Peer Review Update

Critical Information For All Missouri CPA Firms!

Beginning in 2008, All CPA Firms That Provide Attest, Review, Or Compilation Services Must Be Enrolled in Peer Review!

Background

Under the statutes and rules of the Missouri Accountancy Act, which officially became law in August 2001, a number of laws related to the practice of accounting changed.

The provisions of the Missouri Accountancy Act are almost entirely that of the Uniform Accountancy Act, which is a model bill that has been passed in whole or in part by more than 40 states. The Uniform Accountancy Act was written by the American Institute of Certified Public Accountants (AICPA) and the National Association of State Boards of Accountancy (NASBA) to create uniformity among state accountancy laws, as well as bring them in line with current practice.

Many firms are unaware of the critical provisions related to peer review and licensure of their firms!

Missouri Accountancy Law--Peer Review

If your firm performs three or more attest services (audits or examination of prospective financial statements), it is required to undergo a peer review every three years pursuant to AICPA standards.

If your firm is currently enrolled in an AICPA Peer Review Program, it will satisfy the peer review requirement.

Firms that perform fewer than three attest services during a calendar year are exempt from peer review requirements until 2008.

Firms may provide reviews and compilations (no limit) and remain exempt from the peer review requirements until 2008.

In 2008, peer review will become a requirement for all firms that provide attest, review, or compilation services.

Rules For The Missouri Accountancy Act

After the Missouri Accountancy Act became law in August 2001, the Missouri State Board of Accountancy worked to write the rules to enforce the new law. As always, implementation of a law involves changing rules and regulations and changing policy. The preparation of the rules and regulations for actual enforcement is called promulgation.

The promulgated rules and regulations for the Missouri UAA were officially approved by the state of Missouri on July 31, 2004.

The rules have been written into five chapters—each of which address key provisions of the law. All five chapters can be reviewed in their entirety on the Missouri State Board of Accountancy’s website at: http://www.sos.mo.gov/adrules/csr/current/4csr/4csr.asp#
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Chapter 5—Peer Review

The fifth chapter clarifies the rules related to peer review as a condition for renewal of a firm license.

Standards: The AICPA Standards for Performing and Reporting on Peer Reviews will serve as the approved standards of Missouri’s peer review process.

Who Needs Peer Review?: Effective January 1, 2004, any firm seeking renewal of its permit to practice public accounting which engages in three attest services in any calendar year is required to comply with the peer review requirements for firm permit renewal. Effective January 1, 2008, any firm that engages to perform a single compilation will be required to comply with the peer review requirements.

Competency: Firms must verify that any CPA who is responsible for signing attest or review reports on behalf of the firm has met the competency requirements (as detailed in the promulgated rules of Chapter 2, Section 061) of firm licensure.

Peer Reviewers: Any CPA who responsible for signing peer review reports must hold a valid and active CPA license.

Multiple-Office Firms: The resident manager of each office located in Missouri or out of state must verify compliance with the same quality control policies and procedures of the office that has undergone peer review.

Administration: The MSCPA or another AICPA-approved peer review provider may serve as the administrative entity for peer review for Missouri firms.

Oversight: A Peer Review Oversight Board (PROB) has been appointed to assess the quality of peer review programs accepted by the Missouri State Board of Accountancy and provide a listing of firms that have participated in a peer review program that is deemed satisfactory to the Board. The PROB consists of five members, all of whom are Missouri licensed CPAs.

Peer Review Transparency

In 2004, the AICPA initiated a program to work toward the increased transparency of peer reviews. The AICPA recommends increased transparency, as it has always been a core principle of the CPA profession as it relates to clients’ information.

The AICPA is focusing on two approaches that would lead to greater transparency. The first provides the public online access to selected peer review information, such as the report, letters of comments and response. The second would only allow state boards of accountancy to access peer review information.

Missouri’s accountancy law currently maintains the confidentiality of all peer review information—prohibiting it from both the public and Missouri State Board of Accountancy.

The Missouri accountancy statute states:

"(1) Shall include reasonable provision for compliance by a firm showing that it has within the preceding three years undergone a peer review that is a satisfactory equivalent to peer review generally required pursuant to this subsection;

(2) May require, with respect to peer reviews, that peer reviews be subject to oversight by an oversight body established or sanctioned by board rule, which shall periodically report to the board on the effectiveness of the review program under its charge and provide to the board a listing of firms that have participated in a peer review program that is satisfactory to the board; and

(3) Shall require, with respect to peer reviews, that the peer review processes be operated and documents maintained in a manner designed to preserve confidentiality, and that the board or any third party other than the oversight body shall not have access to documents furnished or generated in the course of the peer review of the firm except as provided in subdivision (2) of this subsection."

To read the full Missouri statute, go to:

http://www.moga.mo.gov/statutes/C300-399/3260000295.HTM

The Missouri State Board of Accountancy reports that they have no intention of changing this law. They report that peer reviews of Missouri CPA firms will remain confidential.

MSCPA is committed to keeping their members informed of the peer review transparency movement and will continue to work toward maintaining the best interests of its members and the profession in Missouri.

How MSCPA Can Help CPA Firms Comply With Peer Review Laws

Throughout 2007, MSCPA will hold two-hour educational courses on the peer review process. These courses will qualify for the CPA ethics requirement. Check the MSCPA website in late 2006 for times and locations.

In addition, the MSCPA and Missouri State Board of Accountancy have agreed to hold town hall meetings about peer review and detail what is expected from firms. Dates for these events will be in 2007. Check the MSCPA website in late 2006 for further details.

Finally, MSCPA will be focusing its firm outreach efforts in communicating these upcoming provisions to all Missouri CPA firms and helping them enroll and get acclimated to the peer review process.

Questions?

Feel free to contact either organization with your questions regarding peer review and the Missouri Accountancy Act.

Missouri Society of CPAs
540 Maryville Centre Drive, Suite 200
St. Louis, MO 63141
314/997-7966
800/264-7966
fax: 314/997-2592
web: www.mocpa.org
email:member@mocpa.org

Missouri State Board of Accountancy
3605 Missouri Boulevard
P.O. Box 613
Jefferson City, MO 65102-0613
573/751-0012
fax: 573/751-0890
web: http://www.pr.mo.gov/accountancy.asp
email: mosba@pr.mo.gov/accountancy.asp