2011 Special Session for Technical Reviewers

Transcription

1 2011 Special Session for Technical Reviewers Paul Brown, CPA Marcia Hein, CPA Heather Reimann, CPA Paul Brown, CPA Paul Brown joined the FICPA in November 1992 and is the Director of Technical Services for the Florida Institute of CPAs (FICPA). One of Paul s main duties is to serve as the technical reviewer in Florida for the American Institute of Certified Public Accountants (AICPA). The program administers approximately 450 reviews annually in Florida and oversees approximately 125 peer reviewers. Paul also assists members in the areas of professional ethics and professional standards. As part of his role in the peer review program Paul has previously been an instructor and author of continuing education programs for the AICPA and FICPA, for which he had received several outstanding discussion leader and author awards. Paul has also served on the AICPA s Technical Reviewers Advisory Task Force to the Peer Review Board and serves as staff liaison to two committees and one section of the FICPA. Prior to joining the FICPA, Paul was an audit manager with the regional firm of Williams, Cox, Weidner & Cox (now Carr, Riggs & Ingram) in Tallahassee, Florida. Paul holds a Bachelor of Science degree in accounting and finance from Florida State University and has been licensed as a CPA since Marcia Hein, CPA Marcia Hein has over 25 years experience in accounting and auditing with a special emphasis in SEC reporting for small registrants. Since moving to Fort Collins, Colorado her practice consists of accounting and auditing work for small business clients, including accounting assistance to two publicly held companies. In addition, Marcia has been involved in the peer review process since the late eighties. She is a former member of the SECPS Peer Review Committee and California s Peer Review Committee and a current member of Colorado s Peer Review Committee. Marcia added technical reviewer to her resume in

2 Heather Reimann, CPA Heather is presently Manager - Professional & Technical Standards for the Pennsylvania Institute of CPA s (PICPA) where she is responsible for performing technical reviews for the AICPA s in Pennsylvania, Delaware, and the Virgin Islands. Heather has been in the profession for over thirteen years between public accounting, industry and over two years with PICPA. Her industry experience includes five years with multichannel specialty apparel retailer Charming Shoppes, Inc., in Bensalem, PA., where she held positions in their accounting and FP&A groups. Her public accounting experience was with Arthur Andersen, LLP, where she worked in their assurance group as an experienced senior auditor. Her client experience includes not-for-profit, small manufacturing and other serviceoriented entities. Heather is a graduate of Bucknell University in Lewisburg, PA and holds a BS degree in business administration with a concentration in accounting. She is a member of the Pennsylvania Institute of Certified Public Accountants and the American Institute of Certified Public Accountants. She is a native of the Philadelphia area and enjoys running in local road races. 4 Objectives of the Session Teach and inform technical reviewers Confirm existing knowledge Promote interaction and discussion Promote consistency in the PRP 5 Topics of Discussion Technical Reviewer s Role A-133 Engagement Acceptance Process SSARS 19 Issues Evaluation of Peer Review Documents Engagements Not Performed/Reported in Conformity with Applicable Professional Standards in All Material Respects Corrective Actions and Implementation Plans Proposed Revisions to FFC/IP Guidance 6 2

3 Topics of Discussion Peer Reviewer Performance Proposed Reviewer Performance Guidance New Team and Review Captain Training Options Areas of Focus for Upcoming Year 7 Technical Reviewer s Role RAB Handbook indicates the Technical Reviewer s responsibilities are: Anticipate RAB s questions Advise RAB of significant matters that may not be apparent from review documents Deal with evident problems before review is sent to RAB Recommend corrective actions and implementation plans Provide reviewer feedback recommendation Perform oversight when requested 8 Technical Reviewer s Role Other Technical Reviewer Responsibilities: Ensure materials are coherent Use technical reviewer s notes to clarify any issues Convey RAB s thoughts to the reviewer 9 3

4 A-133 Engagement Acceptance Process Common Errors on the Engagement Profile- Single Audit Data Sheet Threshold for Type A major program determination should be >= $300,000 (3% if total fed < $100mil; $3mil or.3% if total fed < $10 billion; etc.) - See Part A checklist Question SA Red flag- $500,000 single audit threshold, not major program To meet low risk auditee criteria- all questions should be Yes Data Collection Form from prior year not filed; CANNOT be lowrisk auditee % of coverage requirement for low-risk auditee is >=25% - Actual tested % should be used at top of form - Required (not actual) $ coverage based on required coverage % should be used at bottom of form 10 A-133 Engagement Profile Single Audit Data (from final audited financials): Total amount of federal assistance expended $ 1,266,428 Threshold for Type A programs $ 300,000 Were any large loan or loan guarantees excluded in determining Type A programs? N/A Yes No % of total federal assistance expended that was tested as major programs 49.36% Was auditee considered high risk? or low risk? If the auditee is considered low risk, did they meet the following for each of the two preceding years? N/A Single Audits performed? Yes No Unqualified opinions? Yes No No material weaknesses in internal control over financial reporting? No findings in Type A programs from any of the following: Material weaknesses in internal control? Material noncompliance? Known or likely questioned costs > 5% of expenditures for that Type A program? Yes No Yes No Yes No Yes No Dollar amount required to audit to meet % of coverage for above $ 316,307 If applicable did auditor use the first year audit exception and deviate from the risk based approach? N/A Yes No This amount should include pass through federal assistance received indirectly from another state or local government. 11 A-133 Engagement Acceptance Process Common Errors on the Single Audit/A-133 Major Program Determination Worksheet Improperly clustered programs; same CFDA #s not consolidated Direct State funds Last year audited as major should be a YEAR; not Yes/No Math errors Non-existent CFDA #s and programs - Ex: School district audits - CFDA # School Food Commodities Program no longer exists separately (since 2009); should be included in Child Nutrition Cluster Consider using Federal Audit Clearinghouse mit=go+to+database 12 4

5 Single Audit/A-133 Major Program Determination Worksheet 13 A-133 Engagement Acceptance Process Reviewer Performance Bring all inconsistencies on Engagement Profiles and Single Audit Determination Worksheet to attention of reviewer Does the Part A information agree with Profile/Worksheet? If error potentially impacts peer review results (incorrect major program determination) - reviewer should address impact; suggest Reviewer Feedback Not including prior year information should not hold up a review if there are no low risk programs; suggest Reviewer Feedback 14 SSARS 19 Issues Increase in deficiencies on Engagement Reviews identified with the new SSARS standards Refer to PRP Engagement Reviews No change to the engagement selection criteria in the standards for Engagement or System Reviews Many issues with SSARS 19 adoption Firm may elect to have an accelerated review for pass with deficiencies/fail reports 15 5

6 Based on the peer review documentation, can you reach the same conclusions as the reviewer? 16 Evaluation of Peer Review Documents Risk Assessment Did they actually discuss the system of quality control? If there are multiple offices, did they discuss how the system of quality control is applied to the different offices? Did they discuss inherent risk factors, such as client base? Does firm have clients with foreign operations? (New SRM Question) Audit hours to total accounting and auditing hours Major and initial engagements CPE Policies and Library Monitoring Policies If firms have large high risk practice, can peer review risk be low? 17 Evaluation of Peer Review Documents Risk Assessment- Quality Control Materials (QCM) SRM Question IIG. about third party practice aids: Describe the key elements of the system of quality control that reside outside the firm such as third party developed practice aids, and other structures and arrangements that affect the firm s system of quality control for its accounting and auditing practice. Internally developed materials? Splintered use of QCM (third party + internally developed) Independent peer review of QCM? Have you properly assessed the reviewed firm s QCM? Interpretation No. 42-2: If the QCM used by the firm were not peer reviewed, the firm s peer reviewer must evaluate whether they were suitably designed 18 6

7 Evaluation of Peer Review Documents Engagement Selection Did the firm have high risk engagements on their background form? Did the reviewer address them? Did the reviewer only choose must-selects? Why? For reviews with multiple types of ERISA engagements, did the reviewer document why they chose only 1 type? Reviewer should document why they chose a particular type of engagement. Risk based? 10% concentration the only justification? Reviewers should document why they chose certain types of engagements over others If not properly documented, could lead to reviewer feedback Technical reviewers do not have the authority to make a reviewer choose additional engagements 19 Evaluation of Peer Review Documents MFC/FFC Is it written clearly? Is the issue readily determinable? Did they combine too many no answers on one MFC? Did they use vague terms? If it was noted on more than one engagement and not taken to an FFC, did the reviewer explain why? Consolidate MFC s to one FFC, are they related? Properly evaluating/documenting systemic cause in System Review? 20 Evaluation of Peer Review Documents Documentation of Systemic Cause It is imperative that the proper systemic cause is identified Do not stop until you are satisfied that the proper cause has been identified Get the reviewer on the phone to discuss Confirm major points via if necessary (helps with nonresponse letters) Make suggestions Consider involving the RAB when necessary Is the reviewer using a canned / catch-all cause repeatedly and inappropriately? Suggest committee issue Reviewer Feedback 21 7

8 Engagements Not Performed/Reported in Conformity with Applicable Professional Standards in All Material Respects Engagement Statistics Data Sheet Summarizes engagements and identifies those not performed in conformity with applicable professional standards in all material respects Engagement Reviews Engagements identified are associated with deficiencies in the peer review report System Reviews Engagements identified may or may not lead to deficiencies in the peer review report 22 Engagements Not Performed/Reported in Conformity with Applicable Professional Standards in All Material Respects What responsibilities does the team/review captain have in regard to engagements that are identified as not being performed and/or reported in conformity with applicable professional standards in all material respects? Inform firm /Document on MFC Form Document firm s considerations of AU 561, SSARS 19 or and AU 390 for recall/re-issuance of financial statements Evaluate and document firm s actions/planned actions Do NOT instruct firms to recall/reissue Consider the impact on peer review report (Reference Source: Standard par. 67 and.109 and Interpretation No. 67-1) 23 Corrective Actions and Implementation Plans Should be in accordance with guidance- suggested actions RAB Handbook Chapter 4 - System Reviews RAB Handbook Chapter 5 - Engagement Reviews Should be completed as soon as reasonably possible Authority granted to Technical Reviewer by Committee? Review information submitted by firm Issue extended/continuation follow up action letters when necessary Follow Waiver/Replacement Guidance (RAB Handbook Ch. 6) 24 8

9 Corrective Actions and Implementation Plans Corrective Actions Deficiencies in Report May have 3 rd party involvement Review accepted when firm signs acceptance letter agreeing to action; Review completed when firm complies with action Non-cooperation can lead to reviewed firm termination Implementation Plans Findings on FFC Forms No 3 rd party involvement No impact on acceptance or completion of peer review Non-cooperation can lead to reviewed firm termination 25 Appropriateness of Implementation Plans Implementation Plans are not required for every FFC with repeat findings Consider requesting a revised FFC form (reviewer recommendation or firm response) Implementation Plan Task Force 26 Proposed Revisions to FFC Forms and Implementation Plans (IP) Guidance Current Implementation Plan guidance clarifications IPs should not be used to correct a finding communicated on FFC that should be a deficiency in the report IPs should not be used as a 4 th level of reporting TR/RABs should consider the severity of the IP they believe is necessary and determine whether the finding should be a deficiency instead If not a deficiency, the reviewed firm s response should be considered in determining whether the firm can address the finding on their own or whether RAB involvement is needed. 27 9

10 Proposed Revised Guidance for FFC Forms Proposed Revised Guidance for FFC Forms Reviewed firm s responses should be comprehensive, genuine, and feasible. FFC should be returned if it s not. Guidance and the FFC form will be revised to require the following information: - Check the box Yes or No does the firm agree with the finding and will it implement the reviewer s recommendation? - The reviewed firm should document: - How they intend to implement the reviewer s recommendation (or alternative plan if the firm does not agree with the recommendation) - The person(s) responsible for the implementation - The timing of the implementation - If applicable, additional procedures to ensure the finding is not repeated in the future. 28 Proposed Revised Guidance for Implementation Plans Engagement Reviews Finding Allowable plan(s) to be performed as soon as possible Repeat findings Require members of the firm to take specified types and amounts of CPE Require firm to submit monitoring or inspection report to the RAB Failure to possess applicable firm license(s) Submit proof of valid firm license(s) 29 Proposed Revised Guidance for Implementation Plans System Reviews Finding Engagements not performed or reported on in accordance with professional standards in all material respects Initial or repeat finding on must select industry Repeat finding on other industries Allowable plan(s) to be performed as soon as possible Require the firm to hire an outside party acceptable to the RAB to perform preissuance or post issuance reviews of certain types or portions of engagements focusing on the areas identified in the finding Require the firm to hire and submit the firm s internal monitoring or inspection report to an outside party acceptable to the RAB Repeat Findings Require members of the firm to take specified types and amounts of CPE Require firm to submit monitoring or inspection report to the RAB Failure to Possess Applicable Firm License(s) Submit proof of valid firm license(s) 30 10

11 Peer Reviewer Performance Reviewer Feedback Reviewer Feedback Form must be signed by a peer review committee member (not technical reviewer) Needed to document the reviewer s performance Needed to support issuance of deficiency letters Feedback should be constructive and educational Common Feedback: Incomplete/inappropriate risk assessment & engagement selection Improper disposition of matters, findings, deficiencies (including systemic cause) Overall poor documentation/incomplete working papers Late submission of documents 31 Peer Reviewer Performance Reviewers must be treated fairly Ordinarily, reviewer performance deficiencies should be initially documented as reviewer feedback If significant performance issues are noted during an oversight or during technical review, AE can issue deficiency letter one or two (rarely) Reviewers that are deemed as not cooperating with the committee and/or board may have their ability to perform peer reviews suspended, restricted, or limited based on the completion of some action(s), as determined by the committee and/or board. 32 Proposed Reviewer Performance Guidance RAB Handbook Chapter 8 Administrative procedures will be streamlined Applies to team captain, review captain, team member, QCM reviewer, technical reviewer, and committee or RAB member Overview of proposed changes Fair procedures under various scenarios Committee considerations for reviews in various stages Allows reviewers and AEs an appeal process Peer Review Board Rules of Procedures for Reviewers 33 11

12 Proposed Reviewer Performance Guidance Failing to meet and maintain reviewer qualifications Ineligible to schedule or perform reviews in any jurisdiction Failing to Perform in a Timely and Professional Manner Includes failing to submit peer review workpapers, respond/resolve technical reviewer/rab questions, revisions AE can suspend reviewer in states administered by that AE Pervasive suspensions may lead to national suspension Peer Review Board Rules of Procedures Committee considerations for reviews in different stages 34 Proposed Reviewer Performance Guidance Pattern of poor performance, serious weakness, multiple suspensions, and egregious performance matters Reviewer feedback Performance Monitoring Letter Performance Deficiency Letter Egregious performance defined and dealt with on a case by case basis 35 Team and Review Captain Training Options New training options available in 2012 Restructured How To course: Day 1 - Theory; Day - 2 Practical Application Practical application Mentoring option: Significant performance on a System Review mentored by qualified/ approved team captain Proposed training options available in 2013 Self-study option for Theory portion of How To course Competency testing option for Theory portion of How To course Separate Engagement Review course Continuing ed.: 2 hour webcasts (cumulative 8 hrs over 3 yrs) 36 12

13 Peer Review Mentoring- New Team Captain Qualifications Option Benefits: Improved quality, succession planning, reviewer pool Approval of mentors begins in Fall 2011 for 2012 Mentor and new team captain approved by AICPA Staff Mentor Qualifications Team captain qualified in good standing Past performance Other Considerations: - Number and level of involvement on peer reviews performed as team captain in past 3 years - Feedback/recommendation from administering entities 37 Peer Review Mentoring - New Team Captain Qualifications Option Mentor Responsibilities Submit application to become a mentor Opt in consent for publication of name on peer review website if approved as mentor Mentor role: - Team member acts in the role of a team captain in-training (minimum 1 System Review) - Mentor verifies that team member performed tasks outlined on Team Member Participation Checklist - Mentor provides an overall assessment - Team Member Participation Checklist goes to the RAB considering the related peer review - RAB provides AICPA Staff with any relevant comments about review or team member s performance 38 Technical Reviewer Focus Areas of focus for the coming year Reconciliation of firm s background information Risk assessments Assessment of QCM materials and practice aids Engagement selection: Proper cross section and reasoning Documentation of systemic cause Ensure firms are responsive to Findings and Deficiencies Non-compliance with SSARS 19 Evaluation of Engagement Profile and Part A Checklist for Single Audits Suggest Reviewer Feedback when warranted 39 13

14 Questions? 40 14