Aug 18, 2022

The Time is Now

How to be Proactive with Your Next Peer Review

Unable to properly prepare for your next AICPA peer review during the two-off years can mean a lot more than just the loss of bragging rights: A CPA firm that receives anything less than pass with no findings (a “clean” report) may soon find that existing clients are questioning their relationship while potential prospects are avoiding them.


A clean report assures clients, prospects, regulators, standard-setters and competitors that your firm’s attest practice is performing at a high level and is not required to improve the quality of its services and processes. Simply put, your firm’s reputation is on the line every time you undergo a triennial peer review.


It’s important to get a jump start on preparing for your next peer review. Here are some steps to take to ensure you have a properly designed and effective quality control system in place that leads your firm to receive a pass — with no findings — on your next peer review report.

 

Establish a culture of quality from day one. A common mistake CPA firms make that can cause them to perform poorly on a peer review is not properly designing, implementing and maintaining a system of quality control. If your system is not properly maintained, the peer reviewers will more likely find reportable issues. In accordance with AICPA’s Statement on Quality Control Standard (SQCS) No. 8, A Firm's System of Quality Control (Redrafted), all CPA firms must establish and maintain appropriate quality control policies and procedures and comply with those policies and procedures to ensure the quality of the professional services they provide to the public.


To make sure you’re following all relevant policies and procedures, there are several publications available from the AICPA that provide guidance, such as Professional Standards, the AICPA Peer Review Program Manual, and the Practice Aids for Establishing and Maintaining a System of Quality Control for a Firm's Accounting and Auditing Practice.


Familiarize yourself with these standards and ensure the auditors/accountants at your firm have the research capabilities and tools to their jobs correctly and adhere to the highest standards.

 

Plan ahead & stick to deadlines. Your firm’s peer review should be finished by its due date. The firm’s due date is reflected on the letter acknowledging your firm’s original enrollment in the peer review program and in the committee acceptance letter related to your firm’s last peer review. The due date is the date by which peer review documents, including the report and if applicable, the letter of response, should be submitted to the reviewer.


To make sure your peer review is completed on time, you should start the review soon after your firm’s peer review year-end. You should plan ahead so that the review takes place at a convenient time for your firm and to allow your reviewer time to properly plan and schedule your review. For example, if you have a heavy tax practice and your review due date falls between January and April, you should plan to start the review in September or October to make sure the review is completed before your busy season begins.

 

Make sure that workpapers can stand on their own. It’s critical to ensure that your workpaper files are deemed to be in compliance with Professional Standards. As you assess your workpapers, give them the “5 Ws” test: Do they stand on their own without any verbal explanation, clearly explaining “who, what, were, when and why?” Don't leave a peer reviewer grappling for answers – make their job easier by making sure your workpapers are in order.

 

Keep up with your internal inspections. During the two off years when the peer reviewer is not up on your doorstep, make sure you're regularly conducting your annual internal inspections so that you can correct any mistakes your firm may be making before peer review time. At Collemi Consulting, we’ve created a “must-do” testing approach to assist CPA firms with an internal inspection process that includes drafting and reviewing your firm’s Quality Control Document to interviewing and evaluating your professional staff.

Here are some examples of the other areas we test during the inspection:

 

  • Review a cross section of attest engagements
  • Test professionals’ CPA licensing
  • Test professionals’ CPE requirements
  • Examine firm’s professional literature

 

Most attest practices we advise get some things right, but almost all of them miss some key points. Common pitfalls include lack of understanding of the auditor independence rules, particularly regarding unpaid prior years’ fees, and not meeting the General Requirements from the Code of Professional


Conduct prior to performing permissible non-attest services for an attest client.
Other missteps include a failure to appropriately modify a report for a scope limitation or a significant departure from GAAP, omissions of required critical reporting elements of applicable standards, and issuing an audit report when the auditor was in fact not independent.


Connect with your peer review team captain sooner rather than later. You should contact your peer review team captain and begin planning the review together early enough, at least six to nine months prior to the due date, to make sure all documents will be submitted to the Administrating Entity (AE) by your firm’s due date.


The peer review team captain will ask for the following items:

  • The firm’s Quality Control Document.
    A list of accounting and auditing engagements for all engagements with periods ending during the year under review (or report dates during the year under review for financial forecasts and/or projections and agreed upon procedures) regardless of whether the engagement reports are issued as well as a description of the approach taken to ensure a complete and accurate engagement listing.
  • A list of the firm’s professional personnel showing name, position and years of experience with the firm and in total.
  • A copy of the firm’s documentation maintained since its last peer review to demonstrate compliance with the monitoring element of quality control.


Based on this information, the team captain will make a preliminary selection of the offices and engagements he or she intends to review.

 

The initial selection of engagements to be reviewed will be provided no earlier than three weeks before the commencement of the peer review. This should provide ample time to enable the firm to assemble the required client information and engagement documentation before the review team commences the review. However, at least one engagement from the initial selection to be reviewed will be provided to the firm once the review commences and not provided to the firm in advance. This engagement should be the firm’s highest level of service and should not increase the scope of the review.


All engagements with years ending during the peer review year (or report dates during the year under review for financial forecasts and/or projections and agreed upon procedures) that are performed and issued by the firm should be available to the team captain at the start of fieldwork.

 

Finally, make it your goal to be timely and accommodating to the peer reviewer. Missing deadlines or seeming uncooperative will leave a bad taste in the peer reviewer’s mouth. Put your best foot forward and let the peer reviewer know that your firm takes quality control very seriously.

 

At Collemi Consulting, we offer a full spectrum of services to assist CPA firms get ready for their AICPA peer reviews, including conducting an engagement review and ensuring workpapers are in order. And there’s no need to undergo the peer review process alone: We can partner with you during every step of the process to help you gather required information and documents and ensure you hit all deadlines. To schedule an appointment, contact us at (732) 792-6101.



Cultivating Connections

By Adrienne Burmeister • 22 Apr, 2024
Follow these strategies to hone your face-to-face networking skills.

Training Time

03 Jan, 2024
Many public accounting firms don’t focus enough on training their professional staff on how to properly research. Don’t make this risky mistake!

Hook 'em! How to Deliver More Compelling Presentations

21 Dec, 2023
Prepping to give a presentation? Here’s a quick trick: Make sure your introduction is attention-getting, and you’ll help ensure your audience members are thoroughly engaged until the very end. If you’re giving a slide presentation, that means that your first three slides are critical. A recent survey of businesspeople by Storydoc, a business presentation company, revealed that 80 percent of audience members who are engaged in the first three slides of a presentation will likely stick with you until the end of your presentation. That’s critical, considering another Gallup study that revealed that 60% of businesspeople admit to being “indifferent” to presentations, while another 11% say they’re “actively disengaged.” So, what to include in those first three slides? The best strategy is to start off with a hook: an eye-catching photo, an impressive number, an agonizing problem that members of the audience are likely to face, or a shocking statistic. Adding that hook toward the beginning of your presentation will help reel the audience in. Here are some additional presentation best practices that we at Collemi Consulting recommend: Know your audience. Understanding who comprises your audience is critical so that you can ensure you’re covering the material that matters the most to them. If you’re speaking at a conference or training event, get a list of attendees ahead of time and see who they are and where they’re from so that you can get an idea of their background. If it’s possible to communicate with attendees beforehand, send them a note introducing yourself and ask them if there are specific issues, they’d like you to touch on during your presentation. Ask questions. If you don’t interact with your audience at the beginning of your presentation, people will settle into a passive “TV-watching” mode, and it will be difficult to keep them engaged. And asking questions can also help you zero in on what matters most to the audience. For instance, you might throw out a question like, “What keeps you up at night most, XX or XX?” (reference specific challenges). Or, ask people to raise their hands if they’ve struggled with a specific obstacle. Then, you can be sure to address the challenges that most audience members indicate they’ve faced. Another way to keep people engaged with questions is by throwing out “trivia” questions related to specific new accounting standards or something else that pertains to the content you’re covering. If you make participants feel like they’re part of the presentation, they’ll be much more likely to pay attention — and retain the information. Add visual appeal. While your presentation is likely filled with a lot of important content, it’s critical to remember not to overload your audience with pages and pages of text. Break up slides with text and simple photos or illustrations that support your message. A well-chosen image is a welcome break from text that can grab your audience’s attention and help reinforce your message. You can find professional stock images on sites like Shutterstock. Provide a next step. Don’t just end your presentation abruptly by thanking people for coming. Close by including a slide that mentions what you’d like the audience to do with the information you shared with them. Perhaps you’d like them to make a list of ‘to-dos’ that will help them implement the information you’ve shared with them. Or maybe you’ll invite them to reach out to you should they need your services. A solid closing will build rapport — and help audience members retain what they’ve learned. Collemi Consulting leverages almost three decades of experience in providing trusted technical accounting and auditing expertise when you need it the most. Salvatore A. Collemi, CPA, Managing Member & Founder, is regarded as an industry leader and subject matter expert by various organizations and media outlets. To schedule an appointment to see how we might work together, contact us at (732) 792-6101.

Marketing for Auditors: 4 Savvy Strategies

20 Nov, 2023
Want to know the difference between high-growth and average-growth firms in the public accounting profession? Here’s a hint: It begins with the letter “M.” If you guessed “marketing,” you’re correct. According to the 2023 High Growth Study by Hinge, public accounting and finance firms grew at a median rate of 11%, lagging behind many other professional services categories. But the study also uncovered that public accounting firms that focus on marketing as a top priority see regular, year-over-year growth of 20% or more! Here is the good news: You don’t have to be a Big 4 firm with extensive resources to leverage marketing to your advantage. Small-and mid-sized CPA firms, and even sole practitioners, can take some simple steps to differentiate themselves in their respective field. Many auditors & accountants and their firms are missing out on major opportunities to target clients using tools that are right at their disposal. Here are four strategies to build visibility for your practice and differentiate yourself from your competitors: Strategy #1—Public Speaking. Landing speaking gigs at industry conferences or on an industry podcasts or webinars are one of the best ways to position yourself and your firm as an expert in the field. Speaking gigs offer auditors a platform to showcase their knowledge, provide insights on relevant topics and establish themselves as an authority in the field while increasing their firm’s visibility. You can use speaking engagements to share best practices, identify emerging trends and offer solutions. To get started, do some research on upcoming conferences in your area where you might offer to contribute. Your State Society and local Chambers of Commerce may also have seminars or online events that offer speaking opportunities. Strategy #2—Create a newsletter. Some savvy CPA firms create email newsletters that provide valuable and relevant information to clients and prospects. Sending out periodic newsletters helps drive traffic to your website or blog (when you include links to relevant articles or resources), builds credibility by positioning yourself and your firm as a subject matter expert (SME), and encourages social sharing. If your content is engaging, it may prompt subscribers to share it on social media. Your newsletter doesn’t have to be lengthy: Two to three short articles, plus a call to action at the end, is enough to capture a reader’s attention. Strategy #3—Include lead magnets on your website. Lead magnets are incentives on your website that you offer potential clients in exchange for their contact information. For example, you might offer a white paper you’ve created on an important topic or a PDF that highlights important new information regarding the latest accounting rules. Creating these kinds of lead magnets can help you grow you email list and build a database of potential leads. Strategy #4—Amp up your social media. You may already be leveraging social sites like LinkedIn to promote yourself or your business, but are you gaining followers and increasing engagement? The best way to grow followers and generate more interaction is to share information of real value to those you want to target. It’s also important to post content frequently and interact regularly with followers. Remember that social media is all about dialogue (not sales pitches!). Approach it as a conversation; post content your followers are likely to share or comment upon, which will extend your reach to their connections. Be generous with your time and advice, and potential clients will want to work with you. Short on time? Pick one or two of these strategies to focus intently on in the upcoming year; the investment in time will be worth it. Collemi Consulting leverages nearly three decades of experience to provide trusted technical accounting and auditing expertise when you need it the most. We regularly work with CPA firm leadership to help them reduce risk and maximize efficiencies to grow their attest practices. To schedule an appointment, contact us at (732) 792-6101.
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