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PROC discusses peer-review administration: fewer RABs, APS identification and tracking firms that resign
Summary
CalCPA told the committee it has reduced RAB frequency due to lower review volume and expects about four RAB meetings per month; the PROC debated gaps in tracking firms that resign from peer review and recommended staff discuss data-sharing with CalCPA and AICPA, and flagged alternative practice structures for consistent identification.
CalCPA’s peer review director, Rich Smithy, told the California Board of Accountancy Peer Review Oversight Committee that the administering entity has canceled several report-acceptance-body (RAB) meetings because the number of reviews has declined. "As we're looking out over the next 6 months and candidly over the next year, we expect the number of RAB meetings per month to be at about four meetings," Smithy said, adding the figure was down from five or six previously.
Committee members used the reports and the draft PROC annual report to focus on two operational issues: (1) whether the board can or should obtain a list of firms that have voluntarily resigned from peer review so staff can verify they are not performing attest (A&A) work while unenrolled; and (2) how alternative practice structures (APS) should be identified and handled by peer reviewers.
Chair Fausto Hinojosa and members explained the risk: a firm could un-enroll but later perform attest work without being subject to peer review. Michelle Center (staff) and Laura Ross (committee member) said CalCPA currently asks firms to self-report structure and ownership information six months before a scheduled review and that CalCPA and the AICPA have tools to flag risk profiles. Smithy agreed there is not a centralized public list of voluntary resignations and offered to continue discussions with board staff on how to capture that information. "We don't track it, so we'd have to develop some mechanism to develop that," he said.
On APS, committee members reported that the AICPA had temporarily directed APS reviews to the National Peer Review Committee (NPRC) to standardize how elevated-risk structures are handled; members recommended updating presurvey questions and reviewer checklists so peer reviewers reliably identify APS and related independence concerns.
Staff and members agreed to reword draft recommendations for the annual report so monitoring language is not limited to a single state (Pennsylvania) and to add AICPA as a partner where appropriate. Staff will follow up with CalCPA and the AICPA about data availability and possible reporting mechanisms.
