Peer review: Advancing clarity and remote procedures

Hosted by Neil Amato

The AICPA Peer Review Board recently issued an exposure draft that includes proposed changes to AICPA standards for reporting on and performing peer reviews. Brad Coffey, CPA, an AICPA manager, explains more about the exposure draft and what the proposed changes are designed to accomplish.

Here are links to several resources covered in the conversation:

What you'll learn from this episode:

  • Details of the recent Peer Review Board exposure draft.
  • An explanation of the difference between system reviews and engagement reviews.
  • How the proposed standards address remote work as part of the peer review process.
  • How someone can become a peer reviewer.
  • How interested parties can comment on the exposure draft, and the deadline for such comments.
  • News on a recent proposal by the AICPA Professional Ethics Executive Committee that addresses SEC independence rules.

Play the episode below or read the edited transcript:

To comment on this podcast episode or to suggest an idea for another episode, contact Neil Amato, a JofA senior editor, at


Neil Amato: Welcome back to the Journal of Accountancy podcast. This is senior editor Neil Amato. On today's episode, we'll focus on a recent exposure draft issued by the AICPA Peer Review Board, what it aims to change, and why. That's coming up after this word from our sponsor.

Amato: Joining me now on the podcast is colleague Brad Coffey. Brad is a CPA and manager in the AICPA Peer Review Program. He's also a liaison to the standards task force of the Peer Review Board. Brad, the Peer Review Board issued an exposure draft a few weeks back that includes proposed changes to AICPA standards of performing and reporting on peer reviews. It seems that some changes were designed to enable more of a remote work setting around the peer review process. First, is that true, and then also can you describe the substantive changes that are being proposed?

Brad Coffey: Hi, Neil. Thanks for having me. First, to answer your question, yes. And, let me point out by saying that the general objective of the project was to make the standards easier to navigate, easier to read, understand, and apply, and where appropriate, modern technology that allows for remote work was considered in the development of the proposed changes.

To give you a little bit more, just some background information, now I'll quickly note that there are two types of peer reviews. There's a system review, which focuses on the system of quality control of the firm, and engagement reviews, which focus on the work performed on a selection of engagements. The explanatory memorandum of that exposure draft, it discusses changes that are being proposed that were considered to be the most significant by the board.

The extant peer review standards, they currently require a majority of procedures for a system review to be performed at the reviewed firm's office, and to your question, the exposure draft includes a proposed change that's intended to provide peer reviewers with the ability to determine the extent of system review procedures that will be performed at the reviewed firm's office based on an assessment of peer review risk.

Similar to that, there's also a proposed change that would remove the requirement for a reviewer to visit a "sufficient number of offices," I believe is the phrasing. This change is allowing for more procedures to be done remotely, similar to the assessment of peer review risk, as I just mentioned in the last point.

We have some other changes that are explained in the explanatory memorandum, one of which is changing or removing the requirement for surprise engagements. These selections are basically those that are withheld from the firm until shortly before the peer review begins. Again, that would be based on peer review risk. Another change would be to eliminate the term "significant deficiency" on engagement reviews. They'll simply be referred to as deficiencies moving forward because the selection process is more formulaic and the report rating is based on the number of deficiencies identified in the peer review rather than any judgment in determining the "significance" of them.

I'll come back around to just the overall approach. When the standards task force developed the clarified standards, they put a lot of work into identifying what was an actual requirement from the extant standards, and they also look for what would actually be an application type guidance, which is typically how a user might meet a given requirement under certain circumstances. I'll point out that an important component of this is feedback from the users of the standards. So we certainly welcome any feedback that the board may consider for any future changes that need to be made.

Amato: The show notes for this episode will have links for people who want to comment. The exposure draft appears to have changed how the standards are organized and presented. What's the reason for that and the expected result of those proposed changes?

Coffey: That's a great observation, and we hope this is a great change that is welcomed by all of the users. For a number of years, the AICPA staff and members of the Peer Review Board have received feedback continually that the standards are difficult to navigate. The proposed changes, the way that they're organized, it organizes the standards and the application guidance based on the intended user so that it's easier for various stakeholders in the peer review process to locate guidance that's relevant to them.

For example, the first section is a collection of common concepts applicable to all peer reviews and various users, so it's more generically named. But, as you proceed through the exposure draft, you'll see that there are sections afterwards that are developed with the end user in mind so like peer reviewers, reviewed firms, and these are also separated by the type of peer review, like I mentioned a minute ago, with having a system review or an engagement review. The requirements and the related application material are different, and they're organized in such a way that those users understand more specifically where they are in the standards and what is applicable to them.

In addition to that, we also have a section towards the end, it's the 400s through 430, and these are requirements and application material that are intended to be used by entities that administer the Peer Review Program. A lot of times this is done by local state societies or the National Peer Review Committee, which is at the AICPA administration level.

Amato: Broadly, can you talk about the Peer Review Program and the success it's having in enabling high quality audits?

Coffey: Sure thing. The Peer Review Program has been around for quite some time, since the 1980s, and its overall mission has been to serve as an educational and remedial process while it's serving as an integral part to the AICPA's Enhancing Audit Quality initiative. We're certainly seeing some great strides and improvement in the quality of audit and accounting services provided by enrolled firms, who quite frankly are adapting to change at a rapid pace while serving as trusted advisers to their clients. The spirit of continuous improvement is very apparent among a lot of the results that we're seeing in the enrolled firms.

Amato: Obviously, no program can succeed without quality people. I guess there's probably a need for more peer reviewers, and if so, what type of people are you looking for and how can they apply?

Coffey: You're absolutely right. The quality peer reviewers are what make the program effective, and firms often look to their peer reviewers for insight and guidance, and many peer reviewers have told us that it's a rewarding line of work because they're able to serve their peers, other CPA firms, and a process which facilitates knowledge sharing, collaboration, which in turn helps them improve the audit quality or accounting service quality of various engagements that are performed.

We have a section on the AICPA's website that covers qualifications in more detail, but I'll give you a brief overview of them. The peer reviewers generally perceived as an expert in their field, as I mentioned, and there are requirements for these individuals to be active in public practice at the supervisory level and accounting or auditing function of the firm. They need to be associated with a firm that has a "pass" report rating on its most recent peer review.

Other types of characteristics would be the current knowledge of professional peer review and the quality control standards, which would be applicable to the type of practice that would be reviewed, and there are CPE requirements and a number of years of experience in public practice that are also a component of the general, we'll call it the résumé. If an individual meets these requirements and they're interested in serving as a peer reviewer, they would just need to simply complete a résumé in our dedicated peer review system, which is called PRIMA or Peer Review Integrated Management Application. This is used by other peer reviewers and firms to locate peer reviewers, and it also allows them to input their résumés with applicable experience. This system also facilitates the administration process of peer reviews from beginning to end, so it's a very robust system and like the program itself, it's continuously improving.

Amato: Brad, this has been a great discussion on all things peer review today. Anything you'd like to add in closing?

Coffey: Well, let me circle back to the initial point I made. The exposure draft process has an important piece of it, which is feedback from the users. The exposure period at this point runs through Dec. 15, 2021, so we're asking folks to submit their comments about any proposed changes or recommendations they might make regarding the exposure draft by that day.

Amato: Thanks again to Brad Coffey. The Peer Review Board's exposure draft and comment information will be linked in the show notes for this episode.

In other news, the AICPA Professional Ethics Executive Committee issued a proposal that addresses provisions in the recently amended Securities and Exchange Commission independence rules. Public comments can be submitted through Jan. 5 at We will link to this article in the show notes.

A request to listeners, we ask that you subscribe, rate, and review wherever you listen to our show. Thank you for listening to the Journal of Accountancy podcast.