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Nov 1990

More frequently asked questions. (Quality Review Program)

by Mancuso, Anthony J.

    Abstract- Many resources are available for organizations wishing to implement the American Institute of Certified Public Accountants' (AICPA) Quality Review Program. State CPA societies offer courses on how to develop a Quality Review Program, and Quality Review Program publications are available from the AICPA and publishing companies. The AICPA also offers consulting reviews, which evaluate quality control standards and help accounting firms prepare for their Quality Reviews.

Many practitioners have asked questions regarding the Quality Review Program. The following are some practical answers to frequently asked questions.

How can we obtain knowledge and what resources of information are available regarding the Quality Review Program?

The state societies offer quality and peer review courses that will help you find out how to develop an effective quality control system that complies with AICPA standards and will help you learn how to efficiently plan and execute a successful Quality or Peer Review. The courses allow you to choose from two seminars and a self-study program. * Preparing and Arranging for a Successful Quality Review: A Practical Approach. * How to Conduct a Review Under the AICPA Practice Monitoring Programs. * Preparing for Review: Maintaining Quality Control (A Self- Study Program).

Attending the seminar on "Preparing and Arranging for a Successful Quality Review: A Practical Approach," will provide you with an overview of the review programs, and some practical suggestions about preparation for a review. The nine elements of quality control and guidance on minimum documentation requirements of professional standards are discussed along with some suggestions regarding practical approaches to documentation requirements, using some sample forms and checklists. The program provides you with some tips and techniques for dealing with the review process, and how to prepare for and deal with the reviewers. The roles of the administering state society, the AICPA, and review approval processing procedures are also covered.

If you decide that in addition to taking a course to help prepare for Quality Review you want to expand your involvement in the review programs and become a reviewer, you might consider the course on "How to Conduct a Review under the AICPA Practice Monitoring Programs." This course will allow you to not only become knowledgeable about the review process, but will qualify you as a reviewer. The course covers the review process, including planning, performing field work, synthesizing, concluding and reporting practice monitoring findings for both an on- site and off-site review. Forms and checklists are used in a case study illustrating the documentation of practice monitoring engagements.

The course also focuses on the types of reports and the letters of comments issued to firms and the firms' responses to the letters of comments. If your interest is in conducting a quality review, the course also provides help in marketing practice monitoring services.

If you are too busy to attend the seminars, you can listen to a detailed presentation on quality control in the comfort of your own home or office. An audio-cassette, self-study program, "Preparing for Review: Maintaining Quality Control," provides all types of accounting firms with an easy to use guide to understanding, developing, maintaining and upgrading their quality controls. The focus is primarily on the firm's accounting and auditing practice, although administrative, tax and other areas are also covered.

Several publications are also available to help educate you and get you through Quality Review. The following manuals can be obtained directly from the publishing company. * The AICPA publishes a complete manual that is available to members at an annual subscription price. The manual was developed to assist reviewers carrying out Quality Reviews, state societies that participate in the administration of the program, associations of CPA firms that assist their members in arranging and carrying out reviews, and the AICPA Quality Review Division itself. The manual includes guidelines, questionnaires and checklists. * Practitioners Publishing Company publishes a manual entitled "Guide to Quality Control," which is available at an annual subscription price. The guide presents a system of quality control that a firm can either adopt as is or adjust to meet its own specific needs. * Panel Publishing Company has a newly published manual entitled "Quality Control Manual for Local CPA Firms," that is designed to help you pass your Quality Review or Peer Review with a minimal amount of disruption to your practice. The manual provides you with the practical, comprehensive step-by-step guidance that you need and is written with the small to medium-sized local practice in mind. The manual is available at an annual subscription price.

Other professional literature governing quality control is available from the AICPA Order Department, and includes the following:

* Statement on Auditing Standards 25 (which superseded SAS 4). * Statement on Quality Control Standards 1. * Interpretations of SQCS 1. * Quality Control Policies and Procedures for CPA Firms--Establishing Quality Control Policies and Procedures. * Standards of Performing and Reporting on Quality Review.

Technical questions regarding the Quality Review Program can be directed to the AICPA Quality Review Division, 1211 Avenue of the Americas, New York, NY 10036-8775. Some state societies have established committees that identify other resources for responding to technical questions regarding Quality Control. Contact your State Society Quality Review Administrator for information regarding your state.

Consulting reviews are available and offer an opportunity to obtain not only a risk-free objective evaluation of the firm's quality control standards, but a method of receiving suggestions on how to improve your quality control system for your independent Quality Review. In essence, the consulting review is a trial run that can help you prepare for a review of your quality control system prior to your actual Quality Review. The review is carried out by using guidelines, programs and checklists developed by the AICPA Quality Review Division. Consulting reviews are performed by reviewers selected from a reviewers data bank maintained by the AICPA. Fees for consulting services, if rendered by the AICPA or a participating state CPA society, will cost $500 per day, plus travel and out-of-pocket expenses incurred by the consulting reviewer. If you join the PCPS Division of Firms, the AICPA will allow you a credit of $250 toward your Peer Review. Firms or individual practitioners could also provide consulting reviews and can be retained directly by your firm at rates negotiated with the consulting reviewer. Arrangements can be made by contacting a participating state CPA society, the AICPA Quality Review Division, or a firm or individual practitioner.

Are there circumstances that can cause termination of my firm enrollment in the Quality Review Program?

Yes. The AICPA Quality Review Executive Committee (AREC) adopted a resolution that provides procedures for termination of firm enrollment if the firm fails to submit certain information regarding the arrangements for a Quality Review or submit the report, letter of comments, if any, and the response to matters discussed in the report or letter of comments. The QREC also adopted a resolution terminating enrollment, if the firm fails to pay administration related fees to the administering state CPA society, refuses to cooperate, fails to correct material deficiencies, or is found to be so seriously deficient in its performances that any education and remedial or corrective actions are not sufficient.

Are professionals in my firm, other than CPAs, required to obtain CPE under the Quality Review Program?

The AICPA Continuing Education Membership requirements state that for each three-year reporting period beginning with the 1989 calendar year, or with the second full calendar year after the adoption of the bylaw provision, AICPA members in public practice, except those in retirement, shall demonstrate for each calendar year that they have completed acceptable continuing education as follows:

* A member in public practice shall, during each three-year reporting period, complete 120 hours with a minimum of 20 hours each year. * A member who complies with a state licensing or state society membership continuing education requirement shall be deemed to be in compliance with this provision, provided such a requirement is for an average of 40 hours per year, at a minimum, and provided the member submits a statement of compliance with such a requirement showing completion of at least 20 hours each year. * A member who is not subject to such a state requirement shall, each year, submit a report of the amount of continuing education completed during the immediately preceding calendar year showing for each program completed 1) the sponsoring organization, 2) the location at which the program was given, 3) the title of the program or a description of its contents, 4) the dates attended, and 5) the number of hours claimed.

Firms performing audits under the "Government Auditing Standards" must also meet certain continuing education requirements. These requirements are:

* Auditors responsible for planning, directing, conducting, or reporting on government audits should complete, every two years, at least 80 hours of continuing education and training that contributes to the auditor's professional proficiency. At least 20 hours should be completed in any one year of the two-year period. * Individuals responsible for planning, directing, conducting substantial portions of the field work, or reporting on the government audit should complete at least 24 of the 80 hours of continuing education and training in subjects directly related to the government environment and to government auditing.

These requirements must be met within two years from when the "Government Auditing Standards" became effective, which was for audits starting January 1, 1989.

The AICPA's requirement on CPE applies only to AICPA members. Non- certified members of a firm are not required to conform to the AICPA requirement. The AICPA's Division for CPA Firms is more stringent in that the requirement for CPE applies to all professional firm members. Standards, under which the Quality Review Program operates, requires a firm to establish policies and procedures to provide the firm with reasonable assurance that all personnel will have the knowledge required to enable them to fulfill the responsibilities assigned. Determination of whether a firm has met the requirements of CPE and training are evaluated during your Quality Review, when the reviewer discusses with the firm their appropriate compliance with the AICPA, State Board and State Society CPE requirements.

Anthony J. Mancuso, CPA, Weber, Lipshie & Co.

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