Demographic Information

In July 1993, questionnaires were mailed to 1,500 Colorado CPA firms enrolled in any of the three practice monitoring programs (SECPS, PCPS, or QR). The questionnaire was directed to the person responsible for quality control and review. Four hundred thirty-seven usable responses were received from firms that either had quality review or peer review. Thirty-four (7.8%) of the respondents participated in the SECPS, 85 (19.4%) in the PCPS, and 318 (72.8%) in the QR monitoring programs.

Practitioner Responses

Procedures. Responses were compared between practitioners enrolled in the PCPS PR program and those enrolled in the AICPA QR program. The areas analyzed are 1) QR/PR in general and 2) the extent of perceived improvement in overcoming certain engagement deficiencies.

Attitudes About Quality Review. Table 1 summarizes practitioner attitudes about quality review. Responses are reported in three categories: disagree, not sure, and agree.

Practitioners in both groups agree on the direction that QR/PR should take in the future. The largest percentage of each group agrees that the timing of a QR/PR (once every three years) is appropriate, and that QR/PR should be continued. Respondents in both groups disagree that QR/PR should be extended to either management consulting services or tax services or that QR/PR should be legislated as a requirement for all CPA firms.

Agreement on whether or not QR/PR has improved firm performance is not as strong. Both groups disagree that the QR/PR program has helped them develop closer ties with other CPAs. Both groups also disagree that QR/PR has helped their firms focus on future direction. The largest percentage of each group agrees that their firms' practice has improved as a result of their reviews. There seems to be a slight difference of opinion on whether meeting the QR/PR requirements has caused the skills, expertise of firm personnel, and internal inspection programs to improve. A slightly larger percentage of QR respondents disagree, whereas a substantially larger percentage of PCPS respondents agree. These differences of opinion might be explained, in part, by the fact that most QR firms had only completed one review.

Practitioners' perceptions about whether or not QR/PR has affected the image or ability of their firms to compete are related to public awareness of a firm's QR/PR status. A larger percentage of both groups disagree that the QR/PR program 1) has enhanced the professional image of their firms, 2) has provided recognition and credibility to small firms, or 3) has affected the firm's ability to bid competitively.

Both groups strongly believe prospective clients do not frequently inquire about the QR/PR status of their firms. Approximately 42% of the respondents in the PCPS group admit they have not adequately promoted the results of their reviews. This is true of an even larger percentage of firms enrolled in QR. It should be noted that many of the PCPS firms have been reviewed more than once. If QR/PR is to have the enthusiastic support of practitioners, it needs to be promoted to third-party users by all who are involved - the AICPA, state societies, and firms.

Both groups have similar views relating to the protection QR/PR provides to the public. The largest percentage agrees that the QR/PR program protects the public by providing standards for compliance in accounting and auditing services. There does not seem to be a clear consensus on whether the QR/PR process is serving its purpose of self-regulation of the profession. They tend to disagree that the QR/PR program aids the public in selecting a CPA firm for accounting and auditing services. Again, this may be a reflection of the program's inadequate promotion.

Only a small percentage of each group believed that firm exposure to liability has decreased as a result of the QR/PR program. An even smaller percentage said malpractice insurance premiums have decreased for their firm as a result of QR/PR.

Cost-benefit relationships (Table 2) are always difficult to measure. Even though both groups indicated QR/PR should be continued, a rather large percentage indicated that review costs exceed the benefits provided.

Quality Improvement

Related literature revealed engagement deficiencies commonly found by review teams. Some of these deficiencies were selected as a basis for the survey instrument. For each of the statements in Table 3, respondents indicated the extent to which their firms improved as a result of QR/PR. The responses are reported in three categories: insignificant, not sure, and significant.

For all of the statements but one, a larger percentage of respondents in both groups said their firms had shown insignificant improvement as a result of QR/PR. This may be explained by the fact that CPAs who meet professional standards have already been performing satisfactorily in these areas. In such cases, review recommendations may be brief or nonexistent.

Even though the percentage of both groups indicating significant improvement is small, it can be argued that any TABULAR DATA FOR TABLE 1 OMITTED improvement is worthwhile. A higher percentage of members of the PCPS group than the QR group believed their firms had improved in all of the survey items but one. This might be the result of the PCPS program having been in effect for a longer period of time, and its members having undergone more than one review. The exception was "writing the accountant's opinions/reports" where 26.4% of the QR group reported significant improvement.

TABLE2

QUALITYREVIEW/PEERREVIEW

QRPCPS

AttitudesRelatingtoReviewCost/BenefitFirmsFirms

Costsfarexceedthebenefits.43.0%30.6%

Costsexceedthebenefits.36.130.6

Costsareaboutequaltothebenefits.16.225.8

Benefitsexceedthecosts.4.110.6

Benefitsfarexceedthecosts..62.4

TABULAR DATA FOR TABLE 3 OMITTED

John E. Elsea, PhD, CPA, and John R. Stewart, PhD, CPA, are with the University of Northern Colorado.