you to check the California Board of Accountancy website for the latest updates to implementation issues related to California’s new mandatory peer review requirement.
Attention All CPAs
All California individual licensed CPAs, CBA-licensed partnerships and CBA-licensed corporations have additional reporting requirements to the CBA under the mandatory peer review law that became effective Jan. 1, 2010. For example, if you are an employee in industry or public practice or government, you still must report. If you maintain a CPA license in California but practice in another state, you will need to report. This is not a one-time reporting requirement. Every three years all firms and licensees will be required to report.
When does a firm or individual CPA have to report?
How to report.
How can a firm receive an extension of time to undergo a peer review?
What is peer review?
Who is required to undergo peer review?
If a firm only performed one accounting and auditing engagement, will it still be required to undergo a peer review?
Are there any exclusions from the peer review requirement?
Is a sole proprietorship considered a firm in California?
If I issue a compilation in 2010 and then cease all attest work, do I still need a peer review? My reporting date is not until 2013.
If I have not previously issued any reports but accept an accounting and/or auditing engagement, what are the CBA requirements?
I have just started a public practice firm. How does this apply to me?
Does a firm need to submit its peer review report?
What are CBA-recognized peer review program providers?
How much will my peer review cost?
How do I get started?
What can I do now?
When does a firm or individual CPA have to report?
The reporting requirement is being phased in over a three-year period. The following schedule outlines the phase-in period:
Special Note from the CBA: Though the requirement to undergo peer review applies only to firms, the CBA does not maintain a listing of CPAs operating as sole proprietorships. As such, all licensees are required to respond, even if only to inform the CBA you do not operate as a sole proprietorship and are therefore not subject to the peer review requirement. Likewise, firms that do not perform the specified accounting and auditing services also must respond so the CBA can evaluate the applicability of peer review to the services provided by each firm.
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How to Report
The CBA has an online peer review reporting form and a hardcopy form. You may use either form to submit your information.
To use the online form you must have a PIN number. In July 2010 the CBA sent a letter to all firms and individuals with license numbers ending in 01-33 to notify them of the requirements and that letter contained their PIN number. You may also request a PIN by contacting the CBA Peer Review Unit at (916) 561-1706 or firstname.lastname@example.org. A licensee or a firm may report at any time. However, if the licensee or firm is required to have a peer review, the peer review report must have been accepted by the CBA recognized peer review program provider within the 36 months prior to their reporting date. The CBA reporting form includes a question about the peer review report acceptance date.
Important: This acceptance date is not the date when your peer review is performed. For most California firms, it is the date that CalCPA California Peer Review Committee accepts your peer review. After your peer review is performed by your peer reviewer, it is submitted for technical review and committee approval. This process typically takes two to three months. After committee approval, a letter is sent to the firm informing them of the date their peer review was accepted by the committee. Due to tax season, the committee recommends that firms undergoing peer review start the process in the summer or early fall of the year before their reporting date.
Correcting Peer Review Reporting Information: If you submitted incorrect information on the online peer review reporting form, you must submit a hardcopy Peer Review Reporting Form. Clearly mark this form “Corrected Copy.”
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The California Peer Review Committee does not grant extensions of time to complete engagement peer reviews. There are limited extensions of time on system peer reviews. The only exception to these extension rules is for serious medical issues involving key personnel or their immediate family of the firm or peer reviewer. If an extension is granted that extends past the firm’s reporting date, the firm must notify the CBA of the extension and provide proof of the extension. The firm must then report the results of the peer review to the CBA within 45 days of the peer review report acceptance by the CBA-recognized peer review program.
When a firm is enrolled in the peer review program, the firm is assigned a due date for peer review administrative purposes. The due date is the date by which the peer reviewer must submit the report and work papers the peer review office. However, this due date is not an extension of time for complying with the CBA regulations.
Peer review is a systematic review of a firm's accounting and auditing services performed by a peer reviewer who is unaffiliated with the firm being reviewed to ensure work performed conforms to professional standards.
Peer review is required for all California-licensed firms, including sole proprietorships, that perform accounting and auditing services using any of the following professional standards:
Note: These include both GAAP and OCBOA financial statements, as well as audits performed using GAAS.
Yes. There is no exclusion from the peer review requirement based solely on the number of engagements performed.
There are two exclusions from the peer review requirement:
Yes. Business and Professions Code Sec. 5035.1 defines a firm to include a sole proprietorship.
Yes. California law is effective for all work performed after Jan. 1, 2010. It is recommended that you have a peer review conducted within 12 months of your last qualifying engagement, regardless of your reporting date.
Within 18 months of the completion of services, the firm must have a peer review report accepted. If this 18-month period is beyond your phased in required reporting date, inform the CBA by your reporting date that you have just started issuing reports and will submit your reporting form at the end of the 18-month period.
A firm’s peer review must cover a complete year of existence, not a partial year. See the comment above for when your peer review should be completed.
A firm that receives a peer review rating of pass or pass with deficiencies is not required to submit the peer review report. The firm will only need to complete the Peer Review Reporting Form and submit it to the CBA as described above.
A firm that receives a substandard peer review rating (a rating of fail) is required to submit the peer review report, along with any materials documenting prescription of remedial or corrective actions, within 45 days after the report is accepted by the CBA recognized peer review program provider.
A CBA-recognized peer review program provider is an organization that is recognized to administer peer reviews in California. Only the AICPA is recognized by the CBA to perform peer reviews. The AICPA uses several administering entities nationally, usually state-certified public accountant societies, to administer its peer review program. A firm practicing in another state should use the administering entity approved by the AICPA for that state.
The California Peer Review program charges an annual registration fee. Firms pay this fee annually, not just in the year of their peer review. For calendar year 2011, the fee is $150 for the first professional and $50 for each professional up to a maximum fee of $1,200. A professional is a CPA, a CPA candidate or person working in that capacity. This applies to all members of the firm that fit the definition of a professional 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. The fee you pay will be negotiated between you and your peer reviewer.
Visit CalCPA’s peer review website and under the "Firm Resources" section complete the enrollment form. The information on this form will determine the due date. There are two enrollment forms. If any of the owners are AICPA members, use the AICPA enrollment form. Otherwise use the non-AICPA form.
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CalCPA’s peer review website contains useful information. 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. In addition, the CalCPA Education Foundation is offering a class—Upcoming Peer Review: Is Your Firm Ready?—for firms to prepare for peer review in the San Francisco/Peninsula area May 26 and in the Los Angeles area July 21.