Peer Review and Quality Management: Key Updates, Resources, and Considerations for Your Firm

Peer Review and Quality Management: Key Updates, Resources, and Considerations for Your Firm
Uniform GuidanceDecember 5, 2024

Peer Review and Quality Management: Key Updates, Resources, and Considerations for Your Firm

Are You Leveraging Peer Review Engagement Checklists for Governmental Audits?

If your firm works on governmental audits and hasn't yet taken advantage of widely recognized peer review engagement checklists, there's no better time to start. While these checklists are primarily developed as reviewer tools, they can also serve as a valuable resource to double-check engagements for compliance with professional standards. In addition, they can be beneficial when conducting pre-issuance or engagement quality control reviews, as well as for internal inspections or root-cause analyses.

For auditors working in the governmental sector, key sections of the engagement checklist set include:

  • Section 4,400: Supplemental Guidelines for Reviewing Quality Control Policies and Procedures for Engagements Performed in Accordance with Government Auditing Standards (Yellow Book)
  • Section 20,500: Governmental Audit Engagement Checklist
  • Section 20,600: Not-for-Profit Audit Engagement Checklist
  • Section 22,080: Supplemental Checklist for Audits of For-Profit Housing and Urban Development Engagements
  • Section 22,100 (Parts A and B—UG): Supplemental Checklists for Single Audit Engagements
  • Section 22,110: Supplemental Checklist for Reviews of Audit Engagements Performed in Accordance with Government Auditing Standards (Yellow Book)
  • Section 22,120: Supplemental Checklist for Reviews of Attestation Engagements and Reviews of Financial Statements Performed in Accordance with Government Auditing Standards (Yellow Book)

These industry-recognized checklists can help ensure that your governmental audits meet all professional requirements and maintain a high standard of quality.

New Guidance on GASB Accounting Changes and Error Corrections

A recently issued Technical Question & Answer (TQA) provides nonauthoritative guidance relating to GASB Statement No. 100, Accounting Changes and Error Corrections. This guidance focuses on auditor opinion unit considerations when a fund previously reported as major is now presented as nonmajor. The newly required financial statement column may raise questions about how to treat prior-year major funds in the current-year audit report. The TQA offers practical insight to ensure compliance and consistency in reporting.

Clarifying the Applicability of AR-C Section 70 in Consulting Engagements

Back in 2014, when Statement on Standards for Accounting and Review Services (SSARS) No. 21 was issued, it introduced AR-C section 70, Preparation of Financial Statements. This standard was intended to apply only when an accountant was explicitly engaged to prepare financial statements, but it also did not preclude voluntary application.

Today, with the rise of client advisory services (CAS)—including controllership and CFO-level outsourcing—the preparation of financial statements often occurs as a by-product of broader consulting services. In such cases, some accountants have considered these financial statements as a separate service (thus applying AR-C section 70), while others have viewed them as part of the overall consulting engagement (thus following consulting services standards).

The proposed amendment to SSARS clarifies that while accountants are not prohibited from applying AR-C section 70 to these engagements, they are not required to if the financial statements are simply a by-product of a broader CAS arrangement. The goal is to reduce confusion and diversity in practice by confirming that performing these engagements entirely under consulting services standards is acceptable. The exposure draft of this clarification is currently open for comment until December 20, 2024.

Enhancing Quality Management in Your Firm

The effective date of new quality management standards is fast approaching. Firms must have their systems of quality management operational by December 15, 2025, and must evaluate whether those quality objectives are being met by December 15, 2026.

Key steps to consider now:

  • Identify and understand your firm's unique risks.
  • Implement appropriate risk responses.
  • Establish a timeline for evaluation, ensuring you meet the required deadlines.

Many tools, practice aids, and comparison documents are available to help firms transition from existing quality control standards to the new quality management framework. By familiarizing yourself with these resources, you can streamline implementation, reinforce your firm's commitment to quality, and ensure a smooth transition to the new requirements.

Not-for-Profit Audits: Avoiding Common Deficiencies

Recent peer review insights reveal that inadequate documentation is one of the most common deficiencies in not-for-profit audits. Enhanced planning and better utilization of available resources can help prevent such issues. Consider leveraging illustrative financial statements and Form 990 examples—complete with sample financial statements, Excel worksheets, and cash flow tools—to strengthen your audits.

Scaling Risk Assessment for Less-Complex Entities

Auditors of smaller or less-complex entities may find certain risk assessment procedures challenging to apply in full. Guidance now exists to help scale the requirements of Statement on Auditing Standards No. 145 to fit less-complex engagements. By tailoring your approach, you can maintain compliance while avoiding unnecessary complexity.

In Summary

The evolving professional landscape offers a range of tools, updated standards, and clarified guidance aimed at enhancing the quality and efficiency of your firm's services. From leveraging engagement checklists for governmental audits and integrating new TQAs on GASB changes, to preparing for quality management standards and clarifying the applicability of AR-C section 70 for CAS engagements, staying informed helps ensure that your firm consistently delivers top-tier, compliant services.

Keeping abreast of these changes not only strengthens your audit quality and operational frameworks but also supports your commitment to serving clients with the highest level of professionalism and expertise.

How KVR Can Help

At KVR, we specialize in helping accounting firms navigate the complex landscape of professional standards and requirements. Our team can provide guidance on implementing quality management systems, avoiding common audit deficiencies, and leveraging the latest tools and resources to enhance your practice.

Contact us today to learn more about how we can support your firm's commitment to quality and excellence.

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