DLLR's Division of Occupational and Professional Licensing

 

What You Need to Know About Peer Review Volume 1 - Maryland Board of Public Accountancy

 

Legislation requires a CPA or CPA Firm that provides audit/attest services and certain compilation and review services to undergo peer review. Below is the first in a series of Frequently Asked Questions about peer review:

 
  1. What is a peer review?
  2. Who is required to have a peer review?
  3. I have been providing services that require me to undergo a peer review.  When must I report it to the Board?
  4. When is an engagement review required under the Board's peer review program?
  5. When is a system review required under the Board's peer review program?
  6. How often is a peer review required under the Board's peer review program?
  7. Where do I find someone to perform my peer review?
  8. In order to report my peer review on time, when should I schedule it?
  9. What standards are used to perform a peer review?
  10. How will I report my peer review?
  11. Is it true that I can report the same peer review on two consecutive renewals?
  12. If I receive an adverse or second modified peer review, what happens?
  13. I do not perform audits, reviews or compilations now, but I will in the future, When will I have to report my peer review to the Board?
 

What is a peer review?
Under Maryland law, a peer review, also referred to as a quality review, is a study, appraisal or review, by an individual authorized by the Board to perform such a review, of one or more aspects of the professional work of an individual licensed by the Board as a CPA, or firm having a permit issued by the Board. It can take the form of a system review, an engagement review, and or a report review.

Who is required to have a peer review?
Peer Reviews are required of individuals who are licensed as CPAs or authorized firms that provide compilation, review, or audit/attest services as of October 1, 2005. If you perform audit or attest services governed by standards issued by the American Institute of Certified Public Accountants or the Government Accounting Office; or reviews and certain compilations governed by standards issued by the AICPA, you must have a peer review. Firms that only perform compilations under SSARS 8, which are exempt from the reporting requirements of SSARS and are not distributed to third parties, are not required to have a peer review.

I have been providing services that require me to undergo a peer review. When must I report it to the Board?
If you are currently performing services defined by the law as requiring a peer review, you will have to report the final acceptance date of your most recent peer review with your first license renewal. The final acceptance of the most recent peer review cannot be older than three years from the date that you renew your license.

When is an engagement review required under the Board's peer review program?
An engagement review is required when a licensee or permit holder not required to have a system review performs engagements in accordance with the Statements on Standards for Accounting and Review Services (SSARS) of the American Institute of Certified Public Accountants or review or compilation engagements in accordance with the Statements on Standards for Attestation Engagements (SAEES) of the American Institute of Certified Public Accountants.

When is a system review required under the Board's peer review program?
A system review is required when a licensee or permit holder performs any of the following services:

  1. engagements governed by the Statements on Auditing Standards (SASs) of the American Institute of Certified Public Accountants, or Government Auditing Standards (SAAEEs) issued by the U. S. Government Accountability Office; or
     
  2. examinations of prospective financial information under the Statements on Standards for Attestation Engagements of the American Institute of Certified Public Accountants.

How often is a peer review required under the Board's peer review program?
Any individual or firm who provides compilation, review, or audit services must have a peer review within three years after October 1, 2005 and every three years thereafter.

Where do I go to find someone to perform my peer review?
There are too many reviewers in Maryland as well as neighboring states for the Board to list. Also, not every reviewer may be qualified to perform your review due to differences in your respective areas of practice. Most state CPA societies or associations provide a directory of firms interested in performing peer reviews. You may also want to contact fellow practitioners to obtain references on potential reviewers. Check approved peer review programs.

In order to report my peer review on time, when should I schedule it?
You should make arrangements to schedule a peer review at least 15 months before your license renewal date to ensure its completion in time to report it to the Board.

What standards are used to perform a peer review?
The standards for performing and reporting peer reviews as established by the American Institute of Certified Public Accountants (AICPA) currently in effect are used to perform peer reviews.

How will I report my peer review?
When you renew your license, beginning October 1, 2008, you will be asked to report the date of the acceptance letter of your most recent peer review, and which person or firm conducted the peer review. You will not be asked to disclose the details of your peer review.

Is it true that I can report the same peer review on two consecutive renewals?
It all depends on the completion date of your peer review. You will be required to report your most recent peer review when you renew your license or permit. Because you are required to obtain a peer review every three years and licenses/permits are renewed every two years there will, inevitably, be some overlapping. For example, your license renewal date is November 1, 2010. Your most recent peer review was completed on June 30, 2010. You can report the June 30, 2010 peer review when you renew on November 1, 2010 and when you renew on November 1, 2012. You will have to report a new peer review when you renew on November 1, 2014.

If I receive an adverse or second modified peer review, what happens?
An "adverse" report is a report of a peer reviewer that indicates pervasive significant deficiencies in the system of quality control or compliance with professional standards by the individual or firm being reviewed. A "modified" report is a report by a peer reviewer that indicates a significant deficiency in the system of quality control or compliance with professional standards in the individual or firm being reviewed. If you receive an adverse report or a second modified report, the peer reviewer is required to furnish a copy of the peer review to the Board. Also, a peer review program is required to forward an initial "modified" report in circumstances where the firm or person being reviewed fails to complete corrective action in a timely manner.

The Board, in these cases, will review the reports and determine if any corrective or disciplinary action is warranted in addition to the corrective actions required by the peer review program. The Maryland peer review program is based on the principle that a systematic monitoring and educational process is the most effective way to attain high-quality performance. It is expected that most deficiencies will be addressed and corrected through enhanced educational processes. In some cases, the Board may require the individual or firm to undergo a peer review more frequently than every three years or complete continuing professional education (CPE) in addition to the 80 hours of CPE required to be reported for renewal of license. If the peer review indicates a violation of the Maryland Public Accountancy Act or regulations, including but not limited to a failure to cooperate and correct material deficiencies, the Board may file formal charges against the licensee or permit holder. If, after a hearing, the Board determines that charges are supported, the Board may impose a reprimand, suspension or revocation and/or a civil penalty not to exceed $5,000.

I do not perform audits, reviews or compilations now, but I will in the future, When will I have to report my peer review to the Board?
You will be required to report completion of peer review within three years from the date you initiated a service that warrants a peer review. The exact timing depends upon the renewal period of your license.