Peer Reviews to Exclude “Preparation Services”
The Accounting and Review Services Committee (ARSC) is still working on the new (proposed at this point) compilation and preparation services standards. I have been asked whether CPA firms will be subject to peer reviews if they only prepare financial statements–under the soon-to-be-issued new standards–and don’t issue compilation reports.
It appears the answer to that question will probably be no (exposure draft now pending–see below).
I just received the AICPA August Peer Review Update and it contains the following:
Peer Review Exposure Draft on new SSARS Services
The Peer Review Board has issued an Exposure Draft that proposes the exclusion of preparation services performed under SSARS from the scope of peer reviews for enrolled firms. Additionally, firms would not be required to enroll in the peer review program if their highest level of service is preparation services performed under SSARS. Paragraph .06 of the Standards currently indicates “an accounting and auditing practice for the purposes of these Standards is defined as all engagements performed under Statements on Auditing Standards (SASs); Statements on Standards for Accounting and Review Services (SSARS); Statements on Standards for Attestation Engagements (SSAEs); Government Auditing Standards (the Yellow Book) issued by the U.S. Government Accountability Office; and engagements performed under Public Company Accounting Oversight Board (PCAOB) standards (see interpretations). Engagements covered in the scope of the program are those included in the firm’s accounting and auditing practice that are not subject to PCAOB permanent inspection.”
What does this mean?
If you are a small firm and only prepare financial statements (under the proposed standards), you will not be required to enroll in a peer review program. One possible exception–your state board may require it (but I doubt this will happen). If you issue compilation reports, you will be subject to the peer review standards. (Under the proposed ARSC standards, firms will be able to prepare and issue financial statements without a compilation report; preparing financial statements is a non-attest service.)
When will the new preparation services standard be issued?
I don’t know for sure, but ARSC will meet in November 2014; I expect issuance at that time.
When will the peer review exposure draft be considered?
The Board will consider the proposed changes and the comments received during open session on January 28, 2015. The proposed changes, if approved, will be effective upon approval.