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Peer Review: Auditing AA r j^by J. Michael Cook "In our opinion, the system of quality control that was in effect with respect to your United States audit practice (including coordination of your audit services with those performed outside the United States for your clients) during the year ended March 31,1977 provided reasonable assurance of conforming with generally accepted auditing standards." We take substantial pride in this excerpt from the report of Ernst & Ernst issued at the completion of the toughest test of our quality controls, their application and the people that make them work - a comprehensive review by our peers. Although the opinion confirms our own knowledge and the results of the comprehensive internal practice-review program that we have conducted for many years, we believe that this "audit" provides us, our clients and others who rely on our opinions on financial statements with a meaningful evaluation of the continuing quality of our professional services. This article describes briefly the background and recent developments of the peer-review program of the American Institute of Certified Public Accountants (AICPA) and the review of our audit practice conducted by Ernst & Ernst. Mike Cook, a partner in Executive Office, is the assistant to the managing partner. Mike was responsible for coordination of our peer review by Ernst & Ernst and has participated in the development of quality control and peer review standards by the American Institute of Certified Public Accountants. He was a member of the peer review committee appointed pursuant to the Securities and Exchange Commission's Accounting Series Release No. 173. The AICPA Peer Review Program Various peer review programs have been discussed in the AICPA for almost ten years. The genesis of the current program was the work of the Special Committee to Study Quality Review for Multioffice Firms which was appointed in January 1974. In April 1974 the Voluntary Program for Reviews of Quality Control Procedures of Multioffice Firms was adopted by the AICPA Board of Directors. However, in part because of disagreements concerning publication of the results of such reviews, none were conducted under this program. In connection with the work of the AICPA Committee on Self-Regulation, there was extensive discussion of the peer review program at the AICPA Council meetings in May and October 1975 and at the 1975-76 Member Forums and Winter Regional Council meetings. In view of the interest in the peer review program expressed by the Securities and Exchange Commission (SEC), firms with SEC practices believed that the voluntary program should be implemented promptly; other firms believed that more time should be devoted to studying the implications of the program. Consequently, a discussion document on a Voluntary Quality Control Review Program for CPA Firms With SEC Practices was issued for comment in February 1976. The program was approved by the AICPA Council in May 1976. At the same time, the Council instructed the Committee on Self-Regulation to develop a peer review program for firms without SEC clients. The results of these efforts were incorporated into a combined Voluntary Quality Control Program for CPA Firms, which was adopted in October 1976. Two committees were appointed to implement the program. The Special Committee on Proposed Standards for Quality Control Policies and Procedures was formed to provide guidance on the quality control policies and procedures that would be appropriate for participating firms and to develop guidelines for conducting and reporting on reviews. The Quality Control Review Committee, chaired by DH&S partner Hal Robinson, was charged with developing administrative procedures necessary to implement and operate the program. While these committees were working diligently on their respective assignments, a major change in the program took place in 1977. At the AICPA Council Meeting in September, the AICPA Division for CPA Firms was established with an SEC Practice Section and a Private Companies Practice Section. One of the requirements for membership in each Section is mandatory peer 20
Peer review: Auditing the auditors
Cook, J. Michael
Auditing -- Standards -- United States -- Evaluation
Cook, J. Michael
Robinson, Haldon G.
Chetkovich, Michael N.
Stringer, Kenneth W.
Neary, Robert D.
Reiss, Harry F.
Neebes, Donald L.
Albers, Wayne J.
DeBrunner, Gerald J.
Walworth, Charles A.
Haskins & Sells. Executive Office
|Abstract||Illustrations not included in the Web version.|
DH&S Reports, Vol. 15, (1978 summer), p. 20-23
|Source||Originally published by: Deloitte, Haskins & Sells|
|Rights||Copyright and permission to republish held by: Deloitte|
|Format||PDF page image with corrected OCR scanned at 400 dpi|
|Collection||Deloitte Digital Collection|
|Digital Publisher||University of Mississippi Library. Accounting Collection|