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PROC presses staff on tracking firms that leave peer review and on oversight of alternative practice structures
Summary
The PROC debated whether the CBA can identify firms that resign from peer review but later perform attest work, discussed AICPA’s temporary centralization of alternative practice-structure reviews with the NPRC, and recommended staff pursue data-sharing options with administering entities.
The California Board of Accountancy’s Peer Review Oversight Committee (PROC) spent substantial time on Dec. 12 reviewing a draft annual report section that recommends improving oversight of firms that leave — and later rejoin — the peer review program and on how to identify firms operating in alternative practice structures (APS).
Committee members and staff raised a recurring concern: a firm that resigns from the peer review program and later conducts attest (A&A) engagements may evade timely oversight if the board cannot identify unenrolled firms. Chair Fausto Hinojosa said that a firm performing attest work while unenrolled “would be in violation of board of the council's rules.” CalCPA’s peer review director (Rich) said administrators remind firms of their obligations when they notify the administrator that they are unenrolling and that the administering entity typically adjusts reporting dates to capture prior engagements when necessary.
Michelle Center, CBA staff, described draft annual-report recommendations the PROC is considering: (1) examine the peer-review population and reviewer capacity; (2) continue monitoring administering-entity relationships (the draft singled out Pennsylvania because of its assistance to CalCPA, but staff proposed rewording to make it clear other states are monitored as appropriate); (3) track and understand how APS may affect peer-review risk and whether peer-review intake and presurveys should better identify APS; and (4) explore whether the CBA can receive information about firms that resign from peer review so staff can notify firms and monitor reenrollment.
AICPA and CalCPA representatives explained current practice: firms self-report participation and provide presurvey information about firm structure and ownership roughly six months before a scheduled peer review; if firms restart attest work they generally must notify the administering entity within about 90–120 days, and firms have up to 18 months from their first attest engagement to obtain a peer review. The AICPA told PROC that because APS were an emerging, elevated-risk area, the AICPA temporarily centralized reviews of APS through the National Peer Review Committee (NPRC) to promote consistency while tools and checklists are developed.
Members debated whether the PROC should recommend the CBA ask CalCPA and the AICPA for data extracts (for example, lists of unenrolled or voluntarily removed firms) and whether the board has authority or practical mechanisms to receive and use that information. Staff said some of the requested data may not currently be available in a coded format but agreed to open conversations with administering entities and the AICPA to determine feasibility.
The PROC asked staff to redraft recommendations to (a) clarify monitoring is not limited to a single state, (b) include the AICPA where appropriate, and (c) consider how to identify APS through presurvey questions and reviewer checklists. The committee will review the revised draft at its February meeting.
