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Transparency
as a Means to Serving the Public
JANUARY
2005 - In our October 2004 issue, AICPA Chairman Robert L.
Bunting discussed current AICPA initiatives to reform the
peer review and quality assurance systems for all CPA firms,
not just those registered with the Public Company Accounting
Oversight Board (PCAOB). The NYSSCPA supports these plans
because they foster greater transparency in the accounting
profession. Transparency is critical because it gives the
public greater confidence in the integrity of audits and the
accountability of auditors.
Peer
Review’s Role in Transparency
For
more than 25 years, peer review has shown significant value
to its participants and has worked to protect the public.
Statistics show marked improvement in peer-reviewed firms’
accounting and auditing practices. There has also been an
increased reliance on peer review by government agencies,
as well as growing public demand to see the results of the
reviews.
Last
year, the AICPA restructured and renamed its SEC Practice
Section (SECPS) to create the Center for Public Company
Audit Firms (CPCAF). The CPCAF peer review program is the
successor to the SECPS peer review program, with the objective
of administering a peer review program that evaluates and
reports on the non–SEC-issuer accounting and auditing
practices of firms that are registered with and inspected
by the PCAOB, which created an inspection program to periodically
evaluate registered firms’ SEC-issuer audit practices.
The AICPA now has two practice-monitoring programs: the
CPCAF peer review program (about 900 participating firms),
and the AICPA peer review program (about 33,000 firms).
The AICPA reports that about 6,400 of these firms currently
post their peer review results on the AICPA website. These
files are accessible to everyone via www.aicpa.org/centerprp/publicfile01.htm.
According
to the AICPA, currently 43 of the 54 states and territories
either mandate peer review for licensure, give the state
accountancy board the authority to do so, or are considering
moving in that direction. The NYSSCPA has supported legislative
proposals to make peer review a requirement for licensure
in New York, and the State Senate has passed such a bill
twice.
Improving
and Expanding What Works
The
AICPA is discussing a member referendum that would recommend
broadening peer review to become a requirement for CPA licensure.
All CPA firms subject to peer review would be required to
place certain information, such as their peer review report,
letter of comments, and letter of response, in an electronic
file maintained by the AICPA. The AICPA is also developing
a member-education program to inform CPAs about peer review
and assess their desire for greater transparency.
As
part of his mission, AICPA Chairman Bunting has called on
his fellow CPAs to be “catalysts for change,”
with a focus on high expectations. The frank analysis of
peer review past and present in an AICPA white paper (available
at www.aicpa.org)
demonstrates that. The Institute recognizes the peer review
system’s strong points and shortcomings. It is building
on what works, and not expecting solutions to come easily.
The
leadership of the AICPA and Bunting in this area goes beyond
mere political expediency. It shows that they recognize
the importance of peer review to a universe of people that
now includes regulators, clients, credit grantors, and the
public that all CPAs serve.
Louis
Grumet
Publisher, The CPA Journal
Executive Director, NYSSCPA
lgrumet@nysscpa.org
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