PEER REVIEW PROCESS
The following is a detailed description of the peer review process and its scope as appended by our peer reviewers to their report:
Description of the Peer Review Process
Overview
Firms enrolled in the AICPA Center for Public Company Audit Firms (the Center) Peer Review Program must have their system of quality control periodically reviewed by independent peers. These reviews are system and compliance oriented with the objectives of evaluating whether:
• The reviewed firm’s system of quality control for its accounting and auditing practice applicable to non-SEC issuers has been designed to meet the requirements of the Quality Control Standards established by the AICPA.
• The reviewed firm’s quality control policies and procedures applicable to non-SEC issuers were being complied with to provide the firm with reasonable assurance of complying with professional standards.
A peer review is based on selective tests and directed at assessing whether the design of and compliance with the firm’s system of quality control for its accounting and auditing practice applicable to non-SEC issuers provides the firm with reasonable, not absolute, assurance of complying with professional standards. Consequently a peer review on the firm’s system of quality control is not intended to, and does not, provide assurance with respect to any individual engagement conducted by the firm or that none of the financial statements audited by the firm should be restated.
The Center’s Peer Review Committee (PRC) establishes and maintains peer review tandards. At regular meetings and through report evaluation task forces, the PRC considers each peer review, evaluates the reviewer’s competence and performance, and examines every report, letter of comments, and accompanying response from the reviewed firm that states its corrective action plan before the peer review is finalized. The Center’s staff plays a key role in overseeing the performance of peer reviews working closely with the peer review teams and the PRC. Once the PRC accepts the peer review reports, letters of comments, and reviewed firms’ responses, these documents are maintained in a file available to the public. In some situations, the public file also includes a signed undertaking by the firm agreeing to specific follow-up action requested by the PRC.
Firms that perform audits or play a substantial role in the audit of one or more SEC issuers, as defined by the Public Company Accounting Oversight Board (PCAOB), are required to be registered with and have their accounting and auditing practice applicable to SEC issuers inspected by the PCAOB. Therefore, we did not review the firm’s auditing practice applicable to SEC issuers.
Planning the Review for the Firm’s Accounting and Auditing Practice Applicable to Non- SEC Issuers
To plan the review of Piercy Bowler Taylor & Kern, CPAs and Business Advisors, we obtained an understanding of (1) the nature and extent of the firm’s accounting and auditing practice, and (2) the design of the firm’s system of quality control sufficient to assess the inherent and control risks implicit in its practice. Inherent risks were assessed by obtaining an understanding of the firm’s practice, such as the industries of its clients and other factors of complexity in serving those clients, and the organization of the firm’s personnel. Control risks were assessed by obtaining an understanding of the design of the firm’s system of quality control, including its audit methodology, and monitoring procedures. Assessing control risk is the process of evaluating the effectiveness of the reviewed firm’s quality control system in preventing the performance of engagements that do not comply with professional standards.
Performing the Review for the Firm’s Accounting and Auditing Practice Applicable to Non-SEC Issuers
Based on our assessment of the combined level of inherent and control risks, we identified selected engagements performed by the firm to test for compliance with the firm’s system of quality control. The engagements selected for review included engagements performed under the Government Auditing Standards and audits of Employee Benefit Plans. The engagements selected for review represented a cross-section of the firm’s accounting and auditing practice with emphasis on higher-risk engagements. The engagement reviews included examining working paper files and reports and interviewing engagement personnel.
The scope of the peer review also included examining selected administrative and personnel files to determine compliance with the firm’s policies and procedures for the elements of quality control pertaining to independence, integrity, and objectivity; personnel management; and acceptance and continuance of clients and engagements. Prior to concluding the review, we reassessed the adequacy of scope and conducted a meeting with firm management to discuss our findings and recommendations.
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