California Board of Accountancy

Common Reasons for Peer Review Failures


Beginning on January 1, 2010, all California-licensed accounting firms, including sole proprietorships, performing specified accounting and auditing services are required to undergo a peer review every three years.


As of October 1, 2012, the California Board of Accountancy (CBA) has received over 200 failed peer review reports from the American Institute of Certified Public Accountants' (AICPA) administering entities. Based on an analysis of the failed peer review reports, the CBA has compiled a list of the top nine reasons that firms were issued failed peer review reports.


Firm Policies

  1. The firm does not have monitoring procedures, or the procedures are not performed properly.
  2. The firm's quality control policies and procedures are not in compliance with professional standards.

Audits

  1. The firm did not prepare planning documents or complete the planning steps.
  2. The firm does not adequately perform audit procedures.

Reviews

  1. The accountant's report is not updated to current professional standards.
  2. The firm did not perform inquiry and analytical review procedures or have documentation.

Compilations

  1. The accountant's report is not updated to current professional standards.
  2. The firm did not prepare an engagement letter or the letter is not in compliance with professional standards.

Government Auditing Standards

  1. The firm does not adequately perform procedures as required by professional standards.

The above list was compiled to educate licensees to prevent future mistakes. Please keep in mind that the above list is not an official list of the AICPA.


The AICPA's Professional Standards are available at: http://www.aicpa.org/Research/Standards/Pages/default.aspx.


For more information about avoiding peer review pitfalls, visit http://www.dca.ca.gov/cba/licensee/pr_pitfalls.shtml.